Essar Oil UK has just reported its best three-quarter year results, with a profit after tax of $179m (up to December 31), compared with $35.3m for the same period in the previous year.
It has also confirmed the signing up of two further dealer sites to the Essar retail brand, following its debut in November at a site owned by Top 50 Indie HKS at Coalville in Leicestershire.
Both the latest sites are nearer the oil company’s Stanlow Refinery in Cheshire, which it acquired from Shell in 2011. The second site was launched in association with S & S Station Limited at Walkden in Manchester, and the third site, at Middleton in Lancashire, was opened in association with the Casson family. It is operated by three generations of the family which has owned the site for almost 60 years.
SB Prasad, Essar Oil UK’s chief commercial officer retail, says the Essar retail brand was being well accepted and he was hopeful more sites would be added in the coming months: "We want to take the first few steps very carefully. But by the end of this financial year (March/April), we hope to have about 10 sites, and maybe even 100 by the end of this year. There is certainly the potential for that.
"Once we begin signing retailers they become the ambassadors for the brand, they give their feedback and speak to other dealers, and that’s how it multiplies.
"Our goal is for Essar to be established as a nationally recognised brand, in a good position among the major players. To do that we ultimately need a few hundred sites."
Prasad has a good deal of experience in forecourt retail networks having been in the downstream sector for 35 years, starting with Bharat Petroleum Corporation Ltd in India in 1981. He then joined Caltex (now Chevron); Reliance Industries; and joined Essar twice firstly in 1995. He later joined Essar again in 2004 to develop the Essar retail business in India.
"It was very similar to what we’re doing now because no-one knew Essar there as a retail brand. When I left to go to work for an oil company in Africa in 2006, we had almost 500-plus stations in India."
Almost 10 years later, Prasad has joined Essar for a third time to take up the challenge of building a UK retail network.
"By the time I arrived in the UK in July last year a lot of the groundwork had been done on the retail side and we started going out into the market, talking about our values. Our greatest strength is operating directly from the refinery.
"One can always ask the question why didn’t we start supplying retailers four and a half years ago when we bought Stanlow. The reason was that it was in bad shape. A lot of time, money and energy has gone into bringing it up to a standard that means we can call it probably one if the finest refineries in the UK. It needed to be robust enough to give us continuity of supply."
Brian Hayes, commercial business manager at Essar, explains that there is continuous work in progress, plus a series of projects scheduled over the next two years, which will add a lot of value to the refinery.
"Essar has been investing to take the refinery to a point where it is safe whatever the market conditions are. Security of supply is fundamental to the operation of the refinery.
It’s one of the key measures. We’ve just hit 19 months of 100% product availability. In my long experience I can’t recall a period when that has ever happened. It takes a lot of investment to do it.
"Our tagline internally is to make Stanlow the customer supply point of choice’. If you want to sell fuel, and it’s not available, you create doubt about whether customers should come to you or not."
Having achieved the confidence in knowing that the refinery was in an excellent condition, the next logical step for Essar was to get into what it calls ’the last mile’ straight to the retailer.
Hayes comments: "If you own the refinery and you have huge assets, then why shouldn’t you be represented in the market? But also, from the perspective of talking to enough dealers, why should a dealer pay a margin to someone who sits between us as manufacturer, and them as the end user?"
Getting into the last mile completes the vertical chain, says Prasad: "From the refiner straight to the customer we don’t have middlemen. Retail also helps to grow the brand. Essar is more into business to business. The oil companies and our wholesale/distributor customers know us, but the end users don’t. So while serving the motoring customer you’re creating a value in terms of brand, financial value, and enterprise value for the company.
"We have been supplying quality products for a long time. And now we want people to know that this quality product comes from a company called Essar."
In terms of convincing dealers to switch to a new brand and another supply option for retailers is to be welcomed Prasad says a lot of work has been done, understanding where the opportunities would be.
"We are trying to find the gaps, as well as what the value is that any dealer would look at before he even thinks of switching over, essentially from a big brand. There is no doubt it would be very tough for us to move a dealer from a brand like Shell or BP."
However, the Essar team is hopeful that once dealers get to see stations like the HKS Coalville site they will be encouraged to consider a new offer.
"Customers have reacted well to the branding," says Hayes. "As a new entrant to the market you need something to differentiate you from everyone else something unique. We came up with the idea of the curved pole sign so that it would be recognisable as ours and nobody else’s. We wanted something with large LEDs for the pricing. If it’s going to be a value price proposition, that needs to be clearly visible to the motorist driving past."
For the dealer Hayes says the biggest value the company can offer is the high-quality product direct from the refinery. "The second main selling point is our transparent and straightforward approach to pricing. What I see from a lot of time spent talking to dealers is confusion. I don’t think they always understand the pricing, and we hear lots of stories from people saying the invoice price they paid wasn’t quite what they thought it would be."
Another key selling point is the quality of communications says Prasad: "Dealers can pick up the phone directly to me or anyone."
Who is Essar?
Essar Oil UK is a subsidiary of Essar Energy Limited, which owns and operates the Stanlow Refinery located on the south side of the Mersey Estuary near Liverpool. It purchased the Stanlow Refinery at Ellesmere Port, formerly owned by Royal Dutch Shell, in 2011. Stanlow produces approximately 15% of UK transport fuels, including three billion litres of petrol, 3.5 billion litres of diesel and two billion litres of jet fuel a year. The Essar Group is a multinational corporation with annual revenues of US$35 billion and investments in steel, energy, infrastructure and services. It began as a construction company in India in 1969 and subsequently diversified into manufacturing, services and retail. It has 1,700 retail fuel outlets in India. In the past decade it has grown through strategic global acquisitions and partnerships.