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L. ratings: 7.3 volts, 80 amps;] 14.9 volts, 40 amps. ASSOCIATED EQUIPMENT CORP. 5170 San Francisco Ave St Louis 15, MISSOUTT Private Brand 'Gas' Same as Major, OFFICIALS of two oil companies -Pure Oil Co. and Sun Oil Co.are trying to prove that private brand gasoline not only is cheaper than major brand gasoline, but that it is just as good. What's more, they are trying to prove that often private brand stations are larger and better than major brand outlets, that they are growing by leaps and bounds, and that their gallonage is far higher than that of major brand outlets. While officials of the two companies testified to this effect in two price discrimination cases under way at the Federal Trade Commission, the star witness was Calvin Houghland, head of Direct Oil Co., which has 108 stations in 9 states. He said the average gallonage at his outlets is 35,000 a month. .} Same Gasoline: Under oath, Mr. Houghland testified as a Pure Oil witness that: "A major company, has what it calls a house brand which is its gasoline. We buy that same gasoline. We buy and sell the house brand gasoline. We buy from Gulf the same gasoline they are selling at their stations. If we buy pre ́mium gasoline from them; it is the same premium they are selling in their stations." Suppliers Named: Mr. Houghland named some of his current suppliers as Gulf Refining Co., Esso Standard Division of Humble Oil & Refining Co., Standard Oll Co. (Kentucky), Cities Service Oil Co., Arkansas Fuel Oil Corp., Republic Oil Co., Delhi-Taylor Oil Co., Ashland Oil & Refining Co., Sinclair Refining Co., and "a number of others." Mr. Houghland added that "the majority" of private brand stations handle the same gasoline as is sold elsewhere under the brand of a major oil company. He said that Esso Standard used to force Direct to buy gasoline with "a little dye, just a little different color, so their dealers wouldn't object to us buying the same gasoline they had." The dye, he said, made “not a bit of change" in the quality, only in the color. Robert L. Piper, hearing exáminer, asked, "Other than Esso the other suppliers sold you exactly the same gasoline that they sell their dealers?" "That is correct," replied the Direct Oil Executive. Bought at Low Price: Mr. Houghland's buying price, however, was well below the posted tankwagon price for dealers han- . dling branded gasolines, he explained in a series of six exhibits. The exhibits gave full details of the profit and loss picture, the ́ margins, the selling prices and the gallonage in 1955 and 1956 at three Direct stations in and near Birmingham, Ala. The figures indicate that Mr. Houghland was buying regular gasoline for as much as 7 cents a gallon below the posted tankwagon prices for the area. Mr. Houghland said he bases his. marketing policies on the theory. that his gasoline "is as good" as that sold at branded outlets. "Our customers think it is as good," he said. Private Brander Gives Information HERE ARE the inside facts about one station of the Direct Oil Co., as submitted to an FTC hearing. They show that in 1956, an outlet in Birmingham sold 535,800 gallons of gasoline, at an average margin for regular and premium of 7.7 cents a gallon. Station profit for the year came to $15,454, after paying for heat, light, supplies, and the salaries of the station manager and employees. The table indicates the price the Direct outlet paid for its products in that it shows Direct's selling price and its average margin. This indicates it was buying gasoline in 1956 at as much as 6 and 7 cents below posted tankwagon prices of major companies in the area. only through its dealers, for two` reasons, he went on: 1. Sun does not want to "undermine the health of our dealers," and 2. Sun feels the prices to private branders would have to be "three, four and five cents a gallon less than we would realize at the tankwagon level." Mr. Horrocks admitted the private brand buyer who picks up the gasoline saves the refiner delivery costs, but explained that this is only 0.2 to 0.4 cent a gallon. As an example of the price differential, he said that Crown Central was selling to Stallings, a private brand operator at Norfolk, Va. at 3.15 cents a gallon off tankwagon on regular and more than that off on premium gasoline. Pure Oil and Sun Oil have been -accused of "predatory practices" in trying to lower prices to 1 cent above those of private brand outlets. They are trying to prove to the FTC that the private brand does not need a 2-cent differential. 'Differential Not Needed': Mr、 Houghland, whose testimony was that the private brand operator is a big boy who can stand on his own feet, said a 2-cent differential, enforced by antitrust agencies "would be a license to steal" for the private branders. Officials of some private brand outlets disagree, however. Mr. Houghland said Direct has outlets in Tennessee, Kentucky, Alabama, Georgia, Florida, North Carolina, South Carolina, Virginia and West Virginia. Trick of the Trade: One of the tricks of the private brand operator in checking on his competitors, is to count cars turning in and multiply them by 6.4 gallons, the average fillup, he said. A private brand operation can and often does boost sales at a sta tion, both Mr. Houghland and the major company officials agreed. Sales Increases Cited: Mr. Houghland said he bought a station from Pure, at Asheville, N. C., which was doing 8,000 gallons a month and raised it to 42,000. Direct bought a station from Texaco, Inc., at Waynesville, N. C. which was doing 7,000 gallons a month, and raised it to 22,000. Direct bought an outlet from Pure Oil at Cleveland, Tenn., and raised it from 6,000 gallons a month to 21,000 gallons a month. Direct bought a station from Cities Service Oil Co., at Tarrant City, Ala., and raised it from 9,000 to 36,000 gallons a month. · Switch to Major Hurts: While a major brand station can increase its sales by switching to a private brand, the reverse is not true, according to Mr. Bules. Mr. Bules testified that after Pure Oil bought the Benzoco private brand chain in Akron, O., about 1953, sales dropped off more than 20 percent. He said Pure Oil changed the brand name to Pure Oil over a one year period, switched to lessee dealer operation, and saw posted prices rise to the "equal" of most major brand postings. At the time of purchase, the chain handled 6,100,000 gallons a year. Last year, these same stations ran a little over 5,000,000 gallons," he said, despite a 3.5 percent a year increase in the Ohio market. Salos Factors Given: How does Mr. Houghland explain the gain from private brand operation? First, he feels that brand name does not mean " a great deal" in selling of gasoline. Factors that count, in order, are: 1. Location. 2. Price. 3. Service, "wiping windshields, speed in and out, greeting customers by name." He said Direct stations don't wash or grease cars, "just sell gasoline and oil and give good, fast service." 4. Physical size of the property. He used to look for 60 to 70 feet of frontage, now seeks 150 to 200 feet for fast service. Direct uses aggressive marketing methods, and the average station will change its price 12 to 15.. times a year. About 80 percent of Direct stations use trading stamps under ."our own plan." Direct stations team up, at times, to give away an automobile, and they sell cigarettes and other "come-on" items at cost. Then, there are "weekend sales" when Direct stations cut prices` late Friday, after major company offices are closed, and raise them again Monday, before they open. This is "a private brand gimmick" that builds up sales on Saturday and Sunday. Finally, Direct stations sell at 1 to 3 cents a gallon below prices at major brand stations. Mr. Houghland discussed his theory of the salaried operator versus the lessee dealer. "We have managers for our stations and if his business is bad, he still gets his salary. I would say that our station manager has security and a major oil company dealer really doesn't have security. "He invests his money and, just as I have, he can lose money. If our station loses money, our manager still gets his salary." Pure Oil has asked similiar facts and figures from other private brand operators in the Birmingham, Ala., area, where Pure is accused of the "predatory" practices. Sales Figures Differ, The U. S. Census Bureau is trying to explain a large difference in two separately-determined figures on the dollar volume of re tail sales at U. S. gasoline stations in 1958. It may be the end of the. year before the answer is found. The first figure came in the "Retail Trade Annual Report—1958.” This put the sales at $15,758,000,000. A similar figure for 1959 is about $16,759,000,000. In another count, the U. S. Census of 1958, the volume is put at $14,241,000,000 for 1958. The difference between the two figures is $1,517,000,000, on the order of 10 percent. Each of the figures comes from the Census Bureau The larger figure is based on information obtained from a sample of gasoline dealers. The smaller figure is based upon a complete check. |