Bearing the signage of a successful global brand can bring huge benefits to any retail environment. A company like BP, for example, represents a known quantity, with known values, and displaying its brand on a forecourt can therefore be a great boost to business.
Until disaster strikes.
The fallout from last April’s Deepwater Horizon drilling rig explosion, which caused 11 fatalities, reverberated around the world as the subsequent oil spill into the Gulf of Mexico endured for three months. It was an extremely difficult time for everyone involved with the BP brand.
Neale Smither, BP’s UK supply, marketing and retail manager, says it was a time of increasing anxiety as the distressing course of events unfolded: "Initially we’d heard of a tragic accident involving the deaths of 11 people, which is a significant event in any industry.
"Then the next chapter of the story was that some oil was leaking out of the well. There was then a big mobilisation exercise with respect to boats, ships, aeroplanes, and putting booms up to try and protect the shore line. At this stage, my staff were concerned, but also felt it was something rather removed from our UK business.
"However as the magnitude of the environmental implications became clearer, then, as a BP employee, there was an increased level of nervousness around what it might mean for our company and our brand, and how people would regard us here in the UK.
"Then when it got political and the publicity around the incident increased ten-fold, it brought it much closer to home for BP staff."
Smither’s reaction was to get out and talk to the dealers, because he knew that any vacuums in communication would easily be filled by the media.
"My role really became one of communicator, initially to staff and then to our dealer partners, making sure people were informed about what was going on, and what the BP position was. Looking back that was the best contribution someone in my position could have made. By creating a dialogue with people, you start to get a more measured and balanced set of perspectives on the incident."
Snax 24 deal
In terms of the effect on business, Smither and his team were quite reassured at a fairly early stage to see that there hadn’t been a significant impact in the UK on people’s buying behaviour a position backed up in conversations with dealers.
In fact BP clinched a new five-year deal to supply Snax 24’s 40-plus sites during the most difficult moments surrounding the Gulf oil disaster, last June, when the politics around the incident were being very widely reported.
"The impact on the BP brand had been significant in the US," says Smither. "But here in the UK a more balanced reporting of the incident had helped ensure there wasn’t a customer fallout, or a significant dent in reputation. A Greenpeace protest in London was the most visible activity, but not much else came to my attention." BP has already spent around £8bn on clean-up operations and successfully plugged the well in July; and it has pledged $20bn against future claims.
"We are looking to dispose of $30bn-worth of assets across the globe to pay for it," explains Smither. "But the bulk of that will be in the upstream business, not in our area refining and marketing so there needn’t be any financial impact, or any change of strategy in the UK downstream sector. However, we have to accept that there are considerable sums of money involved in the outcome of the process that will now follow, which is one of various bodies completing their investigations and then various activity in the courts."
But while all that is going on, BP’s commitment to completing the clean-up operation remains 100%, according to Smither. The company has set up the Gulf Coast Research initiative which will undertake any remediation that is required during the next 10 years.
"We tried to do the right thing from the beginning," he stresses. "It was a massive incident, involving loss of life and environmental implications. My hope is that history will look more kindly on the steps that BP took to respond to this tragic accident, than the way it came across at the time. One of the things that has made this tragedy so difficult in terms of working for BP, is that safe and reliable operations are paramount in everything we do. Good safety is good business, because when it goes wrong, look at the consequences."
Changing demand profile
Despite the tragic events of 2010, Smither is upbeat about the UK market: "On the surface the UK looks very difficult because fuel demand is declining 2-3% year-on-year, and refineries are finding it increasingly difficult to survive with the changing demand profile of petrol and diesel.
"BP is at an advantage in that it no longer owns any refineries in the UK," explains Smither.
"Secondly, there is a part of the UK retail business which is growing convenience. We know that the overall market for shops on forecourts is growing by between 3-5% per annum. But we are growing more strongly than the market in our shops.
"In our M&S real estate we’re looking at like-for-like growth of 7%, which is much higher than M&S like-for-like growth on all of its stores. So there’s something very encouraging around the growth of retail forecourt convenience.
"Another positive point is that we have looked at the fuel performance both on our own sites and sites that our dealers own and operate, in order to understand why some sites perform better than others. And we’ve discovered that the stronger the convenience offer on a service station, the better its fuel performance. On our co-owned estate, sites with the best shop offers have even been able to show some growth in fuel, where the overall market is in decline.
"When we’ve looked at our dealers, we’ve found that those dealer groups that have invested more in the convenience business are generally performing better on fuel than those who have put less attention on it."
The current strategy is therefore a further rationalisation of the co-owned network by about 30 to 300; and a focus on developing more high-quality, bigger footprint convenience outlets. Co-owned sites will have one of two offers on them either an M&S with a Wild Bean Café, or a Wild Bean on its own supported by a strong convenience offer or a transient convenience offer, currently branded Connect.
The plans also include growing the 800-strong dealer network, and attempting to create one consistent BP-branded network in the UK.
"But we will only grow it with dealer partners that share our commitment with respect to the core offers that we think define the BP network, and they are: a quality shop offer; a strong coffee/food-to-go offer like Wild Bean; premium fuels we have Ultimate; and the Nectar loyalty programme. We’ll be looking to persuade dealers that are not currently part of BP to join our vision of what makes an attractive business. We will make it easier to share information with dealers about the things that have worked very well in our co-owned real estate, like Wild Bean Café. Similarly there are dealer groups we can learn from.
"My vision is that over time we will become much less in two conversations co-owned and dealer owned but in one. The stronger we can make the network nationally, through the sites we own and the sites dealers own, the more consistent we can make it look and feel to customers. We are all going to benefit from that."
Smither says the company is looking at ways of making the Wild Bean franchise model easier for dealers to access, to give them more flexibility and more choice.
"We should start to see the impact of that coming through in the first quarter of this year. My hope is that Wild Bean, which currently sits today on 340 outlets, mostly BP-owned, has potential for considerable growth with our dealer partners."
Smither is also hoping to extend the M&S offer to dealer-owned sites: "The relationship with M&S is good, the performance has been very strong. You need two things to make M&S work on a forecourt the right trading area, and the right amount of space. As we’ve looked around the country it’s surprised us just how few sites there are in the industry today that could support that whether they’re BP sites or not. We’ve currently got M&S on 125 of our sites, and we are now talking to some of our big dealer partners about sites we’ve identified in their networks that could support an M&S offer."
In pursuing quality Smither is hoping to attract more dealer partners, although he accepts that some sites will fall out of the network: "A dealer today must recognise that they will need a quality shop offer in order to support their performance on the forecourt with fuel, because the market is not doing us any favours.
"But I believe BP has a positive message compared to other oil companies that are looking to sell up. It’s not all doom and gloom.
"We have confidence in the market. We are looking to grow our dealer network. We’re absolutely clear we’re committed to the UK."
At the peak of the response:
l 48,000 people involved
l 6,000 vessels
l 120 aircraft
l 13 million feet of containment boom
l Over £8bn spent to date
l £12.5bn claims fund established, and £1.3bn already paid out to claimants
l £300m pledged for Gulf Coast Research initiative
Support from snax 24
Snax 24 signed a new five-year deal with BP during its blackest period following the Gulf disaster. Gerald Ronson (pictured below right, with Neale Smither), founder and chief executive of Heron International, which operates the Snax 24 chain, commented: "Snax 24 is delighted to continue its strong and long-standing partnership with BP. The partnership has the potential to grow in areas beyond the current offer of fuel supply, Ultimate fuels and Nectar, to include offers such as the Wild Bean Café. The incident in the Gulf of Mexico had no bearing on our decision to re-sign with BP, and I have no doubt that BP will continue to do the right thing with respect to settling the environmental clean-up and claims."