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Growth & EV Charging Strategy with Parkland USA
4 Plays2 years ago
PetrolPlaza spoke to Doug Haugh, President of Parkland USA, while at the NACS Show 2022 in Las Vegas. We discussed the growth of the company in the U.S., strategy for EV charging and the importance of food.
Transcript
Introduction and Swipe Fees Discussion
00:00:05
Speaker
Welcome to the Petro Plaza podcast, where we talk to industry leaders about hottest topics around fuels, convenience and carwash.
00:00:16
Speaker
where we look at the service station of today and tomorrow. So I'm here with Doug Haag, the president of Parkland USA. We've just seen an incredible session along with Toyota. We even had a senator here to talk about the issue of swipe fees, which we know in the US is a really big topic for the
Market Activities and Expansion Plans
00:00:39
Speaker
industry. I wanted to take a deeper look into what Parkland is doing right now. You've been very active in the market.
00:00:46
Speaker
through a number of acquisitions. You've started expanding. Well, in Canada, you're already one of the leading players, but you've started to expand in the US more. And it also seems that you've focused your kind of C-Store concept on the run after the acquisition. So can you just talk us through some of these major movements that you've done in the last years, and what is kind of the general strategy of Parkland in the US? And if you want to touch on Canada as well, that would be great. Right.
00:01:15
Speaker
Obviously have been in building a business across Canada for for the last decade in particular 2,000 sites across Canada coast to coast we like to say 90% of Canadians live within five clicks of one of our stores So we have pretty good coverage across the country, although, you know always work to do In the US it's been much more of a focused effort. We have acquired 20 companies in the last year
00:01:39
Speaker
probably 36 to 40 months. So we now have 212 of our own stores, we have 445 dealers that we supply and work with every day, as well as a large commercial business. So we're also a big player in the diesel business, both at truck stops and car locks, as well as, you know, backyard and sort of commercial customers at their property.
00:02:01
Speaker
So we like to work on both sides of the gas diesel balance. And yes, and we've got a big focus on electrification and servicing the growing base of EV customers that we know are coming.
US Operations and Electrification Focus
00:02:15
Speaker
And we have a very unique, a lot of what we talked about at the conference here today was sort of the unique opportunity we have in British Columbia where it's sort of a microcosm of the future because we have almost 20% of the cars being sold now are EVs.
00:02:30
Speaker
So it's a really good chance for us to learn from the leading edge, understand how to service those customers, understand the infrastructure we need, understand the site experience, the real estate that's necessary, the technology we have to integrate. There's a lot to do, but we're very excited about the opportunity.
00:02:48
Speaker
Before we move into the topic of electrification, which is part of the presentation today, and it's a fascinating one.
Cultural Integration Post-Acquisitions
00:02:55
Speaker
I wanted to ask, you know, through all these acquisitions that you've done, one of the challenges is how to unite all those brands and that culture. So what can you say about that? Well, I think, you know, it does start with people and culture. And we have a very intense focus on our people and their communities. So one of the things that we've
00:03:14
Speaker
really built across the company is a team that's focused on the team. I always tell people team first. You can't take care of a customer if you haven't taken care of each other. And so we have a group of employees and teammates and associates that make it their job.
00:03:30
Speaker
to integrate the new employees, the new teammates. It's not some integration team's job. It's not just the leadership's job. It's every employee at every level, at every store, every branch, every dispatch hub. You know, because I can stand up there and say that all day long, but if they don't feel that welcome from the guys or gals sitting next to them, then it doesn't carry a lot of weight, right? So we found that that's really sounds super simple and obvious, but it's the most important part of making integration work.
00:03:57
Speaker
Because I think in Canada, it's different because you're so settled in the industry. But when you come into the US with hopes of, I guess, being a major retailer, you've got stores all over the US, which is already quite ambitious. Normally, it's more localized in the US.
00:04:13
Speaker
I guess you need to use everything because there's so many great brands in the U.S. when it comes to the convenience store industry. So what do you think are the key points that you need to make sure you have the highest standard to be able to compete in such a dynamic
Growth Strategy in Target Markets
00:04:26
Speaker
market? No, I mean it's and we're you know I think we are distributed across the U.S. but our strategy has been much
00:04:34
Speaker
very tightly focused. It's not obvious if you just look at the map, right? But if you look at why we bought those businesses, where we bought them, and how the businesses they were in that we incorporated into our operations. We run more in markets that are
00:04:52
Speaker
are rapidly growing. So we like to be in markets where there's new customers every day because we are going to be faced with this EV transition and it introduces a lot of uncertainty. There could be demand destruction. We know there's going to be demand destruction just from fuel economy improvements. And so if you look at our markets across Idaho, we made big investments last year in Idaho. Well, people don't realize over the last 10 years, the fuel demand in Idaho has doubled.
00:05:17
Speaker
So there are lots of new customers. Same thing in Miami, one of the fastest growing cities in the US. It's the capital of the Caribbean where we have investments in 23 countries. A lot of our staff comes in and out of Miami. So it's really made a ton of sense for us to be there and it met the customer profile that we really want to service. The other thing that we do is we are
00:05:41
Speaker
We are vertically integrated on supply, right? So we run ships, we run a refinery, we run some pipelines. So the physical supply is a really important dynamic to us. And we like to be in markets where that pays, right? And that typically is in markets where it's hard.
00:05:57
Speaker
So we want to be in growing markets that are also hard to supply. And when those dynamics come together with good regulation, good governance, fundamental underlying economies, strength of the economy in that market,
00:06:15
Speaker
That's why we're in Idaho, that's why we're in Utah, that's why we're in Northern Arizona, that's why we're in Miami. And you'll see us continue to invest in those markets. So it is widespread geographically, but it's actually narrowly focused in terms of what we're investing in and why.
00:06:31
Speaker
Yeah, I think that's really interesting because if you're able to survive and be successful in harder markets, then that's lessons that you can take not only to other parts of the US, but to other countries in the Caribbean or otherwise.
EV Charging Strategy and Market Position
00:06:45
Speaker
Talking about lessons that you can bring from one place to another, in Canada, you've announced and established a very clear intention of being a big
00:06:56
Speaker
EV charging player. I think recently you announced that you wanted 100 ultrafast chargers and we know that some parts of Canada could be similar to California maybe in terms of the mindset of society. So what can you tell us about these plans to become a major charging player and how does that go into the traditional fueling business?
00:07:21
Speaker
I mean, one, we have a unique opportunity to have sort of a living lab where in British Columbia, we're now one in five cars being purchased off the lot as an EV. You add that up, there's a lot of new customers to service. There's not a lot of infrastructure. So we think that being early to that equation is gonna pay off in spades because once people find a reliable place to meet this need,
00:07:47
Speaker
We think that could be a very sticky customer long-term. We've invested a ton of work in our loyalty program to make sure that the experience is fully integrated. It's not like some chargers at the back of the lot, or it's not line of sight, it's not brightly lit, there's no canopy. I mean, we just think those days are way behind all of us, hopefully, and that that doesn't really meet the customer need. They want the same type of bright, safe, secure experience that they have in our modern forecourts today. So we're very focused on that experience.
00:08:16
Speaker
And it just gives us a place to perfect this offering that has enough liquidity. You need reps, right? Practice counts. And this gives us a chance to do enough sites, enough chargers serving enough customers to really understand what works before we try to accomplish the same type of offering in the US. Fortunately, again, the markets I mentioned that we're in in the US are going to be slow to adopt EVs, right? They're more distributed.
00:08:46
Speaker
or they're politically, you know, motivated the other direction. I mean, there's all kinds of inputs to the equation from a customer decision standpoint. But, you know, we're not in California and we're not going to be in California because one, it's a different type of competition. The government is very hostile to our industry there. So it just doesn't make sense for us to invest where, you know, a lot of the States we are in, you know, are welcoming the investment with open arms. They want to grow.
00:09:12
Speaker
They have great regulation, good governance, and a growing population. So we're very thankful to have the opportunities we do in a province like British Columbia to work with regulators, work with utilities, work with the government to really figure out this balance that's going to be needed to make the transition.
00:09:32
Speaker
It's a great advantage, right? You could say the same for, for example, Circle of K having such a big presence in Norway. So they're basically playing in this field that is way ahead. I mean, one out of five in British Columbia is a really high number. It's almost similar to the ones in Scandinavia.
00:09:51
Speaker
And talking about that experience, I feel like the charging customer is not going to be as forgiving
EV Charging Customer Expectations
00:09:58
Speaker
as maybe other type of customers. When they go to a site and they don't have a positive experience with charging, I think there's going to be a big no to return to that site. So it probably makes sense what you were saying of, if you're going to do it, do it right, which is something that you mentioned. Yeah, don't disappoint. I mean, that first impression is important in all things with customers and people, right?
00:10:19
Speaker
make sure your first impression doesn't stink. And these things are the reliability on these chargers, particularly the high-speed ultra-fast chargers, is not something to be taken for granted at all. They are actually, they take as much maintenance or more. We've perfected fuel dispensers over the past hundred years. I mean, you just beat the heck out of them and they just work, right?
00:10:43
Speaker
These chargers are not at that level of reliability. They're not at that level of maturity in terms of product. So it's going to take a commitment to reliability. I mean, we're starting to monitor, you know, the sites around us where there is offerings in our markets today. And the uptime that we see is atrocious and customers are reflecting that. And they're very vocal about it because this is a digital experience through and through. So they're finding your site using locators or their car screen, you know, we'll direct them to available chargers.
00:11:10
Speaker
And then when they show up, and a lot of times they're not the most convenient location because they're not ubiquitous. So they may have driven across town or across their neighborhood and not just stopped on the way, you know, where they normally would be able to stop. So the fact that they go to that extra effort and then you're not reliable for them is really going to be penalized, we think, by the customer. And, you know, as you said, a much kind of a higher, more demanding customer than maybe what we have in the field business today.
00:11:38
Speaker
Another thing that you mentioned I thought was very interesting in the presentation, which I'd already seen as the competition that Parkland kind of partook in or supported with, I think it's called Electrify
Innovating EV Stations of the Future
00:11:51
Speaker
Canada. Electric autonomy, I think it was? Yeah. Where basically a number of architecture studios presented designs for the electric station of the future. I had a look through them. There were some fascinating concepts. So one thing that I thought
00:12:07
Speaker
It's interesting that you said this how through this new segment, you actually got the participation from many people across industries to come in. And I think that's fascinating, especially as I think a lot of people who are studying architecture or digitalization have right now some kind of deterrence from what would be a traditional fields industry. However, they're very motivated by this other segment. So I think competitions like that can actually bring in lots of really interesting ideas.
00:12:35
Speaker
for this kind of multi-energy, multi-service hub of the future. It was an amazing experience for us. I think if we would have went to this same group of architects and said, hey, take your precious time and spend on helping us build a better gas station or even a better convenience store.
00:12:52
Speaker
I have many more important things to work on. But given this opportunity to work on the EV station of the future, the response was almost overwhelming. We were completely blown away by the level of engagement, the level of creativity.
00:13:07
Speaker
The passion that these folks brought to the project, it was hard to pick a winner because we had so many great designs submitted. But it was a good lesson for us in sort of, hey, let's open our eyes and our arms and our vendor base to a much broader spectrum of the economy that
00:13:31
Speaker
As you said, if we went to them with our traditional business, they would probably ignore us. But there's a lot of excitement around this topic. There's people willing to put time and effort and passion into it. And I think if we can bring that creativity and innovation into our business, we'll be far better for it. And I think just a lot of that will bleed across to our store designs in the base case, where there hasn't been a lot of innovation for many years in many, many countries, some there has.
00:13:55
Speaker
But, you know, I think, you know, when you look at Canada, you look at parts of the U.S., it's a pretty standard box in most cases, right? So we think there's a tremendous opportunity for innovation both architecturally, technically, you know, user experience, loyalty that really goes far beyond what our industry offers today.
00:14:14
Speaker
Well, as somebody who's half Scottish, I was quite happy that the one who was a Scottish company.
Diversifying with Food Services and Digital Platforms
00:14:20
Speaker
As a final question, I wanted to say, we're getting increasing competition from, as we diversify the business with better food service and now all the types of energy, our competition also increases. And as we think about these mobility energy hubs, what kind of services are you looking at that you think will be the differentiating factor
00:14:44
Speaker
against the competition from all sides, not only another energy retailer, but maybe another cafe. We do think food is the biggest differentiating point. We recently made a $350 million investment in a food company in Canada called M&M.
00:14:58
Speaker
that I don't know as an American, but Canadians all know that brand. It's been revered across the country for many, many decades. And they've recently gone through an incredible transformation in their business with their retail experience around food. And we think that we needed to find the level of expertise and scale in food that we couldn't build on our own. So we acquired that. That team is now working with our store designers and our merchandisers
00:15:25
Speaker
And our category manager in a very integrated effort to totally transform how we look at food service and the experience of food that customers have at our sites. So I think that's a big one. I think the other one is we have an incredibly untapped opportunity around the digital experience itself. We have the most convenient locations, the most convenient real estate. So the ability to expand our digital reach into that domain with loyalty and with geolocation apps and that whole digital customer experience platform
00:15:54
Speaker
is really gonna open the Vista for us to offer all kinds of new products and experiences in the most convenient place to get them, right? Because eventually, even though it's digital, you do physically need to get the product, right? Or experience the service. So, you know, that's where we think we can add tremendous value to the real estate investments we've made by having the best corners at main and main and the, you know, densest part of town with the most activity or the, you know, the great exit off the interstate where travelers are gonna come through and need all kinds of services.
00:16:24
Speaker
We just see tremendous potential upside for our business. We're here at the NAC show. It's the first official day of the trade fair.
00:16:33
Speaker
Do you have your eye on any specific technological developments? I'm more of a junkie for the food side. So I'm always looking for the latest trend that we can put on an end cap and blow out of the stores that people are just dying to have. And there seems to be a new one every year. So I'm always hunting for that hot product. All right. That's great. Well, it's great to have you here on Pedro Plaza, Doug, and enjoy the rest of the show. Thanks, Oscar. Really appreciate it.