Forecourt Trader - 30 years at the heart of the fuel retailing community

Super marketing

05 December, 2006
Speed and efficiency are key at Morrisons
Page 21 

Phil Maud, Morrisons' director of petrol filling stations

Supermarkets have not exactly been the most popular of organisations among the traditional fuel retailing fraternity - not since the early '90s, when their price-cutting strategies led to a phenomenal period of growth and the capture of one third of the market.
But then supermarkets probably don't have much time for the workings of the traditional oil company either. At Morrisons, Phil Maud, director, petrol filling stations, sees them as inefficient, bureaucratic and political, and much prefers the lean and fast-moving environment of the supermarket world. He was operations manager at Asda - which he joined in 1994 - before moving to Morrisons in June 2001: "Supermarket fuel interested me because of the tremendous growth it's enjoyed - particularly during the 12 years I've been in it," he says. "In 1994 Morrisons had about 40 petrol stations and were probably doing something like 150mlpa. We now have 277 forecourts, an 8% market share and are doing three billion litres a year." However, Maud believes supermarket growth has not taken place purely because of pricing, but also because of convenience of the purchase - offering everything a family needs in one visit."In the early '90s, oil companies accepted that supermarkets were cheaper than oil companies, because they didn't sell much volume," says Maud. "Then Asda launched a loyalty scheme which seemed to propel its volume skywards, and Esso started panicking and launched Pricewatch. "Since then, supermarkets have not been particularly more aggressive than some of the oil companies in their retail pricing position. In fact, we see Shell as being incredibly aggressive on prices - unnecessarily so," - an opinion, ironically, he shares with the rest of the market.But contrary to popular belief, Maud says supermarkets have always made money out of fuel: "There's definitely a return on capital for all supermarket petrol stations," he stresses. "The economics are different - compared with traditional sites - but it's the volume of fuel we sell that makes us profitable. We cover our overheads very well with that volume."In terms of pricing, Maud says the strategy at Morrisons is the same as everywhere else: "We aim to be among the lowest price in the locality. We look at any forecourt - not just supermarkets. If a traditional forecourt was undercutting us on price we'd seriously consider matching that price. In recent weeks, as prices have plummeted, obviously the supermarkets have driven the price down, but we haven't screwed the margin. We led it down in line with forward cost prices - any oil company must be kidding itself to think we could continue charging 95ppl, making 12ppl profit!"In recent months we've dropped prices quicker than the oil companies, because it generates PR and a bit of public interest; and helps to reinforce to the consumer the message that supermarket petrol stations are cheaper. We're not - overall - but the fact that prices were dropping by one or two pence every week for nearly 10 weeks, meant customers were consistently seeing supermarkets as cheaper than oil companies. Not because the oil companies were more expensive, but because they - even Shell - were slow to react."He agrees that supermarkets are more 'cute' with their marketing activities: "In 2002 we dropped to 69.9ppl and got masses of headlines about it. We don't sell below cost and we don't sell at silly prices, but if the market is coming down we'll take advantage of it and shout about it. And the customers perceive us as giving value, and the oil companies as ripping them off."The ability to react quickly is a key part of the company's fuel marketing operation. Maud can send out a message and drop all fuel prices automatically within half an hour: "Our IT is phenomenal," he stresses. "We've got web access to real-time sales through our HTEC systems. We don't just have HTEC tills, we have HTEC's virtual back office. This is a central database server which recalls all the real-time sales. I can log on and know exactly how many litres I've sold within seconds - and compare it with sales in the previous week - because every transaction on every till is sent back to a central database. We also have real-time tank dips - everything is networked and it's instant. I know how well we're doing today, and can gather a national picture on pricing."Morrisons first started selling fuel in the early '80s, and had branding with Shell and Texaco throughout the '90s.Then in '97 Morrisons set up a 'proper' petrol team following which, the branding was improved, facilities updated and new stations built. The Miles loyalty card was also launched - it is now 10 years old."Miles is a genuine loyalty card and we've no plans to drop it," says Maud. "A customer gets 15 points per litre, and when they've bought 335 litres, they get a £5 voucher to spend in-store - simple as that. No forms to fill in, and nothing in the mail. It's cost-effective for us, and for the customer - who gets, effectively, 1.5ppl off fuel." The Morrisons strategy has always been to build big stores - "we don't do convenience stores" - with a petrol forecourt, although, proportionally, this is no longer the case since the takeover of Safeway in 2004: "Before Safeway we had 125 stores and 115 had petrol," confirms Maud. "Now we have 370 supermarket outlets, and 277 have fuel. In terms of forecourt stores we build a standard shop - 624 sq ft including till area, office, store room and toilets. It's designed to offer basic motorist requirements rather than a full offer. Snacks and drinks, motor accessories, magazines, confectionery, cigarettes - they're our main focus, with a small amount of chilled foods, which we take from the main store."Our view is that you don't need to go overboard - the big store is there if customers want to do a proper shop."Another key aspect of the Morrisons forecourt offer is car washing - nearly every site has a rollover wash; and 90% have jet washing as well. An upgrade programme will see 100 car washes soon replaced with Wilcomatic Christ units: "We've got a strong culture of car washing - it's a big valeting offer - and as a category contributes about 20% of gross profit," comments Maud."Supermarkets don't need to push valeting - or fuel. Our issue is almost not about getting customers onto our forecourts - it's about processing them effectively and getting them out of the forecourts as quickly as we can!"To this end, pay-at-pump is now a feature of all new site openings, Maud having wisely waited for Chip & pin technology before rolling it out: "Chip & pin has made pay-at-pump work," he says. "Customers feel more secure using it - one reason is that the card is not sucked inside. One in five customers pays at the pump - which has eased the queuing problem."Morrisons has recently trialled cash acceptance at the pumps - again with HTEC - and is also considering cash cards as well. Other forecourt technology includes ANPR - fitted on all new sites in the past three years - which has proved very effective in reducing drive-offs.Morrisons has also been waving the green flag with the launch of E85 bioethanol fuel on 10 sites: "It's not radically different to petrol, so I like it because I can put it in petrol tanks and sell it from normal nozzles," explains Maud. "It is better than biodiesel which has concerns as there is no standardisation. But as a short-term solution to increase the amount of renewably energy used in road vehicles, I think E85 is an ideal product. We're lobbying government, and working with Ford, Saab and the National Farmer's Union to get the government to recognise it."In future, the Morrisons' strategy is to try to offer fuel to all customers. The company has opened seven greenfield sites this year - virtually all with fuel - with 8-10 planned for 2007; and, where possible, forecourts - some unmanned - will be added to existing stores...



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Weekly retail fuel prices: 4 November 2019
RegionDieselLPGSuper ULUL
East130.9367.90138.13126.75
East Midlands130.73139.73126.64
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