In the summer of 2011 Shell surprised the industry with its purchase of around 250 Total sites from a consortium, Rontec Investments, which had just acquired Total’s UK retail and fuel distribution business. This was during a period when most oil companies as amply illustrated by Total were either rationalising their networks or pulling out of the market altogether. A trend which has continued Esso is currently in the throes of disposing of its retail network.
Three years later, and more surprising news from Shell it’s selling 250 sites. What’s going on? Firstly, they are not the same 250 sites although one or two could be it’s a coincidental number, confirms David Moss, Shell’s general manager retail North Cluster. Also, they are being offered for sale to a pre-selected list of independent retailers in a confidential commercial process.
"This is not about selling assets. It’s about how Shell grows the brand in the UK," stresses Moss. "Of course it reduces our capital employed which is helpful because we can put more of that capital into the existing estate.
"We still want to have a major presence in the co-owned sector in the UK, and we want to be able to keep that fresh over the coming years. That requires a lot of money, and like any business person I need a return on that investment.
"Sometimes we acquire and sometimes we dispose, to ensure the asset base is the best we can afford. Our long-term strategy is always to ensure we have the best assets for the business. When we bought the Total sites, we wouldn’t necessarily have known this was the refresh we were doing.
"But if you take the overall portfolio, you could argue yes, that was the intention. It’s always part of the network plan to have the right sites in the right location, and see if they prove to be the best. It’s what we call the PNP the perpetual network plan."
Moss says the company has been on a journey that started about two years ago, a journey to make the best brand even better, and minimise what he describes as the "inconsistencies" of the offer throughout the network.
He wants customers not to notice or care whether they’re on a company owned or dealer-owned site, such will be the level of investment in service station facilities and services, and high standards of safety and customer care that he wants to become synonymous with the Shell brand. "The customer proposition, whether via a co-owned or dealer site, must be right, both in terms of the physical assets and the personal element of service," says Moss. "It is the way in which something like 6,500 people represent Shell in the UK, and are providing that customer proposition for around five million customers a week. It has to be right every time."
After much deliberation Shell has decided its optimum company owned network should number about 500 sites, (currently 750), while it plans to double its dealer network to 6-700. But Shell will remain a national marketer with a presence in Scotland all the way down to Cornwall, for co-owned as well as dealer-owned sites. "This is not about chunks of geography that we’re going to exit," stresses Moss. "We’re looking to grow the dealer estate by selling 250 co-owned sites to those dealers that are going to invest and really get the potential out of them." The forecourts on the ’for sale’ list are what Shell describes as ’tier 3’ sites average volumes of 4mlpa, profitable, but requiring investment. Dealers must bid on a minimum of 10 sites, and agree to a five-year contract.
"We’ve already chosen the list of dealers, based on their ability to purchase, but more importantly their ability to run sites to our required standards over time. So somebody could come to us with a lot of money, but if they can’t run the network then we’re not interested. If you want the best brand, you have to have the best dealers representing that brand."
In return for commitment to the brand, Moss says Shell has a great deal to offer a strong brand with a great heritage, considerably enhanced by its 60-year relationship with Ferrari, and the fact that 99% of what goes into an F1 car is the same make-up as Shell V-Power Nitro+. "We are seeing good growth and since launch in April 2013, we’ve sold over 800 million litres of Shell V-Power Nitro+," says Moss.
"Deli2Go is also really flying. We’ve got 300 so far and are still investing in the format." Customers also like Shell, according to Moss. "Our customer feedback is also good we have 20,000 responses a month. They like Shell because we have a network of sites in prime locations, that they visit regularly; and because we keep the offer fresh, and are prepared to invest in it, they’ve paid that back with their loyalty. The consistent thing is the Shell fuel. We have a solid investment programme, certainly over the next five to 10 years, to ensure our offer is fresh. We also have some very exciting marketing programmes for 2015.
"Our plans for growth are quite considerable. Growth in our brand, growth in the customer offer, and certainly growth for the retailer and dealers that are with us on the journey. We want more sales, more customers, more loyalty and more return on our investment. Shell is here in the UK for the long term. It’s a very important market and works for our customers, our people and our shareholders. But we want to do it better."