Pros & Cons of Selling Branded vs. Unbranded Fuel
When you enter the fuel industry, there is an important questions to consider: “Will I sell branded or unbranded fuel?” There are distinct advantages and disadvantages of each option. It is essential to fully understand those differences and their implications before starting your business.
Providing over 10 million jobs in the U.S., the oil & gas industry is one of the highest earning global enterprises, with millions of consumers filling up their gas tanks every week. To fill this need, independent gas retailers have been on the rise during the last five decades. These fuel sellers rely on invaluable industry insights to inform their business decisions.
No matter what you decide, to succeed as an independent gas retailer, you need reliable data and insights for your business. DTN FastRacks® helps you gain a selling edge so you can remain competitive for your customers.
Let’s discuss branded vs. unbranded fuel options so you can make the best decision for your consumers.
What Is Branded Fuel?
No matter the industry, there are immediately recognizable brands, like Nike, Target, or Dove. Similarly, certain fuel brands are easily recognizable and trusted by consumers. Take any road trip, and you will see the popular brands of fuel being sold; Shell, Chevron, Exxon-Mobil, and others dot the highways.
These branded fuels start the same as unbranded fuels. The difference is:, each branded fuel contains a proprietary mix of additives (such as antioxidants and detergents) that the brand claims are better for–and increase performance of—car engines.
For example, various brands offer and advertise nitrogen-enriched gasoline specifically designed to clean and protect intake valves and fuel injectors. Whether branded vs. unbranded fuel is better for a vehicle’s engine is essentially a marketing claim. Because of the proprietary nature of branded fuel mixtures, it is nearly impossible to conduct scientific experiments to independently verify that one brand is measurably superior to others in any given engine. In addition, federal and state regulators have established minimal criteria that any retail gasoline must meet in order to be sold. In the end: almost anything a consumer pumps into their car won’t hurt the engine. Of course, consumers should always follow the guidelines of their car’s manufacturer for the best results.
Consumer perception will influence where they are likely to purchase fuel, so it’s important to keep that in mind when choosing a fuel to sell. Retailers might decide to buy branded fuel for a variety of reasons.
Pros of Selling Branded Fuel
There are several benefits of branded fuel. Let’s cover some popular reasons why retailers choose branded fuel.
Available Brand Support
When purchasing from an established brand, independent retailers will often receive a certain level of support, which often include signage and pump maintenance & ownership.
Increased Consumer Recognition
We are often creatures of habit. Consumers can be loyal to a particular brand, and that tendency is consistent when purchasing fuel. When offering a well-recognized brand of fuel, a retailer can increase their perceived value to their customers, and thus increase their sales and revenue.
Cons of Selling Branded Fuel
With the good comes the bad. There are, of course, some negative considerations regarding branded fuel.
Strict Brand Requirements
Because gas retailers that sell branded fuel act similarly to franchisees, they often need to comply with strict policies to continue their association with the brand; including the visual look of the store, or even sales requirements and quotas.
Fewer Negotiation Options
When working with a specific contract for branded gas, there is less flexibility in negotiation for a better price. Even if there are better prices available on the market, retailers that offer branded gas might not be able to take advantage of them, due to contractual obligations.
What Is Unbranded Fuel?
In the U.S., most gas sold in the retail market is from independent retailers, many of which are convenience stores. While some people believe that unbranded fuel is inferior to branded fuel, all fuel sellers, branded or not, must comply with federal quality standards and regulations. This means that certain additives are present in both branded and unbranded fuel, and both fuels have been tested and proven not to be harmful to a vehicle. Of course, some turbo engines require a specific octane level, so always adhere to your vehicle’s owner manual for specific fuel requirements.
Pros of Selling Unbranded Fuel
Now, we will discuss some pros of unbranded fuel. Why do retailers choose unbranded?
Benefit from a Lower Price
Non-branded fuel can be up to $0.15 cheaper per gallon, leading to reduced costs for retailers. Being able to sell their gas for cheaper can also attract more consumers looking to trim expenses, especially during an economic downturn.
Because they aren’t attached to a specific brand, retailers that offer unbranded fuel have more flexibility in the type of fuel they sell. That means they can shop around to find the best price on the market for the fuel they think their consumers want.
Cons of Selling Unbranded Fuel
There are a couple of disadvantages to selling unbranded fuel. They include:
Lower Priority in Fuel Shortages
In the case of a fuel shortage, contracts for non-branded fuel have a lower priority for replenishing than branded fuel, resulting in uncertainty and prices increases in if an outageoccurs.This could prove challenging as COVID-19 continues to change gasoline demand.
Little to No Brand Support
When selling unbranded fuel, independent retailers are on their own. Without a recognizable brand or large-scale advertisements, you will need to have other ways to attract customers to keep your revenues up. This could involve significant investment in amenities offered in your retail establishments, such as food, beverage and restroom options.
Should I Buy Branded or Unbranded Fuel?
After learning and understanding the differences between branded and unbranded fuel, the question remains: which fuel should you buy? As an independent retailer looking to sell gas, you have many factors to consider when choosing between branded vs. unbranded fuel. Both have their advantages, but a lot depends on your specific business goals and needs.
It’s wise to look closely at the requirements associated with selling fuel from a specific brand. If there are sales quotas that need to be met, can you meet them in your location? Are you comfortable with the level of control and authority that the national brand will have on your independent site?
Carefully considering the ramifications of your decision can help you choose what’s right for you and your business.
No matter what you decide, to succeed as an independent gas retailer, you need reliable data and insights for your business. DTN FastRacks® helps you gain a selling edge so you can remain competitive for your customers. Request your DTN FastRacks® demo today.