September 28, 2006
Politics Play a Part in 7-Eleven’s Decision to Drop Citgo
Venezuelan President Hugo Chavez called George W. Bush the devil. Now it might be said that 7-Eleven is telling Citgo, a subsidiary of Venezuela’s state-run oil company, that it can take its business and go to the place where the real devil resides.
The convenience store chain announced it was ending its 20-years plus relationship with Citgo to launch its own brand of fuel. And 7-Eleven officials, according to The Associated Press, were at least partly influenced by the U.S./Venezuelan acrimony of late.
“We sympathize with many Americans’ concern over derogatory comments about our country and its leadership recently made by Venezuela’s president,” said 7-Eleven spokesperson Margaret Chabris.
“Certainly Chavez’s position and statements over the past year or so didn’t tempt us to stay with Citgo,” she said.
While Mr. Chavez’s remarks about Mr. Bush brought extra attention to 7-Eleven’s announcement, it was not the reason behind the decision to seek other fuel suppliers, said Tom Kloza, director of the Oil Price Information Service.
“This has nothing to do with Chavez,” said Mr. Kloza told The Associated Press. “They (7-Eleven) just didn’t want to be tied to one supplier.”
7-Eleven, he said, was looking for suppliers who would sell it gas at a lower cost and “that was not Citgo.”
According to The Associated Press, 7-Eleven will now purchase fuel from several distributors. The company pumps gas at 2,100 of its 5,300 stores in the U.S.
Discussion Questions: Do you think politics had a significant role in 7-Eleven’s decision to end its relationship with Citgo? What will 7-Eleven’s decision
mean for its business? Will other gas retailers doing business with Citgo follow 7-Eleven in finding other suppliers?
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I have no clue why 7-Eleven dropped Citgo. I do know that they should pay their PR firm a bonus. If you haven’t seen it multiple times already, their is a “don’t buy Citgo gas” email coming soon to an inbox near you! And I’d bet my Kellogg marketing degree that the demographics of the 7-Eleven consumer and the people forwarding that email look like a DNA match that even the Los Angeles County Prosecutor could get a conviction with.
Gasoline, like all commodities, is largely purchased at wholesale based on 2 criteria: price and reliability of supply. Although many supply chain experts suggest simplification by reducing the number of suppliers, sometimes it’s safer to to have more than 1 source. And suppliers need to be wary of depending on too few key customers. If Citgo could guarantee 7-Eleven the lowest gas prices everyday, would Citgo spokespeople make political comments? If Citgo wants the highest price possible for its gas, can it expect the loyalty of its wholesale customers? And how many gasoline suppliers can guarantee a supply solely from domestic and Canadian sources? Do wholesale customers care which hostile country their supplies originate from? And what about American oil suppliers who make no secret of their contempt for George Bush?
A decision of this magnitude would have had to have been in the works, or at least under serious consideration, for more than a week. However, the comments that Chavez made may have tipped the scales or hastened the announcement.
7-Eleven’s decision to drop Citgo had nothing to do with politics. Saying it does just gets them free advertising. Whole Foods did the same thing when they decided to drop money losing lobster tanks but said they did it because it was cruel to lobsters. I would bet anything that if Citgo cut their fuel prices in half tomorrow, 7-Eleven would jump right back in bed with them regardless of what names they called our president.
Thanks, 7-Eleven, for taking a stand regardless of the motivation. There was a time when Southland Corporation owned a major share of Citgo, the amalgamation of the old Cities Service, Sinclair Oil, and some dogs & cats. I fondly recall our marathon planning sessions at Southland each Spring to determine how to position price increases for the Summer vacation season. Ah, the American way.
So what’s the fallout? Positive stock price movement for 7-Eleven and their new suppliers and negative movement for Citgo. One more reason to renew domestic oil exploration and begin building nuclear power plants again. And, hopefully, one more wake-up call to develop realistic alternative energy sources that do not require more fossil-fuel power to create them than they provide (hello!, hydrogen). One can hope. One can hope.
Looks like a good, old-fashioned business decision to me (with a little top-spin, PR-wise because Hugo Chavez & Venezuela are front and center in the news cycle). The management team is apparently is trying to: cut costs, get out of a single-source vendor situation and establish their own 7-Eleven branded gas – all good operations decisions it would seem. And they are getting media attention which will create extra public awareness.
7-Eleven’s decision to drop Citgo was in the works due to Citgo exiting select markets. Is this a political decision? Yes and no. No, as it relates directly to the action/grandstanding by its leader. Yes, when this type of action is a good indicator for future supply disruption. All retailers demand and must have consistent merchandise supply. One key element all the major suppliers have in common from the 30s and 40s is consistent supply. They delivered on their promise. 7-Eleven is prudent to find new suppliers.
The change by 7-Eleven had to have been planned for some time and with Citgo’s connection to the Venezuelan flame thrower, it was timely PR to communicate the planned change and convert it into a “good deed.” How oft the sight of timely means to do good deeds makes deeds done good.
I just returned from the GMA Merchandising, Sales and Marketing Conference where VP of Enterprise Procurement for 7-Eleven, Denis Wojcik said that the decision was based on research that showed consumers didn’t, by and large, realize or care that Citgo was the brand they sold. Apparently, they feel they will do just as well with 7-Eleven branded gas.
Political or not, this is exactly one of those moments when a company needs to seize upon an opportunity such as the Venezuelan nut offered them. Americans will almost always back any entity that seemingly resists buying products from extreme anti-American sentiment. This is easy PR.
The Association is just covering for an industry that is always in the grey area when it comes to business practices. Also, this gets 7-Eleven’s name out there talking about their new brand. BTW, having multiple options for buying fuel is by far the best way to go regardless if they’re severing ties with Citgo or anyone else.
I’ll be the contrarian here: I think it was foolish for 7-Eleven to link this change to the turmoil involving Venezuela. They’re much better off telling the (probable) truth, i.e., that they feel they can serve customers better using their own brand. Customers will appreciate this, yet they might not appreciate a retailer who changes things around purely (or supposedly) for political reasons.
This was a business decision with a great PR spin. This has been in the works for more than a year. There is no way that this could have been accomplished in the short time that Chavez called Bush the devil. Score one for the 7-Eleven PR department. They even got us to talk about them.
7-Eleven made a great move here for a few key reasons…The #1 reason is their gas supplier is a very volatile, unstable source based on the new leadership in that country. #2; They were planning to take this route anyway, so the timing gave them additional positive PR which is always a plus, and could translate to consumer appreciation and enhanced loyalty.
Given the instability and volatility of the leadership there, more sanctions and less business with them for all of the US is a positive; and 7-Eleven will get positive marks for starting that initiative.
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I have no clue why 7-Eleven dropped Citgo. I do know that they should pay their PR firm a bonus. If you haven’t seen it multiple times already, their is a “don’t buy Citgo gas” email coming soon to an inbox near you! And I’d bet my Kellogg marketing degree that the demographics of the 7-Eleven consumer and the people forwarding that email look like a DNA match that even the Los Angeles County Prosecutor could get a conviction with.
Gasoline, like all commodities, is largely purchased at wholesale based on 2 criteria: price and reliability of supply. Although many supply chain experts suggest simplification by reducing the number of suppliers, sometimes it’s safer to to have more than 1 source. And suppliers need to be wary of depending on too few key customers. If Citgo could guarantee 7-Eleven the lowest gas prices everyday, would Citgo spokespeople make political comments? If Citgo wants the highest price possible for its gas, can it expect the loyalty of its wholesale customers? And how many gasoline suppliers can guarantee a supply solely from domestic and Canadian sources? Do wholesale customers care which hostile country their supplies originate from? And what about American oil suppliers who make no secret of their contempt for George Bush?
A decision of this magnitude would have had to have been in the works, or at least under serious consideration, for more than a week. However, the comments that Chavez made may have tipped the scales or hastened the announcement.
7-Eleven’s decision to drop Citgo had nothing to do with politics. Saying it does just gets them free advertising. Whole Foods did the same thing when they decided to drop money losing lobster tanks but said they did it because it was cruel to lobsters. I would bet anything that if Citgo cut their fuel prices in half tomorrow, 7-Eleven would jump right back in bed with them regardless of what names they called our president.
Thanks, 7-Eleven, for taking a stand regardless of the motivation. There was a time when Southland Corporation owned a major share of Citgo, the amalgamation of the old Cities Service, Sinclair Oil, and some dogs & cats. I fondly recall our marathon planning sessions at Southland each Spring to determine how to position price increases for the Summer vacation season. Ah, the American way.
So what’s the fallout? Positive stock price movement for 7-Eleven and their new suppliers and negative movement for Citgo. One more reason to renew domestic oil exploration and begin building nuclear power plants again. And, hopefully, one more wake-up call to develop realistic alternative energy sources that do not require more fossil-fuel power to create them than they provide (hello!, hydrogen). One can hope. One can hope.
Looks like a good, old-fashioned business decision to me (with a little top-spin, PR-wise because Hugo Chavez & Venezuela are front and center in the news cycle). The management team is apparently is trying to: cut costs, get out of a single-source vendor situation and establish their own 7-Eleven branded gas – all good operations decisions it would seem. And they are getting media attention which will create extra public awareness.
7-Eleven’s decision to drop Citgo was in the works due to Citgo exiting select markets. Is this a political decision? Yes and no. No, as it relates directly to the action/grandstanding by its leader. Yes, when this type of action is a good indicator for future supply disruption. All retailers demand and must have consistent merchandise supply. One key element all the major suppliers have in common from the 30s and 40s is consistent supply. They delivered on their promise. 7-Eleven is prudent to find new suppliers.
The change by 7-Eleven had to have been planned for some time and with Citgo’s connection to the Venezuelan flame thrower, it was timely PR to communicate the planned change and convert it into a “good deed.” How oft the sight of timely means to do good deeds makes deeds done good.
I just returned from the GMA Merchandising, Sales and Marketing Conference where VP of Enterprise Procurement for 7-Eleven, Denis Wojcik said that the decision was based on research that showed consumers didn’t, by and large, realize or care that Citgo was the brand they sold. Apparently, they feel they will do just as well with 7-Eleven branded gas.
Political or not, this is exactly one of those moments when a company needs to seize upon an opportunity such as the Venezuelan nut offered them. Americans will almost always back any entity that seemingly resists buying products from extreme anti-American sentiment. This is easy PR.
The Association is just covering for an industry that is always in the grey area when it comes to business practices. Also, this gets 7-Eleven’s name out there talking about their new brand. BTW, having multiple options for buying fuel is by far the best way to go regardless if they’re severing ties with Citgo or anyone else.
I’ll be the contrarian here: I think it was foolish for 7-Eleven to link this change to the turmoil involving Venezuela. They’re much better off telling the (probable) truth, i.e., that they feel they can serve customers better using their own brand. Customers will appreciate this, yet they might not appreciate a retailer who changes things around purely (or supposedly) for political reasons.
This was a business decision with a great PR spin. This has been in the works for more than a year. There is no way that this could have been accomplished in the short time that Chavez called Bush the devil. Score one for the 7-Eleven PR department. They even got us to talk about them.
7-Eleven made a great move here for a few key reasons…The #1 reason is their gas supplier is a very volatile, unstable source based on the new leadership in that country. #2; They were planning to take this route anyway, so the timing gave them additional positive PR which is always a plus, and could translate to consumer appreciation and enhanced loyalty.
Given the instability and volatility of the leadership there, more sanctions and less business with them for all of the US is a positive; and 7-Eleven will get positive marks for starting that initiative.