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Sunoco CEO Lynn Elsenhans has seen the future of the US, and it is Cheetos, bottled beverages and burritos on the go.

More so than its former competitors, Sunoco has dumped refining and put its corporate chips on marketing and logistics. "Sunoco is totally transformed," said Oppenheimer analyst Fadel Gheit. "I'm not sure we'll be covering them in another six months."

After enduring a virtual pariah status, retail marketing is abuzz with deal activity among energy companies, said Tom Kelso, managing director at investment bank Matrix Capital Markets Group, which represents convenience store sellers. "There are more buyers than sellers," he said.

Since 2010, NASCAR-sponsor Sunoco has added 250 new stores and counts more than 4,900 retail locations, with a presence in NASCAR-friendly states Alabama, Tennessee and Kentucky in addition to stores in the Northeast corridor.

Sunoco, which has announced plans to sell its 330,000 b/d Philadelphia refinery and its 175,000 b/d Marcus Hook refinery, both in Pennsylvania, may be an extreme case of the down-is-up paradigm, but mid-tiered refiners are pumping up the marketing volume with hopes that retail bucks will continue to cushion bottom lines. Tesoro last month said it would add 292 retail fuel stations to its existing 1,200 stations in the Northwest and Southwest. Murphy Oil and Marathon Petroleum also aim to boost their retail marketing profile. "Where we have the logistical network to support additional locations we will evaluate these opportunities, possibly looking to move further into the South," Marathon spokeswoman Angela Graves said last week of the company's Speedway network.

As the gap between rich and poor widens in the US and the economy hobbles along, convenience stores seem situated to prosper from the new demographic. "People are more likely to get a sandwich and a cola at a convenience store than at a restaurant now...because it costs less," Kelso said. "Many people actually trade down." Says Gary Arthur, president of Valero Retail: "The retail channel has done well" in these times. While not resistant to bad times, it is "resilient," he said.

This confounds observers accustomed to deals flow in the opposite direction. "It's so new, I haven't wrapped my brain around it," said Daniel Gilligan, president of the Petroleum Marketers Association of America. "It's hard to understand how it will play out."

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For years, oil players such as ExxonMobil, Shell and ConocoPhillips have moved to shed retail stores in the US. One reason for the exit: they were no longer deemed essential in stoking company visibility and share prices, said Bob Bassman, a lawyer who represents petroleum marketers. ExxonMobil today owns 750 retail outlets in the US, spokeswoman Claire Hassett said. "Our intention is to convert them all to branded wholesalers in the future," she said last week in an email, referring to distributors. BP North America still owns "a few properties in the US, but [operates] none," spokesman Scott Dean said.

The retreat by majors is not mirrored elsewhere. Shell and BP want a higher retail profile in Brazil. In Russia, BP's retail stores are a "money-making machine," Gheit said.

Chevron seems unique among peers for a desire to keep a US retail grip. "We have no plans to sell our retail marketing outlets at the present time," Chevron spokesman Sean Comey said in an email. "We continue to focus our growth efforts in areas that are aligned with our manufacturing assets." Retail allows Chevron to "test new concepts, experiment with innovative ideas and measure the reaction of customers," he said.

Refiner Valero oversees a growing private label merchandise business for its 995 retail stores in eight states. "We started with nothing more than selling hot dogs on a grill," Valero's Arthur said last week in a phone interview. In 2008, Valero Retail launched its private label and today counts about 100 private products, including sodas, teas and flavored waters. Salty snacks, soft tacos and kolaches, a pastry popular among Slavic and German emigres, are big hits in Valero stores, he said.

Retail is not a footnote business at Valero--it overshadows the company's ethanol business, for example. Of Valero's $1.29 billion second quarter operating income, $1.253 billion came from refining and $135 million came from retail, while ethanol totaled $64 million.

Sales from retail often eclipse or come close to topping fuel sales. At Valero, Arthur estimates that so far this year, non-fuel sales made up 55% of Valero Retail's gross profit while fuel sales were 45%.

There will be winners and losers in the gasoline retail world. Kelso sees a looming consolidation wave. Bassman thinks hard times are in store for Sunoco, who declined to comment on its retail strategy. "The industry bet is they are not going to do well," Bassman said as Sunoco prepares to take on long-time retail hands Wawa and Sheetz.--Leslie Moore Mira in New York

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