CST Brands shifts fuel pricing strategy after spin-off

  • CST Brands shifts fuel pricing strategy after spin-off

    In the latest financial report from CST Brands, for the fiscal quarter ending September 30, 2013, there is an interesting note about how the company has shifted its fuel pricing strategy since the spin-off from Valero.

    On page 37 of the report, there is a paragraph under the title “Motor Fuel Strategy”:

    “Prior to the separation and distribution, our business existed as an outlet for our former parent’s products and the focus was on maximizing consolidated parent company profitability. Occasionally, we priced motor fuel with the overall objective of increasing motor fuel gallons sold with less emphasis on retail motor fuel gross margin. This resulted in a higher profit generated by our former parent’s refining segment, which was beneficial to their consolidated earnings performance. As a separate company, we generally manage our motor fuel pricing to maximize motor fuel gross margin. This strategy, from time to time, may result in different motor fuel gallons sold from historical levels as a result of our being separated from our former parent company.”

    The change in the CST Brands motor fuel strategy is evident in these numbers:

    Fuel volumes, in gallons per site per day: 5,003 in Q3 2013 vs. 5,131 in Q3 2012
    Fuel margins, in cents per gallon before credit card fees: $0.20 in Q3 2013 vs. $0.13 in Q3 2012

    Unlike with other c-store chains which announce changes in fuel pricing strategies and then deliver results that conflict with their goals, CST Brands delivered results completely in line with their new mission as a new company.

    From a fuel price management perspective, corporate fuel strategies will change in emphasis from time to time. CST Brands has been successfully using PriceAdvantage as their exclusive fuel pricing software for all their company owned stores since 2012, first under the Valero parent which had one retail fuel objective focused on volumes, now as their own CST Brands entity with the new fuel objective focused on price and margin optimization.

    As one of our customers told me after I congratulated him on the strong quarterly results of his company, “A great product yields great results.”

    Do you have the fuel pricing software that allows you to deliver great results no matter what corporate objective, like CST Brands does?

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