Competitive market forces have meant that words like rationalisation and reorganisation have become synonymous with the petrol retailing world. Many oil companies have undergone major overhauls – and it’s been no different at Texaco.
The merger with Chevron in 2001 was followed by a worldwide restructure last year to make it a much leaner and fitter organisation. Texaco’s UK retail business is now part of ChevronTexaco Global Marketing – the Marketing, Europe region – which essentially gives it the ability to share best practice. Hence, what’s developed in one part of the world can be deployed consistently across the globe.
The rationalisation has worked its way down to the UK head office at Canary Wharf. Whereas a decade ago the company occupied 10 floors, it now uses six. The whole of Marketing, Europe – including the terminals and distribution – numbers 416 staff, a loss of up to 150 people in the past couple of years. And in line with the rest of the industry the retail network has contracted – from a peak in the late ‘90s of 350 co-co sites – to 260; and 140 tenanted sites, down to around 120.
“We had a lot of assets that were simply not performing,” says John Lynn, vice-president Marketing, Europe. “Like a lot of other oilers, we’re very much looking at the company-owned network and asking which of these sites is going to survive?”
Which is why many Texaco tenants are being offered the chance to buy their sites. “We are going to keep our core co-co network. But the focus now is on low-capital intensive channels, and increasing dealer outlets – which currently number 550 – and providing them with good support,” says Lynn.
This refocusing of the network means that Texaco is no longer a national player. Its key marketing areas are south west of a line from Manchester to the Wash – the central corridor, the south west, Wales and the north west – built around its supply chain. It has a refinery in Pembrokeshire in which it recently invested £44 million. It has also been involved in swapping assets with other oil companies, such as its deal with BP in which it swapped sites in Scotland with BP sites in Wales and the south west. “We’ve just about exited from the areas we wanted to with exchanges and other one-offs,” says Lynn. “We’ve no plans to merge with anybody and we’re not for sale. We recognise we’re a smaller player than some of our competitors in north west Europe, but that doesn’t mean we can’t generate good cash and returns, and that’s what our strategy is built around.”
Currently Texaco’s share of the fuel market is around 10 per cent, but Guy Vigar, general manager, Retail Sales Europe, says the company is not too concerned with market share. “It’s not relevant to what we’re doing. If you measure it on a national basis, you’re not going to see huge increases. But regionally, in our preffered areas, you will see big growth in market share.”
With tenanted sites seen as a declining class of trade, that growth is going to come from the dealer sector, according to Paul Oakford, general manager, Marketing Support Europe: “Our focus is on putting together a complete package to work with the independent retailer. We have a huge internal focus on being the ‘best partner’ for the independent retailer. It’s not just about price, Texaco can bring many other things to the table.”
One of the elements of winning over dealers to the Texaco brand is Advantage, a communications programme designed to deliver value-added marketing support and provide a clear two-way communication link between Texaco’s different departments and the retailer. It was first established in the Netherlands five years ago, and introduced in the UK in 2002. Key features of the programme include conventions and regular events, a bi-monthly newsletter, training, syndication of promotions, focus on service and standards through the ‘Do More’ Championships and information sharing. A recent boost to information sharing was the launch of a website called Texaco Station which all Texaco retailers are being encouraged to sign up to. Launched last November it gives retailers access to online fuel ordering and tanker ETAs; online statements and invoice details; pricing information; online planograms, training information, access to maintenance services with Taylor Woodrow; news, product information, promotions, exhibition and activity calendars, document library on health and safety, HR, legislative, security etc.
There is also a National Advisory Council whose members are voted for by the retailers. The first NAC meeting was held in 2002, with a further six meetings held in 2003.
The programme enables Texaco and its retailers to work together to develop solutions – such as the mobile retail training van which was launched in 2003 in response to retailer concerns about sending staff off-site for training. In terms of conventions, there was one in Harrogate last year, and an even bigger one last month in the Midlands, at the Hilton Birmingham Metropole, attended by 460 people, which included a day-long conference, evening meal and entertainment and trade show the next day. Hailed as a big success, it’s likely to become an annual event.
“It’s important and the retailers enjoy it,” says Vigar. “I think there is a lot of trust out there by retailers. We have given them a fair deal and we communicate with them. We’re still prepared to go and spend money (a six-figure sum) on an event like this because it suits our retailers. It would be easy to cut that kind of cost out.”
At the trade show there were a host of things that dealers could sign up to and earn themselves an extra £4,000 a year. They included Travelex ATMs; car wash and shop promotions; valeting kit; Freeserve internet trial packs; and T-Mobile Hotspot service, which allows customers to connect at high speeds to their office on a Texaco forecourt without wire connections.
“We think it’s innovative for our industry that we’re taking the power of our co-co network – the things we’ve developed that have proved successful – and sharing it with our business partners,” says Oakford.
While Texaco management is giving off all the right vibes about building and maintaining good working relationships with its retailers, it will also be focusing on service and standards. “There will be a number of dealers who struggle to meet what we require from the brand, and we may shed some who don’t meet those minimum standards,” says Vigar. “They are not necessarily rural sites, the biggest problem is the two million- litre sites on the edge of big towns. Rural sites that have survived till now are there for a reason – because they play a part in the community. They may have a post office, or off licence attached which is helping them survive – their earnings aren’t purely based on fuel sales volume. If you’re on the edge of town and you’re competing on price with the hypermarkets, you’ve got a fairly poor location, and you don’t have a shop that’s big enough to make a difference, that’s a difficult site to survive.
“One of the big things that will determine the future of a service station is how it is managed by the individual. As Tesco and so on are coming onto forecourts they are developing nice looking sites with a fantastic level of service, which is what the consumer is learning to expect .”
While there are no plans for a joint venture with a supermarket, or revelations of a fantastic new shop format, as espoused by certain other oil majors, there is talk of a ‘review’ of fuels strategy – the message being, ‘watch this space’.