GAS STATIONS FUEL GROWTH FOR K-VA-T FOOD STORES

DAN ALAIMO

CHICAGO -- K-VA-T Food Stores, Abingdon, Va., is steadily moving ahead with installing fuel centers in its Food City parking lots and may eventually sell gas in more than half of its locations, said Louis Scudere, vice president, research and site development, during the Food Marketing Institute show here.

K-VA-T now has 21 fuel centers, two locations are under construction "with tanks in the ground," and three more are in the design stage, Scudere told SN after a workshop on "Petroleum Marketing," which he moderated. The chain has 86 stores. "We've been putting them into almost all of our new construction except where site characteristics might prohibit it. Then we will probably do one or two retrofits a year," he said.

Retrofits take more time, he said, "because you have to get into zoning and landlord issues that you can usually address on the front end of a new operation."

The viability of a fuel station "is very much real-estate driven. In some places, you are landlocked and there is no way to put one in."

But fuel has become an integral part of K-VA-T's marketing mix, he said. "Realistically 50%, or maybe as many as 70% of our stores could end up with fuel at some point in the future." Scudere would not pinpoint a timetable for the installations. The retailer installed its first fuel center about three years ago, he said.

Scudere also would not say exactly how much K-VA-T is paying for the fuel centers, although he did discuss costs in general. An unattended site where the fuel is purchased in the store can cost as little as $150,000, while an attended operation with a canopy starts at $250,000. For operations like Albertson's, Boise, Idaho, which include a 3,000 to 4,000-square-foot convenience store, "my guess is that is running them somewhere around a million to a million-and-a-half dollars per site," Scudere said.

"So you can go from simple to very elaborate. It just depends on how you feel you need to represent yourself in the market," he said.

K-VA-T's installations are somewhere in between, with six fueling positions, a 28 by 80-foot canopy, and an 8 by 10-foot kiosk, which is staffed by an attendant, he said. In the kiosk, the retailer sells cigarettes, soft drinks, some candy and automotive products like motor oil and window-washer fluid. Bulletproof glass helps protect the attendant in case of safety threats.

Supermarkets can realize as much as a 20% sales uplift by installing gas stations, said Joseph Leto, president, Energy Analysts International, Westminster, Colo., a speaker on the workshop program. But Scudere would not divulge K-VA-T numbers, saying only, "We feel like there has been an uplift.

"For the first three years, we were content to try to understand the fuel business and understand the operations of the fuel centers. We wanted to become, hopefully, state-of-the-art fuel center operators. Then from that point, we are beginning to take the next step and integrating that operation into our stores," he said.

A frustration has been finding a vendor that could integrate the stores' point-of-sale system with that of the fuel center so that the retailer could use a loyalty card program to generate more crossover sales, he said. "Within the next six to 12 months, I think there are going to be some very viable retail solutions out there that are going to have the ability to integrate the fuel center and the in-store operations on the loyalty marketing level, and allow the operator to leverage that to a synergistic relationship," Scudere said.

Some supermarket shoppers don't patronize the fuel pumps, while some gas customers don't come into the grocery store. "Whatever we can do to drive whichever business the way that we need to drive it to optimize that asset utilization is what we need to do."