OPIS In-Depth: QuikTrip Move to Denver Could be Lucrative

Watch for “new era” retailer QuikTrip to make a huge splash when it debuts new stores in the Denver area. In addition to status as a high-growth market, with a lot of smaller format major brand stations, the Denver area is a hotbed for discounted rack prices, a study by OPIS notes. It has not been unusual for the first 100 days of this year to see unbranded gasoline deals at double-digit discounts to OPIS Low numbers, and wholesale diesel offerings are also among the most competitive in the Rockies.

QuikTrip’s focus on Colorado intensified when the state moved to a full hearty beer in January, and indeed the company is also likely to increase its Kansas store count now that the state has moved from a 3.2 beer as well. Quik Trip has 38 stores in the Wichita metropolitan statistical area (MSA) as well as 24 sites in the Kansas City, Kan., area.

But Colorado is virgin territory for QuikTrip. The Denver region has regularly been one of the fastest-growing MSA’s in the country this century, with a population that will soon cross 3 million. One recent seven-year stretch saw the city add 100,000 residents.

What might marketers expect? OPIS reviewed the roll-out of multiple QuikTrip stations in North Carolina, and observed the chain initially selling unleaded for an aggressive 5.05cts/gal below the competition. Now that the brand has been well received in that state, that price edge has narrowed to about 2cts/gal below others.  On a nationwide basis, QuikTrip tends to price its fuel at 1.5cts/gal below average competition.

Overall, Quiktrip’s 800+ stores have a national market share of 3.25% and OPIS calculates a market efficiency rating of 4.6, among the best in the business. (Market efficiency is a rating that takes the market share and divides it by the percentage of sites a chain operates. A company with a 10% market share and 5% site total would have a market efficiency rating of 2).

Sources suspect construction on some stores will begin later this year. QuikTrip grows through new builds and hasn’t expanded through acquisitions in about 50 years. The chain has had people looking at real estate in Colorado since the middle of last year.

What will they find in Denver? According to OPIS’ MarketSharePro, the following companies represent the primary competition:

Many retailers do considerably better than a simple glance at rack and retail numbers might indicate. As OPIS was going to press, we saw some multistate marketers buying Denver unbranded gas for 13-14cts/gal under the OPIS Low Posting.

QuikTrip’s supply people have a reputation as some of the most efficient buyers in the business, with a large presence in the Group 3 market where they are shippers on pipelines. Denver gets some of its supply from Group 3 refiners, but the most attractive deals are often from local refiners.

The threat from QuikTrip would appear to be most severe to major flagged stations. For example, Denver has 241 stations with either the Conoco or Phillips 66 flags, and those properties don’t have the efficiency of QuikTrip and are unlikely to match the chain’s street offering. Smaller format stores that fly Sinclair, 7-Eleven, Exxon and Mobil flags might similarly be targeted.

There are eight Costco locations in the Greater Denver area, but conference calls from that company do not suggest that the area is set for any further expansion shortly. You can’t beat Costco on the street there since they tend to price at 13.38cts/gal below the retail average. Similarly, Sam’s Club has six locations and they tend to price at 11.86cts/gal under average numbers.

Colorado marketers don’t believe QuikTrip will only concentrate on the Denver area. The Colorado Springs MSA ranks as the 18^th fastest-growing MSA in the country and can be supplied from Denver area racks.

--Tom Kloza, tkloza@opisnet.com

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