North Atlantic Petroleum creates a new regional player by sdaferv


									                             North Atlantic Petroleum creates a new regional player
                            by Diane L.M. Cook

                                                                     North Atlantic Petroleum’s retail
                                                                     convenience representative
                                                                     Shawn Murphy sees a great
                                                                     future for the rebranded
                                                                     convenience store sites,
                                                                     purchased from Petro-Canada
                                                                     four years ago.                                        July/August 2007               YCM 27
         North Atlantic Petroleum is a major player
         in the petroleum industry in Atlantic Canada.
         Since 1994, the company has owned and operated a 115,000-barrel per day
         refinery in Come by Chance, Newfoundland. The refinery specializes in
         clean fuels that meet the most demanding specifications on the                                    A few years ago
                                                                                                      there was a major
         planet most of which are exported to the eastern seaboard of                            shakeup in the gas station
                                                                                            and convenience store indus-
         the United States, California, and to Europe.                                  try in Newfoundland when North
                                                                                    Atlantic purchased Petro-Canada’s
                                                                                retail gasoline network on the island and
                                                                             quickly rebranded the entire network.
                                                                             North Atlantic now has a marketing division
                                                                      with 61 gas stations in addition to its home heating
                                                                    business, and a commercial and wholesale petroleum
                                                                 products business. The company has always been active in
                                                               the local market selling approximately 10% of its refined
                                                             products to the local retail marketplace. Products include gas,
                                                           diesel, home heat, stove oil and propane.
                                                              YCM spoke with North Atlantic’s retail convenience represen-
                                                        tative Shawn Murphy about all the recent changes in the company.
                                                           Backtracking to over four years ago on May 23, 2003, North
                                                     Atlantic diversified its retail business with the purchase of Petro-
                                                    Canada’s entire retail gasoline network in Newfoundland. “With the
                                                   acquisition of the Petro-Canada sites, we firmly entrenched ourselves as
                                                  a major retail player in the Newfoundland marketplace,” says Murphy.
                                                     After the purchase, North Atlantic immediately rebranded all of the
                                                 sites by removing Petro-Canada’s signage and replacing it with North
                                                Atlantic’s signage, logo, its unique and distinguishing bright orange
                                                colours and flame logo on the canopies.

                                                       YOU’RE IN THE CONVENIENCE BUSINESS NOW!
                                                       Not only did North Atlantic find itself as a major retail gas player after it
                                                       purchased Petro-Canada’s gas stations, but it also suddenly found itself in
                                                       the convenience store business. The Petro-Canada sites comprised both
                                                       company-owned corporate sites and independent contractual sites with
                                                        independent operators, many of which had convenience stores.
                                                            Before North Atlantic could implement any business strategies, the com-
                                                         pany first had to take a good look at the industry and what was happening.
                                                          Not only was there new government legislation regulating retail gasoline
                                                          pricing but there was a growing competitive market as well.
                                                               In 2001, the Newfoundland Petroleum Act was passed, regulating
                                                            the wholesale and retail prices of gasoline similar to legislation that
                                                              had already been passed in Prince Edward Island. Retailers were
                                                               now told what margin they could make from selling a litre of
                                                                 gasoline. And a few years before this legislation, the province of
                                                                    Newfoundland amended its Shop Closing Act to include Sun-
                                                                      day shopping, a day when convenience retailers were the
                                                                        only stores allowed to open and therefore enjoyed a brisk
                                                                           business. On top of this, the latest provincial budget
                                                                              outlined yet another substantial increase in the
                                                                                 province’s minimum wage, scheduled to increase
                                                                                     to $9 per hour by the end of 2008.

28 YCM   July/August 2007
                                                                      “We work closely with the different companies to make sure
                                                                 we achieve the    right product mix, the right SKUs,
                                                                      and in the right product placement in the stores.”

                   Competition in the gas/convenience industry has been growing              stores was not a problem. However, the bigger challenge was to
               steadily for the past several years. “The introduction of big box retailers   organize the independent sites.
               and the aggressive strategy of drug stores that use convenience items,            Armed with the old saying, “there’s strength in numbers,” buying
               such as soft drinks, as loss leaders to lure shoppers into their stores are   power has become a crucial issue in today’s competitive marketplace.
               giving convenience stores a run for their money,” says Murphy.                “The ‘mom and pop’ stores have been steadily disappearing because they
                   “If it isn’t loss leaders, it’s paper money or coupons being offered      are not able to compete against the buying power of the big international
               from other branded chain stores, including grocery stores, that have          retailers. Securing goods at the lowest possible cost is important in
               edged themselves into the mix. Most of the competition have been              today’s market,” says Murphy.
               busy updating their stores, with some companies aligning themselves               Next North Atlantic had to choose a wholesaler that could
               with a second major retail partner like a McDonald’s or Tim Hortons           deliver Newfoundland-wide. Murphy says as a local company, it
               in an effort to bring in extra traffic.”                                      decided to use F.J. Wadden & Sons Limited, a local wholesaler that
                   One of North Atlantic’s strategies was to organize as many                has been in business for over a century. After only 22 months, the
               sites as possible into one buying group. Organizing the corporate             North Atlantic buying group has grown to 27 members, consisting

                                                                                                 July/August 2007          YCM 29
                            “The key for most of our promotions
                             is to make it different, keep it local,
                             and tailor it to
                             the local market.”

                            of both corporate and independent retailers under the North
                            Atlantic banner.
                                  “We also realigned some stores, installed new coolers, and
                            implemented up-to-date planograms. Another one of our strate-
                            gies is to solidify our relationship with our suppliers. With our
                            company headquartered in St. John’s, it’s not always easy to
                            negotiate deals and promotions when most decision-makers for
                            the suppliers are located in other cities throughout Canada. We
                            work closely with the different companies to make sure we
                            achieve the right product mix, the right SKUs, and the right
                            product placement in the stores.”
                                  Other retail programs North Atlantic has incorporated in its
                            gas/convenience sites include standalone promotions, cross-promo-
                            tions with gas and combo deals. “The key for most of our promotions
                            is to make it different, keep it local, and tailor it to the local market.”
                                  Most of North Atlantic’s promotions are either instant gratification
                            or involve one grand prize per store in the belief that consumers are
                            more influenced by a promotion when they see a prize in the store
                            and know that the prize will be won by someone shopping in that
                            store. The perception is that they have a better chance of winning than
                            if it were one big prize being offered by a national chain.
                                  Recently, North Atlantic promoted a road trip combo as a
                            cross-promotion with gas. The company took a Big Turk bar
                            (Newfoundland’s favourite chocolate bar), a 355 mL can of Coke,
                            and an 85-100g bag of Humpty Dumpty chips and advertised it
                            for $1.68 with the purchase of $20 in gas. The promotion was
                            overwhelmingly successful.
                                  “We also construct promotions around local celebrities like Rex
                            Goudie, a Canadian Idol runner-up. And we have run big promotions
                            such as last spring with Pepsi where we sent four lucky people off to
                            see Madonna live at the Bell Centre. We have also done seasonal
                            promotions centred around the Super Bowl and the NHL playoffs,
                            partnering with different vendors and offering authentic football
                            and hockey jerseys in each store. The hockey jerseys are those from
                            Newfoundlanders currently playing in the NHL.”
                                  In the midst of all these changes came the announcement in
                            October 2006 that Harvest Energy Trust was purchasing North
                            Atlantic. The Calgary-based company was quick to assure North
                            Atlantic that it was ‘business as usual’.
                                  North Atlantic’s future plans include fine-tuning its business
                            strategies and looking for ways to recapture lost margins due to
                            new provincial regulations for gas and the decrease in consumption
                            of tobacco products and the expected increase in contraband. YCM

                            Diane L.M. Cook is the editor of sister publication Octane Magazine.

30 YCM   July/August 2007

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