United Oil Co. was known for decades as a small, Gardena-based chain with a few dozen gas stations notorious for their funky designs.
That began to change three years ago, after an acquisition that tripled the company’s gas station count.
The renamed United Pacific became the largest independent gas station/convenience store chain in the Western U.S. The company, now based in Long Beach, operates stations under the 76, Conoco and Shell flags, as well as its own United Oil brand, which was retained as a matter of consumer
marketing.
The company reported annual revenue of more than $3 billion in 2013, which put it at No. 8 on the Business Journal’s most recent list of the largest private companies based in Los Angeles County.
The revenue number has most likely more than doubled since United Pacific’s huge 2015 acquisition, but company Chief Executive Joe Juliano declined to disclose specific financial details. More growth, however, is planned – Juliano said he’s out to double the company’s size again, hoping to operate roughly 750 stations.
“Our goal is to be the chief acquirer and consolidator in the Western U.S.” Juliano said.
Deep pockets
United Pacific has plenty of financial wherewithal to make deals. Its ultimate owner is Tokyo-based telecom holding company and investment powerhouse SoftBank Group Corp., which reported $84 billion in revenue last year and $231 billion in assets.
Softbank got Pacific Oil when it paid $3.3 billion for New York-based private equity firm Fortress Investment Group in 2017. Fortress, with about $70 billion in assets under management, had acquired a majority stake in what was then United Oil in 2014 on undisclosed terms.
Juliano said Fortress provided the majority of capital for a string of acquisitions and operations, including the purchase of Pacific Convenience & Fuels of Pleasanton and its 251 stations in mid-2015 for an undisclosed sum. United Oil had about 120 stations at the time, so the acquisition tripled its size and preceded the rebranding as United Pacific.
The company has been eyeing potential deals for sites in northern California, Colorado and other western states but will keep its powder dry on the acquisition front for now, Juiliano said.
“The market is pretty frothy right now – there’s lots of interest in these types of assets,” he said “Valuations and purchase prices have been bid up. But when the right deals at the right prices come along, we’ll be ready.”
The company is meanwhile putting millions of dollars into upgrades of the convenience stores at its stations – as much as $250,000 a pop at larger sites. United Pacific operates convenience stores through the I Got It!, Food Mart, My Goods Market and Circle K brands.
Margins for the company’s fuel business have been slowly increasing since the oil market crash three years ago, but there’s now greater opportunity at the on-site convenience stores.
“Retailers might make about 5 cents off each gallon of gas after expenses, but they can make 50 or 60 cents off the sale of one fountain beverage inside the store,” Linda Lisanti, editor-in-chief of Convenience Store News, a Chicago trade publication, said in an email.
Upscale upgrades
Lisanti said it has proven difficult for many of the nation’s 122,000 gas-station-based convenience stores – 8,200 of those in California – to remain relevant amid changing consumer tastes.
“It remains an industry challenge to get consumers from the fuel pump into the convenience store,” she said.
Some convenience store operators have gone more upscale in bids to lure customers.
“High-quality foodservice – which includes both prepared foods and dispensed beverages – is quickly becoming a must to stay relevant and competitive,” Lisanti said. “Many retailers have gone from offering traditional roller grill programs, to made-to-order foodservice concepts. Coffee, too, is being elevated, with some retailers offering made-to-order lattes and mochas prepared by staff baristas.”
Juliano said many of the larger stores at United Pacific sites have added kitchens where customers can place orders and have items made fresh for them in a short period of time – akin to a fast-food chain restaurant. Many also have added cappuccino machines.
More convenience store changes are likely very soon, including automated check-out kiosks, he said. That’s a trend on the East Coast, where Sheetz Inc. of Claysburg, Penn. and Wawa of Media, Penn. have had kiosks for at least 20 years, according to Jeff Lenard, vice president of strategic industry initiatives for the National Association of Convenience Stores in Alexandria, Va.
Juliano said United Pacific may even institute home delivery service soon.
“Home delivery mobile apps could soon begin to eat into our customer base, so we’re looking at getting into that business ourselves, possibly in partnership with an eatery or deploying our own fleet,” he said.
Lenard said many convenience store chains are eyeing home delivery, which he termed “last mile” service. He noted that Irving, Texas-based 7-Eleven Inc. has home delivery at some stores.
Gas margins rise
Margins on fuel sales continue a long bounce back from the oil market crash of 2014-15, said David Hackett, president of Stillwater Associates, an Irvine-based transportation fuels consulting firm.
That in turn has boosted cash flow projections and valuations, he said.
Both Juliano and Hackett said the 12-cent-a-gallon hike in the gasoline tax at the pump that went into effect last fall throughout California to raise funds for road repairs has had little effect on sales volumes.
“The tax was implemented at a time when fuel was at 10-year lows,” Juliano said. “If gas prices were to go up past $4 a gallon, I think we would start to feel that a little bit more.”
