Shell to Transition All Stores to Wholesale/Joint Venture Supplied

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Shell to Transition All Stores to Wholesale/Joint Venture Supplied

HOUSTON -- CSNews Online has learned that Shell is transitioning more of its markets from direct-supplied and company-operated to wholesale- or joint venture-supplied, as part of the company’s strategy to grow the Shell brand in the U.S. and maintain a focus on wholesale -- a plan that was initiated in 2005.

"Globally, we have a vision to be the No. 1 gas retailer in the U.S. The majority of our stations are supplied through wholesalers and joint ventures [JV]," company spokeswoman Anne Peebles told CSNews Online. "With the strategy we launched two years ago, that percentage continues to grow. The journey we talked about two years ago was what we needed to do to strengthen our network in the U.S. and grow the Shell brand for the benefit of consumers, dealers, employees and the investment community."

The company's strategy was made up of three parts:

-- Enhancing its wholesale business to make it best in class and becoming the preferred supplier to the best wholesalers, which called for a focus on the support it provided to wholesalers, such as marketing support and the services provided, as well as operational tools to improve their business;

-- Engaging in a portfolio optimization and asset management, to strengthen the brand by actively and profitably managing its assets and supply relationships, through the transition of a number of markets from company-operated and supplied to wholesale-owned and supplied; and

-- A retail structure realignment, which called for moving toward a support structure that supported both retailers and wholesalers on a geographic or regional basis.

The most recent plans, which were already announced to employees and its channel partners, will keep a vast majority of affected stations Shell-branded, Peebles told CSNews Online. During the next two years, Shell will transition its remaining 2,000 company-owned stations and 400 retail supply contracts left in its network.

Areas that will be transitioned during this time include Philadelphia and southern New Jersey, Fairfield, Conn., Houston, Dallas, New Orleans, Portland, Alaska, Sacramento, Hawaii, Washington D.C., southeast Florida, Boston, New York, San Francisco, Chicago, Seattle and remaining sites in Los Angeles, Peebles stated. The transition is underway and is expected to continue into 2009, she added.

The plans fall under Shell's portfolio optimization strategy, which was developed because the company believed the capital employed in retail assets could be put to better use elsewhere, she said, noting that the wholesale channel is closer to consumers and operates more regionally. "They are really in a great position to help us grow the brand where we are going to sell," she said. To date, 750 retail sites and supply contracts have been switched to wholesale- or joint venture-owned and supplied.

"The early results in 2006 really made us want to go in this direction," she added. "The portfolio optimization was delivering results that exceeded our expectations and the market sales were generating more proceeds than our goal. Our JVs have been very successful thus far and the wholesalers are performing and serving customers well."

She continued: "It felt like a natural continuation and evolution of our strategy."

To date, Shell has transitioned markets in Cincinnati, Columbus, Denver and Indianapolis. Meanwhile, its joint venture, Motiva, transitioned markets in Atlanta, Austin, Baton Rouge, Birmingham, Orlando, southwest Florida, Tampa, Memphis and some individual sites in Connecticut, according to the company.

This year, the company completed the transition of sites in southern California to Tesoro Corp. as part of the sale of its refining and terminal assets, and transitioned markets in Kansas City and Hartford/New Haven, Conn.