The battle for market share got interesting last month when Energy Petroleum in St. Louis, Missouri aligned with Shell. In the process, a number of significant events occurred. The first is that Energy Petroleum, a Signature Class Chevron marketer, walked away from Chevron to become a Shell "Alliance Distributor." Alliance distributors are the Crème de la Crème of the Shell distribution network. They are the ones who commit to Shell and its family of brands. By committing, an Alliance Distributor agrees 80% of its sales will be with Shell. This commitment also means that the Alliance Distributor cannot have any other major brand contracts. They can, however, still sell private label and/or OEM brands in bulk. Clearly, this meant Energy Petroleum had to make a choice between Shell and Chevron in order to be a Shell Alliance Distributor.
The immediate impact of Energy Petroleum's choice is that it will be working to convert its Chevron sales to Shell. Further, since Energy Petroleum parted ways with Chevron, other distributors will be vying to get close to Chevron with hopes to pick up Chevron's national account business in the region.
But the story does not end here. This is because in addition to these events, Shell also changed its relationships with four other marketers in the region. Three were moved from direct Shell marketers (the old-style contract) to become an "associate marketer." This means that although they can still represent themselves as Shell marketers, they will likely, for all intents and purposes, be a sub-jobber buying from Energy Petroleum. The fourth distributor impacted by the change moved from the old-style contract to become an "Authorized Distributor."
Whereas these changes will likely drive swings in regional sales volumes, they appear to also be creating some unintended consequences. In short, this is because some Shell distributors with old-style contracts who see what happened in Missouri are now expressing fears they may find themselves relegated to Associate status. Additionally, some new Authorized distributors are concerned they may suddenly find themselves with a new and unexpected Alliance distributor inserted into their market, thereby eliminating their access to any new National Account business.
As a result of these concerns, there is a growing chorus of Shell marketers asking, "Whereas we have, or are being asked to commit to Shell, will they remain committed to us?"
No doubt after getting to this point in the story, some are now asking, so what's new? This happens all the time, marketers have been aligning with majors for many years and they have always felt some level of vulnerability in the process.
In fact, those asking this question are right; Energy Petroleum's alignment is not unusual. Instead, it's just one more example of a natural evolution taking place in the lubricant supply chain and the growing pains and gains that go with it. Just as Shell will win some from Chevron, Chevron will win some from Shell, and others majors and marketers will continue to choose to align with one supplier over another as time goes on.
So why is Energy Petroleum's alliance with Shell newsworthy? Well the answer is; this move is bigger than most. Moreover, it serves as a reminder to majors and marketers that no relationships are guaranteed. Because of this, neither the majors nor the marketers should become complacent in their relationships.
Major-marketer relationships require continuous investment to assure alignment of business plans and principles. If these become misaligned, the majors and marketers can either work together to bring them back in line, or run the risk of watching their relationships fall apart. And in reality, if they can't be aligned, both the major and the marketer may be better off going their separate ways.
At the end of the day, business relationships work best when both partners are aligned in their culture and objectives. When that happens, both the marketer and the major have the best chance of an effective, productive, and sustained relationship.