This coming year will see the growing trend towards market consolidation, according to Adam Wadlow, partner at property specialist BarberWadlow.
"Last year’s Rontec deal with Total was possibly the start of a general pattern," he said. "The sale of Motor Fuel Group was another case in point. In order to survive in the marketplace fuel retailing groups need scale and a strong management team; and that will work through with other networks. It will be all about economies of scale, and buying power.
"Petrogas, with its Applegreen brand, is another strong operator with a sophisticated management team, and one to watch in the future. These are interesting developments in the market.
"Single-site owners will have to face facts they will be making less money out of fuel, as oil companies will get more aggressive in their deals and will be focused on the bigger networks. There’s still a place for small petrol retailers but they will have to be more focused on building a sustainable shop business. However, it is very encouraging for the fuel retailing industry that it is well received by banks and private equity companies, who are interested in the sector and prepared to invest when they’re not investing elsewhere. It is still very difficult but the business case is strong.
"Oil companies are continuing to dispose of sites and this presents further opportunities for independents.
"On the other side of the coin the supermarkets are also continuing with their acquisitive nature Asda is keen to grow its petrol retailing network; and there’s the Waitrose tie-up with Shell. It does make it all a fairly active market for 2012."
Meanwhile, retail director of GB Oils, Ramsay MacDonald, said: "While there is no telling how the price of crude will perform this year with the Middle East volatility and increased demand particularly in the BRICA economies we would expect the UK dealer market to be slightly more predictable. The economic picture is no less gloomy and banks remain adverse to lending within our sector. As ever, the pressure remains on dealers to explore new revenue streams and further develop existing ones. Maximising shop revenue and margins will be a priority.
"With companies such as GB Oils committing to serve dealers across the length and breadth of the UK, the concerns many dealers have faced in recent years regarding continuity of supply have receded. This new choice for dealers has to be a positive for all types of site. We think that there will continue to be further changes both within the dealer community and most of our competitors will continue to consolidate or downscale their dealer activities. At GB Oils we shall continue our drive for growth in the dealer market. It’s an exciting time to be part of our expanding network improving our offering to dealers of all sizes is a key part of our 2012 plans."
Jonathan James, director of independent retailer James Graven & Sons, said there will be a lot of positives for the convenience trade as a whole this year with a boost in trade expected around the Olympics and Diamond Jubilee celebrations. "The industry will need that type of celebration to bring us out of the financial doom and gloom which is being predicted," he said. "Nobody is doubting, including the major multiples, that 2012 is going to be a tough year.
"It has been announced that supermarkets now account for 36% of all new retail developments and they are likely to still be looking at putting petrol stations on those new sites so there will be further growth of supermarkets in the forecourt sector. There’s also going to be continued uncertainty in the Middle East. Oil prices will be all over the place and, accordingly, people will be cutting back on fuel volumes."
Brian Madderson, chairman of RMI Petrol, said: "In the shorter term, wholesale prices are back on the increase with Brent crude touching US$112/barrel since the start of the year driven by market concerns over Iran, which is all part of the difficult geo-political scenario affecting the Middle East.
"The issue this time relates to Iran’s potentially hostile intentions with its nuclear programme. Stoked by Israeli and US fears, the EU voted to ban all imports of crude oil from Iran but failed to make this stick immediately as the main recipients are the financially weak members, Spain, Greece and Italy. In a tit-for-tat exchange, Iran has been threatening to block the Straits of Hormuz through which 30% of the world’s crude oil passes, so this stand-off looks set to continue for a while yet.
"In just the past two weeks, wholesale prices at US$/tonne level have increased for unleaded petrol by over 11% and by more than 8% for diesel so UK pump prices are under great pressure and are bound to increase this month. Analyst predictions of US$125/barrel by the second half of the year and US$135/barrel in 2013 seem entirely plausible.
"Wholesale prices of oil are only going one way in the near to medium term and there is little immediate prospect of a serious rally by pound sterling against US dollar the petrol currency to ease the pain. This is why RMI Petrol believes that without any practical stabiliser system on the horizon, the time is now ripe for urgent fuel tax reform. Tax is the only control that government has over fuel pricing so let the debate over optimum duty and VAT levels start now."
Barrie Richards, owner of St Blazey Service Station in Cornwall, has just signed with Gulf Retail following Jet’s withdrawal from the southwest. "The way I see the market going with fuel supply is towards lower cost operators and the ability to maintain competitively priced product and moving further away from the need to get that from a major brand," he said. "Further down the line we will see more self-branding and people buying fuel in a more flexible way than through formal contracts."
News Review of 2011
January
As the New Year kicked off following an extremely icy December, the news was all about the ’perfect storm’ triggering record fuel price hikes. A rise in fuel duty, VAT and global oil prices was to blame.
February
Former Asda boss Andy Bond joined Euro Garages as executive chairman alongside Mohsin and Zuber Issa; while research by Datamonitor showed supermarket giant Tesco was the UK’s favourite fuel retailer.
March
Middle East unrest triggered futher increases in fuel prices, causing motorists to try unsuccessfully! driving on empty, according to roadside rescue organisation Green Flag. MRH sold Pace to GB Oils Ltd.April
Tobacco display ban got the go-ahead; the Chancellor’s fuel duty cut backfired on retailers as it was instant, not allowing time for stocks to catch up; and fuel was set to becoming the highest cost of running a company car.
May
Fuel prices were yet again in the news as accusations of ’predatory’ and ’unfair’ pricing tactics were levelled at supermarkets and certain oil company sites. The Snax 24 consortium was deep in talks to buy Total UK.
June
Average forecourt shop sales increased 3% showing great resilience in tough times, according to an IGD report; but a BOSS survey showed crime on UK forecourts continued to rise, the main source of loss being through drive-offs.
July
Rontec Investments signed an agreement to acquire Total’s retail and fuel distribution business. Of the 810 sites acquired, 254 would be sold to Shell, but operated by Snax 24 under a management agreement.
August
Euro Garages opened Rivington Services a £12.3m site on the M61. Harvest Energy signed the 16-forecourt Cornwall Garage Group in a five-year supply deal, while Welcome Break opened its first electric car-charging points.
September
The Road Haulage Association demanded an immediate 5ppl cut in fuel prices, complaining that HGV drivers were unable to take advantage of supermarket promotions such as Sainsbury’s 15ppl fuel campaign.
October
GB Oils owner DCC announced its agreement to buy Total’s distribution assets from Rontec Investments. The deal included contracts to supply 300 dealer-owned, dealer-operated Total-branded service stations.
November
RMI Petrol warned Chancellor George Osborne about the serious consequences of the government’s proposed fuel duty increases in 2012, recommending the planned rises be deferred again.
December
MPs voted unanimously to pass a motion demanding the government puts the two fuel-duty rises planned for 2012 on the back burner; while a rural fuel duty rebate pilot scheme was given the green light from the European Union.
No comments yet