Strategy into Action: 2007 Year in Review
Despite tough market conditions, BP made progress on its strategic goals locally and nationally, and continued to grow market share.
- BP remains focused on strengthening its brand to get more of the consumer’s 
wallet.
- Local marketing has been very successful.
- Improving supply reliability is a top priority.
- BP remains committed to the jobber channel and current markets.
Despite challenging conditions regarding a volatile marketplace, increasing global demand and a shrinking supply cushion, 2007 was a strong year for growth of the BP brand, explained J.R. Thomas, President of BP Midwest US Fuels Marketing, in his overview of the strategic, operating and marketing landscape.
Thomas reiterated that BP’s strategy has not changed since last year’s BPAMA convention. In 2007, BP focused its efforts on getting the fundamentals right. Thomas reported that BP has made progress in its three areas of focus: operational execution, supply availability and brand performance.
Thomas particularly stressed the local focus and national scale as an organizational priority, reflecting how BP thinks and behaves. “We want to create an organization that is locally focused but captures national scale efficiencies, " remarked Thomas. "Battles are not won or lost at the national level; they are won and lost at the local level."
A volatile, unpredictable market
It’s no secret that the market has changed significantly over the last several years, and Thomas did not sugarcoat the new reality.
Continued gasoline demand growth globally has placed strains on existing tight US supply, forcing reliance on foreign imports to fill demand, explained Thomas. While crude capacity has increased globally over the last few decades, it has increased at a slower pace than global demand for the product. As a result, the supply cushion has decreased dramatically, down from 18 days in the 1980s to three or four days today.
In the US, gasoline inventories have remained flat, while demand has risen from 1.5 MBD to 9.6MBD in 2007. The net result has been a dramatic reduction in gasoline stock days and an increased reliance on imports.
Simply put, demand is outpacing supply and the industry’s flexibility has diminished. The delicate balance between supply and demand, along with inventories, refining capacity and imports, have made for an unpredictable and challenging operating environment.
Furthermore, unplanned outages within the first six months of 2007 resulted in a decline of nearly 12 percent in US refining capacity. Today, any unplanned outage has a dramatic impact on the business and takes longer to resolve than in the recent past, said Thomas. The industry has lost its capacity to absorb disruptions, resulting in increased marketplace volatility.
Thomas acknowledged that, while BP and jobbers alike want the market to return to its easier times, the current challenging environment is unlikely to change. "The question then, is, how do we succeed in this new reality?" asked Thomas rhetorically.
Strategy under challenging conditions
"What are we going to do with our strategy?" he asked. "First, we are going to continue to grow brand value so that we can get a disproportionate share of our consumer’s wallet," proclaimed Thomas.
He pointed to the launch of the $36 million Helios Power brand campaign as a major success for the brand. He also noted the company’s progress in our Helios 100 shop program, aimed at providing a consistent site experience.
Local marketing is a great success
"We are also going to continue to focus on local marketing, because the response to these efforts has been tremendous," reported Thomas. BP’s sponsorship of FLW Outdoors has brought the BP brand to the forefront among fishing fans. BP’s sponsored boat simulator is a life-size BP Ranger Boat, giving consumers the thrill of piloting a professional bass fishing boat.
In addition, national programs such as BP Visa have been highly successful. At this point, BP has four million cardmembers in the US, 1.6 million of whom have the BP Visa gas rewards card. BP Visa, which is designed to drive loyalty, has doubled BP’s share of the cardmembers’ gasoline spend.
Commitment to branded marketers’ success
"We are listening to branded marketers and are committed to the issues that are important to you," said Thomas. Allaying concerns about BP’s withdrawal from a few select markets this year, Thomas reassured participants that the company remains fully committed to its current markets and to the jobber channel as its primary growth focus. "We plan to grow geographically where we can win," he said.
Thomas reiterated that BP is committed to giving its customers a relevant, compelling and distinctive value proposition, supported by a strong suite of offers. As such, BP continually looks for such programs that enable branded marketers to win and grow, including a strategy to bring NTI large formats to the BP brand.
Improving supply reliability is a top priority
"BP is committed to having supply available when you need it, and where you need it. Improving supply reliability is our number one priority," said Thomas. He told convention participants that BP has made advances, but acknowledged that the company still has work to do.
Getting demand forecasting right will be crucial to BP’s future success, stressed Thomas. To this end, BP has developed and piloted a tool to improve demand forecasting. This will be rolling out to all terminals in the fourth quarter and will be operational in January.
"We believe we are putting a tool in place that will be ‘game changing’ for us," noted Thomas.
BP: committed to winning in the marketplace
At the end of the day, it’s about winning in the marketplace, concluded Thomas. And despite a tough environment, BP was able to maintain market share, bring on additional sites, grow like-for-like sales, improve the consumer site experience and see improvement in branded marketer satisfaction. He highlighted that BP has achieved:
- Stable market share
- Positive year-to-year volume
- Like-for-like volume double industry average
- New site activity up 182 sites
- Strong brand health (market leader)
