SIGMA Annual Meeting 2011: Great Meeting in Our Nation’s Capital.

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SIGMA always produces great conferences made better by a confluence of independent retailers and suppliers that span every size company and geography. The sessions at this year's annual show were excellent covering a range of topics. One in particular that stood out was Bob McNally, President of The Rapidan Group and former White House advisor. Bob spoke on Crude Oil Forecast: Where is it Going? In his presentation, Bob laid out a clear case on how OPEC no longer supplies the market-calming effect it once did in the face of volatile oil prices. With worldwide oil demand outstripping supply well into the future, high fuel prices and even greater volatility are expected. He also explored how new potential supply sources, such as oil from ANWR? or Iraq, fall well short of expected worldwide demand. He did predict a rise in natural gas demand, which bolds well given US reserves.

Higher gas prices and greater volatility make retail fuel more challenging. For those that utilize fuel automation and a diverse supply portfolio, volatility can actually provide a competitive edge at the pump. Retailers have generally seen healthier margins on fuel this year. Maintaining those margins will likely mean additional investment in cost-reducing strategies and technologies.

The SIGMA Spring Convention is not too far away. We look forward to another round of informative sessions and great industry conversations. See you in Naples, Florida!

 
 

Perky Jerky, Forecourt Automation, and NACS/PEI

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NACS/PEI was a hit again this year. Chicago was a great location for convenience store buyers and suppliers to gather around the latest products and services. There is a ton of information to absorb at the show, but two trends seemed to catch my notice more than others – first, the continued rise of “energy” related products and, second, the advancement of greater automation in the forecourt.
 

Past years have seen a proliferation of energy drinks - so many now that retailers struggle to sift through all of them and pick the ones best suited for their stores. This concept of packaged energy has even gone so far that they are now mixing natural stimulants with beef jerky - something called Perky Jerky. I kid you not. This is surely a sign of the coming apocalypse.
 

The other trend of greater forecourt automation is really a continuation of something that began over a decade ago, but has gained greater speed in recent years. With high fuel prices since 2008 and rising competition at the pump, fuel retailers are looking for proven technologies that will give them a competitive edge. This edge comes in the form of lower costs via fuel management automation and supplier portfolio diversification and increased revenue through customer analytics and loyalty programs.
 

We featured our two newest products – ForeSite™ SV (Supervisor View) and ForeSite™ IC (Inventory Control). By all accounts, prospects were excited to see an intuitive, web-based set of applications that alerts them when fuel replenishment plans will fall short of inventory needs due to bad weather, poor traffic, and other unpredictable events as well as detect immediately instances of fuel theft, leakage, cross drops, and other issues related to fuel inventory. With both products released in July of 2011, there was a buzz over the fact that a top-tier retailer such as 7-Eleven had already become a ForeSite customer within a few short months.
 

As I said earlier, NACS was a hit this year on a number of fronts. We had a pod in OPW's booth and are thankful our partner allowed us to participate with them. We look forward to next year’s NACS. Personally, I am eager to see what the next phase in the energy fad will be. My money is on caffeine-infused fruit.
 
 

Message to Tea Party: There Are Some Taxes Worth Paying

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There are rumblings that the Tea Party will turn its small government, lower taxes, spending cuts eye towards the federal gas tax, which is up for renewal later this year. If so, I have a short message for the Tea Party (if anyone is listening): After the debt ceiling debate and U.S. credit rating downgrade by the S&P last Friday, please recognize that there are some taxes worth paying and this is one.


The argument is that it is inefficient for states to remit taxes to the federal government, who then turns around and reallocates them back to the states. In fact, it is another example of ineffective big government as the states are viewed as better equipped to determine how that money should be spent. Prima facie, this makes sense, but what is wholly missing from the analysis is the necessity for a coordinating body to support the needs of interstate commerce. Without that coordinating effort, roads and bridges will vary in condition, safety, and availability from state to state. Why? Here are two primary reasons:
  1. Less populous states will have lower tax bases to support roads and bridges than more populous ones. Obviously, tax revenue and infrastructure quality/investment correlate highly.
  2. States will always have conflicting and competing funding priorities with road projects, which means these projects will not always receive needed investment dollars in some states

So what? Less populous states probably don’t need the same level of infrastructure investment as others. Wrong. Roads are traveled by more than cars. Trucks hauling goods across the country rely on these roads to get to their destination safely and cost-effectively. If a less populous state decides to invest its limited dollars elsewhere and lets roads and bridges decline, then the cost of transportation will go up for freight companies relying on these roads due to such reasons as poorer gas mileage and more breakdowns as they will get poorer gas mileage, more breakdowns, and more miles driven from finding alternative routes. In the end, destination states will see higher prices on goods.
 

As much as we are a federation of states and many decisions are best made at the state and local level, we are still a united states. Interstate commerce is the lifeblood of our country, and there must be some reliance that our roads and bridges will support that lifeblood. So, there must be a centralized authority making decisions (not all decisions by the way as the federal gas tax comprises only 28% of all dollars spent on infrastructure projects) on where to spend money for the national good. Will it do so always in the most efficient manner? Possibly not. Might there be a better way to allocate the funds and measure the effective use of those funds? You bet. But one thing is absolutely clear, the federal gas tax revenue is essential and cannot go away in the hopes that states will raises taxes to make up the difference and do a better job. As our roads are already in bad shape with the American Society of Civil Engineers giving them a D-; we actually need to invest more and not less in our infrastructure.
 

Please, let me say it again, message to the Team Party: There are some taxes worth paying. The Federal gas tax is one.
 

Weather Alert: Hurricane Season and Fuel Supply Disruptions

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As I watched Tropical Storm Don dissipate this weekend after making landfall in South Texas, I thought about the next tropical storm and when we would see our first hurricane of the season. Having been hammered in 2005 with Katrina and 2008 with Ike, most folks on the Gulf Coast watch intently as bad weather builds in the Caribbean and Gulf of Mexico. Katrina and Ike wrecked terrible loss of life and property damage; they also caused severe fuel supply disruptions. Even though Tropical Storm Don never reached Hurricane status, the threat of it last week shut down 6.8% of oil production in the Gulf. If this does not sound like a lot, consider the fact that it was not modeled to be an intense storm and roughly 30% of U.S. oil production and 7.4% of natural gas is produced in the Gulf.


Are Hurricane-related supply disruptions in the cards for 2011? The answer is unclear, but fuel distributors and retailers can take precautions to prepare for the worst if the need arises. Here are just a few:
  1. Determine supply availability at least 4 days in advance of anticipated landfall
  2. Secure supply and “keep full” if refineries are preparing for a shutdown
  3. Maintain generators at retail locations to reopen as soon as possible post-storm

Different weather conditions will require different reactions in terms of fuel supply decisions. Severe weather may curtail traffic and consequently fuel demand, which may cause fuel buyers to slow purchases. Buyers who avail themselves of multiple supply options will have greater flexibility when dealing with Mother Nature. More storms are coming in the Gulf. Are you prepared?
 
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