“There’s something really strange going on,” muses Brian Madderson, managing director of Dover-based George Hammond plc, from his office overlooking the harbour. And he’s not just talking about the weather either. He is extremely curious as to why the oil companies don’t seem keen to put their forecourt fuel prices up to reflect the rising world prices.
He has his own ‘conspiracy’ theories – which he would rather keep to himself – but he just can’t see how oil companies can justify keeping prices so low. “If so many deals in the market are Platts-based – and having just gone through a re-signing we know what the deals are out there – someone is pulling the wool over our eyes in terms of prices in the marketplace,” says Brian.
“Five years ago there were some fairly juicy fixed margin deals to be had, so we were less concerned about price. Now we’re on a deal where we really have to earn the margin. At 82.9ppl we’re making 5ppl on Platts prices, (at today’s prices) so when we see sites selling at 77.9ppl we know they’re selling at cost – and sometimes even less. But retailers have no option but to price at a level that gives them a satisfactory margin. An independent can’t possibly slug it out on his own against rival supermarket or oil company sites selling low.”
Despite the madness of the fuel market however, Brian seems extremely positive about the recent re-signing of all eight forecourts in the group to BP in one fell swoop, and there’s plenty of talk of expansion.
For this is a privately owned, family-based organisation with an amazing history of survival through adaptation to new market forces. It is primarily a shipping company whose roots can be traced back to the eighteenth century when it started as a shipping agency for vessels using the English Channel and the ports of Kent. The intriguing tale of the Hammonds, the Lathams and in later years the Ryelands – and many others in between – can be seen in a wonderful hardback book which charts its long journey through shipping history and involvement in businesses such as salvage, stevedoring, deep sea pilotage, transport and warehousing.
Its move into petrol retailing in 1973 came about quite by chance, when the current chairman, David Ryeland, stopped to fill up his car with petrol at a nearby garage, only to be asked if he wanted to buy it as it was in the hands of receivers. It’s a long story but ultimately it triggered a fruitful move into the forecourt business.
At its peak in 1989/90 the group had around 15 forecourt sites, a mix of Shell and Esso, some owned, some licensee. Then in 1998 all the sites were put out to tender and went 100% Shell. Five years later, and for a period of time both sides were making appropriate noises to re-sign the deal.
But what happened next appalled both Brian and director of the retail division, John Ryeland, (son of David), responsible for the forecourt network.
“Having beaten a path to our door to re-sign us earlier in the year, at the last minute, Shell inexplicably withdrew its offer, and replaced it with something very different. It was quite un-commercial so we decided to part company,” says Brian. “We are still dumbfounded by it all and we have still not got a satisfactory answer as to why the company did it and the way it did it – it was all handled very badly,” he stresses. Shell’s loss turned out to be BP’s gain. “I had a meeting with BP’s head of retail Graham Sims which was absolutely key. Within seven weeks of our first meeting the company had put together an offer and a legal agreement for all our sites in the most professional and understanding way. My main concern was for the actual changeover from Shell to BP imagery, but the contractors we used – Xmo Strata – were first class, and it was completed with minimum disruption.
“We have settled in very well with BP and I believe its modern image is the best on UK forecourts. The Nectar card is good and way ahead of Shell’s Pluspoints because of the widespread capture of points at different retail outlets. The Ultimate fuel is also good, although I think more could be done to promote it, particularly because of the price differential which has recently become more marked.”
So with eight sites based around Kent and Sussex, and a total annual volume of around 50 million litres, Brian and John are looking to develop the network further, and would consider a greenfield development. And having made the best deal they can on the fuel side, they are now turning their attentions to the shop.
“Five to 10 years ago, 90% of profit came from fuel, and 10% from the shop. Nowadays it’s 50/50 and I see that moving further towards increased shop profitability,” says John, who has for the past three years been part of the progressive Lakeside group, a bunch of like-minded independent retailers who generate mutual support with their shared thoughts and experiences. “Last year we opened our first Spar store on our Three Elm Service Station in Tonbridge, and more recently on our Dover site. We’re really excited about the development of sales through these sites, and have plans for more stores.” With a mix of 24-hour opening, convenience store, BP branding, car wash, cash machines and off licence, John believes the network has tremendous potential – and he’s only just at the start of tweaking the convenience offer.
So while the shipping side of the business remains stable, it’s full steam ahead on forecourts – until the tide turns, that is...