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

Time for indie pennants

01 August, 2011
As fuel retailers are hit with falling volumes and margins, Top 50 indie Peter Brough says it's time independents joined together to form their own brand
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Top 50 indie Peter Brough has called for independent retailers to join together to form their own fuel brand and cut out the expensive middleman the oil companies. In a presentation to a packed audience at the ACS Forecourt Seminar run in association with RMI Petrol at Leicester City Football stadium last month Peter, managing director of Cheshire-based Manor Service Stations, which runs 12 sites, said he believed the industry was going through its biggest fundamental change since the 1960s.

He said fuel volumes were falling on traditional sites because retailers were unable to compete with the supermarkets. "Why are we in such a big mess in terms of volume? Fundamentally it is because we're being outsold on price. The reason is that supermarkets sell an awful lot of fuel. If they sell an awful lot of fuel, they can get it at a good price.

"But there are 5,400 independent fuel retailers, at around 5,000 independent fuel locations. That's a lot of fuel. Oil companies once they've sold their refineries are just middlemen. The big difference between the prices paid by the supermarkets and the price we're paying is the brand. We're paying an enormous amount to a middleman for a brand."

Peter said independents should seize the opportunity to set up their own brand together and cut out the middleman. "Even if just 10% of independent garages 540 were to join, and commit ourselves to, say 10,000 a site, you're talking about raising 5.5m, which is enough to create a brand. Three million pounds spent on TV is going to create a brand. We all know it we've seen it happen with insurance companies. Use a meerkat and you've got a brand! We'd be big buyers and therefore even if we're not getting the same price as Tesco, we should be getting much much closer. If we don't do something the UK will end up like France very few service stations and most of the fuel sold by supermarkets."

Peter believes that in the long term, creating an independent retailer-owned fuel brand could be the industry's only salvation. "It's no good talking about it it's not rocket science. It can be done. But a movement needs to start and it needs to start soon. And we need the bigger groups to get involved.

"If we face the situation where supermarkets are allowed to sell below cost and if the government doesn't do anything about it we'll never be able to match those prices. If we can get closer I'm working on the assumption that a pared-down operation that doesn't have all the bells and whistles that we get from the likes of BP and Shell, could still be a well-known brand, and one that is trusted by the public."

Simon Davis of fuel supplier Harvest Energy, one of the sponsors of the event, said his company was indeed offering today's independent retailers the chance to create their own brand and that it was possible to match the competition to within half a penny on price. He cited own-brand examples of Top 50 Indies Petrogas with its Applegreen brand; Park Garage Group with the Park and Shop brand; and more recently Malthurst, which has launched Torq on five sites in Scotland. "They all have one thing in common all three are supplied by Harvest Energy," he said.

Predatory pricing

RMI Petrol chairman Brian Madderson is leading the fight to bring the damaging effect of predatory pricing in the fuel-retailing sector to the attention of the government, with a view to an investigation by the Office of Fair Trading.

He told the audience that fuel-price briefing notes had been issued to more than 250 MPs and ministers, and that he had held preliminary discussions with the OFT, and received positive feedback.

"I wrote to the Chancellor complaining about unfair pricing tactics and the fact we're leading to a two-tier marketplace. The Chancellor replied that 'fair competition is also essential for delivering sustainable economic growth'."

Madderson said he was hopeful that although in 1990, 1998 and 2008, various agencies and commissions looked at fuel pricing, and waded through saying 'let the supermarkets roll, let the oil companies roll, it's great for the consumer always to have low pricing', this time will be different.

"What we're saying this time is that enough is enough. We have to look at the wider picture for jobs, rural communities, and energy resilience. And it's no good the OFT backing the consumer on a price basis only, because the collateral damage that will cause our industry, we will live to regret in the years ahead."

Madderson related the story of how Justin King, chief executive officer of Sainsbury's, had freely admitted in a radio interview in May that the company had been selling at a loss for about six months and that this had increased its fuel volume by 6%. "That's 180 million litres of fuel that Sainsbury's has taken out of the marketplace," stressed Brian. "That's equivalent to about 120 filling stations' total business. Is that reputable retailing? Is that really sensible?

"Fuel is a scarce strategic resource and should not be treated in the same way as baked beans, bread, tea and other items where you can loss-lead, have bogofs and all the rest of it. We must be much more careful about how we conserve and treat our fuel resources in this country.

"Certain oil companies have also followed suit, and they are selling fuel from their company-owned sites at levels below which they are selling to their own franchised dealer network," Madderson added. "That can't be right. And the OFT seems to agree with me. So we've got all our members writing to their local MPs. These MPs have been writing to the ministers in the Treasury, business, energy, transport, OFT, Defra, and getting interested responses."

Madderson said RMI Petrol would be lobbying hard after the summer recess to get the government to re-think its taxation policies for fuel estimated to add 8ppl to fuel prices at the pump next year because it will rock the economy, retailers, and the industry, if nothing is done about it.

Alternative fuels

Mike Waters, director for market insight at leasing and fuel management company Arval gave the audience an overview of alternative energy sources for vehicles. He began by saying that growing mpg performance of new cars and a rise in popularity of diesel cars would continue to put a squeeze on fuel volumes. "Mpg performance of new cars is coming down rapidly so cars coming into forecourts need less fuel," he said. "Diesel cars also account for 60% of new car registrations and are gathering pace year after year."

Waters said the drive-train mix of the car parc would be very different in the future. The committee on climate change projections claims that by 2030, 40% of new car sales will come from conventional cars; 40% from plug-in hybrids, and the remaining 20% from electric vehicles. In contrast, 70% of the mileage covered will be in conventional cars; 20% in plug-in hybrids; and 10% in electric vehicles.

Speaking about the electric vehicle market specifically, Waters said incentives remained essential in the short-to-medium term, along with infrastructure development, and that following the launch of the Nissan Leaf and Mitsubishi iMiEV there would be 12 additional electric car launches in 2012.

Waters went on to conclude that legislation is forcing the development of alternative technologies and fuels, and heavy investment in new technology from all manufacturers will continue. "Hybridisation will ensure that petrol and diesel remain the fuels of choice for at least the next decade," he said.

"Fuel volume sales decline will be partially offset by increased mileage and vehicle sales. In 10 years' time all technologies will be in the market, but the vast majority will still be internal combustion engine-based."

Cash machines

Ron Delnevo, managing director UK & Europe for Bank Machine, discussed the importance of free-to-use cash machines on forecourts. He shared information on trends in cash versus cards, and cash machines as an improved income source for forecourts. "Every forecourt in the country should have an ATM," he told delegates. "An ATM will draw people to your business, and giving those people the opportunity to withdraw cash means they can spend it in your business. Give people cash and they will spend it.

"Secondly, make sure the ATM at your premises is supremely well presented and gives the best service to your customers," added Delnevo. "There is no point in having an ATM if it does not provide a reliable service in fact you're better off not having one."

Government legislation

Shane Brennan, public affairs director of the ACS, discussed the key political issues for convenience retailing on the forecourt. Setting the scene for the association's number-one priority over the past six months its sustainable high streets campaign Brennan pointed out that there were 400 new supermarkets planned in 2011 with only one out of 146 out-of-town supermarket cases called in for review. And 59% of council refusals were overturned at appeal.

ACS' lobbying over the Localism Bill, pushing for retail diversity, has had some positive outcomes. It forced a vote in the House of Commons and the argument was taken into the House of Lords. But Brennan called for more retailers to take part and write to their MPs.

Talking about responsible retailing, Brennan said retailers need to focus on high standards, demonstrate responsibility, make local contacts with licensing and health professionals, and listen and react to their customers.

Brennan also highlighted alcohol licensing changes. He said there are proposals for extended scope of who can complain about an alcohol licence application, new powers for Local Authorities to refuse or review licences, and a new 'cost recovery' model for licence fees. A positive for forecourt retailers has been the recent rejection of a proposed prohibition of forecourt alcohol licences in England in the House of Lords. However, there is continued legal uncertainty in Scotland.

There were also presentations by Jonathan Reynold, academic director at Said Business School; HIM director Natalie London; and JTI's multiple account managers Darren Strode and Richard Box.





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