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

Poles apart

03 May, 2011
Dealers are struggling to compete with the pricing tactics of oil company sites and supermarkets. Amy Lanning reports
Page 10 

Retailers are being urged to come forward with evidence of predatory pricing by supermarkets and oil companies as retailers' fuel volumes continue to decline and margins are increasingly squeezed. Brian Madderson, chairman of RMI Petrol, has written to the government calling for an investigation into the unfair practices of both supermarkets and oil companies, which is leaving independent retailers unable to compete on price and causing further shrinkage of volumes.

"On behalf of independent retailers who have complained to us, we have written to the government to advise them of this predatory pricing or unfair pricing which is taking place and asking for immediate intervention," said Madderson. "Otherwise independent retailers are going to go out of business even faster than they have been. We are passing on any evidence given to us to the government and we are asking any other retailers out there who similarly have hard evidence of predatory or unfair pricing by the hypermarkets or oil companies to write to us at RMI Petrol so we can gather a dossier."

Phil Richardson, who operates Park Road Garages in the North East, has come forward with evidence of predatory pricing by a Sainsbury forecourt in Bishop Auckland, as well as evidence of Total company-owned sites in the North East selling at or below his buying price.

On April 19 the Sainsbury site in Bishop Auckland was selling unleaded at 128.9ppl and diesel at 135.9ppl. At the same time at Phil's nearby site he was selling unleaded at 137.9ppl with a margin of 3.8ppl and diesel at 142.9ppl with a margin of 3.54ppl.

"The opening of a new Sainsbury's store in Bishop Auckland selling fuel at 6ppl below my buying price has resulted in the market going into freefall," said Phil. "Dealer sites supplied by Jet or others on fixed margin deals are able to cope, but the rest of us on Platts deals are being slaughtered. If you take any copy of Forecourt Trader you will see the report Fuel Prices by Brand, which shows quite clearly that all the majors, with the exception of BP, sell fuel more cheaply than their dealers.

"We cannot sell at these prices and as our core volume drops the problem becomes more acute as our prices need to rise to stand still. I am very concerned at the speed of the deterioration and genuinely fear that a large number of small independents are at serious and immediate risk."

Brian Tew, who operates Gloucester-based Simon Smith Group, has written to his local MP about anti-competitive pricing by Shell, which is affecting his Shell-branded Comptons Garage site in Cubbington, near Leamington Spa. "I've written to my MP because anti-competitive pricing means that constituents that live near my Shell petrol station don't get the same benefit in terms of retail price as people get from Shell Leamington, which is company-owned. Shell is using its refinery profits to subsidise lower prices on its owned petrol stations. I believe that subsidy should be provided to all service stations. Shell frequently prices at a level that is lower than we buy it at wholesale."

Simon Smith Group inherited a Shell contract from the previous owner of Comptons Garage. Prior to that new contract, the site had been able to price competitively. "We suffered 40% reduction in fuel volume as a result of Shell's new contract, which the previous operator has no option but to accept unless he goes to another oil company," explained Brian.

"This is a very important issue. All oil companies are doing a similar thing. I'm concerned about what will happen in the marketplace in the long term. What oil companies would like to do is kick out the independents by making them uncompetitive on price. Oil companies are playing with wholesale prices all across the country. Where they need to, they share a bit of their refinery profit.

"The truth of the matter is that Platts is not a very realistic way in which to rate wholesale prices because oil companies can manipulate it. Independent retailers suffer all the time because they are tied to Platts. Most of the time it doesn't matter if the market is stable but when you get situations like in Libya and prices go up, that leaves independents at a huge disadvantage. Unless the government sees it as anti-competitive pricing, it's very difficult to get people to listen."

Jonathan James, operations director at Cambrideshire-based James Graven, is having to sit 4ppl above a nearby Tesco site's prices on both grades of fuel. "This has been going on for a while and my concern is why haven't they budged? I want to know what their game plan is; what are they trying to achieve? In rural areas it's going to knock the smaller petrol station on the head. Once supermarket sites have knocked the competition on the head they will put prices up, so that's not in the public interest in the long term."

Jonathan said fuel volume across the James Graven estate was down 10% year-on-year and he's had to abandon promotions at his standalone Budgens stores offering 5ppl off fuel for every 50 spent in-store because margins are too tight. "Most independents can't sell fuel for nothing," said Jonathan.

"I know of an independent who has stopped doing business accounts because he's not earning enough to do it. It's a sad indication of the times."

RMI's Petrol's Brian Madderson is calling for retailers to provide dates, locations and companies involved, along with purchase prices and selling prices on those dates when below-cost selling is apparent, in a bid to build up a dossier of evidence.

"Retailers tell me that this is probably the most serious issue for businesses," said Madderson. "Independents are making such small margins that they just haven't got any room to match the prices of oil companies and the hypermarkets.

"There are two oil companies Shell and Total that appear to be causing the most problems. We have mentioned this to Shell so it is aware of the grievances. We've had a polite letter back saying it would take it up with the company concerned as if it's not happening all around the country."

To add insult to injury, as retailers were gearing up for two back-to-back bank holiday weekends, Morrisons launched its Fuel Britannia campaign, giving motorists 6ppl off fuel at one of its 296 petrol stations around the UK in return for spending just 40 instore.

Richard Lancaster, marketing director at Morrisons, said: "With petrol prices at an all-time high and disposable income down 100 a month on last year, we want to provide our customers the best deal on the market. We know that over the Easter holidays and the Royal wedding, motorists will want to travel further to visit friends and relatives, but will be put off by the cost of petrol. Our offer ensures that our customers can enjoy this time and worry less about the cost."

Simon Privett, who runs Tollgate Service Station in Gravesend, Kent, which is close to a Morrisons site, said: "That's going to hurt us. What are they doing? They're subsidising fuel by using the store but I don't see how they can afford it. Morrisons fuel is already discounted but dropping it by another 6p will be below cost, so it's a loss leader. I won't know how it will impact us until it all kicks in. But it's the strongest promotion I've ever heard of. It's madness."

Simon has been as much as 10p adrift from Morrisons and now is 6p higher on unleaded and 5p on diesel. "Just yesterday they dropped their price by a penny I couldn't believe it. It's just crazy. In the area I'm still the dearest and I'm only making 3.5ppl. I'm on Platts so it's not loaded as such but I have RTO leverage which is 0.79.

"I don't think past Morrisons promotions have affected us much. If you're a Morrisons customer you're a Morrisons customer. If you're a BP customer, you're a BP customer. When there's a promotion on we get emergency people here. People see the queues at Morrisons and come to us. The Morrisons forecourt isn't big and it can be bedlam up there. Cars are queuing from the store and up the road to get in so we've picked up business because the site is too busy. Normally they only put in 10 or 20, but when they say they don't want to queue at Morrisons, that's music to my ears."


send evidence

If you believe your fuel retailing business is suffering as a result of unfair tactics by oil companies or supermarkets you can contribute to RMI Petrol's dossier of evidence, which will be passed to the government for investigation. You can email leonnie.braker@rmif.co.uk or send a letter to Brian Madderson, RMI Petrol, 201 Great Portland Street, London W1W 5AB with the following information: date, location, company involved, your fuel purchase price that day, as well as selling prices.





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