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Fueling Growth in Petro-Retailing: Fueling Growth in Petro-Retailing: New Business OpportunitiesNew Business Opportunities

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Presentation OverviewPresentation Overview

Define the key drivers of Define the key drivers of

change change

Identify key imperatives for Identify key imperatives for

Indian Petro RetailersIndian Petro Retailers

Discuss the new business Discuss the new business

opportunities which will opportunities which will

emerge in Petro Retailingemerge in Petro Retailing

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Drivers of Change

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Our assessment of the regulatory environment indicates that Petro Our assessment of the regulatory environment indicates that Petro retailing will undergo significant change across the value chainretailing will undergo significant change across the value chain

Increase in refining capacity is transforming India from a net Increase in refining capacity is transforming India from a net importer to a net exporter of petroleum productsimporter to a net exporter of petroleum products

Decontrol of petroleum products marketingDecontrol of petroleum products marketing

Possible replacement of the Oil Coordination Committee (OCC) Possible replacement of the Oil Coordination Committee (OCC) with a downstream oil & gas regulatory bodywith a downstream oil & gas regulatory body

Disinvestment of the government’s equity in petroleum refining Disinvestment of the government’s equity in petroleum refining and marketing companies and marketing companies

Entry of new domestic and multinational players into the sectorEntry of new domestic and multinational players into the sector

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We also leveraged our international experience We also leveraged our international experience and understanding of and understanding of the Indian the Indian consumer to identify learnings for petro-retailing in Indiaconsumer to identify learnings for petro-retailing in India

Sample List

Petro retailing Petro retailing and Retail and Retail clientsclients

Indian Indian marketmarket insightsinsights

Indian retail Indian retail market market

understandingunderstanding

Market ResearchMarket Research

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Currently there are some stark differences in the Indian market Currently there are some stark differences in the Indian market compared to the more developed marketscompared to the more developed markets

QuQuality interpreted as ‘no ality interpreted as ‘no adulteration’adulteration’

QQuantity interpreted as getting uantity interpreted as getting the right amount of fuel, i.e. the right amount of fuel, i.e. integrityintegrity

Price is not a differentiating Price is not a differentiating factorfactor

However, aHowever, as the Indian market evolves, s the Indian market evolves,

• PParameters such as integrity of fuel quantity and purity are likely to become arameters such as integrity of fuel quantity and purity are likely to become hygiene factorshygiene factors

• Consumer needs will change and require changes to the value Consumer needs will change and require changes to the value propositionproposition

Quality interpreted as iQuality interpreted as impact on mpact on fuel efficiency and engine fuel efficiency and engine performanceperformance

QQuantity is not a parameter for uantity is not a parameter for considerationconsideration

Price is a very important factorPrice is a very important factor

Indian marketIndian market US marketUS market

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DDistinct psychographic consumer segments are emerging in Indiaistinct psychographic consumer segments are emerging in India

Each consumer segment represents a potentially profitable target group

Prestige seeker

Trust Seeker

Routine Chore doer

Time Poor

• Higher emotional needs • More brand conscious• Stereotyped as “self-made”• Potential target for

international or premium brands

• Unique to emerging markets such as India

• Driven by a strong desire for integrity and by strong relationships with the retailer

• A typical late adapter, price and quality conscious

• Petroleum purchasing is seen as a ‘drudgery’.

• Seeks additional vehicle repair and maintenance services.

• Indulges in monotonous routine jobs

• Strong need for locational convenience and other non-fuel related services.

• Characterized by his need for quick service and convenience.

• Likely to be a professional, 24X7 worker

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IInsights into the nsights into the differing differing needs and behaviours of the Indian needs and behaviours of the Indian consumer indicate that clear opportunities exist for petro-retailersconsumer indicate that clear opportunities exist for petro-retailers

“I buy from the pump because I have a good relationship with the owner…”

Over 50% of consumers say …

“The brand of petrol is not important to me…”

Less than 10% of consumers will use a cybercafe at a petrol station

Taxi and truck drivers want ‘dhobi’ services

90% of consumers…“Don’t fill up the tank at a station…”

45% of car owners have shopped

at a convenience store in New Delhi

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Strategic Imperatives for Petro Retailers

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Given the opportunities and Given the opportunities and changing consumer needs, there are changing consumer needs, there are three key imperatives for retailersthree key imperatives for retailers

• How to build a unique and sustainable competitive advantage ?

• How to attract new customers ?

• How to capture a greater share of customer’s wallet ?

• How to build a unique and sustainable competitive advantage ?

• How to attract new customers ?

• How to capture a greater share of customer’s wallet ?

Develop in-depth consumer insight (Know Your Consumer)

Build offering around the target consumer

Build a strong brand proposition

Develop in-depth consumer insight (Know Your Consumer)

Build offering around the target consumer

Build a strong brand proposition

Key Issues Imperatives

Focus on “Topline” growth

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25%

21% 20%

18%

16%

Developing in-depth customer insight is essential pre-requisite to Developing in-depth customer insight is essential pre-requisite to brand building and acquiring market sharebrand building and acquiring market share

Generation F3•Fuel, food, fast•M/F < 25 yrs

True Blues•M/F•Station loyal•Cash

Road Warriors•Middle-aged men•High mileage•Premium

Price Shoppers•All demographics•Regular

Homebodies•Females w/children•Local station

Mobil Brand Identity

Rational levers• High performance• Reliability• Service

Emotional levers

• “It’s meant for me – high performer”

• “It puts in my hand the latest technology”

Psychographic Consumer Segmentation - USA

ExampleExample

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Retailers will need to create Retailers will need to create differentiatdifferentiateded offerings offerings depending depending on the needs of the target segmenton the needs of the target segment

Breadth of offerings

Store Appearance

ServiceConvenience

Image

Price

Basis of Differentiation

Food

Distribution

Levers for differentiating a non-fuel offering

OR

OR

Petro-retailers in India will need to adapt global business models to suit the local environment

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Successful brand-building strategies will evolve from “product” Successful brand-building strategies will evolve from “product” related features to “service” related featuresrelated features to “service” related features

Product related features

Quality ?

Quantity ?

Location

Service related features

Personalized Consumer experience

• Speed of service

• Attendant disposition

• Station Ambience

Brand building linked to customer maturity

Brand building linked to customer maturity

The recent experience of campaigns in India bear testimony to the effectiveness of brand building

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New Business Opportunities

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Value added products and services

Sale of Value Added Fuels High volume – low

margin businesses

In the next few years, opportunities in petro retailing will arise In the next few years, opportunities in petro retailing will arise in three key areasin three key areas

In short, “revenue enhancement” is the key

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A fuel-based differentiation strategy will result in a more A fuel-based differentiation strategy will result in a more profitable product mixprofitable product mix

A strong consumer brand image…

“Good Performance”

… delivers a more profitable grade mix

Illustration : Leading American petroleum company

LeadingPetroleumCompany

Exxon Mobil Shell

31%43% 43% 46%

20%

23%16%

19%

49%34%

41% 35%

LeadingPetroleumCompany

Exxon Mobil Shell

Premium grade

Intermediate grade

Regular

Sale of value added fuels

There is a need to create a differentiation around “premium” fuels

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Non-fuel products and services will also generate additional Non-fuel products and services will also generate additional revenue streams in the future……revenue streams in the future……

Non Fuel Contribution of Petroleum Retailers

USA

Revenue 38.6%

Profit 65.8%

USA

Revenue 38.6%

Profit 65.8%

France

Revenue 28%

Profit 40%

France

Revenue 28%

Profit 40%

Value added products and services

Convenience Stores

Food Service

Ancillary Service

The critical issue is to develop product assortment to drive both “traffic” and “consumer” purchases

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Price based differentiation strategy could also become a useful Price based differentiation strategy could also become a useful tool in the long-termtool in the long-term

High volume, low margin businesses

QuikTrip Operating Model• Chain of over 300 C-store format petroleum stations

in 9 states in US

• Known to provide excellent service, quality petrol at much lower prices

• Discount quality petroleum to drive volumes – sells 75% more gasoline per gas station per year as compared to the majors

• Stores limited categories of food/snack/beverage items – available only in fast turnaround SKUs – ensures competitive pricing and delivery of the ‘freshness promise’ through strong backward integration

Might not work in

India in the short-term because of

low non fuel sales

Petroleum marketers in India would need to develop other consumer hooks such as “consumer experience” to build customer loyalty

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In conclusion ..…In conclusion ..…

• The next generation petro-retailer will adopt a consumer centric organisational

model aligned to a distinct value proposition

• “Cookie cutter” approach won’t work in India – a key to success will be to adapt

international models to suit the local environment

• Retailers who best understand and satisfy their target consumers latent needs will

have a sustainable competitive advantage

• There will be clear opportunities to build strong brands around service and

customer experience; value added fuels and non-fuel products & services

• Price-based platform will be powerful in the Indian context in the long term, but

the challenge will be to deliver it profitably