Esso to serve up Tim Hortons

"They have gotten out of mufflers and tires, and into doughnuts and hamburgers," said Bill Simpkins, spokesman for the Canadian Petroleum Products Institute, an oil industry association. The motivation isn't hard to fathom: Mr. Simpkins said a litre of gasoline nets a retailer a profit of about a penny.

The Globe and Mail
March 27, 2002

Esso to serve up Tim Hortons
Firms sign exclusive kiosk arrangement
Patrick Brethour

CALGARY — Esso gas stations across the country are adding a new kind of fuel to their product mix — soup and sandwiches.

Imperial Oil Ltd., majority-owned by Exxon Mobil Corp., and Tim Hortons yesterday unveiled plans to set up 300 food kiosks in Esso's "On the Run" major service stations by 2005, as both firms try to transform the neighbourhood gas station into a lunch destination. "This is dashboard dining," said Imperial Oil spokeswoman Sarah McLaren, adding that 18 kiosks have been set up since December.

Imperial Oil's deal with Tim Hortons, a unit of Wendy's International Inc., is the latest step in the oil industry's push to wean itself from its dependence on the slim profit margins of retail gasoline sales. The exact percentage of non-gasoline sales is a closely guarded secret, but the abundance of convenience-store items, baked goods and snacks makes it clear that the industry is deriving more revenue — and profit — from those sources than ever before.

"They have gotten out of mufflers and tires, and into doughnuts and hamburgers," said Bill Simpkins, spokesman for the Canadian Petroleum Products Institute, an oil industry association. The motivation isn't hard to fathom: Mr. Simpkins said a litre of gasoline nets a retailer a profit of about a penny.

Other gasoline retailers offer hot food in some locations, but the scope of the 10-year pact between Toronto-based Imperial Oil and Tim Hortons is far more ambitious, expanding on a relationship dating from the early 1990s that allows Tim Hortons to sell beverages and baked goods in Esso stations.

The new arrangement is exclusive, preventing each firm from inking a similar deal with the other's competitors. The total number of food kiosks far exceeds any current setup or announced plans from Imperial's rivals. Once completed, kiosks will account for one in 10 of all Tim Hortons locations.

Even more significantly, the new kiosks will be a different kind of creature than many of the current fast-food/gas pairings on major Canadian highways. Esso and Tim Hortons said they will install the kiosks in gasoline stations in big cities, taking aim at hungry consumers hustling to complete weekend errands as well as lunch-time business during the week.

The two firms are even hoping to attract walk-in lunch business, a major step away from the roots of the service station. "We are really turning into convenience retailers who just happen to sell gasoline," said Imperial Oil's Ms. McLaren.

The deal allows Tim Hortons to expand its reach into prime locations at a relatively low cost, said Patti Jameson, spokeswoman for the national fast-food chain.

Retail marketing consultant Len Kubas, of Kubas Consultants in Toronto, said the pact with Esso will also give Tim Hortons customers access to parking spots in urban locations, something that many of its current stores don't offer. He said the pairing of Tim Hortons and Esso should prove popular among drivers, but he also said he was not so sure whether much walk-in traffic will be generated.

Mr. Kubas said Imperial Oil's competitors will be watching the new stores closely as they formulate their own plans.

Petro-Canada said yesterday that it recognizes the "huge growth potential" of the market, but did not have any immediate plans to follow Esso's lead. Of PetroCan's 1,600 retail locations, 33 have an A&W Food Services Canada kiosk.

Shell Canada Ltd. of Calgary said it has no wide-ranging partnership with a national fast-food vendor for its 2,000 retail outlets. And Suncor Energy Inc. said it plans to continue its limited collaboration with Country Style Food Services Inc., which has sold coffee, baked goods and prepackaged sandwiches in some Sunoco retail outlets since the late 1990s. "We're looking at keeping things very simple," said Neil Levine, spokesman for Sunoco, a subsidiary of Calgary's Suncor.


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