As Shell continues its relentless cut-price fuel strategy, the rest of the petrol retailing industry continues to scratch its head in total disbelief. None more so than independent dealer Graham Greaves, who runs a third-generation family-run petrol forecourt and coach business - Henry Cooper, Lane End Garage in Annitsford, Northumberland -with his wife Pamela and
mother Lily. The business, which has been going since the ’20s, has always been allied to BP. It is a matter of yards away from a another site - now owned by Shell - with which it has happily co-existed since the ’40s. Not any more.
It was when the site became part of Shell’s ’cluster’ scheme - where one operator runs five or six sites, introduced two years ago -that prices started becoming extremely competitive, according to Graham: "I kept my price 1ppl above Shell. I was on 2.24ppl fixed margin, less a promotional cost of 0.36ppl, so I couldn’t match the site. It would have been commercial suicide. I took advantage of the fact I had a loyal customer base, because we were giving people a good service.
"Fuel volumes were around 100,000 litres a week - down about 20,000 litres - but we were still doing very nicely."
With his BP supply agreement up for renewal, Graham decided to go the Platts route: "I realised fixed margin deals were no good to me, as I wasn’t going to survive, even with my stance - staying 1ppl above Shell. I enjoyed the thrills and spills of the Platts deal, and being able to set my price for the first time.
"Then Shell became ruthless - that’s the only word to describe it. There was no rhyme or reason to what price was being set on the pole sign. The managers of the site couldn’t tell me why, nor could the area managers - nobody could!"
Graham pitched his price at 2ppl above the Shell site and found that while volumes dropped, somehow profits were up. But he is very concerned.
"Our volume is now down to 70,000 litres a week. It’s eroded over the past two years. I would say it’s like a bit of poison, just enough to feel ill, not enough to kill us.
"I used to be 2ppl adrift, then it was 3ppl, now it’s 4ppl. And that’s happened in the past two to three months."
Graham got mad, but he also decided to get even: "The other night - Guy Fawkes night - and Shell had annoyed me so much. I got a fuel Bowser, capable of holding 3,000 litres of fuel, put it on the back of a wagon, popped up to the Shell site, and bought roughly £15,000 worth of fuel and drained the tanks.
"I put the nozzle in the top of the tank - it stopped every 500 litres - and just kept paying for it in cash. I didn’t get stopped until the following morning, when I took all my coaches up there to fill them up, and the guy in the shop said they didn’t have any more diesel left - I’d have been surprised if they did have!
"He said I couldn’t go back until they’d had a delivery. I knew at that stage they were going to go up 3ppl - they realised I was going to keep going back and emptying their tanks until they moved up on price. I was fortunate enough to have a spare tank which I use for the coach business, and I managed to get 18 loads of fuel out of them at 97ppl! .
Like many retailers Graham is at loggerheads to understand how Shell can be getting away with this, and is adamant the Office of Fair Trading should be looking into Shell’s pricing stance, which he believes is crucifying the industry. "Is Shell’s outlook to finish off more sites? In the same breath the company is looking for more business, taking other dealers on. But then you have a situation where there is a Shell co-owned site at one price and a Shell dealer at another - and the dealer is frightened to advertise his price on the pole sign because of customer reaction. Does Shell want to work on two levels - co-owned and dealer?
"It’s madness, there’s no rhyme or reason to it," stresses Graham. "There are no longer any sites left in this area - a triangle between Annitsford, Whitley Bay and Blythe - not even supermarkets. We’ve got a lovely captive market. So why is Shell hell-bent on giving fuel away at below cost, yet murdering people when they come in the shop to buy a can of coke and a packet of crisps - 50p dearer for a packet of cigarettes, 20-30p on a can of pop. I’m now beginning to feel it is targeted at me personally.
"Shell does not seem interested in sales in the shop - it’s just interested in pumping volume at less than cost.
"It’s very unfair to make someone the whipping boy because you control the fuel from the wellhead to the nozzle. There’s not many industries which control the product in that way right the way through the chain."
At the other end of Graham’s street is a Somerfield site, which he believes must be struggling too. "It normally matches me - maybe 1ppl adrift. At the moment I don’t think it’ll be making any money on the petrol, but will be relying on the big forecourt shop. They’re probably doing 100,000 litres a week, while the Shell site is probably doing 180-200,000 litres a week."
In fact Shell sites in the area have been so busy on occasions, according to Graham, that road traffic police coming on to his site tell him they’ve had to warn the Shell sites to either close or put up the prices. "The queues are blocking the road - particularly in rush hour," explained Graham. "You can’t have cars queuing for a forecourt blocking up a dual carriageway.
"What often happens also, is that the staff on the Shell sites get so fed up, they close the site. People are working on a minimum wage, and at certain times of the day there is only one person manning the site. If he wants the loo or to have a sandwich or something, the poor kid is on his own, what’s he supposed to do? One person can’t operate at the speed needed to keep servicing the pumps. The sites are suffering more drive-offs, they run out of fuel, the turnover hammers the equipment and they can’t be making money. They’re 4ppl under - why not be 2ppl under. There’s no logic to it!
"We have loyal customers - a good regular base of people who come along every week. People are a lot more aware and understand that the independents can’t compete with the majors. "Shell has gone on like this for too long. It’s never ending. And the irony is that its market share is not going up significantly.
"I’ve worked hard all my life and am happy to do it - I’ve got a good business and want to keep it that way. When you’ve operated a business all your life, failure is not an option. I don’t want to be the guy who locked the door!"