CITGO Competition
Now Viewing CITGO's competition in: Gas Stations
Call Preparation Questions
Customers, Marketing, Pricing, Competition
Who are the company's typical customers? - While most customers are car drivers, commercial truck drivers are also an important market and most gas stations offer diesel fuel. Other customers include boat and RV owners.
How do marketing and promotion fit into the company's strategy? - Most customers choose gas stations according to location and price, so companies typically spend very little on marketing and promotion.
How does branded gas advertising affect demand for the company's products? - Large oil companies advertise nationally to build awareness for branded gas.
How have retail price trends affected the company's sales and profitability? - The retail price of gas is extremely volatile: it ranged from less than $1 to over $4 for regular unleaded between 1998 and 2008.
What does the company consider when setting retail prices? - Due to competition, retail prices can change daily and vary significantly by location. Price zones set by oil companies can affect dealer prices.
How has the company's competitive strategy changed over time? - As more retailers added gas to their merchandising mix, the competitive set for gas stations expanded to include convenience stores, mass merchandisers, warehouse clubs, and grocery stores.
Competitive Landscape
The volume of consumer and commercial driving drives demand. The profitability of individual companies depends on the ability to secure high-traffic locations, generate high-volume sales, and buy gas at the lowest possible cost. Large companies have advantages in purchasing and finance. Small companies can compete effectively by having superior locations. Average annual revenue per worker is $300,000.
Business Challenges
CRITICAL ISSUES
Flat Demand - After several decades of growth, fuel consumption for all motor vehicles has stabilized, limiting market growth and causing many gas stations to struggle for survival. The average miles driven and gallons of gas consumed per vehicle has been basically flat in the past 10 years. Improved fuel efficiency of some passenger cars (excluding vans, light trucks, and SUVs) and commercial trucks helped control consumption growth and offset the effects of low-mileage SUVs. Stagnant market growth especially harms gas stations, which typically carry low margins and depend on volume to generate profits.
Volatile Costs Affect Thin Margins - With narrow margins, significant changes in manufacturer prices can affect profitability for gas stations. Manufacturer prices for gas can increase up to 45 percent in a single year, driven by highly volatile commodity prices for crude oil. While variable manufacturer prices can result in almost daily retail price changes, competition may limit how much stations can charge. In the wake of rising gas costs, stations may struggle to cover taxes and credit card commissions with the relatively small margin they make per gallon.
Industries Where CITGO Competes
- Energy & Utilities
- Oil & Gas Refining, Marketing & Distribution(primary)
- Oil & Gas Transportation & Storage
- Crude Petroleum Pipelines
- Retail
- Gasoline Retailers
