The distinctive blue and white signage of United Co-operatives will soon be appearing on forecourts far and wide if Clive Adamson, general manager of the Society’s petrol division, has anything to do with it.
In recent months he has overseen the acquisition of a number of sites belonging to two high-profile independent forecourt operators – three sites in York from former Forecourt Trader of the Year Graham Kennedy, of Inner Space Stations; and last month seven sites from Paul Jervis, of Action Stations. The latest additions are in Sunderland, Yorkshire and the north Midlands and have helped expand the Society’s trading area and increase its forecourt portfolio to 34.
“About 18 months ago we started a rolling three-year strategy to build our forecourt network to 50 sites,” says Adamson. “That looks fairly comfortable now, and I don’t see any reason why in the next three years we don’t get to more than 100.”
United Co-operatives was created from the merger of Yorkshire
Co-operatives and United Norwest in 2002. It is one of the largest retail co-operatives in Europe, with a turnover in excess of £1.8billion and more than 15,500 staff employed from the Midlands to Cumbria and from Northern Ireland to the east coast of Yorkshire. It has five major businesses: food, travel, motor dealerships, health care and funerals.
The petrol division operates from Sunderland in the north to Retford, near Nottingham, in the south, and from Westhoughton, near Bolton, in the west to York in the east. It sells more than 170 million litres of fuel a year and generates £1.5million in car wash revenue.
But it is the convenience store business on the forecourts which has the greatest potential for growth, with sales of more than £29m forecast for the current financial year.
Much of the petrol division has been transformed over the past five years, and there is ongoing redevelopment of forecourt shops – extensions and refurbishments, coupled with a greater variety of grocery lines, including beers, wines and fresh produce, and strong promotional offers.
Adamson says the growth in like-for-like sales over the past few years has been “astonishing”. In the first year after the redevelopment programme began, the Society enjoyed a 25% increase, then 18% and latterly 10%. This year the increase is running at 6.6% – more than the equivalent growth for the mulitple grocers.
Although Yorkshire Co-operatives first began acquiring forecourts about 20 years ago, it’s only gradually and relatively recently that the true potential of the petrol retailing business has been identified and acted upon. “Initially, the forecourts were run by whichever managers were in the business they were linked to – such as the car franchise manager of a motor group,” explains Adamson.
“Then about 18 years ago the Society began to realise the potential in the petrol station business and decided it had to have its own division. In 2002, we had about 20 forecourts but the merger has opened up a new area of trading for us, as United Norwest was not into petrol retailing.
“We are very acquisitive and will look at buying a site doing anything from two-million litres a year to 12m. You can be successful with a low-volume petrol station: we have some sites doing only 3mlpa but they’re doing £25-30,000 a week in shop sales.
“Location is important. We will look at little villages with, say, an old attended site with an MOT bay where there’s enough room to build a 2,000sq ft shop – so the petrol sales are almost a secondary consideration.
“Obviously, we look at high-volume sites as well. But if there’s a big site, say on the A1, we don’t think will ever do a grocery/convenience-style operation, we wouldn’t take it on.”
Adamson says that in terms of demographics, “it’s nice to have around 3.5 million bodies around you”, within a half-mile to a mile radius. But it’s not always the answer. “One site, the Great North Way – one of the former Inner Space Station forecourts – appears to be in the middle of nowhere. It’s next to the main ring road going into York. There isn’t another filling station from the A64 until you get to York, so the location is superb for transient traffic.
“It’s a 10mlpa site and the footfall coming from the cars is massive. The feeder routes to the site are little villages, so a lot of people pass it on their way to and from work. They may get the call from home requesting bread, milk and so on – so there is a niche market there.
“Since the acquisition, we’ve put the United Co-operatives signs on the pumps and over the shop door to give people awareness before they come into the shop. Other than that, there’s not much difference on the forecourt from when it was owned by Graham Kennedy. The main investment has gone into the shop, which has been re-fixtured and a lot of grocery lines introduced.
“One of the things we have been impressed with on the North Way site is how we can stand off on fuel price and remain high on volume. There’s a Shell site down the road which at one stage was 4ppl cheaper than us and our volume remained.”
The North Way site was the Society’s first experience with BP – it now has 13 BP sites – and Adamson is impressed with the strength of the brand. Following the acquisitions, the network has a mix of Shell, BP and Esso branding.
“Oil companies are not the easiest people to deal with. The problem is, every two years you have one oil company chasing the market which is good to deal with, and one going in the opposite direction, where they stand off on price and don’t give support. The ones that have decided to go for profit rather than turnover are supported by the ones trying to buy volume, so we tend to stick with a few and benefit from the swings and roundabouts. We wouldn’t put all our eggs in one basket. We do have different deals. On some we’re still on fixed margin with shared rebate but on a lot of sites we’ve gone on to Platts, which I’m pleased with because we’re in control of our own destiny.
“A fixed margin is nice – it’s what we have with Shell at the moment – but it can be withdrawn at any moment. I firmly believe it will be better for the market when all dealers are on Platts.”
The Society started using its own brand name over its forecourt shops only about five years ago. Before that it used whatever supplying oil company format was in vogue at the time – such as Shell Shop or Esso Snack & Shop. But, says Adamson, just by changing the fascia above the door, sales increased by an average 15-20% – testament to the strength of the Society’s brand name in the areas in which it operates.
The Society’s Food Group incorporates three distinctive trading groups – convenience stores, food markets and superstores – and serves more than one million customers every week. It operates more than 400 c-stores throughout the north Midlands, the northwest and Yorkshire.
“We’ve been very strong on the acquisition of c-stores over the past few years. But what’s getting more difficult is finding groups of them – they’re drying up,” says Adamson, reflecting on the disappointment at losing out on the recent acquisitions of major independent convenience store groups such as Bells and Jacksons by the supermarkets.
The Society has also been held back on larger acquisitions such as Texaco’s network because of the trading restrictions within the network of co-operative societies, which mean they cannot encroach on each other’s territories. Buying a national network is therefore out of the question.
“There are a lot of single-acquisition sites out there. The problem is, it takes a lot of time and energy to do just one purchase. It’s a lot easier to buy a group, and it helps to build the portfolio more quickly.”
Hence the focus on the forecourt sector. “We have identified there are still a lot of groups in the petrol industry, so the focus and target has moved slightly from the convenience trade to petrol sites – to build convenience stores selling petrol, rather than a petrol site with some groceries. We’re looking at quite a number of forecourt independents at the moment. These deals are happening both by independents approaching us and vice versa.
“With the acquisition of Action Stations and Inner Space Stations, whose proprietors are well-known in the industry, we approached both of them. That has been the way in the past few years but we have noticed in recent months, with the publicity of these sales, that retailers are beginning to come to us now. I think they have begun to realise they have built up successful businesses and have taken them as far as they could go. They have done what they can in the shop, and with fuel margins falling, they need to boost the bottom line. With our background in fuel and grocery stores, we’re well-placed to take on these sites – and we’ve done it very successfully.”
Adamson says the United Co-operatives regards its staff as its major asset. “After an acquisition, we put a lot of time, money and effort into integration. We bring staff to hotels to meet with HR trainers, managers and so on. The employees are the greatest part of the acquisition, and if they aren’t behind us, we can have a difficult time building sales.
“We spend a lot of money on the shops but we also invest heavily at the back end of the store – making staff canteens, enlarging store rooms, and making better offices for the managers.”
Pay is better than in your average independent forecourt, and there are staff discount schemes plus a minimum 27 days holiday a year on top of Bank Holidays and a final salary pension scheme. Subject to budgets and targets being hit, employees also get £500 of shares each year.
All these benefits help to keep staff happy in their work and keen to maintain the high standards of customer service Adamson believes has been vital to success.
“As far as customers are concerned, the United Co-operatives badge over the door means a good store, with good service, an extensive range of products and good pricing. As part of the co-operative movement we also have a strong ethical stance. We stock Fair Trade products and donate to a lot of local communities and charities
“On our posters it says ‘your community retailer’. The community is who we’re serving and that’s who we want to give back to.”