Food City's plan to aggressively market gasoline in the Chattanooga area as it takes over 29 Bi-Lo stores will ratchet up the competition vying for the consumer's fuel dollar.
"It's a big priority for us," said John Jones, Food City's executive vice president, about the company's fuel centers. "It's a big part of our business."
Food City will join a swelling list of fuel retailers in the area. They range from convenience store operator Weigel's, which expects to put up at least four units in the region, to additions at Wal-Mart Supercenters and at some of that retailer's new Neighborhood Markets going up here.
Consumers prefer to fill their gas tanks at grocery stores and wholesale clubs rather than traditional gas stations, according to a study by Market Force Information. A poll of more than 5,300 consumers identified these top four gas retailers.
› Costco and QuikTrip
› Sam's Club
› Murphy USA
Source: CSP Daily News
Knoxville-based Pilot, along with major players Speedway and RaceTrac, also have entered the fuel fray in and around Chattanooga in recent years, joining existing companies such as Mapco, Kangaroo, Murphy USA and others.
The U.S. convenience store count increased to a record 151,282 units as of the end of 2013, which was a 1.4 percent increase from the year prior, according to the latest figures by the National Association of Convenience Stores.
Of that number, 126,658 convenience stores sell fuel, the association said. The retailers sell an estimated 80 percent of all the fuel purchased in the country, and less than 500 of these stores are owned by the top five oil companies.
At Food City, about 85 percent of its stores have fuel centers, according to the grocer. Officials are looking at its Chattanooga locations where installing gas pumps in its store parking lots will make sense based on demographics and space.
"If we see a viable location for a fuel center, we'll work diligently with the landlord to bring that to fruition," said Jones, who also is heading up the Food City transition team in the Chattanooga area.
He wouldn't put a number on how many Food City aims to put up, but he noted that any new store the Abington, Va.,-based grocer builds has a fuel center.
Food City parent K-VA-T Food Stores plans are to start work in late August to early October rebranding and revamping the existing Bi-Lo supermarkets. No stores will be closed, and Food City will hire the vast majority of the 2,000 Bi-Lo employees, the company said.
Meg Major, of industry publication Progressive Grocer, said businesses utilize fuel sales for different reasons.
A study by Market Force Information found that gas stations can be highly regional. Here are the favorites in four U.S. regions and Canada.
› South: Shell, Kroger, QuikTrip, Exxon Mobil
› Midwest: Speedway, BP, Casey’s General Stores, QuikTrip
› Northeast: Exxon Mobil, Sunoco, Hess, Sheetz
› West: Costco, Chevron, Shell, Safeway
› Canada: Petro-Canada, Shell, Esso, Co-op
For supermarkets, there's a "cross-pollination" with the help of loyalty reward programs which offer discounts to fuel customers who buy goods in their stores, she said.
"It's a meaningful savings," Major said. "There are reciprocal benefits for Food City and customers."
Also, fuel centers are a means by which supermarkets extend their one-stop-shop appeal, she said.
"Customers visit the store, fill up [with gas], and they're on their way," Major said. "It's an ingredient in most supermarket retailers' playbooks."
Food City already has "a pretty good track record" in fuel sales, so it makes sense to extend that expertise to Chattanooga, she said.
Bill Weigel, chief executive of the Weigel's chain based out of the Knoxville area, said plans are to start building four stores around the Scenic City quickly, including one on Signal Mountain Road in Red Bank.
"We're looking at locations in Chattanooga and North Georgia," said the CEO about the business that operates 63 stores in East Tennessee.
Citing the competition in the area, Weigel said his company is ready.
"If we're not capable of competing, we wouldn't be there," he said. But, Weigel added, "we have to earn our spurs."
Niraj Patel, manager of the existing Shell Gas Station on Signal Mountain Road, said the added competition by Weigel's and a Murphy store that's going up at a nearby Wal-Mart could take some business away.
"We'll have to wait and see how it turns out," he said.
That said, Patel added his station has been there for nearly a decade.
"That will help, and knowing everybody," he said, but he noted that some people like to try new things.
Red Bank Mayor John Roberts said Weigel's planned Signal Mountain Road store is another key addition to that city and its tranforming south side.
"People are in a hurry and want to get in and get out," he said about the planned convenience store.
Red Bank also has a Bi-Lo at Morrison Springs Road and Dayton Boulevard, and the parking lot appears large enough to hold a fuel center, though nothing is definite. Roberts said if Food City went that route, it would need a permit.
Jones said it's too early to start talking about exact locations for its fuel centers, but he added that Food City has different configurations with dispensers numbering from six to 20.
Also, company's fuel centers have kiosks to sell goods, while others are walk-in "middle-sized" units or full-service convenience stores, he said.
Food City also runs some convenience stores not directly tied to supermarket locations, Jones said.
"We operate several freestanding stores," he said. "We've got four different footprints — everything from smallest to the largest."
Major said there're a lot of cars on the road and opportunities for companies to benefit abound.
According to a 2014 study by Market Force Information, convenient location and competitive pricing are the two factors consumers like most about their gas station of choice.
The ease of entering and exiting the station also is important, as is the safety of the location and an efficient transaction process, the study found.
Less critical to consumers are the availability of car washes and environmentally friendly fuel, it said.
Major said that for Food City, its aim is to woo customers into its parking lot.
"If you can tie in your shopper loyalty program, it's very important. It helps shoppers. It's an opportunity to secure loyalty," she said.
Contact Mike Pare at email@example.com or 423-757-6318.