Understanding Sheetz's Strategy

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Understanding Sheetz's Strategy

ALTOONA, Pa. -- Sheetz Inc. sells gas below cost only during grand openings, Stan Sheetz, the convenience store chain's president and CEO, told members of the Salem Rotary Club. Sheetz's job is to win customers, even if it means initially selling gas at lower costs, he said.

"If they [competitors] don't match my price, then they lose a lot of customers," Sheetz said.

Over the past year, Sheetz has jumped into the Roanoke, Va., market with four new stores. And as Sheetz moved in, other companies were forced to react, The Roanoke Times reported. As a result competitors' gas prices dropped to match Sheetz's. And the prices stayed low, said Clint Morse, program chairman of the Salem Rotary Club. "We thought it would be interesting to find out why," he said.

During the Rotary Club's weekly meeting, Stan Sheetz explained that food sales drive the company's business. Sheetz stores sell more than 50 million meals a year. "We don't make any money on gas. We make money on food," he said.

The family-run business operates 277 stores in Pennsylvania, Maryland, Virginia, West Virginia and Ohio. The company expects $2 billion in sales this year. The company has been blamed for undercutting smaller gas station operators and putting them out of business, the report said.

But in the Roanoke market last week, prices were relatively stable. The average price for regular unleaded gas was $1.24 a gallon. Sheetz was selling fuel for an average of $1.19 per gallon, while a Stop In convenience store across from the Sheetz in Roanoke sold regular gas at $1.19, as did the Citgo that neighbors Sheetz.

Bal Sansoa, owner of the Quick Mart, told The Roanoke Times that Sheetz has affected his gas sales. But customers still want his Texaco brand gas, even if it costs more. "Because we have the branded gas, we're not totally, totally dead," he said.