Rick Dobson joined the logistics department of Imperial Oil in 1970 as an engineer in the Sarnia, Ont. refinery. In 1973, Dobson moved to the products division headquarters in Toronto. Six years later, he was made manager of the ioco refinery. In 1982, he moved to Exxon International in New York, assigned to Esso Eastern – Australia first, and then Esso Sekiyu K.K. – Japan. Five years later, Dobson returned to Imperial as manager, retail business division, a position he held until 1990. That year, he became general manager – operating services, and in June 1991 was named general manager wholesale/supply east. Dobson assumed his present position in 1992.
Q. The gasoline retail industry has been going through some changes over the past few years. What are those changes and has there been significant downsizing?
A. You mentioned downsizing.
The word we would use is ‘restructuring’ because there’s actually growth in the industry demand these days for gasoline transportation fuel, but what the industry is doing is to try to satisfy that demand by the customer for fuel through more efficient networks.
Yes, downsizing in a sense that we’re trying to get fewer service stations serving more customers each because, in a very clear way, the customer is telling us they’re not willing to pay for all of those convenient locations everywhere on every street.
The onset of the recession was the first trigger because we saw demand decline and have had flat or declining demand until this year. Even when it returns to growth, it will be slow growth.
The industry is restructuring to readjust to the fact that margins are low. You can only afford to provide service at fewer and fewer locations.
It’s like many other industries, we have an over-capacity situation. Another way to define it is that Canada has twice the number of service stations per capita than the u.s., or, to reverse the description, half the sales per outlet that the u.s. would have.
It started around late 1990, early 1991. Now, we’re in the third full year of restructuring, and the good news is we’re starting to see some growth in demand.
It’s not just retail sites that have closed. There have been some refineries and refining capacity that have been closed in Canada as well. We’re trying to get the whole supply and marketing structure in Canada efficient so it will survive at lower margins.
Q. What changes have been made at Imperial Oil through restructuring?
A. We definitely have fewer service stations today, and, significantly, have reduced the network. We have reduced our costs where we can be very optimistic about the future even with margins that stay flat.
Since 1991, we’re down 900 sites, from 4,300 to 3,400 Esso-branded sites.
We are concentrating on a strategy of value for the customer. That customer-driven strategy, we feel, is being very successful.
So, we looked at things like adding more value to the consumer with Tiger Express, through fast and friendly service.
Even in a restructuring environment, we’re going to see some continued tough times in the sense that not a lot of money is being made in this business in a margin sense.
We see the opportunity for us with Tiger Express, new products and services and lower costs we’ve been able to get.
Q. What is Tiger Express?
A. We haven’t been too public about this, but, we’ve been testing an offer called Tiger Express about a year and a half.
It’s a new kind of offer. Not just a convenience store redressed with a new sign.
Our 14 biggest sites in Ottawa are all Tiger Express and have been since last fall as part of a market-wide test.
We are so excited by the results now, we are in the process of a national rollout of the project.
We now have 23 in Toronto, one in Barrie, [Ont.], and [are] on the verge of having about 14 in Vancouver. We’re up in the 40-site range now, and by the end of the year we’ll probably be in the 65- to 70-site range across the country.
Longer-term, in a couple of years, we’ll probably have 250, maybe 300, across our network.
Tiger Express is a key part of our new offer, the value we’re trying to deliver to the customer.
In all locations, we’ll have some form of fast food, express-related fast food. In a lot of locations, that becomes a Tim Horton’s donut offer, in some locations, it will also include pizza. Pizza Hut is one of the partners we’re working with.
We value the Tim Horton’s brand and Pizza Hut, too, because the customer knows what they’re going to get.
Every location will also have an [automated teller] bank machine. People will get to know they’re always there.
In addition, we have a bigger convenience store with a broader range of products.
At most of our larger sites, we will have something called Express Pay, which is a way a customer can activate and pay at the pump with a credit card – an Esso credit card, or Visa, or other valid credit card.
It’s another way of getting customers in and out quickly.
Q. How important is price to gasoline retailing?
A. I don’t know of any other retail business where a customer is mobile, can probably see at any time from their car three or four different price values to choose from.
Price is extremely important in our business. It’s probably more important than it should be, in terms that the customer many times does not perceive the value difference they should between different offers and different types of products.
There’s a good high percentage, about 20%, who will switch for tenths of a cent per litre.
Logic tells you when you do the calculation, that’s not very much change out of your pocket. They could go for better value rather than better price.
Q. Earlier this year, Imperial Oil launched a higher-octane Esso premium gasoline, 92 octane rating rather than 91. Is higher octane important to the consumer?
A. The consumer, if you’ve read the research in Canada, would say gas is just gas. It’s a difficult communication job to convince them otherwise. They’ll learn it over time.
It looks like it [octane] is going to become more important – the quality of gasoline to the high-performance, high-compression engines that the industry is starting to market.
And, the older a car gets, it has a tendency to need more octane.
We’re convinced going to 92 octane was the right thing to do. The 91 wasn’t satisfying enough of the vehicles. Some drivers would notice ‘pinging’ and performance problems at 91 that shouldn’t be there with premium gasoline.
We sold that as part of our ongoing product quality message in a very successful campaign and we have improved the sales of our 92 octane premium.
They [consumers] have to make a choice at the pump. If they don’t make the right choice, they’re probably wasting some money, because if it’s not a high enough octane product, they’ll have inefficient combustionable mileage, maybe environmental problems. If it’s too high, they’re probably just wasting their money.
