DENVER -- When it was announced within one week in June that both BP and 7-Eleven Inc. planned to sell off their retail properties in Colorado, more than one CSP Daily News reader posed the question, What's happening in the Denver market?
The simple answercompetition in the market is toughcould hold for every metropolitan market in the United States. But the extended answer is multi-tiered, touching on refinery limitations, beer-sale restrictions and, yes, a growing number of competing channels and chains making themselves at home in the Centennial State.[image-nocss]
Where I live, within 5 miles of my house, there are 14 grocery storesKing Supers, Safeways, Albertsons, one convenience store retailer who lives outside Denver told CSP Daily News. Now you have Whole Foods in the market. Of course, Wild Oats started here.
Add to that a strong showing by the big-box stores, and the competition profile really starts to hit home, said another c-store retailer, who asked not to be identified. Denver is soft due to hypermarket penetration and well-financed and price-aggressive strategies by the few oil companies still in the market, he said. These include Conoco, Shell and Valero.
For BP, which sold off its Casper, Wyo., refinery a number of years ago, an eventual selloff of its 100-or-so retail sites in Colorado was just a matter of time, according to most sources.
[When the Casper refinery was running], they were able to get product into the Denver market via a pipeline, said Ron Turner, executive vice president of the Colorado Petroleum Marketers & Convenience Store Association. They closed the refinery down [in the 1990s]. So since then, BP has really been like a large marketer in Denver, buying [gasoline] from different sources and adding their additive package. I think it's strictly based on being able to get proprietary product in here. That's placed them at somewhat of a disadvantage.
A BP spokesperson explained the sale as a decision to focus our investments in other markets, a logical choice, according to one Denver c-store owner. If you figure they can get $60 million to $80 million for those stores, that's a pretty good chunk of change for BP to put to work somewhere else.
For 7-Eleven, the choice to franchise its 200 company-owned stores in Colorado was likely based on profits not adding up, said the Denver c-store owner, noting state-imposed beer-sale limitations and increasing competition as causes.
Beer should be at least 24% of my sales. I don't have it here, said the retailer, who has completely given up selling beer. [In other markets], you can see customers four or five times a week on average. Here, that average is closer to 1.2 or 1.4 [times a week]. Not only are your in-store volumes not what they are in other states, but your expenses are highfrom rent to labor, they hit you pretty hard. 7-Eleven is looking at those markets where they're not hitting certain averages and deciding they can make more money, and take away all this overhead, by franchising out [the stores].
7-Eleven spokesperson Margaret Chabris agreed with that point, while disagreeing with others. It's an opportunity for more revenue for 7-Eleven, but it also is [a matter of strategy], she said. We really feel if we get the right franchisee in the store, they're going to work very hard to make it a success. I don't think it has anything to do with the nature of Denver. We are a mostly franchised company in the United States, and we believe strongly in our systems and our infrastructure and daily distribution. We think we have a good franchise offering and we wanted to provide business opportunities to more people.
Chabris also noted that 7-Eleven will retain ownership of the property and buildings in the market.
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