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Safeway will soon sell gasoline Mail Tribune / Bob Pennell A large lined hole is the first sign that a gas station is being built on the north side of Medford Center near Crater Lake Avenue. The station will be run by Safeway and represents that grocer's first local venture into gasoline sales. Grocery chain builds station at Medford Center, joining other grocery and general retailers in the fuel market By GREG STILES First Costco, then Albertson's - now Safeway is entering the local retail gas market. Once, oil titans such as Chevron, Texaco and Shell dominated the Rogue Valley retail fuel scene with competition from a few independents. The independents gained a larger market share during the final quarter of the 20th century, but new competition is coming from general merchandise and grocery giants. While the number of stations dotting the roadside has declined, there are sufficiently more metered pumps to keep pace with Jackson County's 181,000 residents. The 25,620-square-foot Medford Center Safeway station at the Royal Avenue entrance off Stevens, with six fuel pumps and two 20,000-gallon tanks, won't be among the largest in the area, but it still could cut into existing dealers' business. "The term we use in the industry for the big box companies selling gas is hyper-marketers," says Brent DeHart of the Oregon Gasoline Dealers Association." Oregon's ban on self-serve stations made it one of the last areas for grocery retailers to enter the gas market. But the trickle that began in 1999 has turned into a steady stream. A.G. Edwards analyst Jack Russo says the promise of one-stop shopping has enticed retailers to open fuel stops. "They want to give shoppers everything in one spot," Russo says. "They're not making a lot of money off it, but all the majors are doing it." National retailers Kroger, which owns Fred Meyer, and Wal-Mart have also stepped into the marketplace. "Target has announced its intentions that it wants to get into it, too," DeHart says. "Nobody wants to be left behind." But the added convenience for motorists and shoppers could push small operators off the profitability cliff. Albertson's has seven stations in Oregon, according to the Oregon Department of Agriculture, with its latest entry opening today in Roseburg. The grocery chain's posted prices have been both below and above Medford's prevailing rates. Safeway has more than 100 supermarkets with gas stations companywide. In Oregon, there are operations in Cottage Grove, Corvallis, La Grande, Lebanon and Roseburg. Clark Cooney, field operations manager for the agriculture department's measurements and standards division, says Safeway will soon expand to 11 stations. When Safeway opened a fuel station with 10 pumps in Roseburg late last year, it sold gas for about 10 cents less than its competitors. However, the prices are now nearly equal to other stations, even with the Safeway Club card discount. Costco has stations in Medford, Eugene and Warrenton, with one about to open in Albany. It has typically been on the low end of the price spectrum here and in other areas where it operates stations. "Costco has been known for its low price and there have been accusations that they sell below cost," DeHart says. "That's great for consumers in the short run. But there is nothing more anti-competitive than selling below cost until you eliminate the competition. "The major oil companies are concerned, because they have brands to protect. Chevron USA doesn't want to see people pocketing their Chevron card and buying unbranded fuel." The newcomers can either draw fuel from the same source as independents or strike deals with independent refineries. A Costco station, for example, can pump 500,000 to 700,000 gallons per month. DeHart says Safeway could do 200,000 gallons "almost immediately." The long-term impact is what concerns his association, which represents 110 dealers and about 300 of the state's roughly 500 stations. "It might be convenient for a lot of people on the way to work," De Hart says. "But you take that kind of percentage from the small dealers and they will just go belly up; because they just can't absorb a 10 percent hit." Safeway broke into the gas business in 1999 when it acquired Texas chains Randall's and Tom Thumb. "As we have with our other acquisitions, we share the best practices from other divisions," Safeway national corporate spokeswoman Deborah Lambert says. "They had quite a successful fueling business with 19 stations. We liked the model and thought it made economic sense." Safeway views the fuel stops as a way to reward loyal customers and draw in new customers as well. "We see the added value and convenience of the Safeway Club card and it enhances the value of the card," Lambert says. The Safeway project is being done by Longview, Wash., contractor PNE Corp., has completed more than 100 major petroleum ground-up gas station projects since 1992. Reach reporter Greg Stiles at 776-4463 or e-mail [email protected] Mail Tribune Home | Ottaway Newspapers, Inc. | Dow Jones & Co., Inc. | Privacy | Contact Us Copyright � 2001 Mail Tribune, Inc.