Esso’s On the Run format will soon be consigned to the archives as the final tranche of the oil major’s company-owned sites are put on the market, and it charts a new path to growth if not market leadership in the retail fuel market.
On the Run was introduced in 2003 and was a respected format, designed to meet the needs of busy motorists on the move, with its mix of modern forecourt and café/convenience offer.
However times change, and so eventually will ownership of the last block of Esso’s company-owned sites around 200 of them, based in central and southern England.
It will complete a series of site sales, which began in 2012 with the acquisition of 31 Scottish sites by the UK’s biggest independent dealer MRH (Malthurst); with 43 sites in the North East and North Wales going to another Top 50 Indie, Euro Garages.
Euro Garages was also successful in the second phase of sell-offs announced in January, when it acquired 48 sites in the Midlands and Eastern England; while Rontec bought 36 sites in South Wales and South West England. The sites are still in transition and should be completed by June.
The final phase of site sales will leave Esso with just the joint-venture Tesco sites, of which there are nearly 200.
The background of a shifting focus to larger volume forecourts, the development of the retail backcourt, and the importance of both in the offer to the consumer in the retail fuels industry, is very much at the heart of Esso’s transition into what it terms a ’branded wholesaler’ approach.
Simon Herbert, who has been Esso retail director, UK & Ireland, since the latter part of 2012, admits there are a mixture of emotions at the sale of the company-owned network, because of the amount of effort and pride that’s gone into it over many years. "Yes it’s a wrench. But there’s a lot of excitement as well, because the future is exciting," he says.
Herbert was in at the start of the journey that has led to the sale of the network. "I’ve worked in the company for 15 years, in the US and Brussels, covering strategic planning roles, and commercially in all of our fuels organisations aviation, marine, industrial and in retail. But I’ve also worked through several business transformations, and I was actually part of the team that laid the foundation for the branded wholesaler approach back in 2009. So I’m very familiar with the approach, and how it will work in the UK." Herbert says a key piece in the transition is continuity of employment for the ROC staff that currently work on the company-owned sites. His greatest concern in any business transformation, are the people, and ensuring they are treated with respect and fairness "that’s a fundamental principal".
Herbert insists the transition is not an exit from retail, but a strategy focused on committing to the market, and building the Esso-branded network and fuel sales. "We think the UK is a fantastic market and one that we want to grow and continue to operate in. The sale of our company-owned network is a transformation in what we do, and the realisation that working through specialists is the right way to go about this business."
By working through specialists, he means leaving the job of retail to companies with a proven track record, like Euro Garages; and the distribution to companies like Greenergy, which operates the Esso brand in the North.
Those companies have already proved their worth in generating new business and enhanced fuel sales for Esso, according to Herbert.
"We’re a large global entity, and tend to do things globally that’s how we’re set up. That doesn’t necessarily work in the retail market it can stifle retail flair.
"We also have to take a global view when we compare our investment in the retail business against our investment in exploration, production, refinery and so on, in which we can generate a higher return than through retail."
However, Esso doesn’t want to be out of the retail market, and has thought long and hard about how it can continue to operate in it.
The company is still very proud of its fuel brand and all that it represents, with its continuing focus on fuel technology development. It also claims to be one of the few remaining oil companies that has its own internal research and development organisation. It also has a market-leading lubricants brand in Mobil 1. Hence its decision to specialise in what it does best and take a step back from frontline retailing.
"We are a specialist in the manufacture of quality fuels and lubricants; and the investments we can make in the brand and promotional marketing support that go around that prove that the model is still very strong," explains Herbert.
"What we’re effectively doing in selling our network is moving out of the day-to-day retail operations and focusing on what we’re good at advanced, quality fuels." Herbert says the branded wholesaler approach is a method of operation which has worked very well for the company for a number of years in the US. It has also been rolled out in Belgium, where it has proved successful.
"The branded wholesaler model keeps us in the retail business which is very important to us. It also allows us to specialise in what we’re good at; and it allows branded wholesalers and independent dealers to prosper in the market as well.
"Branded wholesalers sell our fuel at their sites under our brand, they benefit from our marketing and promotional programmes; plus they run the haulage to their sites. But the great aspect of this is their focus on retail, their increasingly sophisticated retail offer, and the localisation of that offer. They’re able to really respond to the market at a local level." Eventually Esso will be one level back from the retail level. Its face to the customer will be at the terminal rack.
"We would go to market through our branded wholesalers who would act as the specialist to that independent dealer market. Currently that is Greenergy for the north of England; we’re yet to work the transition for the second half of the country.
"Our focus will be on investing in the Esso brand, creating that consumer pull. It is a compelling proposition for an independent dealer to want the Esso flag on their forecourt, and allows them the flexibility of what they want to do with their retail offer and their fuel supply.
"We’ve got respected and trusted brands and we think that makes a great proposition in the marketplace. We’ve got a great network over 1,000 sites now (a branded mix of company-owned, alliance independent dealer and branded wholesaler). That’s as a result of our transition as well Rontec and Malthurst have brought us additional sites for the past 18 months and that’s helped build our network. That’s the combination of our brand strength, and their retailing strength.
"We have a great refinery in the UK at Fawley in Southampton, great pipeline network, great fuels terminals, so we’re still committed in the entire integrated chain. We’re one of the few, if not the only, large major oil company that’s still fully integrated. Our distribution network is unparalleled. We also have a very strong Esso card offer, using a specialist in that market Wex Europe Services that will increase our offer in the fleet area of the business. We have the Tesco Clubcard, which is now available at over 900 Esso sites and continues to rise every week. We have run some great promotions double points in December, couponing in January and all that is just a start. You can expect more investment from us in our brand, our fuels and in our promotional support marketing programmes.
"It’s a great proposition, whether you’re an independent retailer or a larger group branded wholesaler, and we’ve seen a notable increase in fuel sales as a result of all our transitions in the past 18 months. We’re bucking the industry trend."