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Pacific Convenience & Fuels Gets to Work

SAN RAMON, Calif. -- When Pacific Convenience & Fuels LLC (PC&F) took over ConocoPhillips' nearly 600 company-owned convenience stores Jan. 30, 2009, the facilities "were all over the place," according to Sam Hirbod, president and CEO of PC&F.

Certain areas updated and upgraded locations, some were a mix, while others had been neglected for some time and were in need of significant capital investment.

"The systems in place were redundant, creating a higher expense to operate those sites, which is what you would expect from a major oil company," Hirbod recalled. "There was very little room for creativity or input by the managers. They had no motivation to go out and source the best contracts or the best marketing approach. The focus in the stores was basically make sure the fuel is pumped out and provide a mediocre offering to the consumer. So we saw a lot of opportunity [for improvement] there."

Over the last year, the San Ramon, Calif.-based company has gone to work transforming the former ConocoPhillips locations and ensuring that the same high standards are applied throughout PC&F's entire retail network, which now consists of roughly 335 company-operated stores, 100 fee-operator sites and a handful of dealer locations in California, Colorado, Nevada, Oregon, Texas and Washington.

The stores acquired from ConocoPhillips were already branded Circle K, and Hirbod said while the company considered other options, it was "the most efficient decision" to maintain the partnership. At the majority of PC&F's company-operated locations, the stores are branded Circle K, with Conoco-supplied fuels offered at the forecourt.

"Circle K has made a commitment to help us improve these stores and their offering, and we are in the process of refreshing all the stores that need refreshing," said Hirbod, who estimated that 65 percent of the acquired store base falls into that category.

Each refresh includes the addition of open-air coolers; new wallpaper; new foodservice and coffee graphics; new merchandisers and gondolas; modern shelving; and new cooler trims and checkout areas that shorten the distance between the cashiers and customers.

These refreshes are not just about aesthetics, but incorporate product changes as well.

Hirbod told CSNews Online ConocoPhillips allowed its vendors to do much of the ordering and control the stores' planograms based on what was in stock rather than what consumers wanted. In contrast, PC&F's marketing approach is more focused on meeting consumer needs, and making sure stores carry SKUs with high turnover.

One of the first things PC&F did when it took over was evaluate and redo all of the national contracts that were in place. "We did away with more than 70 percent of the previous contracts," Hirbod said. "We were very fortunate to realize tremendous efficiencies ... we got an instant lift and a great response from the changes."

In addition, PC&F recognized the ConocoPhillips stores were too focused on tobacco, and not much else. "They had a very high tobacco-to-sales ratio, and it wasn't that these were all tobacco stores, they just didn't have focus anywhere else," he explained.

The new owner has since put an emphasis on fresh foods -- a category Hirbod said was non-existent before. Stores now feature a full hot dog steamer, hamburgers, pizza and other menu items in line with the assortments found at ampm and 7-Eleven.

And more foodservice developments lie ahead, as the company is working with Quiznos to create a pre-packaged sandwich program. PC&F also recently formed a committee to go out and identify the products that boast the best packaging, quality, serving sizes and the best marketing available for its new, proprietary "Healthy Choices" brand.

"Salads and fruit are available almost everywhere now, but I call those products 'one and done,' because the customer will try it once, but not again. Convenience stores are putting in these products with marginal quality because they believe people will not buy quality at a c-store, but we don't believe that at all. We believe consumers want quality wherever they shop, and so we're looking for the right vendors and the right packaging to fit our industry," Hirbod said. "We don't want to get into the fresh food business just for the sake of being in it ... we want to deliver the quality consumers want."

By the end of this quarter, 25 percent of the stores will be refreshed, and he anticipated the remainder to be completed by September, noting: "We need to have this completed in 2010, so we can go to the next step and implement our full marketing tactics, and gain the scalability of having the right products in the right markets."

Still, after just a year, the numbers are already showing improvement. According to Hirbod, the in-store margin at ConocoPhillips' stores was less than 24 percent -- the lowest margin of any national chain. Under PC&F's guidance, margin is up nearly six points.

At the end of this transition, the goal is for the stores to cater to a wider demographic, including the professional, the soccer mom, the construction worker, the college student, the young driver and the senior citizen. "We still have the stigma here in the U.S. of having convenience stores focused on just a certain demographic, and it's a self-fulfilling prophecy. We're trying to break that mold," Hirbod told CSNews Online.

For more on Pacific Convenience & Fuels LLC, including a look at its growth plans for the future, check out tomorrow's CSNews Online Daily News.

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