M&A Activity Spurs Rebranding
Over the course of a convenience store chain’s lifetime, it will likely rebrand. From acquiring a new company, to attempting to expand its market, to staying on top of relevant trends, the motivations behind rebranding efforts run the gamut.
Whatever a company’s reasons, however, a well-executed rebranding strategy should consider the point of view of a c-store’s most valuable asset — its customers.
While logos and corporate signage each play a significant role, a clearly defined, differentiated value proposition is essential to keeping customers coming back for more.
Recent Post-Acquisition Efforts
Merger and acquisition (M&A) activity continues to impact the c-store industry today. Consequently, managing the branding aspect of this growth is imperative.
In 2014, Ohio-based Speedway LLC, a subsidiary of Marathon Petroleum Corp. (MPC), acquired Hess Retail Holdings in a deal valued at more than $2.8 billion that affected more than 1,200 Hess stores. As of March 31, 320 of the acquired stores had been converted to the Speedway brand, according to MPC.
“As we continue to implement best practices and branding from Hess to Speedway, [which includes] implementation of our technology platforms inside the store, we’re enjoying the benefits that we expected,” said Stefanie Griffith communications manager for MPC. “In fact, we met the $20-million [synergy] goal in the fourth quarter of 2014 that we had told the market [we would], and we are on pace to hit the 2015 mark in synergies as well.”
Speedway estimates that from 2015 through 2017, it will spend $410 million to convert the acquired locations to the Speedway brand and transition them to Speedway’s technology systems. Remodeling a portion of the acquired locations and implementing Speedway’s marketing programs are also part of the rebranding plan.
A similar story is playing out at Casey’s General Stores Inc., an Ankeny, Iowa-based operator of more than 1,850 Midwest c-stores. Last year, the company acquired the Fargo, N.D.-based Stop-N-Go chain of 24 convenience stores and began the rebranding process, immediately changing signage to reflect the new ownership.
Within a few weeks after an acquisition closes, all product usually starts arriving from Casey’s distribution warehouse, explained Sam James, a financial analyst for Casey’s. From digital menu boards, to updated signage, to slick new countertops and floors, all rebranded Casey’s stores will be consistent with the company’s newly erected locations.
“It can be as simple as dropping in our equipment in an existing space, but oftentimes it involves bumping out the box and making the store larger,” noted Brian Johnson, vice president of finance and corporate secretary for Casey’s General Stores. “In some cases, we’ll actually scrap the old building and build a new one on the property. It varies on a store-by-store basis.”
Nine of the Stop-N-Go remodels have been completed so far, each to a tune of slightly less than $1 million per location. The lion’s share of that investment has gone to integrating Casey’s prepared food program — highlighted by its popular made-from-scratch pizza, made-to-order sub sandwiches and freshly made doughnuts — into the former Stop-N-Go locations. Integrating these prepared foods into all locations, in fact, is the company’s highest priority, Johnson stressed.
“We feel that if a customer drives by a Casey’s store, whether it’s a store we built or a store we bought, they’re going to expect that pizza,” he said. “Our prepared food program is a big synergy that we bring to these acquisitions.”
The Stop-N-Go locations Casey’s acquired did not have an established prepared food program in place. “That’s where we saw the value in this acquisition,” Johnson said. “We also felt those markets overall were a little underserved from a prepared food program standpoint, and that’s why we’re really excited to get our pizza and doughnuts and subs in there as soon as we can.”
Casey’s c-stores are predominantly located in small communities, two-thirds of which are towns with populations of 10,000 or less. “A lot of times when we acquire a store in a smaller town, we may very well be the only prepared food offering in that area,” James added.
Navigating the Learning Curve
Personnel training is one challenge Casey’s has faced in rebranding newly acquired stores. The company typically retains store-level employees from the acquired stores and uses its own area supervisors and district managers to implement training programs.
“It takes quite a bit of training before the kitchens actually open up,” said Johnson. “Our pizzas are true, made-from-scratch products. We’re either building or acquiring 60 to 100 stores a year, and we have a good program in place to train our store-level employees to make good, quality products.”
Acquiring new c-store locations sometimes leads to new store product offerings, Johnson added. Loyal Stop-N-Go customers, for example, urged Casey’s to keep Stop-N-Go’s popular, fresh-made buns post-acquisition. Depending on their success, the buns may be offered in other Casey’s stores, too.
“It’s not the first time an acquisition has taught us something,” Johnson observed. “We’ve been doing pizza for a long time, but it was [a past] acquisition that had in-store seating that proved to be a good complement to driving sales in that category. Other acquisitions also opened our eyes to the importance of having an expanded coffee bar, which we now put in every one of our stores.”
For Speedway, logistics and training present the biggest rebranding challenges, Griffith reported.
“In addition to securing permits in a vast number of municipalities, there are many supply and logistical issues that need to be addressed, not only for goods and services, but also for equipment and hardware,” she said. “Addressing these aspects of the project poses a significant challenge in terms of the staffing required to complete these rebranding efforts, as well as the training of personnel with the implementation of Speedway’s technology platforms on the inside of the store."
Freshening Up Existing Stores
While rebranding following an acquisition is a natural first step, existing stores shouldn’t be overlooked in a company’s rebranding efforts.
Casey’s, for example, is upgrading nearly 800 of its existing locations in a major remodel initiative that totals an investment of about $500,000 per store. The project includes increasing store size, expanding cooler doors, adding walk-in coolers, and adding the made-to-order sub program and coffee bars. This fiscal year, the company will complete 250 remodels.
Casey’s also plans to replace about 25 stores this year by either rebuilding in the same location or nearby, more than doubling their size to accommodate its prepared food program, Johnson noted.
“We’re very excited about the concept because right now we’re seeing an incremental cash-flow lift that justifies that investment," he said. “And from a bigger scale, it really lengthens the life of that store. It freshens it up and it is a great customer experience.”