eu retailing opportunities for ftse100 oil companies, hypermarkets & fmcg suppliers
DESCRIPTION
2009-2020 Outlook, B2B & B2C Opportunities, Proposition Development for FTSE100 Oil Majors, Hypermarkets, Retailers and Suppliers like Mars, Nestle!TRANSCRIPT
Downstream Retail Opportunities for Oil Companies & Hypermarkets
By Shahzad Paracha
Global Forecourts Opportunities & Challenges
Mature Markets
Demand Growth 1%
Eroding margins (later stage of market development)
Aggressive non-traditional competition
Refining Margins Impact
Channel & network choices
Non-Fuel partnership choices –Shell/Sainsbury, Exxon/Tesco
Balance of owned, Franchise & JV’s
Regional footprints via competitive fuel pricing & high margin & high growth Convenience Retailing
BRIC Economies
135% demand growth by 2030
Early Stage Markets India, China, Russia
Opportunities High cars per capita
High population & demand growth
Urbanization
Rise in disposable income & confectionery category
Competitive RCVP offerings
Double digit premium fuels demand
Transitional Markets Brazil
Opportunities 3% Growth & Good RCVP & Retail
formats in region
Premium fuels market development2
Percentage of Total Forecourts by country
3
Source : Energy Institute 2008
Number of Supermarket Forecourts by Country - Dec’2008
4
Source : Energy institute 2008
Forecourts Retail & Refining Margins 2008
Retail Gross Margins in 2009 & increase/decrease in 2008
Downstream Profitability: Retail/Ex-refinery price spread in p/lit
5
Average Gross Refining Margins NW Europe
Source: Energy Institute 2009Source: Wood Mackenzie Downstream Oil Service 2009
Volatile Pricing & Weak Demand
Average Retail Fuel price breakdown in Western Europe @ 2008
Quarterly Road fuel demand changes in Europe 2007–2008
6
Mature Markets Fuel Demand Growth ONLY 1% hence NEED to
Capitalize Stores Propositions to raise Sales Per density, ROI & ROACE
Source: Wood Mackenzie 2009 Source: International Energy Agency (IEA)
UK Motor Fuels Industry
Motor Fuels Trading
1988 2008 Growth (%)
Passenger Cars (Mln)
20 30 50
MF Volume (000 Mln)
15 38 153
MF Value (000 Mln)
17 33 94
Oil Majors Vs Hypermarkets
Oil Majors Forecourts
Hypermarkets
MF Forecourt share (%)
62 13
MF Market Share (%)
62 38
Efficiency Index (E.I)
1:1 1:3
7
Interesting Trading Trend (1998 -2008): Slow MF Volume Growth due to high fuel efficiency of cars
Low MF Value Growth Vs MF Volume due to:
1. High VAT, duties &
2. 2% Fuels margins on Non-Premier Retail Fuels,
equivalent to 90% of UK demand
Oil Majors 30% Network rationalization for:
Adapting later stage of market development
Efficient & profitable network model – High ROACE
UK #1 Efficient Network Vs EU average (ATP 4 Vs
1.5 MLit/yr in EU)
Source: Energy Institute / Retail Marketing Survey 2009
* Note: Estimates based on Industry trends & assumptions
BREAKDOWN OF UK FORECOURTS 2009
BY GROUP ON MOTORWAY
8Source: Petroleum Review 2009
UK & EU Stores Retailing Opportunities
UK
Forecourt Stores Demand (£ Bln)4
UK Retail Demand (£ Bln)25
Stores Avg Transaction Value (£)5
YOY Demand Growth (%)5
Average Margins (%)40
Projected Forecourt Stores Demand 2020 (£ Bln)
20
BP, Shell, Esso Market Share (%)50
9
EU
Stores in UK forecourts network (%)90
Stores in EU Network Average (%) 80
Forecourt Stores Demand (£ Bln) 40
Demand Growth projections (%) 5-7
Average Margins (%) 30-40
Average Transaction Value (Euros) 5
Company Operated Stores Share55% of EU CR
BP, Shell, Exxon Mobil Share45%of EU CR
UK + Germany + France CR 50% of EU CR
Sources Various: Energy Institute / Retail Marketing Survey, Mintel (2008 & 2009)
* Note: Estimates/projections based on Industry trends, assumptions on market size, consumption & average margins growth etc
EU Forecourt Stores Statistics 2009
0
10
20
30
40
50
60
70
80
90
100
% of Network with Stores
Average Stores Size (sqm)
10Source : Energy Institute 2008 & 2009
EU Forecourt Stores Statistics 2009
11Source : Sources Various - Energy Institute, UKPIA 2008 & 2009
* Note : 2008 Actuals & projections based on industry trends, markets size, convenience retailing and disposable income growth rates
EU Forecourts – Growth & Savings Opportunities
Average number of washes per year Consumer perception of car wash options
12Source : Energy Institute/Retail Marketing Survey 2009
Customer Motivation Fuel Management Savings Initiatives
13Source: Energy Institute/Retail Marketing Survey 2008
Oil Companies & Hypermarkets :Non-Fuel Priorities (in Mature Markets)
Low Fuel Margins & 30% network rationalization 1998-2008 for high ROACE
Current CR penetration 17% of Total CR
Target CR & £20 Bln industry by 2020
Monitor Retail Customer Compliance
Raise compliance rate of Category Management Implementation
Improved Supplier relationships
Card Payments & terminals, huge gap in demand Vs actual
Locations – Store locations on customer insight not property deals.
Desired Customer Experience Offer
• Store concepts/formats/product standardization & consistency
• Improved branding
• Site, network operations & CRM
• Supply chain management
Insight Focussed RCVP Initiatives –Development & Execution with KPI’s:
• Brand share of preference
• Value for money perception
• customer loyalty/penetration,
• Sales density (£/sqm),
• Average transaction value
• Shopper marketing
• Mystery Motorist Program
• Brand Tracker
Improve Returns on Promotional Spend via
• More targeted promotions
• Wider customer coverage
• More precise Sales Volume & Value planning
• Monitor compliance
14
Vending at Forecourts
EU Forecourt Opportunities & Target Markets for Suppliers - Vending Proposition
Vending at Forecourts
• Consumers used to paying for fuel at the point of purchase
• Lost impulse purchase occasions as consumers no longer need toenter store
• Snacks are impulse purchases and low cost added spend vs cost ofrefuel
• Cashless sales spend of snacks greater (up to 15%) vs cash
• Consumers purchase more items and are willing to pay a premium
• Technically possible & need further Tests in Strategic FIT EU Markets
• Fit for purpose machines i.e. In-store & on Forecourts to capitalizeloss opportunity from Pay at Pump & raise Sales Density (£/sqm)
• Part of Forecourts Retailing CVP Implementation Program in KeyMarkets within EU
16
17
Examples of Vending
Mars Market Entry Target Markets
1. UK
2. France
3. Germany
4. Ireland• 40% of EU CR
18Source : Sources Various - Energy Institute, UKPIA 2008 & 2009
* Note : 2008 Actuals & projections based on industry trends, markets size, convenience retailing and disposable income growth rates
Oil Majors & Hypermarkets Expansion: Focus on Downstream CR
Opportunity for Suppliers
CR: Convenience Retailing
EU Fuel Declining Margins – Capturing Customer Footfall
20
Oil Majors & Hypermarkets EU Alliances – Successful Pilots
Successful South Asia Alliances
21
BP –Sinopec (China)
Total –PETRONAS (Brazil
China consider C-store concept
Global brand trends in Middle East in Fuel & Non-Fuel Retailing
22Source : Circle