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Will Cookies Pump Up Gas Stations?

There are plenty of aromas associated with gas stations, most of them less than pleasant. But customers of United Oil Co.’s stations could soon smell something totally unexpected: freshly baked cookies.

In an effort to boost its margins and differentiate itself from the competition, Gardena’s United Oil, which owns or operates 127 Southern California gas stations under various brands, including Chevron, plans to roll out a line of private-label goods in the stations’ convenience stores this year.

After experimenting recently with branded bottled water, the company intends to sell a variety of treats under the name Zooey’s, including ice cream and, yes, cookies. United Oil is even installing expensive ovens in some locations to bake them in-store.

“I want people to say, ‘Wow, that was a great cookie,’” said Jeff Appel, the company’s vice president. “It creates an incentive to go back beyond the Frito-Lay chips by the door, because you can buy those anywhere.”

United Oil hopes to capitalize on the growing trend toward private-label products, which convenience store operators have pursued to varying success. In 2008, 7-Eleven introduced its 7 Select brand of snacks, beers and cookies. In 2010, BP’s AM PM stores introduced the Good Stuff brand of candies.

Difficult association

Larry Hilton, president of Service Station Consulting Services in West Los Angeles, said that while some stores have had success with private labels, most of the major gasoline station chains have avoided the trend. Not surprisingly, consumers find it difficult to associate tasty food with the name of an oil company.

“The biggest difficulty is letting the public know about the product, convincing them of the quality and getting them to try it,” he said.

United Oil made its first foray into private-label marketing in May when it launched the H2O line of bottled water.

However, it was primarily a charity project, with H2O standing for “Help to Others.” The water sells for 89 cents for a one-liter bottle, with about 18 cents per bottle going to the non-profit food bank Community Distribution Center in Sun Valley. Appel said selling the H2O brand actually cost him money because he gets higher profits on brand-name water sold in his store.

With the push into private-label treats, United Oil will install ovens at five of its stations, including one near Beverlywood and another in West Covina, at a cost of more than $1 million each. Appel admitted that he hasn’t performed a cost-benefit analysis on the investment, but he’s confident the aroma of baking cookies will drive sales.

Flavors will include chocolate chip, oatmeal, nut and rose water, and the estimated price will come in well below $2 per cookie. With the new products, Appel said he hopes to elevate the image of private-label food.

“When you say private label, the connotation is lower end, whereas Zooey’s is higher end,” he said. “If the customers come inside the doors, that would be a business win because now the convenience store has become a destination.”

Making a gas station convenience store a shopping destination could be a tall order, though. Mike Doherty, president of Cole & Weber United, an advertising agency in Seattle that is a division of WPP in New York, said the company is more likely to succeed with the initiative if the presentation and price match consumers’ impulse decisions at the cash register.

“The challenge is to catch their eye quickly and let them know the product’s available and then price it so it fits with their other purchases,” Doherty said. “For United Oil there is an opportunity to marry ice cream and baked goods with something they are already coming in for.”

Competitive style

Service Station Consulting’s Hilton said the gasoline business remains highly competitive, especially for high-volume retailers like United Oil that depend on low prices to draw customers.

But United Oil, which sells gas under the Arco and United Oil brands in addition to Shell and Chevron, has tried to separate itself from the competition with attention-grabbing architecture.

One station on La Brea Avenue in Los Angeles features a ramp that takes vehicles on top of the convenience store to a car wash. Another station has a 26-foot-tall tower decorated with a glass mosaic that suggests a waterfall. Yet another is designed with a Western theme with antique barrels and cigar-store American Indian statues.

Inside, the stores have hand-painted murals, stained-glass windows and Italian floor tiles speckled with mother-of-pearl.

Appel insists good design is also good business. As evidence, he pointed to a station in Compton. He hoped the station would sell 8,000 gallons of gas per day. It now sells 18,000 gallons a day and he attributes the success to its attractive design.

“It’s a low-income area but the people appreciate the station and support it,” Appel said.

The company was started in the 1940s by Appel’s grandfather and it has remained a family business. Today, Appel owns and runs it with his father, Ronald. It has approximately 650 employees.

While the launch of Zooey’s involves risk, the main expense – oven construction – is part of a remodeling program at the five stations that was necessary anyway, Appel said. Remodeling costs will be approximately $4 million per station, including the ovens.

In addition to Zooey’s launch, the company recently signed a deal to serve Wolfgang Puck’s coffee brand and has increased its involvement with local charities, such as the H2O project.

Appel believes the combination of unusual products and upscale presentation will position his chain to grow in revenue and number of locations.

“Four or five years from now, they will be the Trader Joe’s of the gasoline business,” he said. “That means they will provide good value and fun stuff you won’t see anywhere else.”

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