Rick Mikesell of Cummings Oil Co.
Investing in Family Futures
From the second floor window of the new Cummings Oil Co. building in Albany, president Rick Mikesell looks across the tranquil waters of Waverly Lake at one of the greatest threats to his family's 100-year-old business - the gas pumps of Costco.
Though the Costco station's spreading canopy is barely visible through the bare winter branches, Costco's gas queues are rarely out-of-sight or out-of-mind for Mikesell.
"That's one of the things that keeps me awake at night," he said. "When Costco, Safeway and Fred Meyers started selling gas back in 2000 and 2001, we took a nosedive. They can afford to sell gas below cost as a loss leader, just to get people into the store. How can you compete with that?"
For Mikesell, that question was not rhetorical. It was a question that had to be answered - and he had to answer it. At stake was the future of what was then called Cummings Transfer Co., founded as a freight hauler in 1901 when there were more horses than cars on the road.
Mikesell's grandfather, Ken Edick, bought the company in 1950. When he died in a car accident in 1978, the company passed to his son in law Rich Mikesell. When his son , Rick, graduated from OSU in 1987 with a business degree, he went to work for the family company. Then in 1997, Rich, the company's patriarch, fell ill with cancer at age 57. He tapped Rick to succeed him just a week before his death.
"I lived in fear that I would take over this 100-year-old company and run it into the ground in two years," Rick confided.
Focus on Family
In the fiercely competitive retail oil industry, where profit margins are razor thin - usually less than 1 percent - Mikesell needed a strategy that could carry the family business forward. His family and the families of 230 employees' were counting on him.
"This company is a means for me to support my family and for our employees to support theirs," Mikesell said. "When we talk to potential employees, we look for people who are motivated to work for their families."
Mikesell and his wife, Shelli, a former OSU cheerleader, have four children - two girls (ages 11 and 12), and two boys (ages 7 and 3). Though he works long hours, he makes time to coach his girls in basketball and his son in Pop Warner football on the Mighty Mite Cowboys team.
Beating the Squeeze
Mikesell inaugurated his sudden presidency by streamlining operations. He promoted lifelong employee Bob Sannan to General Manager, and together they tackled fundamental inefficiencies that had been vexing the company for decades.
"We were always getting squeezed," Mikesell recalled. "We were collecting payment in 30 days, but we had to pay out in 10, so we had to borrow. There was a lot of pressure from the banks to improve operating efficiency. For the first three or four years, Bob and I worked 12-hour days to straighten out the operations."
They not only closed the payment gap, they reversed it. Thanks to electronic transfers, Cummings Oil now collects in just three days. Monthly financial reports, which once took six months to prepare, now are ready for review in 15 days.
Mightymarts
But no amount of operational fine tuning could compete with below-cost sellers like Costco. So for six months in 2002 Mikesell and Sannan worked with a business consultant to create a strategy that would shift Cummings Oil away from head-to-head competition with giant retailers.
The 2-inch thick business strategy that emerged was risky - so risky the bank initially balked at it. Cummings Oil would sell off low-volume stations along Interstate 5 and on the coast. With those proceeds plus several million in loans, they would buy Chevron's retail stations in Eugene and Salem. The stations would join their Albany and Corvallis properties under the "mightymart" brand. The stations would barely break even, but they would give Cummings Oil a solid foundation in valuable real estate holdings while it made a less public play to expand fuel delivery services.
"What we really do is supply gas to retail service stations: Chevron, Texaco and 76 (Conoco Philips)," he revealed. "We're the largest distributor in Oregon for Chevron and 76, and we're one of the top 5 suppliers in the nation" for those companies.
Top 50
Under Mikesell's leadership, Cummings Oil has grown from $70 million in 1997 to $325 million last year, breaking into the exclusive list of Top 50 private businesses in Oregon. Debuting at No. 46, Mikesell expects to reach the Top 25 this year.
Does that mean that Mikesell can finally relax with family futures secure?
Hardly.
For the insomniac who never takes a nap, who gets his best ideas when he is not in the office, who has to exercise seven days a week to blow off steam, and who recently took up marathon running, relaxation is not an option. He knows that today's success does not guarantee tomorrow's profit.
"The biggest threat to our future success is the majors themselves," he said, referring to the major oil companies. "They really can dictate our profitability."
Consequently Mikesell winces as much as consumers when he sees prices skyrocket.
"Higher gas prices are not a good thing for us," Mikesell explained. "We are not making our money on the backs of the consumer."
Higher pump prices mean cost-conscious motorists, which means long lines at Costco and open pumps at mightymarts. High prices also drive down orders from the stations that Cummings Oil supplies.
Credit Card Crunch
Credit card fees also fuel Mikesell's restlessness. Gas company credit cards are almost a thing of the past - replaced by Visa and MasterCard. Though free to the consumer, merchants pay a 3 percent fee when customers use the cards. Those fees - about 7 cents a gallon - shave an average of $11,000 a month from each mightymart's profit line
Mikesell would like to offer mightymart customers a price break by offering a discount for cash, but so-called "two-tiered pricing," which went away in the 1980's, would be impolitic. It is safer in the long run to abide by oil company pricing guidelines. And Mikesell is in it for the long run.
"Being in business over 100 years, we have come to stand for honesty and integrity," Mikesell affirms. "Our contracts are based on the trust that we will do a good job. I really attribute our success to honesty and integrity - carrying on the tradition my father lived by."
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