Competitive response
Petrolia Fuels is responding to BigCart, a grocery chain that just opened six fuel stations with discounted fuel for big spenders — quantify the damage and decide the response.
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Petrolia Fuels runs 68 fuel-and-convenience stations across Montana and the Dakotas. The network average is 4,800 gallons pumped per station per day at a fuel margin of 28 cents per gallon, and the convenience stores add about $1.85 of margin per visit on 22% of fueling visits. The model is simple and has worked for years: fuel brings the traffic, the store makes the money.
BigCart, the region's largest grocery chain, has opened six hypermarket fuel canopies, each adjacent to a superstore. Its mechanic is loyalty pricing: shoppers who spend $100 or more in the grocery store earn 12 cents per gallon off, which is visible on a highway sign and is effectively free for BigCart because it is funded from grocery margin. BigCart does not need its fuel to make money; it needs it to make the grocery trip stickier.
The first quarter of overlap data is in. The nine Petrolia stations within two miles of a BigCart canopy have lost 18% of their gallons, and their fuel margin has slipped 4 cents as managers match part of the discount on the forecourt. The other 59 stations are unaffected so far. The CEO wants a response that protects the nine stations without handing 4 cents a gallon to every motorist in the state.
You advise the CEO.
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