CORPORATE CASE STUDY: Local approach helps Shell assume Texaco's place

With its exclusive rights to Texaco's brand ending next year, Shell is concentrating PR efforts locally in order to win public and owner acceptance as it converts numerous stations.

With its exclusive rights to Texaco's brand ending next year, Shell is concentrating PR efforts locally in order to win public and owner acceptance as it converts numerous stations.

Thousands of service stations across the country are playing a complex Shell game: Now you see Texaco signs at the pumps, now you don't. But keep your eye on the ball - Texaco will return. Until July 1, 2004, Shell has exclusive rights to the Texaco brand in the US, and its PR arm is helping the company race against the clock to convert the choicest stations to Shells before ChevronTexaco can once again use the last half of its own name. Of course, the situation begs the question why ChevronTexaco would temporarily abandon such an entrenched and beloved brand. "It just seems to be a waste of something it took years and years to build up," observes Julian Read, chairman of GCI Read Poland. Read, who remembers when Texaco sponsored Milton Berle on TV, is watching the conversion take place in Austin. "Companies spend untold millions to build a brand. To throw it away consciously is almost unheard of." That answer shows the complexity of the merger-happy oil and gas business. Mergers and marketing In the late 1990s, growing retail competition prompted Shell, Texaco, and Saudi Refining to form two marketing partnerships. Shell and Texaco combined their refining and marketing in a company called Equilon in the West and Midwest, and Saudi Refining joined both in Motiva, a similar alliance in the Eastern and Gulf states. Houston-based Equiva provided marketing and other services for both ventures. Then Texaco and Chevron merged. Federal regulators worried about market dominance, particularly on the West Coast, with Texaco, Chevron, and Shell so closely aligned. "The FTC has to get its pound of flesh," explains Fadel Gheit, a senior energy analyst with Fahnestock & Co. In this case, the agency forced ChevronTexaco to sell its Equilon and Motiva interests. Equiva/ Equilon melded into Shell Oil Products US, which also manages Motiva, now a 50-50 partnership between Shell and Saudi Refining. Shell probably wouldn't have taken over Texaco stations without the FTC's ruling. The Shell brand had lost some of its luster in the US, and the company had been paring down its network to focus on the most profitable locations. Shell Oil Products US is a domestic subsidiary of the global Royal Dutch/ Shell group. Elsewhere, the parent company developed its Global Retail Strategy (GRS) to evaluate markets and decide which stations to keep and revamp, and which ones to shed. Also crossing the Atlantic was Shell's Retail Visual Identity (RVI) program, aimed at sprucing up and standardizing Shell stations worldwide. With so much on the table, including various "upstream" exploration and production issues, Shell brought some of its best talent to Houston, including Australian Russell Caplan as retail VP. SVP, corporate affairs/human resources Roxanne Decyk came from London. "Twenty-eight percent of the group's assets are here," says Decyk, explaining her reasons for moving to Houston. The company hired Fleishman-Hillard shortly after ironing out acquisition details with ChevronTexaco in late 2001. Shell issued a couple of national press releases about the conversion, but opted against a national PR push. Given the project's magnitude, the company chose to localize its rebranding. This also gave GRS' team a chance to evaluate each market beforehand. "Shell and Texaco have nearly twice as many stores as McDonald's in the US," explains brand and reputation manager Rick Wirth. The market-by-market strategy is logistically necessary, and low-key national announcements keep conversions from becoming old news when the process begins in each city, he adds. As many as five headquarters PR people, six or seven Fleishman employees, and a few regional Shell spokespeople work on the conversion at any given time. "We're doing outreach and, in many cases, acting as spokespeople in [local] markets," says account leader Larry Meltzer, SVP and senior partner/GM of Fleishman's Dallas office. Before, during, and after With conversion launched in 38 markets and scheduled for more than 50 in 2003, the communications format has distilled into a template with before, during, and after phases. Early on, the PR team sends letters to community opinion leaders explaining the process. Shell also identifies station owners or wholesalers who plan to convert, provides them with a little media training, and features them in local press releases. Shell spreads the word that Texaco customers will get Shell credit cards, and it uses rebranding press releases to plug a just-launched MasterCard that offers gasoline discounts. The initial media blitz comes when the first store in a market begins conversion, and TV stations often use Shell's flashy b-roll. Stories in Texaco-heavy markets often lead with the brand's demise, but the "Shell is coming" message pops up too. "They both work," Wirth says. To maintain interest during the conversion, Shell promotes $10,000 gas giveaways and sponsors its Extreme Yellow contest, through which winners in each market get a year's gas supply and a trip to Yellowstone National Park by coming up with the most creative use of the company's signature color. "After" plans haven't been nailed down because conversion has not wrapped up in any of the markets yet, but Shell will likely focus on social responsibility programs, says Wirth. At the outset, some 9,000 Shell stations and 13,000 Texacos populated US streets and highways. Shell sold more gas through its fewer locations, however. When ranked by volume sold, Shell hits number one with about 10% market share, while Texaco sells about half as much. When the conversion is done, 13,000 to 15,000 US stations will carry the Shell brand, Wirth says. The rest will be closed or their independent owners will choose to buy gas from other suppliers. A relative few will remain Texacos. "They're cherry picking," Gheit says. "They are taking the nuggets out of the Texaco assets, but they have to run against the clock." Independent owners run most stations being converted, and some chose not to go with Shell. Nearly 95% of those targeted for retention have committed to switch, however, Wirth says. Station by station communications Shell's relationships with stations vary widely. It owns some and leases them to operators, hires managers to run others, and supplies branded gas to independently owned stations. Communication with stations is just as diverse. For example, representatives of two stations in Read's older, affluent Austin neighborhood voice vastly different opinions about the conversion. Both are also atypical for the region, and for Shell's preferred format: They are neighborhood gas stations without convenience stores that offer auto repair and both self- and full-service pumps. One station is owned by Shell (once Equilon) and leased to an operator. "Shell did a good job of converting us with as little disruption as possible," states manager Veldon Lemens. Down the street, the status of an independent Texaco remains uncertain. "They've sent us letters a few times, but haven't given us much information," says Carol Wright, who works at the family-owned station. She thinks her husband will switch and is expecting a contract soon, but hasn't heard many details. "We're in limbo," Wright adds. Meanwhile, reports of Texaco's death are exaggerated. ChevronTexaco still operates stations in Europe, West Africa, Latin America, and the Caribbean, and last fall announced that it plans to resume selling retail gas under the Texaco brand in the US when it regains the right to do so. Company spokeswoman Nicole Hodgson says ChevronTexaco is already discussing options with retailers in the Southeast. "It would be silly for a company to purposefully kill a brand," Gheit says of Texaco's inevitable revival. He compares Shell to a grocery-store sweepstakes winner who must fill a shopping cart before the buzzer rings. "You have to pile up as much value in the cart as you can when they say, 'Three, two, one, go,' knowing that the rule of the game is that by midnight, it's no longer yours." ----- PR contacts Corporate affairs and human resources VP Roxanne Decyk (reports to Rob Routs, president of Shell Oil Co.) Communications director George Smalley Social responsibility and sustainable development director Rene Gibson Brand and reputation manager Rick Wirth Media relations and external affairs manager Tim O'Leary Government affairs VP Nela Brown Outside agency Fleishman-Hillard Budget $650 million to upgrade Shell stations and rebrand Texaco stations. Percentage assigned to PR is undisclosed

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