Supermarkets Expanding Brands By Filling Tanks and Carts

NEW YORK–As gas prices nationwide continue to hover above the $1.50 per gallon figure, supermarkets and mass retailers increasingly are finding that the way to consumers’ wallets is through their gas tanks.

Kroger, Albertson’s, Safeway, Costco, Wal-Mart, Kmart, Meijer and H.E. Butt will control 74% of hypermarket gasoline sales and 16% of total gasoline sales with approximately 7,000 combination retail/gas locations by 2005, according to a just released study by Energy Analysts International, Westminster, Colorado.

There currently are about 1,250 such hypermarkets nationwide. Wal-Mart pumps fuel at 356 of its 2,600 U.S. stores. Costco sells gas at 125 of its 265 U.S. sites. Albertson’s has 181 gas stations throughout its 1,600-plus chain. Safeway operates gas stations at 100 of its 1,700 stores in North America, mostly in Texas, Washington and Canada.

Fifteen U.S states have laws prohibiting below-cost sales of gasoline, and another 17 have laws restricting below-cost sales in general, according to Energy Analysts. Still, both Albertson’s and Safeway have announced plans to expand their hypermarket outlets. Albertson’s is “exploring the market now to try to find appropriate locations.” Safeway already has several new sites planned for California, which is among those states where stringent regulations have kept hypermarket numbers to a minimum. “We hope to draw new customers to Safeway because of the value price they will pay for fuel,” said Safeway spokeswoman Debra Lambert.

Supermarkets and mass merchandisers can sell gas for less–by as much as 50 cents a gallon–by signing their own deals with refiners and by selling mass volumes of fuel. According to Energy Analysts, “If they sell a lot of gasoline, they don’t need to make much money on every gallon.”