Growing Minnoco gas station brand is fueled by independent operators

The gas station at Penn Avenue and 67th Street in Richfield has carried various names over the past 50 years — Conoco, Mobil, U.S. Oil and others — as owners changed or marketing contracts lapsed.

Now, after two decades of local ownership by businessman Mark L. Olson, the station has been reborn as a local brand: Minnoco.

Across the Twin Cities region, 19 independent gas station owners like Olson have become Minnoco retailers in the past two years, freeing themselves from big oil companies while cutting costs and launching group marketing efforts. More Minnoco stations are coming.

"This is bringing together the independent operator that can't put ads in the newspaper or on radio and TV," said Olson, who converted his station to Minnoco in early August. "It brings everyone together to market the brand just like an SA [SuperAmerica] or a Holiday. That is what we are trying to do."

Under the business model, station owners invest in their own station refurbishments and engage in joint marketing. Minnoco offers coupons for discounted gas and other products via newspaper inserts, social media, e-mail and minnoco.com. It plans an instant rewards program and a fundraising effort for a breast cancer charity this fall.

The model is similar to that of Spirit, a nationwide brand created by a petroleum marketing group. Four of the 210 Spirit-branded stations are in Minnesota.

Minnoco was created by the Minnesota Service Station & Convenience Store Association, an industry trade group. Lance Klatt, executive director, said the goal is to get at least 50 stations under the Minnoco brand.

"We can market our brand how we want," Klatt said. "It is a business model that makes sense. There are a lot of independent retailers that are hungry for a new image, the opportunity to control their own brand and to bring new fuel to the marketplace."

The stations also gain from the buy-local movement. "You look at the logo and you know it is a Minnesota company," said Michael Porter, an adjunct faculty member in marketing at the University of St. Thomas Minneapolis campus.

And in a nod to renewable fuels, Minnoco's mostly green logo features a plant leaf.

Renewable fuel is an important piece of the Minnoco story, and it underscores the changing landscape of gasoline retailing.

All but two of the Minnoco stations sell "Unleaded Plus," or E15, a blend of 15 percent ethanol and 85 percent gasoline that can be used in 2001 and newer cars and trucks. The price typically is 10 cents less than regular fuel, which is 10 percent ethanol.

The ethanol industry has been trying to get more gas stations to sell E15, but it's a challenge because oil companies have little incentive to upgrade pumps for renewable fuel blends that cut petroleum's market share. So ethanol and corn-producer trade groups now offer grants to help stations with pump upgrades to sell a range of ethanol blends

"It's cleaner and it's cheaper and the performance and fuel mileage is the same as regular gasoline if not better," said Joel Hennen, who owns the Shakopee Minnoco station and is chairman of the Minnoco board of directors.

Big oil companies like BP, ConocoPhillips and ExxonMobil once owned gas stations, but have divested them over the past decade. Their names remain on about half of the nation's gas retailers because they fund station improvements under long-term marketing deals.

Minnoco stations aren't the only ones getting help from the renewable fuel industry to introduce E15, and higher ethanol blends like E30 and E85, which are for flexible-fuel vehicles. Mike O'Brien, vice president for market development at Growth Energy, an ethanol industry trade group, said other U.S. regional retailers adding such blends are Sheetz, Kum & Go, and Murphy USA.

"In order to get E15 into the marketplace, you have to go around the established markets," said O'Brien, who is based in Minnesota.

Soon E15 will get another push from the U.S. Department of Agriculture, which is handing out $100 million in grants to upgrade 4,880 of pumps across the country. Of 21 states tentatively approved for grants last week, Minnesota is slated to get the third-largest share, enough for an estimated 620 pump upgrades.

Station owners cite other benefits of severing alliances with big oil companies.

One plus is that stations are free to purchase gasoline from wholesalers at market prices generally lower than those offered by big oil brands, they said. This helps the stations compete against other convenience store chains, which already benefit from wholesale purchasing.

At major-brand stations, the independent owner is "essentially obligated to buy their gas and you can be roped in for seven to 15 years," said Rick Bohnen, who converted one of his two stations on Penn Avenue in Minneapolis to a Minnoco. His other station is a BP.

Bohnen said Minnoco stations also get a break on credit card swipe fees, which can be a major expense at stations, typically costing 2.5 percent of every sale.

Porter, of St. Thomas, said that rebranding under the Minnoco logo can help station owners avoid the fallout from disasters like the 2010 BP Deepwater Horizon explosion and oil spill in the Gulf of Mexico or the 1989 Exxon Valdez tanker grounding and oil spill off the coast of Alaska.

After such disasters, some consumers turn away from that oil brand, choosing to fill up elsewhere.

"Minnoco is closer to a hometown brand, and it is less likely to take the backfire from a Deepwater Horizon spill," Porter said. "You are insulating yourself from that kind of backlash."

David Shaffer • 612-673-7090 Twitter: @ShafferStrib