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Fuel for thought

None of the pontificating politicians in Westminster, who are currently debating forcing forecourts to install electric charging points, appear to have given any thought to the practical issues involved. Had they attended the launch of the fourth edition of the Blue Book they would now be having second thoughts.

UK Hand Car Wash Market - Key Fact

Size >10,000 hand car washes (7,000 mechanical washes), around 60% of total

Turning the tide

With the National Crime Agency investigating links with organised crime and drug smuggling, and raids almost on a daily basis looking for slaves among their work forces, illicit hand car wash operators were probably wondering when MPs would wake up to the problems they pose. What few were expecting, however, was that it was their appalling record of environmental carnage, which has faced minimal enforcement from the authorities, that has finally tipped the balance.

Fuel for thought

Shell added some perspective to the 'electric' onslaught last month with the opening of a new hydrogen refuelling station at Shell Beaconsfield in Buckinghamshire. It happened in the same week as the Department for Transport confirmed a multi-million pound funding boost to increase the uptake of hydrogen.

Opportunity knocks?

With the two biggest members of Forecourt Trader's Top 50 Indies snapping up more and more of the other groups in the listing, it was only a matter of time before they began to consider the biggest deal of all, but its timing still took many people by surprise.

Electric avenues

Many forecourts owners have been looking at the various options for installing electric charging facilities, with many deciding it is too early to commit, but a Bill currently going through Parliament may force their hand.

Motoring at full speed

I f anyone thought that the rate of acquisitions by the biggest dealers during 2017 could not possibly be maintained in the New Year, then the first week of 2018 appears to have dispelled that notion. Having just snapped up 14 sites with the acquisition of the Golden Cross Group, MFG is now reported to be sizing up a bid for MRH.

Mind the gap

While Palmer and Harvey's difficulties were common knowledge they'd put out a notice about takeover talks to secure the company's future the instant termination of all deliveries when it went into administration meant forecourt owners had to scramble to keep their shops supplied.

Charging the industry

Motorway services and large petrol retailers will be forced to install charge points and hydrogen refuelling points for electric cars, under plans confirmed in the House of Commons by transport minister John Hayes.

Spending spree

By the standards of recent years the number of acquisitions by the Top 50 Indies has been quite modest since the 2017 listing was published in March. But that all changed in September, with a flurry of deals. However, with all the major sell-offs by oil companies completed, it is now smaller groups and fellow Top 50 Indies, rather than big tranches of sites, that are being snapped up.

Action on slavery

As many forecourt owners with car wash facilities know to their cost, unscrupulous hand car washes (HCWs), with no regard for labour laws or environmental regulations, can steal many of their customers away by undercutting legitimate businesses. Initially, the authorities seemed reluctant to tackle this scourge, but after intense lobbying by the PRA, and the realisation that HCWs are often involved in human trafficking and slavery, people at the very top are demanding action.

Taking the long view

The government's long-awaited plan to tackle air pollution was always going to be controversial, after the High Court had dismissed earlier proposals as not good enough, and set a deadline of July 31 for it to come up with something better. But the media storm whipped up by its UK Plan for Roadside Nitrogen Dioxide Levels had little to do with its contents, and instead focused on something that will not take effect for 23 years.

Who foots the Bill?

The government's vision for the future of the road travel, which was outlined in the Queen's Speech, contained both reassurance and potential threats for the forecourt sector. The good news is that the government is clearly confident about the future of the forecourt sector, as it features in a pivotal role in the Automated and Electric Vehicles Bill. The threat is posed by the major changes the government is planning to introduce in its determination to develop the electric and hydrogen-powered sector, and questions over who is going to pay for them.

Back to the future

This time last year we were coming to the end of a major restructuring of the industry, as private equity funding was driving the big dealer groups to acquire a large number of sites being sold off by the oil companies. This activity has slowed down over the past year and the UK Fuel Market 2017 vs 2016 on the right shows how the sector has returned to familiar trends.

Safety first

The terrorist attacks at the Manchester Arena and on London Bridge mean security is top of the agenda for many companies, and an incident in Manchester demonstrates why the forecourt sector needs to be vigilant. A Texaco petrol station in the city found itself on the front line in the fight against terrorism when armed police swooped on a customer and briefly closed down the site.

Clearing the air

After hordes of headlines suggesting owners of diesel cars were about to be clobbered with huge pollution charges, there were fears that the surge in demand for diesel would suddenly shudder into reverse, but new proposals from the government have eased some of the anxiety at least temporarily.

Diesel dilemma

Diesel has grown to dominate the road fuels market in the UK, driven by government tax incentives for car drivers. In 2001, with the government seeking to reduce CO2 emissions, the greater efficiency of diesel engines compared with petrol made it the obvious choice, and tax rates were adjusted accordingly.

Building growth

The seemingly inexorable rise in the number of sites run by the Top 50 Indies continued last year, but the increase of 99 to 2,222 is much lower than the 300-plus increases of the two previous years.

Tapping into key trends

The internet has now been widely available for so long that many consumers have grown up with it, and as it continues to develop and affect more areas of everyone's lives it is helping to shape trends in shopper behaviour in the convenience sector. HIM Research & Consulting has been studying these developments in consumer activity and has identified three key trends which could influence future behaviour of shoppers at forecourt shops: the casual connoisseur, the modern mindset; and fast consumption.

Investing in growth

Many dealers continued adding to their estates in 2016, driving up demand, and therefore the value of sites fuelling continued optimism and investment in the fuel retailing sector.

Risks of reform

A House of Lords Select Committee is currently interviewing witnesses as it considers making proposals to reform the licensing laws. Any recommendations will not be binding on the Government, but are likely to be persuasive, and could impact on petrol retailers.

Drive to boost hydrogen sites

The government is consulting on plans to force larger service stations, supermarket forecourts and motorway service areas (MSAs) to provide hydrogen refuelling facilities and charging points for electric vehicles.

Rates rollercoaster

As this issue of Forecourt Trader went to press the Government had just published the headline figures on the results of its revaluation of business rates, and forecourt owners were waiting to see how their bills in April 2017 were likely to be affected. It reported that rateable values in the retail sector were set to increase by an average of 4.7%, although this was heavily influenced by a 26.2% increase in rateable values in London, with most regions in England and Wales seeing a decrease. There is also due to be a reduction of 1.7p from 49.7p in the standard rates multiplier.

Feeding growth

Food-to-go in the UK offers significant opportunities for growth, according to the latest figures from IGD, which has unveiled new research into the market for the very first time. Driven by changing shopper lifestyles, IGD is anticipating the market to be worth £16.1bn in 2016, up by 6.8% from 2015.

The fight goes on

HM Revenue & Customs (HMRC) has successfully appealed to the Upper Tribunal Chamber (UTC) against the decision in the First Tier Tribunal (FTT) that HMRC's decision to refuse Brobot Petroleum an excise duty Deferment Account Number was unreasonable.

Under pressure

If the most important factor affecting the forecourt sector is fuel sales, then the 2016 Statistical Report from UKPIA (UK Petroleum Industry Association) contains a heartening message. Total road fuel sales looked to be in a permanent decline after year-on-year falls from their peak in 2007 to 2013, but the trend is now positive again after the figure increased slightly for the second consecutive year in 2015. Nevertheless total road fuel sales are 9% lower than they were in 2007.

Results of this month's online poll:

With the latest diesel cars requiring Adblue every fifth or sixth visit to a petrol station, do you currently have plans to install the appropriate dispensers?

Level pegging

As Forecourt Trader went to press the nationwide polls showed the two sides were neck and neck and it was too close for either side to be confident of winning the referendum on June 23. As the pressure has mounted supporters of each camp have become increasingly desperate to land a decisive punch, ramping up the rhetoric and stoking up the heat, but the blizzard of contradictory claims has shed comparatively little light.

Delivering growth

The number of Londis and Budgens stores on independent forecourts is set to soar after Top 50 Indie Motor Fuel Group (MFG) signed a new shop supply agreement with Booker Retail Partners (BRP), commencing on July 1.

When staff are a liability

In the recent case of Mohamud v WM Morrison Supermarkets plc, the Supreme Court ruled that WM Morrison was vicariously liable, as an employer, for an unprovoked attack carried out by one of its forecourt staff on a customer. This case raises important points and considerations for all petrol filling station and retail operators, particularly those where a small number of employees are left to operate a site with little supervision.

Top 50 Indies own 25% of UK sites

The Top 50 Indies now account for almost 25% of the forecourts in the entire UK market, according to Forecourt Trader's latest report on the biggest independent retailers.Editor Merril Boulton told an audience of more than 150 at the 2016 Top 50 Indies Dinner that between them they added 361 sites during 2015 taking the total Top 50 to 2,123 sites.

Top of the class

Despite a surge of more than 300 in the total number of sites run by the Top 50 in last year's report, the independent sector's appetite for growth showed no sign of slackening with an even greater increase over the most recent 12 months.

Positive outlook

Last year saw a major landmark for the dealer sector in the UK as it powered ahead to represent nearly 70% of all UK forecourts.

Rising through the ranks

In what has already been a hectic year for businesses in Forecourt Trader's Top 50 Indies, another twist has just been added by HKS more than doubling in size to just under 60 sites in just three months.

World class

Euro Garages' rapid growth in the UK since its formation in 2001 has already propelled it into third spot in the Forecourt Trader Top 50 Indies, and now it is aiming to become a leading player on a bigger stage. after a private equity firm agreed to invest in the company.

Pumping up the future

With Shell signing a deal for hydrogen refuelling stations (HFSs) at three of its sites, and Toyota launching its Mirai hydrogen fuel cell electric vehicles (FCEVs) in the UK, a new kind of fuel is finally gaining a little traction in this country.

Deferred justice

Brobot Petroleum, a Top 50 Indie which operates 23 filling stations in the Midlands, has successfully appealed via the First Tier Tax Tribunal against HM Revenue & Customs (HMRC) imposition of unreasonable conditions to obtain an excise duty Deferment Account Number: Oil Products.

Mind the gap

Over the past few months, as the gap in wholesale prices for diesel and unleaded petrol has narrowed, a debate has raged between motoring organisations and retailers as to whether drivers were paying too much for diesel.

Growth attracts investors

Just days after Forecourt trader published its Fuel Market Review 2015, two big deals endorsed the Review's observation that "all the signs continue to be positive for the retail forecourt sector in the UK".

Delivering growth

Last month Booker Group plc surprised the industry by announcing a deal with Irish food wholesaler Musgrave Group plc, to buy its British offshoot, Musgrave Retail Partners GB which comprises the Londis and Budgens businesses for £40m. Completion of the acquisition is conditional on the approval of the Competition & Markets Authority (CMA) and Booker has already entered into talks with the CMA on the first 40 working day stage of this process. It is a process that Booker is familiar with as it had to clear the same hurdle when it took over the struggling Makro cash and carry business in 2013.

Shell sell-off completed

Little more than a month after Esso announced it had agreed deals to sell off its remaining 201 company owned sites to independent dealers, another swathe of oil company sites is heading for the independent sector, after Shell concluded deals to sell 185 of its forecourts.

MFG unveils new strategy

Last month Top 50 Indie MFG announced plans to remove the Murco brand from all of its company-owned sites, and develop it as a brand exclusively for dealers.

Stormy seas ahead?

After one of the most volatile quarters on record for fuel prices, International Petroleum Week in the middle of last month was perfectly timed to bring some clarity to the turmoil, and give dealers some guidance on what may happen to prices in the months ahead.

Absolutely fuming

The LPG industry was out in force last month trying to wake up the powers that be in the UK to the economic and environmental benefits of LPG.

A sensible approach

New guidance has been published by the Association of Convenience Stores (ACS) to support retailers in preventing fuel theft and advising them on how to respond when it does occur.

Challenging growth

The future is bright, the future is convenience, and there is significant growth out there, delegates were told at last month's IGD Convenience Retailing conference in London.

An age-old problem

As winter approaches with its worst extremes of weather putting all parts of the forecourt structure to the test, canopy maintenance specialists are warning that some overhead structures on forecourts could be in a lethal condition.

Driving crime down

The concept of pre-payment for fuel as a way to prevent drive-offs has been around for a long time, and in some countries it is mandatory, but it has always been resisted by the majority of the trade in the UK. Indeed, as forecourt shops have become ever more important to many businesses, and therefore the need to drive footfall into them, the prospect of many customers simply paying at the pump and then driving off without visiting the shop, has only strengthened opposition.

Present and future

Total retail fuel volumes show a continuing trend of decline, PRA chairman Brian Madderson told an audience of forecourt and convenience retailers and suppliers at last month's Forecourt Forum at the Ricoh Arena in Coventry.

A charge for change

Fuel cards everybody moans about the margins, but continues to accept them as they are used in the transactions of around 20% of an average site's fuel volume. They are key generators of fuel and non-fuel sales. But at what cost?

Behind the scenes, dealers nationwide are taking a closer look at the dwindling margins from fuel cards, and are beginning to question their contribution, particularly in the light of ever-rising site operating costs and changing dynamics within the marketplace.

"When did you last hear a dealer say they love credit card charges, bunkering margins, fleet cards, or paying RPI increases on Platts supply deals?," said one exasperated independent dealer. "In some cases they are netting less than 1ppl for the trouble of supplying expensive and extensive facilities, staffing, cash flow and tax-burdened operations."

In many cases, the card customer will pay the same price or more than the published forecourt price and it's arguable that the card issuers are taking a higher margin than the dealer without any of the substantial costs and risks of providing fuel.

Mainly for hauliers

Fuel cards have been around for around 40 years, having started as a means of emergency re-fuelling on the road mainly for hauliers as they worked further and further away from their home base. They have now evolved from a paper-based means of obtaining fuel offered only to a select number of business users, to being a fully computerised, multi-billion pound essential business tool.

On the plus side they deliver loyal repeat customers who may also shop for higher-margin non-fuel items although some dealers are yet to be convinced. Try analysing the shop sales derived from fuel card customers and you may be surprised. On the negative side, these customers come at a price.

Fuel cards come in various formats: fleet cards eg AllStar; oil company cards such as BP PLUS or EuroShell; pay as you go (PAYG) bunker cards such as Diesel Direct or Texaco Fastfuel; or bunker cards such as Keyfuels or UK Fuels.

Merchant service fee

In terms of costs to the dealer, there are a number of different methods of charging for them. A merchant service fee (MSF) can be charged against the transaction value as a pence-per-litre rate or as a percentage, as is the case with the Allstar card. These charges are either built into the wholesale price of the fuel by the fuel supplier, or paid direct to Allstar by the dealer. The method used depends on whether the fuel supplier has a direct relationship with Allstar and passes on a centrally negotiated deal to the branded dealer; or if the dealer deals directly with Allstar.

In the case of branded oil company cards, the transaction is typically purchased from the dealer at the wholesale price they paid for the fuel, plus a pence-per-litre card commission such as with BP PLUS or EuroShell. For PAYG cards and bunker cards, the site gets a small ppl commission as the fuel is not owned by the dealer. In the 'good old days' fuel cards served as useful 'incremental volume' on top of the volume from traditional private consumers. However, with the growth of supermarkets with their price position and customer promotions dramatically altering the customer mix (mums are more likely to fill up at the supermarket) volume associated with fuel cards ie the business/commercial customer has gone from being a 'nice to have', to being a vital component of a site's overall volume in many cases.

However, as the volume has grown over the years, unfortunately the resultant net margin to the dealer has not. Card commissions those associated with oil company issued cards and bunker cards have stayed frozen at the levels offered when these schemes were launched 25-30 years ago, and in addition AllStar has started to impose an RPI-related increase on its charges. In most cases, industry experts estimate that in order to keep up with the rate of inflation, rates should be at least double what they are today. This all comes at a time when oil companies are imposing targets on retail volume and RPI escalators onto the Platts add-on for wholesale fuel.

A further problem which dealers complain about is the time it takes to get paid by the card issuer and the process by which they are paid, which can be very confusing and cause difficulties in reconciliation.

Other pressures include Allstar's recent introduction of its 'Premier Programme', in which Allstar markets a PAYG bunker card to its Allstar fleet customers traditionally bunker cards have been serviced by CH Jones (Keyfuels). However, both CH Jones and Allstar are now owned by Fleetcor. Experts believe dealers will lose out as traditional Allstar customers are now being encouraged to favour a Keyfuels-supplied PAYG bunker card, (acceptable at around 1,800, mostly dealer sites) to pay for their fuel at sites which accept both cards. The net result is that the dealer will get a reduced margin from the transaction as the commission on PAYG bunker is substantially lower than if the transaction was made using the Allstar card.

As if all this wasn't enough, the popularity of paying for fuel using cards has grown dramatically among private consumers. It is estimated that at an average site around 80% of fuel is now paid for using some form of plastic card. Many people are now paying with premium-rate credit cards which offer enhanced loyalty schemes such as Air Miles or cash back. While this is good news for the consumer, unfortunately this is financed via inflated (compared with standard credit cards) merchant service fees from the dealer. To try and combat this, the PRA is working with the government to push for an early implementation of the EC's proposals on interchange rates and one of these proposals will be to outlaw these premium-rate cards.

However, addressing the issues surrounding fuel cards is proving to be more difficult. In many cases acceptance of the cards is mandatory as it is an integral part of the fuel supply agreement, and rates vary between oil company brands. Besides that, the fuel volume is so significant that it would be commercial suicide to walk away from accepting these cards. Resentment among dealers is building they take all the risk, and the margin they're getting on fuel cards doesn't cut it any more.

Independent retailer Barrie Richards of St Blazey Service Station, said: "We need a strong voice in the industry to enable us not just to pick up crumbs, but to support and sustain our businesses going forward. Pinning us down to impossible returns is not going to support the card companies beyond the short term either.

"What do card operators think we make from fuel? It's clear we are not very good, as an industry, at getting our message across."

Back to our 'exasperated' retailer: "We are all too content to continue griping, yet readily accept the status quo. Independent retailers control the lion's share of retail and commercial sites in the UK and have the critical mass to change their destiny. Ask yourself am I happy with this situation?"

  • Weekly
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Weekly retail fuel prices: 18 June 2018
RegionDieselLPGSuper ULUL
East Midlands131.6092.90141.48128.80
North East131.2866.90141.91127.99
North West131.52141.49128.24
Northern Ireland130.8069.90135.52128.45
South East132.40141.08129.46
South West131.8662.90140.58129.06
West Midlands131.1759.80140.83128.45
Yorkshire & Humber130.8879.90140.94127.89

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