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Retaining North Atlantic brand could be in the cards for Irving

Memorial University business professor says clustering of gas-retail outlets could be what company wants

Next to a driver’s license, there’s probably nothing in a person’s purse or wallet that could identify them as a Newfoundlander more than the Yay! card that comes with membership in the loyalty program at North Atlantic gas and retail outlets.

For those wondering whether the card will have any long-term purpose if Irving Oil’s recently announced purchase of North Atlantic Refining is approved, there’s at least one business and marketing expert who believes you could be collecting Yay! points well into the future.

“That Orange brand has to be an attractive one to Irving, and if they look at themselves mainly as suppliers (to stores) rather than as owners, I think they’ll be OK with keeping that brand,” said Tom Cooper, an associate professor in strategic management at Memorial University’s faculty of business administration.

In all, North Atlantic has 52 retail locations across the island of Newfoundland. Some are owned by the company. Others are operated in partnerships or — in the case of the 24 Orange Stores, the company’s retail centrepieces — through franchising.

“As a network, it’s had real growth, especially when it comes to those Orange Stores,” said Cooper. “It’s been well-managed. When you look at (North Atlantic’s) downstream operations, and their distribution around that, they’ve done very, very well.

“It’s a Newfoundland and Labrador success story.”

Irving has 57 retail locations in the province, highlighted by Circle K convenience stores and, in few case, Big Stop restaurants and truck stops,

In many areas, especially along the Trans-Canada Highway, Irving and North Atlantic retail locations are in close proximity, almost on top of each other. Examples would be Deer Lake, where an iconic Big Stop is pretty much across the highway from a year-old Orange Store, and Clarenville, where a longstanding Big Stop overlooking the community is only separated from another relatively new Orange Store by a Tim Hortons restaurant.

“I think there are lot of people driving by those two gas stations and wondering what it’s going to look like a year from now,” said Clarenville mayor Frazer Russell.

Cooper thinks it could look the same because of the advantages of what is known as retail clustering.

It’s what draws many fast-food chains to the same short strip of a street or highway and creates the so-called “auto rows” of car dealers.

And in many cases, what might seem to be competing businesses are actually all owned by one umbrella company — KFC/Taco Bell/Pizza Hut in fast foods (Yum Brands!); East Side Mario’s/Kelsey’s/Milestones/Montana’s/The Keg in Canadian sit-down restaurants (Recipe Unlimited) or The Gap/Old Navy/Banana Republic in retail clothing.

Locally, the Steele Auto Group would be an example, with well over a dozen different car-makers being represented in its showrooms in Atlantic Canada, and their dealerships located just about one after another on Kenmount Road in St. John’s.

“With the cluster theory, you have companies that are complimentary or even competitors who are located near each other and people learn, over time, if you want that kind of product, that’s the area where you go,” said Cooper.

“If I am driving across the province and I come to Deer Lake, where there are a number of choices for gas stations, where I stop might depend on what else I want. If I want something to eat, a burger, a piece of pie and a coffee, it might be Irving. But if it’s a slushy I’m craving, it could be the Orange Store.

“Competition, especially in that kind of environment can be a good thing for business, and in that instance, it would be more than complimentary if it turned out it’s the same owner of different stores.”

The orange of North Atlantic outlets has become familiar to Newfoundlanders since 2003 when Petro-Canada sold its retail operations to North Atlantic, then owned by Vitol, a Geneva-based firm. The petroleum company has changed hands a number of times since, but the retail brand has endured locally. And while ownership has been Swiss, Korean, or in the case of New York hedge fund managers Silverpeak — which has the sale deal with Irving — North Atlantic has seemed distinctly Newfoundland, especially since the brand is nowhere else.

“When I was growing up, it was Esso that had that kind of network, that presence and brand loyalty, but now, it seems to be Irving and North Atlantic, at least in Newfoundland,” said Cooper, noting there are long stretches of the TCH — Clarenville to the eastern approaches of Gander, for example — where only those two companies have on-the-highway gas/retail locations.

“They are also not always close to each other like in Clarenville,” said Cooper, “and that has to be a consideration for Irving, too.

“If I was going to be build a gas station, I’d to have to follow all the guidelines, all the regulations, environmental and otherwise, just to get to get those tanks in the ground.

“So, if you are looking to grow even more in the market, it’s almost easier the way Irving is would do it through this sale.”

For the past decade, a co-branding deal has seen Irving-owned retail locations run by Alimentation Couche-Tard, a Laval, Que., company that operates thousands of stores globally through similar arrangements with other partners.

That’s one difference from the set-up at North Atlantic locations. Another is that many Orange Stores share the same property with adjacent Tim Hortons. In the case of the Clarenville Orange Store, there is a Quiznos on site.

Still, Cooper sees it as something that could work for Irving, which already expanded in Newfoundland and the Maritimes less than two years ago with the purchase and/or rebranding of more than three dozen stores that had been working with the Ultramar brand.

“A company like Irving, they say to their partner ‘here’s the gas, here’s the propane, and as long as you keep paying us, then everything is OK.’”

Cooper says Irving’s intentions for North Atlantic’s retail arm would obviously be clearer if there were more details of the pending sale, particularly of how Irving has valued the different components — North Atlantic’s idled oil refinery at Come by Chance, the retail outlets and the home/commercial heating oil section.

Newfoundland and Labrador's Natural Resources Minister Siobhan Coady has said it could take two to three months for the transaction to pass through the regulatory approval process, including being vetted by Canada’s Competition Bureau.

Twitter: @telybrendan

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