A message from Alabama’s Petroleum Marketing Industry
Members of the Petroleum & Convenience Marketers of Alabama (P&CMA) operate in every part of the state, and economic activity here would come to a standstill without them. Yet, P&CMA members remain relatively low profile, and maybe that’s a sign of a job well done.
The P&CMA has more than 225 member companies, comprised largely of wholesalers and retailers of petroleum products, commonly known as “jobbers” and convenience store owners and operators. The association also includes businesses that supply products and services to jobbers and c-store owner/operators. That includes a range of products and services – from soft drinks and grocery items, to companies that install gasoline pumps, sell insurance and perform environmental services.
The scope of business conducted by Alabama convenience stores is enormous. According to the National Association of Convenience Stores 2023 Impact Report:
- Alabama has 3,683 convenience stores that employ 59,296 people
- Convenience stores in Alabama do 3,719,830 transactions per day
- Total sales for all stores combined are $17.5 billion per year; of that, in rounded numbers, $13.5 billion is for motor fuels, $5.7 billion is for merchandise and $1.1 billion is for food service.
- Total motor fuel sold is 5.4 billion gallons annually
- Taxes collected for governmental agencies exceeds $3.9 billion annually
- “Swipe fees” paid to credit card processors exceed $335 million
According to the American Petroleum Institute, the cost of crude oil represents 62 percent of each dollar of gasoline sold at the pump. Refining costs and excise taxes account for another 24 percent, leaving 14 percent for transportation and retailing costs. After taking operating expenses into account, the margins for retailers is minimal. A typical misconception, however, is that convenience store operators are sharing in the profits of “major oil companies,” especially when gasoline prices are high. Nothing could be further from the truth. In Alabama, store owners are most typically independent, locally owned Alabama family businesses, often in the second or third generation. The sign out front just means they are in a franchise-type arrangement with Chevron, Shell, or whomever. It’s no different than a Chevrolet dealership or State Farm Insurance agent.
No product on earth generates more competition than a gallon of gasoline so in today’s environment, convenience stores have been forced to find ways to improve their margins. Fountain drinks and coffee, for example, present opportunities for additional margin. Delis and other “ready to eat” food options also capitalize on the trend of more people grabbing meals on the run.
Today, it is not uncommon for a typical convenience store to carry more than 5,000 different products. In the past, stores would stock carbonated soft drinks. Now, customers expect energy drinks, sports drinks, flavored waters, and a huge variety or RTD alcoholic beverages. Add in bottled water and pre-packaged coffee and teas and suddenly you are dealing with a huge inventory category.
In this competitive environment, retailers must pay close attention to reasons profit margins are squeezed. What rings the convenience marketer’s bell loudest are credit card transaction fees. As mentioned earlier, Alabama’s convenience retailers paid more than $335 million in credit card fees last year alone. What is especially troublesome to retailers is that credit card fees increase when the cost of products rise, yet retailer margins do not. To illustrate, a typical credit card fee is 2 percent of the total amount of the sale. When gasoline is selling at $2 per gallon, the credit card fee would be 4 cents. But at $3 per gallon, the fee rises to 6 cents. On the other hand, the convenience store’s profit margin is based on a fixed amount, not a percentage meaning the net impact to the retailer is significant.
Nevertheless, P&CMA members remain committed to their industry, their state and their customers. We’re proud to be “Fueling Alabama.”
FAST FACTS
- 2 Billion Gallons The amount of beer sold by U.S. convenience stores each year, or one-third of all beer purchased in the United States.
- Three to Four Minutes Average amount of time it takes a convenience store customer to enter the store, make a purchase and depart.
- Mom & Pop Shops at 74%, Alabama has one of the highest percentages of one-convenience-store operators in the country.
- 80% Percentage of all fuel sold in the U.S. that is purchased at convenience stores.
- Caffeine Fill-Up Convenience store customers purchase coffee more often than gasoline.
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