Unifying its Canadian c-stores under the On the Run brand, the retailer is uniting its U.S. c-stores under a new banner as part of a strategy to grow its overall operational footprint.
By Erin Del Conte, Senior Editor
After seven straight years of acquisitions, Parkland Fuel Corp. has achieved a pervasive retail presence across Canada, and is now focused on aggressively growing its store count in the U.S. from the Dakotas to Mexico, and from Denver out to St. Louis.
Most recently, Parkland closed on the acquisition of Reinhart Oil, expanding its U.S. presence beyond North Dakota and into the Rocky Mountain region of the U.S. The company’s next acquisition of Missouri Valley Petroleum is set to close Oct. 1, 2018, providing Parkland with business synergies in North Dakota as it commits to collectively pursuing the retail, commercial and supply businesses.
Simultaneously, Parkland is remodeling all stores and unifying its brand in Canada under the On the Run/Marché Express banner it acquired from its Imperial Oil acquisition in 2016. It’s also creating a soon-to-be-announced banner for its U.S.-based c-store locations and preparing to remodel and unite those stores under one cohesive U.S. brand that features foodservice as a central part of its business plan.
Looking forward, the convenience chain anticipates even a more prosperous year in 2019.
BEEF TO FUEL
Parkland Fuel Corp. originally began as Parkland Beef Industries, a publicly-traded cattle feedlot. In 1975, Jack Donald acquired the company and named it Parkland Industries. Donald had previously founded and divested a chain of gas stations under the name of Parkland Oil Products Ltd., and he redirected Parkland Industries’ focus away from cattle and to the retail fuel segment, establishing Fas Gas Plus in western Canadian in 1977.
“Jack started literally with one Fas Gas location, which today has grown into several hundred in Canada,” said Doug Haugh, president of Parkland USA.
From there, the company transitioned through several phases. “There was the income trust phase. In Canada there was a structure similar to Master Limited Partnerships (MLPs) in the U.S., where you distributed most of your cash flow to holders, but it was known as an ‘income trust’ versus an MLP. Those were eventually disbanded in Canada and that’s when we reverted to a C-Corp,” Haugh said.
In 2010 Parkland Industries became Parkland Fuel Corp. and Parkland’s headquarters moved to Calgary, Alberta, Canada. In 2011 Bob Espey rose to chief executive.
“Since Bob took on the CEO role, there’s been a pretty clear vision and mission to build a nationwide downstream champion across Canada,” Haugh said.
Parkland Fuel Corp. began an aggressive acquisition plan, completing 18 purchases valued at more than $2.4 billion from 2011 to 2017, including acquisitions from Chevron Corp., Imperial Oil and CST Brands. In 2014, it announced the acquisition of Pioneer Energy, an Ontario gas station chain with 393 stations. The deal increased Parkland’s unit count to more than 1,000 sites in Canada.
In 2016 Parkland acquired Imperial Oil Ltd. and the On The Run/Marché Express brand in Canada, plus the real estate assets of 17 Esso-branded sites in Saskatchewan and Manitoba. The transaction included the franchise agreements for about 80 On the Run / Marché Express convenience stores currently operated by Esso-branded fuel dealers and distributors. The agreement also gave Parkland the trademarks to On the Run / Marché Express.
The CST Brands acquisition in Canada in June 2017 included 495 dealer and commissioned agent retail fuel sites, 73 commercial cardlock sites, 30 commercial and home heating sites, and 159 company-operated retail fuel sites, as well as a French speaking corporate presence in Montréal.
Today, Parkland is embarking on a major rebrand-refresh initiative to unify all of its Canada-based stores under the On the Run brand over the next two years. Already, the chain has remodeled the first 60 stores and plans to complete renovations on all acquired stores.
“That doesn’t mean that the fuel brand will change. There might still be a Fas Gas, Esso, Ultramar or Chevron for the gas brand. But the stores will be on On the Run. In Québec, stores will feature the same brand treatment and logo but are called ‘Marché Express,’ which is the French version,” Haugh said.
In the U.S., Canadian convenience store conglomerate Alimentation Couche-Tard owns the On the Run brand. Because of this, Parkland plans to create a different banner under which to unify its U.S. convenience stores. Parkland currently has a project underway to evaluate that process. The stores are expected to be remodeled to resemble the On the Run rebranding, leveraging up to 80% of the Canadian On the Run design in terms of architecture and offering, but with a different banner name.
The in-store assortment will vary. “Like any retailer 20-30% of the SKUs are going to be localized to appeal to local tastes and preferences,” Haugh added.
As in Canada, while the banner will be unified, the gas canopy will continue to fly fuel brands such as Phillips 66, Sinclair, Chevron, Exxon, Arco and more.
When envisioning what the remodels in the U.S. might entail, one need only look to the store makeovers in Canada for clues. As the Canadian c-stores are remodeled under the On the Run brand, stores are receiving a more open floorplan, featuring more glass and bright lights for a clean look, as well as common seating areas to allow for more dwell time in the store. The assortment is modernized in terms of category management best practices.
At this point, Parkland is still developing its foodservice offering. “We’re really looking for strong partners that would share our vision of fully integrating the foodservice into the stores,” Haugh said.
Currently, most of its c-stores feature fresh foodservice in some form.
“We do have a large number of sites across Canada with Tim Hortons, which is iconic, sort of the Canadian Starbucks,” Haugh said.
In addition to Tim Hortons, some On the Run sites feature Triple O’s, a restaurant featuring burgers and handmade ice cream and shakes.
Some stores feature made-to order foodservice. All On the Run stores offer a grab-and-go selection of fresh food brought in daily through a local distributor partner.
While the exact food offering may vary, the biggest design change is that foodservice is now a focal point of the store. Whereas some c-stores tack a quick-service restaurant onto the end of a store, almost as a separate entity, On the Run is making food a central focus, fully integrating foodservice into its retail operation.
Parkland has been busy incorporating some of the best concepts and practices from its acquired businesses. From Chevron, it took some design queues from the store layout, which offered a large wide-open floorplan where all sections are part of one cohesive store experience, including foodservice.
“Several of those newer (former Chevron) stores have two story atriums to give a lot more head room and drive- through lanes focused on foodservice,” Haugh said.
Parkland aims to have a store banner finalized for the U.S. and a pilot store up and running by the end of 2018 or the first quarter of 2019.
This August, Parkland announced two new acquisitions. It acquired Reinhart Oil Co. on Aug. 27, which included the retail businesses in Utah, Colorado, Wyoming and New Mexico. At the time of this writing, Parkland was scheduled to close on the purchase of Missouri Valley Petroleum (MVP) on Oct. 1.
“We are aggressively expanding in the U.S. In 2017 we achieved ubiquitous coverage across Canada and, not that we’re finished growing, but it’s the initial completion of our footprint in the Canadian market, meaning you can start in New Brunswick and drive all the way to Vancouver, across all of Canada, and never stop anywhere else except one of our stores,” Haugh said.
Parkland now has its sights set on investing in the U.S. and growing a national business across the country within the next five to 10 years.
Parkland first entered the U.S. market with the acquisition of SPF Energy Inc., the parent company of Farstad Oil Inc. and Superpumper Inc. in 2014, which gave it a presence of about 20 stores in North Dakota. Today, Parkland operates 30 stores in the Dakotas and supplies almost 200 locations across Montana, North Dakota, South Dakota and Minnesota.
The Reinhart Oil Co. acquisition allowed Parkland to extend its footprint into the Rocky Mountain region.
“If you look at demographics and gross domestic product, its an extremely attractive market. Denver and Salt Lake City are two of the fastest growing metro areas in the country. They’re young demographically, which skews to a great market for c-stores, and there’s a lot of strong organic growth opportunities, and new-to-industry development opportunities in those markets, which we like,” said Haugh. It’s also contiguous to Parkland’s other U.S. operations. “There are some leadership and management synergies there in terms of running a business close by.”
The environment is also similar to Canada.
“As far as beginning operations in the U.S., we thought to go where it’s most familiar to our current operations, as opposed to jumping into Miami or southern Louisiana or someplace very different culturally and in terms of selection and far from our supply capabilities,” said Haugh.
As Parkland grows it expects to first expand adjacent its refinery in Burnaby, Canada, which offers tremendous supply assets. “We’d certainly like to have some additional demand downstream of those assets,” Haugh said. From there, the president sees the company pursuing opportunities across the Great Plains from Denver East to St. Louis. But future opportunities also exist up and down the Rocky Mountain region, from Montana down to Mexico. In other words, opportunities for the progressive convenience chain seem far and wide.
The MVP acquisition adds three bulk plant terminals co-located with cardlocks, six c-stores and 19 branded dealers across North Dakota. Plus, a fuel distributorship that sells 84 million gallons of fuel and petroleum products annually.
“In North Dakota, we’re No. 1 in that market in terms of overall volume, and volumetrically MVP is No. 2. There’s a lot of opportunity to combine our strengths in those areas,” Haugh said. Parkland has a strong commercial fuel business across Canada, but the MVP acquisition allows it to grow its commercial propane operating capabilities in the North Dakota market.
Haugh anticipates more acquisitions before the end of 2018, as well as in 2019.
“We’re not just the largest fuel supplier in Canada, we run a really good collection of retail operations, and we think we’re doing the right things now to turn that into a fantastic chain operation,” Haugh said.
Parkland, Haugh stressed, is not just one product line or one business line. It’s committed to the retail business, the commercial business and the supply business.
“If you look at those three areas of strength, that’s a lot different than other consolidators who only want to buy a piece of the business. We don’t want to bust up a company and sell off the pieces or break up the team,” he added.
That difference has resonated with companies such as Reinhardt and MVP, which are long-term, family-owned businesses, Haugh said.
“Their employees mean a lot to them. They want to make sure they’re in the right organization with a holistic team that can come in and really contribute,” he said. “And, that’s what we are.”