The acquisition of the Pembroke Refinery in Wales, along with related marketing and logistics operations throughout the UK, included four major pipelines, six fuel terminals and the supply contracts for around 800 dealers.
The purchase was a good strategic fit for Valero. It has refineries on the US Gulf Coast, but nothing on the East coast. With Pembroke, it exports gasoline into the East coast of the States, and brings diesel distillate into the UK and also into Europe.
Valero is described as the world's largest independent petroleum refiner and marketer, with 15 refineries; 2.8 million barrels a day of throughput capacity; and is number 12 on the US Fortune 500 list. Globally it has 6,800 retail and branded wholesale outlets carrying the Valero, Diamond Shamrock, Shamrock and Beacon brands in the US and the Caribbean; Ultramar in Canada; as well as Texaco in the UK and Ireland. In the UK it supplies just under two billion litres a year to the retail sector. Its vision is to be a world-class competitor in the global energy business.
Since the UK acquisition in August 2011, Valero has been busy strengthening its fuel supply infrastructure, so it currently has full ownership of the mainline pipeline that runs from the Pembroke Refinery, into the Kingsbury Terminal; 100% ownership of the Manchester Fuels Terminal; and has opened up the dormant Seisdon-to-Manchester spur pipeline.
These later acquisitions have strengthened Valero's supply position in the Midlands and the North West, according to Andrew Cox, who has been Valero's director of sales and marketing for the past year, following a long career with the Texaco brand.
"The strengthening of our supply infrastructure enables us to be competitive for the future and also have security of supply. It's very important for the business. What does a retailer want but a competitive price, and to know that when you say you're going to deliver, you are going to deliver."
The strategy in the UK is to profitably grow inland volume, and that means targeting new dealer business.
"Valero is an independent refiner and marketer," stresses Cox. "It doesn't dig holes in the ground. This is our bread and butter. We see great opportunities in this market still."
The company doesn't market in Scotland or the North East. Historically Chevron did a massive asset exchange with BP, swapping assets in Scotland for assets in the South West. Minimal restructuring to the field force has created a north and a south region; with 14 sales people including 12 area managers and two regional managers. Their role primarily is to maintain existing business and gain new business.
"We have around 800 dealers. Last year we brought on about 50 sites, new to our brand, and they tended to be higher volume, which is the key metric for me, against the loss of around 30 dealers, some of which were lost to the industry.
"However, we are not precious about volume size. We want dealers that are going to be good ambassadors for the Texaco brand that means offering a clean presentable site, with good customer service. The average fuel volumes within our network are 2.5mlpa. But we've got some at 10mlpa-plus and some down at 1mlpa."
Sites directly supplied by Texaco need the tankage and size of forecourt to take a full load: "We only supply full loads," explains Cox. "We do supply sites doing a million litres a year, but it's more to do with logistics than fuel volume. If a site needs smaller load sizes we have about 60-80 of those we have links with authorised distributors, such as NWF, who would deal with them."
In selling the Texaco offer to dealers, Cox is particularly proud of the company's delivery service, which comes with a promise: "If a retailer orders before 11am today, we will be able to deliver to them tomorrow with reasonable endeavours on current stats, 98% of the time.
"Our message to retailers is we will endeavour not to leave you dry. We would stand by our service as being out there with the best."
What makes it so good, according to Cox, is an order centre based in Manchester which operates 24 hours a day during the week, 12 hours a day at the weekends, and is open 362 days a year. Dealers can speak to a live voice if they need to, or order online. The company also has its own 44 tonne fleet, through Wincanton, dedicated for its retail business and no one else.
"Coupled with the refinery and pipelines, it's a very solid system," stresses Cox.
"The other thing we pride ourselves on is customer relationships. Our retailers can always speak to their area manager. Great businesses are built on great relationships, and we communicate regularly with retailers through the online forum or various meetings."
In terms of the fuel supply, Cox says Valero offers flexibility on its deals, most of which tend to be Platts formula, weekly and daily. There is a small premium for weekly, based on the fact it is taking the risk on product movement.
"The one thing dealers have these days is a choice of suppliers. There's lots of people still interested in this market, which keeps us all on our toes. The importance of a brand is an interesting debate, but I think it still offers some currency to have a brand like Texaco, that's well known, long established, and that consumers can place some trust in. The Texaco brand was updated in 2009 so the presentation on site is modern built for the 21st century."
In terms of how the company markets the Texaco brand, it has a long-established loyalty scheme called Star Rewards, which has been around for about 25 years. "We think it represents a good deal for the retailer," says Cox. "When you look at average fuel volume participation in terms of what percentage of the dealer's volume has a Star Rewards card associated with the purchase it's around an average of 12%, but it can range from five to 30%. So if a dealer really pushes it, he can achieve great participation.
"We have also recently reduced our marketing fee to retailers. We used to offer a training van and mystery motorist programme. They were well received, but the training van, for example, was only used by about 20% of the people. We took the view that we would have a very focused offer and lower the marketing fee. What a retailer wants is a competitive price and good service.
"We also offer support with local marketing in that we can supply point-of-sale material to retailers. If they were to do money-off promotions, it's down to them to pay for it, but we can print it off at our head office in Canary Wharf, using the right logos and artwork to make it look professional."
With such a sales story Texaco is now making some inroads into the Top 50 dealer sector, having recently gained sites with MPK Garages, Manor Service Stations and the Kay Group.
"We're attracting new retailers with our offer of a competitive price, a good delivery system and good customer relationships, making us a good company to do business with.
"We've been pretty successful this year gaining 21 sites so far. Our aspiration is to grow, we have a good supply infrastructure which we believe is competitive, so we should be up there with the best."