Speedway became a national brand earlier this year when the convenience store chain acquired a rival refining firm, but the company’s CEO said Speedway isn’t finished growing yet as the industry continues to consolidate.
The company’s growth has provided a boost in Clark County as Speedway is already pushing ahead with construction to expand its headquarters in Enon. Speedway has pledged to add 300 new administrative and office support jobs at its corporate headquarters just outside Enon’s corporate limits as part of a $48 million expansion.
Despite growing from a company with a presence in nine states to a national brand in just a few years, the company isn’t finished growing yet, said Anthony Kenney, Speedway’s president and CEO in an exclusive interview with the News-Sun. He noted for the first time the chain is expanding west of the Mississippi River.
“I tell people we’re going to be from New Hampshire to California and Florida to Alaska,” Kenney said. “We’ve got stores truly coast to coast.”
Most of Speedway’s growth is the result of two key acquisitions, starting with $2.8 billion deal to take over the Hess retail chain on the East Coast in 2015. In October this year, Marathon Petroleum Corp., the convenience store chain’s parent company in Findlay, Ohio, made an even larger acquisition spending $23.3 billion to acquire all outstanding shares of Andeavor, a refining company based in Texas with an additional roughly 1,100 convenience stores. Combined, Marathon’s acquisition of the Hess and then Andeavor were valued at more than $26 billion.
Since 2014, Speedway’s presence shot up from 1,500 stores to about 3,900 locations spread across the U.S. Despite that rapid growth, Kenney said Speedway plans to continue to grow by adding stores throughout its territory and he said further mergers and acquisitions are possible if they are the right fit.
“We’re now in the largest transportation fuel markets in the country,” Kenney said. “When you think of the biggest markets that’s where all the cars are. Our business is built around where cars and people are so now that we’re in several big markets in the West gives us that many more opportunities to grow organically with investments in new stores, remodeling stores to take advantage of those high density transportation fuel markets.”
Not done growing
Kenney said future expansion is likely even though Speedway has more than doubled its footprint in less than five years. Along with continued investment in technology, he said the company plans to continue to add stores in key markets where the company officials think they may now be missing some customers.
But he also didn’t rule out future acquisitions, assuming those deals are a good fit for the company’s future plans.
“There are a bunch of chains out there that present good, quality opportunities for us,” Kenney said. “We’re going to be very disciplined in how we look at acquiring stores because they’ve got to be good quality and fit with our strategy. Much more discipline needs to go into the acquisition of stores but I’m not going to tell you there aren’t future opportunities out there because there are.”
Kenney pointed to Speedway’s acquisition of 78 additional stores held by Petr-All Petroleum Consulting Corporation, first announced in April this year. That smaller deal closed around the same time as Marathon finalized its acquisition of Andeavor.
He said Speedway also learned several important lessons about expansion, particularly from Marathon’s acquisition of Hess stores on the East Coast. For example, he said customers in different parts of the country often want different products in the stores. In the Midwest, customers are more interested in a variety of hot coffee options, while stores in the Southwest and West Coast tend to buy more flavored teas and energy drinks, he said.
As it continues to grow, Speedway will spend more time advertising and making customers in the new markets more aware of the brand, he said.
“Several things we learned we’re applying to how we’re going to progress with integrating the Andeavor stores,” Kenney said. “We know there is a little more time and attention that needs to be paid to introducing a new brand in new markets.”
Benefits to the region
The company’s growth will have benefits in Clark County beyond adding new jobs, although Kenney pointed out that adding an additional 300 workers will provide more business for local restaurants, hotels and a variety of other industries.
Speedway is one of the area’s largest employers with more than 40,000 employees across the United States and about 1,200 located in Enon, Springfield, and Vandalia.
Speedway’s rapid growth should also pay benefits to area companies like Eby-Brown a Naperville, Ill. firm with a facility in Springfield that supplies and distributes food products for the convenience store industry. It’s not clear that Speedway’s expansion will benefit Eby-Brown’s workers in Springfield directly, but should provide a significant boost to the company overall, Kenney said.
MORE BUSINESS NEWS: Marathon acquisition could close in early October
Officials from Eby-Brown did not return a call seeking comment for this story.
“Eby-Brown is one of out largest and most important business partners and they’ll even become more significant with this transaction because we’ll be able to leverage the long relationship we have with them,” Kenney said. “They’re going to become a bigger company as a result of our growth.”
Documents filed with Clark County as part of a tax incentive proposal showed Speedway considered at least two other locations outside of Ohio for its potential headquarters expansion. But Kenney told the News-Sun the firm’s history here, along with support and incentives from various entities including the county made the decision to remain easier.
“There are many things at the end of the day that carried the weight in our decision to expand in Enon,” Kenney said.
The Clark County commissioners approved a 100-percent, 15-year tax abatement earlier this fall on the expanded portion of the company’s headquarters.
Local economic development officials previously told this newspaper that Speedway’s decision to keep its headquarters in Springfield gives the region a boost when it tries to attract other companies to the area.
“Having a flagship brand like Speedway really does send a message to the rest of the business community,” said Horton Hobbs, vice president of economic development for the Chamber of Greater Springfield.
One remaining challenge is finding a qualified labor force, particularly as unemployment has hovered around 4 percent and the company’s business increasingly relies on using technology to reach out to potential customers. But Kenney said the region does have access to qualified workers in part because there are several colleges and universities in the region. And improvements in technology will allow the company to allow some key employers to work remotely from regional offices across its territory. Speedway’s growth will likely make the company more attractive to skilled workers as well, he said.
“Our size will allow us access to recruit people and whether we bring them into our corporate headquarters or maintain regional areas where they would be able to perform the work they need to on our technology projects, that’s an example of how we would address that particular situation,” Kenney said.
A changing business
Speedway’s expansion will be key as the company increasingly relies on technology to reach out to its customers while the entire industry undergoes significant changes. The convenience store industry has long relied on fuel and cigarette sales to fuel its business, but Kenney said gas sales are flat or declining and cigarette sales have been cratering for years. That means the chain is now looking for ways to get customers into its stores to buy snacks and drinks instead of relying on profits at the pump.
The company is installing Speedy Cafes in many of its stores to serve made-to-order sandwiches and other products, along with its more traditional pizzas, hot dogs and other meals.
“Food service is a huge area of growth not only for Speedway but for our industry in general,” Kenney said. “As consumers become more aware you can get a quick, on-the-go meal at convenience stores, it becomes important for us to make sure we have the ability to meet those demands.”
By acquiring first Hess and now Andeavor, Speedway now has access to some of the biggest fuel markets in the U.S. But the company’s advertising will also have a greater reach and the company can leverage its Speedy Rewards program across 3,900 stores, as opposed to 1,500. As a now national brand, Speedway will have significantly more clout when it negotiates contracts with the companies that supply food, drinks and other products for its stores.
The rise of e-commerce in which customers increasingly shop online doesn’t necessarily have a direct impact on Speedway because there is not much demand to have impulse buys like chips or a cup of coffee delivered, Kenney pointed out. But having access to large markets with plenty of traffic becomes more important when there are fewer cars on the road, he said.
“When someone would have normally been out shopping for groceries once or twice a week, if half the time they’re now buying them online, that’s one less trip a week they’re making into the market where they might have an impulse stop at a Speedway,” Kenney said.
In the meantime, Speedway is more often competing not only with other convenience stores. Grocery chains, fast food restaurants and perhaps most prominently, dollar stores are offering many of the same products Speedway is trying to sell to its customers.
“Our real estate is second to none in the industry,” Kenney said. “We’ve got some of the great corners in the markets where we operate. They’re going to be the most convenient locations for consumers. Customers are still time-starved and looking for convenience.”
Using technology to win as fewer companies compete
The company’s rewards program, which Kenney said can collect a wealth of information about its customers’ shopping habits, will continue to play a large role in the company’s future.
That will be critical as fewer large chains compete for the same customers. The convenience store business is still mostly made up of hundreds of small chains and single-store owners, but the News-Sun has previously reported there has been a trend toward consolidation for the past several years.
Other chains including 7-Eleven Inc. and Alimentation Couche-Tard. Inc. known for its Circle K brand, have also been acquiring stores, said Todd Hale, a former senior vice president of consumer and shopper insights for Nielsen. Hale is also principal at his own consulting firm, Todd Hale, LLC.
In just one example, 7-Eleven, a brand with more than 8,300 store locations, closed on a $3.3 billion purchase of 1,030 stores in 17 states from Sunoco in January this year, Hale said.
That trend will speed up as many of the small operators don’t have the resources to invest in technology to compete, Kenney said.
“The convenience store industry is consolidating,” Kenney said. “There are going to be a lot fewer number of pure convenience stores that we have in the country today. Today a lot of those are single-store operators that are going to have some challenges as costs continue to rise and they’ve got to be able to leverage scale to be able to meet the kinds of returns you need.”
In the meantime, Kenney said chains like Speedway are adapting as the Baby Boomer generation ages. Younger customers who grew up with cell phones and the Internet now make up about half the U.S. population, Kenney said. The new customers have different shopping behaviors than the older generations.
Marathon’s acquisition of Andeavor will allow Speedway to expand it’s Speedy Rewards loyalty program, which averaged about 6 million active members in 2017, according to information from the company. The program allows Speedway to collect a treasure trove of data about its customers and market more directly to encourage them to buy more inside the stores.
In one example, Kenney said Speedway is installing television screens at its pumps. When customers enter their rewards card, the company knows their past shopping behavior and can target an ad based on those habits. The company is also installing screens inside the store at the checkout to make customers more aware of various promotions to encourage them to buy a bigger drink or another snack.
“We can target a unique offer to you, we know what your past purchases are and we can interact on a one to one level and that’s what the consumer is looking for these days,” Kenney said. “They want you to know who they are, what their past behavior is and make relevant personalized offers to them.”