I f anyone thought that the rate of acquisitions by the biggest dealers during 2017 could not possibly be maintained in the New Year, then the first week of 2018 appears to have dispelled that notion. Having just snapped up 14 sites with the acquisition of the Golden Cross Group, MFG is now reported to be sizing up a bid for MRH.
PRA chairman Brian Madderson comments: "The super dealers continue to hoover up the mid-size groups with seemingly no sign of peak price yet as purchases reach 12 x EBITDA a level unthinkable just a couple of years ago. Now we have the prospect of MFG and MRH merging to form a 900-site colossus, provided the price is the best available to Lone Star, the property-focused private equity owner, which is also said to be considering a market flotation before Easter."
He points out that developments in the forecourt sector mirror events in the wider retail and wholesale market, where consolidation is this year’s "buzzword", with Tesco taking over Booker and the Co-op acquiring Nisa.
He explains: "Major grocers and wholesalers are combining to cut costs, purchase yet more cheaply and overall gain market share to avoid the sad fate of Palmer and Harvey, which collapsed into administration in late November. It is not clear whether such integration will be good for independent retailers or leave them at the pricing mercy of the behemoths.
"Undoubtedly the rise and rise of the German discounters, Aldi and Lidl, has had a massively disruptive effect on our grocery market. In a relatively short time, they have grown to control 13% of the market."
The volume of money spent on acquisitions is being matched by the level of investment in individual forecourts, with the bigger dealers trying out new formats and partnerships with major retailers, and smaller players developing their retail offer with KDRBs of existing facilities and a growth in new-to-industry sites. Kay Group recently opened its fourth new-to-industry site in two years, and Symonds Forecourts intends to open two this year, with three more in the pipeline. Symonds CEO Jeremy Symonds says they will all be high-volume sites with fuel sales of 6mlpa-plus and will feature Budgens stores.
As a fuel supplier and retailer, Certas Energy is optimistic about the prospects for 2018. The company’s head of dealer sales, Craig Nugent, says: "Another successful year for the forecourt sector is anticipated with dealers of all sizes leading the way. Investment in facilities and people remains key, as does developing a close affinity with the communities we serve.
"A strong convenience offering complemented by trusted and impactful brands is the winning combination.
"Gulf will play its part, with significant investment planned in 2018 to further strengthen the brand and our support for the independents. The best forecourt retailers want a proactive fuel partner providing differentiation and the tools to enhance the shopping experience for all those visiting our forecourts and stores. At Gulf Retail we plan to launch a series of new initiatives that will provide dealers with additional tools to grow volumes, improve customer retention and increase revenues."
While many consumers are attracted by the facilities provided by a forecourt, others are very sensitive to prices at the pump, and here the prospects are less promising.
Madderson says oil prices have increased by 140% since their low point in early 2016, and pump prices are at their highest level since 2014. With OPEC limiting production and potential issues in Iran, Iraq, Venezuela and West Africa, most analysts are predicting further increases in crude oil prices this year.
While these geo-political issues are beyond the the control of the UK government, PRA will be taking up a number of issues that are directly controlled by Westminster, and the provincial parliaments. The progress of the Automated and Electric Vehicles Bill, with its proposal to force forecourts to install electric chargers, will be a major focus. The PRA will be arguing that it is too early in the development of chargers to expect retailers to commit, and that funding promosed to other providers should be extended to forecourts.
The proposed introduction of E10 fuel is still a live issue, but the politicians are doing their best to ignore it.
The government, worried about taking the blame for an unpopular measure, wants the industry to take the lead, while the industry is unwilling to act without government direction.
One area of optimism for the industry is car washes. The illicit hand car wash sector has hammered legitimate operators, but an anti-slavery clampdown is helping to halt the decline. Madderson points out: "Even if fuels change in the future, cars will need to be washed whatever is powering them."
news review of 2017
MRH adds 27 sites to its network with the acquisition of Spring Petroleum, which was ranked 11th in the Top 50 Indies. Another Top 50 Indie, High Noon Stores closes as administrators are called in.
A police officer is seriously hurt after being hit by three bullets as a Maxol filling station was "riddled with high velocity gunfire". Christie & Co reveals sales hit a post-recession high and says it sold more petrol stations than ever before in 2016.
Shell opens its first hydrogen refuelling station, at Cobham on the M25. Euro Garages buys Little Chef and eight High Noon sites. Greenergy is sold to Canadian firm Brookfield Business Partners.
Sales of diesel, which have been growing for 26 years, plateau out. Petrol use falls to its lowest level since records began. Rontec extends partnership with Morrisons to 40 more c-stores, but the retailer’s trial with MFG is terminated.
Government consults on proposals to tackle air pollution, including charging older vehicles to enter clean air zones. Greenergy begins road-loading of diesel at Thames Oilport.
Forecourt owners beef-up security after Manchester terrorist attack. Spar overtakes Tesco as biggest forecourt retailer by market share. MRH opens first of five trial sites with Co-op.
Queen’s speech includes proposal to force forecourts to install electric chargers. BOSS Forecourt Crime index hits highest-ever level. Tesco fined £8m over pollution caused by leak of 24,000 litres of fuel.
Government confirms sales of petrol and diesel cars and vans will be banned from 2040, as pollution proposals are approved. Hybrids will still be allowed. Shell unveils plan for fast-charger network.
Crackdown on slavery targets hand car wash sites. MRH buys Chartman’s 10 service stations while Applegreen agrees deal for seven Carsley sites. MFG announces partnership to roll out electric chargers across its network.
Applegreen crowned Forecourt Retailer of the Year for Lisburn motorway services. MFG buys 17 sites in three deals including nine from Manor Service Stations. MRH adds five more with acquistion of Peregrine. Certas Energy buys its first English forecourts with deal for three sites.
PRA challenges plans to force forecourts to install charging points and calls for funding. Palmer and Harvey enters exclusive talks for a takeover.
Palmer and Harvey closes overnight after buyer pulls out. Other wholesalers rally round. Kay Group opens fourth new-to-industry site in two years. Euro Garages buys Esso’s German network.