Speedway's Growth Strategy Stays the Course
FINDLAY, Ohio — Speedway LLC experienced a major growth spurt in 2014 when it closed on its acquisition of Hess Corp.'s retail network, but the convenience store chain is not stopping there.
Tony Kenney, president of Speedway, detailed the retailer's multi-prong growth strategy at Findlay-based Marathon Petroleum Corp.'s (MPC) analyst and institutional investor meeting on Thursday. Speedway is the retail arm of MPC.
Calling Speedway's approach to growth "consistent," Kenney explained that the retailer plans to build up its presence through an organic growth strategy for both its convenience stores and commercial fueling locations, and through high-quality acquisitions.
The organic growth strategy calls for new builds in existing markets to fill in the voids, he said. Regarding specific areas, he noted the company is continuing to focus on western Pennsylvania and Tennessee. In addition, Speedway is exploring growth opportunities in Georgia, South Carolina and the Florida panhandle, he noted.
"There are still several voids in Speedway's geographic footprint that will continue to provide opportunity," Kenney said.
Speedway is also moving ahead with plans to build a commercial fueling lane (CFL) network of approximately 150 locations. The project calls for roughly 150 CFL locations at existing Speedway convenience stores. The focus is on existing locations along interstates, Kenney explained, adding that the properties have to be large enough to accommodate truck traffic without interfering with the convenience store business.
This move comes as trucking remains a dominant mode of transportation, with U.S. freight volumes expected to increase by 29 percent. Also, diesel demand growth is expected to outpace gasoline, he cited.
New builds is not the only area of growth on Speedway's radar. Calling the convenience channel "highly fragmented," Kenney said small operators — which make up the bulk of the industry — are under pressure because of limited economies of scale and the competitive environment.
"Small operators will continue to be challenged," the chief executive said, and Speedway will continue to pursue acquisitions where the company can leverage MPC's supply and logistics network.
Speedway also continues to meet its goals for the acquired Hess stores. The goals include:
- Convert 1,245 stores to Speedway brand and technology platforms
- Remodel approximately 700 locations to drive marketing enhancements
- Achieve $190 million in annual synergies in 2017
- Generate $365 million of annual EBITDA in 2017
According to Kenney, the Hess store remodels and conversions are expected to come in ahead of schedule and under budget.
Enon-based Speedway currently operates in 2,760 convenience stores in 22 states: Alabama, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, Wisconsin and West Virginia.