Taking Flight

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Taking Flight

By Linda Lisanti

When CHS Inc. surveyed petroleum marketers and jobbers recently to see how its Cenex brand fared against other oil banners, company executives weren’t surprised by the high marks it received for quality, pricing, flexibility and catering to customers' needs.

They also weren't stunned by the one area where Cenex lagged behind -- brand image.

"It wasn't that we had a bad image, but it had run its course," Doug Dorfman, marketing and retail development manager of CHS refined fuels, told Convenience Store News. "Most of our competitors have images that are 5 to 7 years old. That's the industry norm. Meanwhile, our image was 15 to 20 years old. It was time for a change."

The Cenex brand, like its iconic butterfly symbol, is now undergoing a metamorphosis. CHS is making a historic investment to transform Cenex into a state-of-the-art petroleum and convenience retailing brand that can rival any competitor.

A comprehensive image makeover is under way for its network of 1,600 retail locations, roughly 800 of which are convenience stores. New advertising airing on the radio and television is improving brand perception among consumers. CHS, too, is continuing to expand Cenex's visibility by adding more retailers in major metropolitan areas.

"Refreshing our assets and improving visibility of our brand, combined with our Cenex Guy advertising and retail support initiatives, it's all coming together at just the right time so we can grow the Cenex brand and get it out in front of folks," Dorfman stated.

As a brand of CHS -- a diversified energy, grains and foods company owned by farmers, ranchers and cooperatives from the Great Lakes to the Pacific Northwest and the Canadian border to Texas -- Cenex has always been associated with small-town, rural America. The previous appearance of its retail locations reinforced these agricultural ties and carried on the consumer perception of Cenex as a home-grown brand.

Generation Image Renewal, the name CHS has given to its new imaging campaign, is not the company's way of turning from its farming roots, but rather bringing that widely recognized red Cenex butterfly into modern-day petroleum retailing.

"Consumers want clean, bright, inviting, well-lit and modern facilities, and an updated, fresh look," Dorfman said. "With this new image, we are still able to leverage the value of the Cenex butterfly for both retail and agricultural, but in distinct ways."

The new retail look debuted in September 2007 and includes redesigned canopies, brighter paint schemes, new lighting and digital signage -- all intended to improve brand visibility and accordingly, boost retailers' fuel and inside sales.

Over the next three years, the company will spend tens of millions of dollars on this project. As of mid-February, when Convenience Store News visited CHS headquarters in Inver Grove Heights, Minn., 160 sites were reimaged. The goal is to have all 1,600 of its Cenex-branded locations sporting the new appearance by June 2010.

"That equates to 500-plus sites a year. It's a large undertaking," Dorfman said.

A Positive Impression

Together with the new image, the CHS award-winning Cenex Guy advertising campaign, now in its second year, is also driving traffic to Cenex retailers. Launched in October 2006, the campaign aims to make general consumers aware of the breadth of products offered by Cenex, and reinforce the purchase decisions of existing customers.

"What we found through our research is that we have really great brand awareness. People know of the Cenex brand. But where we had an opportunity to improve was in their perceptions of the brand," communications director Ann Mann explained.

The research showed that if someone was using Cenex propane to heat their home, then they thought of Cenex only as a propane brand. Likewise, if someone was using Cenex lubricants in their heavy-duty equipment, then they thought of it only as a lubricants brand. "We were missing opportunities to cross-sell," Mann noted.

That was likely because until the creation of the Cenex Guy, each of the brand's product divisions -- propane, lubricants and refined fuels (including c-stores) -- was implementing its own advertising plans. All three were marketing under the Cenex name, but independently. In contrast, the Cenex Guy is an umbrella campaign that still allows for the divisions to do specific product advertising, but now it all ties into one theme.

So who is the Cenex Guy? According to Mann, he's a character with whom Cenex's primary audience can connect. He's your average, everyday guy. He's also somebody who can deliver serious, relevant messages about the Cenex brand in an entertaining way.

"The Cenex Guy adds humor to an industry where there isn't much humor," she said. "We knew we had to stand out above all the clutter and noise in the marketplace. We also wanted to connect with people and have them feel good about our brand."

Much of the multi-million-dollar campaign centers around television ads, but the Cenex Guy also appears in corporate and local billboards, on the radio and in sports stadiums. Every ad closes with the Cenex butterfly and tagline, "Our energy comes through."

The company is focused on getting its Cenex-branded retailers involved and having them bring the campaign to life on the local level. The retailers can choose to display a Cenex Guy counter mat, billboards, newspaper ads, decals, pump toppers or a standup cardboard cutout. Some managers are making use of the Cenex Guy away from their stores. One even brought the cardboard cutout to a wedding reception.

"Our retailers are really embracing the campaign and having fun with it," Mann said.

As of now, the three-year campaign is slated to run through 2009, but there's a good chance that the Cenex Guy will live on beyond that. This month, Mann's team is conducting follow-up research to determine whether the campaign is meeting its objectives.

"We've had some great results so far, but this will give us hard data to support that we're doing the right thing," she explained. "Hopefully, we're leaving consumers with a positive impression, and when they are in a position to choose a Cenex station versus one of our competitors, we've conditioned them to choose Cenex."

Room to Grow

As a CSNews Top 25 chain, it's hard to believe that Cenex got its official start just two decades ago as a way for CHS to sell gasoline. The company's traditional agricultural-based clientele uses tractors and other heavy-duty vehicles that run on diesel fuel, said Don Olson, senior vice president of CHS refined fuels.

CHS gets 2 gallons of gasoline for every gallon of diesel produced by its refineries. The company owns and operates a refinery in Laurel, Mont., and maintains 74.5 percent ownership in a refinery in McPherson, Kan.

In 20 years, the Cenex network has quadrupled from 400 to 1,600 retail sites spread across 22 states. Most are owner-operated by cooperatives and independent retailers. About 40 of them are owned and operated by CHS, and just last month, the company entered into an agreement to acquire 33 Zip Trip stores in and around the Spokane, Wash., area.

One of the company's foremost imperatives is to keep expanding its retail network. Last year, a record 151 new sites were added to the Cenex family. Olson said CHS has been especially effective in capitalizing when competitors pull out of the regions it services, and converting those operators to the Cenex brand.

The company is focused on attracting convenience store retailers, and 99.9 percent of the new sites have a c-store, Dorfman said, noting that Cenex's requirement for a c-store is 800 square feet. CHS is also targeting its efforts toward multi-site operators and urban areas, whereas in the past, it's been more successful with rural independents.

"The benefit of this approach is that larger facilities, with higher volumes and more traffic, equal greater visibility for the brand," Dorfman told CSNews. "Our goal is to continue our aggressive growth with at least 150 new sites added each year. We have hit that the past two years, and are on track for 2008. We've got a lot of room to grow."

To entice retailers to switch to Cenex, as well as help the brand's existing operators be more profitable, CHS continues to broaden the support services and programs it offers. Retailers can hire specialists from the company's Retail Support department to assist them with business plans, forecasting, marketing, software, building, acquisitions and more.

Currently, the department works on a monthly basis with about 350 of the 800 Cenex-branded c-stores, according to Gary Braaten, manager of retail support for CHS. The department bases its offering of services on the needs communicated by its Retail Advisory Committee, which is made up of a dozen Cenex-branded retailers.

"We always ask them, 'What do you see as your major concern for the next year?' And for the past several years, it's always people, shortages and food," he said. So the department created computer-based training modules to address these concerns and others.

This year, Braaten's group is concentrating on preferred business partnerships. The goal for 2008 is to have a preferred vendor for everything that goes on inside the store. Preferred vendors must guarantee a better program for Cenex marketers, and have the ability to sell their products or services in all 22 states where Cenex retailers operate.

"Our retail operators are tired of not getting the best prices," Braaten said, noting that on top of securing preferred vendors, Retail Support is looking for peripheral entities that CHS can buy, acquire or partner with for the benefit of its "Cenex guys."

Mountain Mudd, a specialty coffee franchise, is the first such ancillary profit center CHS has acquired. About 100 Mountain Mudd kiosks exist throughout the country -- three on Cenex-branded sites -- and franchise opportunities are available nationwide. Retailers can gain additional revenue in the form of monthly lease payments from a secured Mountain Mudd franchisee or increased customer counts by operating their own franchise.

"We've found Mountain Mudd does not cannibalize inside hot beverage sales. On the other hand, at the stores with kiosks we track, we've seen their hot beverage sales inside go up, gas gallons go up, and every month, sales at the kiosk go up," Braaten said.

Other ancillary profit centers the company is eyeing include photo kiosks and financial kiosks, both ideal for secondary markets where the population is less than 5,000.

To improve the other end of the financial equation, CHS also is taking steps to help retailers cut costs, particularly in terms of rising credit card interchange fees.

"Retailers are asking for help with interchange fees, and we don't disagree with them," CHS payment solutions and energy business development manager Paul Culver told CSNews. "We think there's still more opportunity to push our proprietary cards."

The Payment Solutions department is evaluating several ways to enhance Cenex proprietary cards to attract new cardholders and increase use among existing cardholders.

As with any metamorphosis, Cenex's transformation will take time. Nevertheless, when all the stages are complete, CHS believes Cenex will be seen as a brand that helps retailers succeed by driving loyalty at their stores and keeping customers coming back.

"At the end of the day, if they're not growing, we're not growing," Culver stated.

For comments, contact Linda Lisanti, Senior Writer, at [email protected].