Texaco Star Slowly Fades

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Texaco Star Slowly Fades

HOUSTON -- Abraham Hamra will soon be among the few men in Houston still wearing the Texaco star. That's because, as of now, Shell doesn't plan to include his Houston station as part of one of the most ambitious rebranding efforts ever in the United States. All around him, cranes are beginning to pull down the familiar red and black Texaco signs and replace them with the just-as-familiar Shell signs.

Shell Oil Co. plans to transform about 370 Houston-area Texaco stations into Shells by the middle of next year. The process started last week, the Houston Chronicle reports.

Although the number of Texaco stations will be greatly reduced -- going from the brand in Houston with the most stations to one of the least -- a handful that don't fit Shell's criteria will be allowed to sell under the Texaco brand. Hamra plans to be one of them. "I guess the Texaco star is part of me," he said.

Origins of the switch go back to when Shell acquired the exclusive rights to the Texaco brand in the United States as the result of a Federal Trade Commission decision requiring divestiture as a condition to letting the October 2001 merger between Chevron and Texaco proceed. The merger had been announced a year earlier. By last February, Shell had decided that a two-brand strategy wouldn't work. The changeover will cost it about $530 million nationwide, with the cost per station running $40,000 to $80,000.

Ultimately, Shell expects to convert the bulk of its 13,000 Texaco stations nationwide.

While unsure of how it will play out, Hamra expects Motiva, a joint venture between Shell and Saudi Refining, to keep supplying him with gasoline until July 2004, when Texaco gasoline wholesalers may come back and he can hook up with them. He has a supply contract with Shell through that date.

In addition to rebranding, Shell has joined the industry trend to fewer but larger stations and convenience stores. One of the keys to being competitive is to move more volume through fewer sites, according to Shell spokesman Rick Wirth in Houston. Aside from the usual competition, nontraditional retailers such as Wal-Mart, Sam's Club and Kroger are putting more pumps on their lots every day. There are some Costco locations that probably pump 1 million gallons a month, said Tom Kloza, an analyst with the Oil Price Information Service (OPIS).

In Houston, Shell will rebrand about 370 out of 513 Texaco stations, which will be added to the existing 248 Shells. In Beaumont, Texas, there are 13 Shell and 44 Texaco stations, of which about 30 will be converted. Those that aren't converted to Shell will be closed or can switch to another brand later if the station owner has the land. If the property is Shell's, then it is expected to be sold for some other use.

In addition to Houston, the work has started in Dallas-Fort Worth; Oklahoma City; Nashville, Tenn.; Colorado Springs, Colo.; Denver; Portland, Ore.; Seattle; San Diego; Los Angeles; and Anchorage, Alaska.

In another move, one distinct from the conversion efforts, Shell plans to reduce its station count by 210 in Harris and adjacent counties within two years, Wirth said. That work began in the spring. These closings were planned regardless of rebranding. As the result of the reduction in locations, the market share by volume for Shell and refining-distribution partner Motiva is projected to slip only slightly to 20 percent from 22 percent.

Meanwhile, ChevronTexaco Corp., based in San Francisco, has gone from being vague about its future to declaring on Sept. 16 that it plans to ensure that the Texaco star remains in the motoring public's future. "While we are not disclosing details of the brand rollout at this time, we wanted to reassure retailers and consumers as soon as possible about the Texaco brand's future," Dave Reeves, ChevronTexaco's president of North American products, said in a written statement. "We will consider using the Texaco brand in areas where Chevron does not now market, and in areas where using both brands make sense for retailers, consumers and our business."

Shell and the joint ventures such as Motiva hold exclusive rights to use the Texaco brand for U.S. gasoline sales until July 1, 2004. Between then and June 30, 2006, they have nonexclusive rights. The exclusive rights revert back to ChevronTexaco on July 1, 2006.