Sticking to what you do best is proving to be the right formula for Valero Energy Ltd, which supplies Texaco-branded fuel to 784 dealer-owned sites in the UK. "We’re totally focused on the dealer," stresses Andrew Cox, the company’s sales and marketing director. "We haven’t had any company-owned sites since 2005, when we started to sell them off. It’s a cyclical business, but there are no plans to change that strategy."
He reasons that retailers are currently making healthy fuel margins, the market has been kind and it’s a good time to be in the industry. The main challenge is that contracts are generally five years and then you need to re-sign. "It means your security is only five years, but this year we’ve successfully renewed 239 dealers. Our renewal success rate is 90% roughly over 100 dealers a year. We’re obviously doing something right."
Renewals are one part of the picture, but it’s important to make gains, which is tough in a highly competitive market. "We’ve made some good headway there too," stresses Cox. "We’re up 40 gains, year-to-date, with another eight to come on before year-end. You can’t win them all but the net number is up only about 5-6 losses from the network. We’re winning from all brands Esso, BP, Shell not any one company in particular. Of the 40, 22 were with Graham Peacock at SGN Ltd."
Other significant signings included 10 sites in Northern Ireland, and the new motorway service area launching in January, near Leeds, with Extra MSA and independent retailer Joe Richardson as the operator. Success has been down to offering a good fuel supply service, according to Cox: "We supply fuel and we do it well. We’re one of the few refiner/marketers in the country. We manufacture our own product; we’re in control of the quality of the product from manufacture to the customer and we feel that’s very important. We continue to invest in our refineries and that’s working really well."
Cox says the company’s Pembroke Refinery is well-positioned: the country is gasoline long and diesel short, and it is able to import diesel into Pembroke, from its Gulf Coast refineries. Plus with a pipeline running up through the company’s Kingsbury Terminal then up to Manchester, prices can be very competitive.
Valero also claims to have the best-in-industry delivery service if you order before 10am today, nine times out of 10 you’ll get a delivery tomorrow, "and this is a real reason for dealers to come to us", stresses Cox. The company has also introduced Vendor Managed Inventory (VMI) an auto replenishment system, that gives the supplier a feed from the retailers’ tanks and the fuel is delivered when they need it. "It takes away that fuel management issue from them," explains Cox. "It helps us as well in that it flattens our load a bit. It’s been embraced we’re up to over 150 sites on VMI already and we only started at the beginning of the year. Overall, it is working well, the dealers like it, although some are a bit apprehensive they obviously don’t want a delivery when the price is going down the next day."
Premium fuels are another success story; a high-margin opportunity for retailers; with 625 Texaco-branded locations currently selling Supreme Fuels (80% of the network). Average sales are around 8% of base grades, and the top 30 sites achieve in excess of 20% of base grades. "Everything to do with the fuel we feel we’re top tier," says Cox. "We don’t get involved with the shop at all, we feel that’s for the dealer’s expertise."
In terms of fuel volumes, excluding the new sites, like-for-like sales are up 2%, which Cox attributes to a number of things offer, brand and also the successful link-up with Confused.com. The promotion is linked to the company’s long- running Star Awards loyalty scheme: "You get your £20 fuel voucher, but you have to sign up for Star Awards, hence our member numbers are up 28% this year, which is huge. The key for us is when you sign people up, you can communicate with them."
The Star Awards scheme will be upgraded with an app next year. But Cox says it is already twice the value of rival schemes, offering one penny off a litre, compared to the typical half a penny. Plus, Valero will match if customers elect to donate their points to charity.
Hand in hand with all this success, Cox stresses the importance of relationships: "You’re signing someone up for five years that’s long time.
"With a good balance of great experience and some new blood, I would hold our team up against any of our competitors."
Valero: Purchased Pembroke Refinery and associated logisitics, marketing assets in 2011
Opened: Manchester terminal in 2013, expanded Avonmouth terminal in 2017
Purchased: Milford Haven terminal (VPOT)and Belfast terminal in 2018. Deepwater import capacity at VPOT and at Inter Grays Terminal; dedicated contract delivery fleet
Dealers: Valero in the UK says it is totally focused on the dealer market (the sale of the company owned network began in 2005), offering secure and reliable supply from its Pembroke Refinery; next day fuel delivery seven days a week; over 100 years brand heritage. It currently has 784 sites in the UK, with a renewal success rate of 90% or an average of over 100 a year, renewing 239 in 2019.
Star Rewards: The Texaco brand’s loyalty scheme, points are awarded for fuel purchases and redeemed for rewards. One point is awarded for every litre purchased; 500 points redeemed for a £5 voucher; 320,000 active accounts, increased by 28% in 2019; members visit 3.5 times a month; penetration is over 30% at many sites; charity donation option; mobile fuel payment app due in 2020.