Technology Top Off
Gilbarco Veeder-Root President Martin Gafinowitz takes a responsive approach to developing retail fuel technology advancements.

DON STEPHENSON: Can you give us a brief history of Gilbarco?
MARTIN GAFINOWITZ: Gilbarco and Veeder-Root have both been around for almost 150 years. Gilbarco Veeder-Root is the sum of a number of companies - all with rich legacies.

Gilbarco started when Charles Gilbert and John Barker partnered back in the 1860s to build the Springfield Gas Machine. The company pioneered a number of areas, producing the first multi-product gas dispensers, first vapor recovery system and a number of other things.

Veeder-Root also had an interesting beginning. Elisha Root and Curtis Veeder had two independent businesses that manufactured counting and measuring devices. The first product was actually an odometer on a bicycle. They went on to develop mechanical counting placements and were very well-positioned, as there was a need for measuring devices. The company went on to become a leader in devices in monitoring underground storage tanks. In 2002, the Danaher Corporation, which already
owned Veeder-Root, acquired Gilbarco and today we are in a unique position in terms of the strengths of the brands and the breadth of the product range we have under one corporate umbrella. I think it's very fortunate for both Gilbarco Veeder-Root and our customers to have the committed, long-term ownership that we do with Danaher.

Martin, obviously, from your accent, you are not from North Carolina...
Well, I am definitely from the southern hemisphere rather than the southern United States. I grew up in South Africa; I left in the late 1980s and went to live in the U.K. for about 15 years. About six and a half years ago, I came to the United States to work at Veeder-Root in Connecticut. About three years ago I came to North Carolina to work for Gilbarco.

How is Gilbarco using advances in technology to improve the product line?
I think that the rate of technology change has been truly astounding - particularly in the growth of the Internet. Who would have thought ten years ago that broadband Internet connectivity would be widely available in convenience stores? This is pretty much the norm now.

I think the other dramatic change we've seen is the availability and pricing of technology products. Those two things have given us an opportunity to do some powerful things and deliver technology that's meaningful to our customers. We produce dispensers that are a profit center - they've always been a profit center in terms of dispensing gasoline, but they also help our customers deliver both a media and merchandising experience to their customers and really pull more shoppers into the store from the forecourt. I think it's important for us to focus on technologies that deliver meaningful value to our customers as opposed to technology for technology's sake.

My observation - and Gilbarco in the past has been as guilty of this - is that the industry has somewhat of a track record of launching technology before it's ready. We've made a very conscious choice to stop doing this and only go to market when we're convinced the products are ready, even if we carry a slight delay in the marketplace, and make sure it's technology that the market wants.

You briefly touched on the dispenser as a profit center. What are some of the things coming along with the point of sale?
This is an incredibly important part of our business and something that we continue to make tremendous investments in. We are delivering a very feature-rich, high reliability product that is tailored around the gasoline and convenience industry. We have tremendous knowledge in this industry segment and a very large store base with our older G-SITE point-of-sale system, but our new product, Passport, is now installed at over 2,000 stations and growing. Some of the real changes we've seen are that the point of sale is no longer defined as the point of sale behind the counter - the dispenser is a point-of-sale device. We're also moving point of sales into kiosks and putting that technology where the consumer wants it to be by bringing that convenience directly to them.

A large part of Gilbarco is the manufacturing of a product that can be shipped to the customer. Where is Gilbarco in looking at offshore components or offshore as an option for manufacturing?
Our main North American manufacturing facility is in Greensboro and we have a smaller facility in Kinston, North Carolina. We operate in a global marketplace and I have no doubt that over time we will also be facing competition from manufacturers originating in low-cost regions. I think it's imperative for the long-term benefit of our employees, our company and our customers that we're able to compete in this global marketplace. We're increasingly leveraging the global supply chain and bringing in more components and subassemblies that are manufactured outside of the United States. But we still do a tremendous amount in North Carolina, and we employ about 1,200 people here. Our global competitiveness has enabled us to grow our business and, in fact, grow the number of jobs in North Carolina.

On the issue of the momentum behind renewable and alternative fuels, what's Gilbarco doing to prepare for this potential change?
The only business we're in is systems and solutions for dispensing fuel, and we intend to be in that business regardless of what the fuel type is. Today, if we look at the growing range of fuels - ethanol, CNG, LPG, biodiesel - we have products that can safely dispense, control and manage all of those products. And seeing as we do this, a dispenser that integrates ethanol and other grades of gasoline in one format, it's important to be able to make that fuel available on each of the islands at every fueling position. For the options to take off for the consumer, I think that availability is important versus having a dispenser stuck in the corner of the gasoline station.

One issue on the radar screen for our industry concerns temperature compensation for fuel. Where is Gilbarco in the process of addressing this?
We need to be sensitive to the fact that the retailers are our customers - not the regulators. And we need to work very closely with our customers to satisfy their demands versus the other way around. Having said that, we do operate in an industry that is governed by many regulations, and we need to be in a position to help our customers meet those regulations with the best technology in the most cost-effective manner.

Another issue that has certainly been a part of our business for years, whether gasoline was 99 cents a gallon or $3.29 a gallon, is gasoline theft. Retailers are put in a position of trying to meet their customers' needs while being convenient. What is Gilbarco doing along those lines to help us meet those needs?
This is a real problem area from a number of perspectives. One is gasoline theft, drive-offs, and another is credit card data theft. As prices went up, drive-offs increased dramatically and a number of retailers started to look at prepayment, which for an industry that strives for convenience is obviously an issue. Our focus has been to bring innovative payment technologies to consumers that allow greater pay-at-pump options so that we can try and capture more of the market and enable customers to pay at the pump.

We've seen an increase in the sale of cash acceptor devices, which have become more reliable. We are also delivering technology to help raise the security. Some of the things we're doing are the interface between the point of sale systems and the DVR cameras. The cashier can immediately identify a drive-off and have the transaction recorded to better enable prosecution.

We've also seen a significant increase in the level of fuel and credit card data theft, and as gasoline becomes a more valuable commodity, those physical security aspects at the pump become more important. We offer revolutionary 'no pulse' technology in our dispensers that will detect if fuel is being dispensed, and if the meter is not seeing any flow, it will stop the fuel flow. We're also increasing the physical strength of the dispenser to limit people's opportunities.

No discussion of our industry would be complete without a discussion of credit card fees. In 2005, they captured 90 percent of the industry's pre-tax profits. I'm curious as to what, if anything, Gilbarco can do to help us control these costs.
One of our top priorities is to help retailers decrease their transaction fees. Unfortunately, we can't directly influence what the credit card companies charge, but we are looking at providing pay-at-pump and point-of-sale technologies that are designed to help minimize those fees. We lead the industry in the installation of dispensers with contactless payment, which increases the number of debit transactions. We also lead with the installation of pay-at-pump, with automatic card handling [ACH] and biometrics, all of which promise lower card processing fees. And cash acceptors are the ultimate avoidance of card fees.

One of the frustrations I have as a retailer and merchandiser of motor fuels is that we are entirely at the mercy of the banking network regulations. When they come down and say that we have to use a new kind of encryption for cards to process on the network, this has us out replacing hundreds of CRIND heads for no increased functionality.
Globally we've seen big chunks of Europe move to what's called chip and PIN technology, which we supply, and we're seeing the Canadian marketplace move into the same technology. There are tremendous changes coming to the way encryption is required on payment devices, both indoor and outdoor, which is going to lead to a lot of cost to the industry. The benefit is in pre-payment security and decreases in fraudulent transactions, and I guess it's arguable about where that benefit resides. No doubt, it's going cost of the industry a very significant amount to upgrade that technology.

Unfortunately, the United States is moving in a slightly different technology direction, but we anticipate being able to supply chip and PIN equipment well ahead of its requirement. The only other thing I would point out is that there are benefits to retailers in those upgrades. As we look at color screens with streaming video and merchandising promotions, dispensers will need newer generation CRIND technology to operate. You wouldn't be able to run those off the older generation.

How important is the continuing development of industry standards, specifically through PCATS, to improve our industry's technological proficiency and streamline our supply chain costs?
Open standards benefit us all. The world has become almost too small for the old style, with manufacturers closely guarding their individual protocols. We've long recognized that opening up those protocols and working collaboratively with a large number of different suppliers actually brings increased value to our customers, and thereby brings increased value to us. PCATS is an incredibly important aspect of our business. We are a founding member of PCATS and are actively engaged in all the working committees and see tremendous benefits in driving these open standards.

What companies do you admire and draw inspiration from?
Two companies in particular are Procter & Gamble and Apple Inc. Procter & Gamble, under its new CEO, A.G. Lafley, has a real philosophy around consumer thought. Its ability to invent new products that address real consumer needs is just tremendous. Procter & Gamble looks at how people go about their lives and how it can bring their products to those consumers. They really live in their consumers' shoes. We try and take these lessons to heart at Gilbarco. We send new Gilbarco employees to work in a gasoline station for a week to give them a view on what life is like from the cashier's perspective: what it means to have customers waiting, how to change a filter. We're trying to get our employees in the shoes of our customers to understand their business better and make our business better.

Apple impresses me from the perspective of how it's figured out how people interact with technology and designed its products around them. I'm in the fuel dispenser business and every time I go to a different gasoline station, it takes me a minute to figure out how the equipment works. Do I lift the lever or not? How do I initiate the transaction? If you look at products today and how we try to design technology around how customers actually use it, I think there is a tremendous lesson from Apple about how important design is in the overall consumer experience.

What are some of the qualities that make someone an effective leader?
There are multiple qualities, but we look for decisive, self-reliant people who are able to make things happen. We are a results-driven organization and we like people who are able to make things happen. I think it's critical for managers to be good listeners, and that they're able to take the time to understand people - what their motives are, what their circumstances are and use that to help them create effectiveness on the job and bring out the best in others. Personally, I value an open and honest style in management - open and honest with yourself, which I think is critical, as well as being open and honest with others.

What kind of culture have you tried to establish at Gilbarco?
The thing that always strikes me is the tremendous group of people we have working at Gilbarco - the dedication and pride they have in the work they do and how hard they work. We strive for a culture of continuous improvement. We are a highly process-oriented company. We measure everything and set objectives. We keep in mind that the outcome of all of those measurements and objectives is the customer. There is no other purpose to measuring anything or setting objectives than making sure we can satisfy the customer. We create an environment where people actually enjoy working and that they're challenged by what they do.

What talents and strengths do you look for in your management team?
Strong, independent, self-reliant people - results-driven. We want people with a high sense of urgency around achieving results; achievement of your goals is almost entirely dependent on having good, capable people around you. I think first and foremost management can develop and help people achieve their goals and help them improve their performance.

What do you think is the coolest application or coolest product that you've seen in a convenience store?
I'm more intrigued by some of the innovative things retailers are doing. I'm sure we've all read about retailers who take care of moms with kids in the car by delivering foodservice products out to the island. I fly a lot, so I love the idea of self-service kiosks, whether it's airlines, grocery stores or gas stations. This is an area where we're about to increase our investments…in fact, by the time this magazine is published, I think we'll have made an investment in that industry.

Editor's note: On February 8, Gilbarco announced the acquisition of Intermedia Kiosks Inc., a provider of customer-operated food service ordering solutions for convenience and grocery stores and quick-service restaurants.