EU Retailing Opportunities for FTSE100 Oil Companies, Hypermarkets & FMCG Suppliers

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Downstream Retail Opportunities for Oil Companies & Hypermarkets By Shahzad Paracha

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2009-2020 Outlook, B2B & B2C Opportunities, Proposition Development for FTSE100 Oil Majors, Hypermarkets, Retailers and Suppliers like Mars, Nestle!

Transcript of EU Retailing Opportunities for FTSE100 Oil Companies, Hypermarkets & FMCG Suppliers

Page 2: EU Retailing Opportunities for FTSE100 Oil Companies, Hypermarkets & FMCG Suppliers

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

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Percentage of Total Forecourts by country

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Source : Energy Institute 2008

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Number of Supermarket Forecourts by Country - Dec’2008

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Source : Energy institute 2008

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Forecourts Retail & Refining Margins 2008

Retail Gross Margins in 2009 & increase/decrease in 2008

Downstream Profitability: Retail/Ex-refinery price spread in p/lit

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Average Gross Refining Margins NW Europe

Source: Energy Institute 2009Source: Wood Mackenzie Downstream Oil Service 2009

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Volatile Pricing & Weak Demand

Average Retail Fuel price breakdown in Western Europe @ 2008

Quarterly Road fuel demand changes in Europe 2007–2008

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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)

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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

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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

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BREAKDOWN OF UK FORECOURTS 2009

BY GROUP ON MOTORWAY

8Source: Petroleum Review 2009

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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)

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BP, Shell, Esso Market Share (%)50

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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

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EU Forecourt Stores Statistics 2009

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10

20

30

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70

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90

100

% of Network with Stores

Average Stores Size (sqm)

10Source : Energy Institute 2008 & 2009

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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

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EU Forecourts – Growth & Savings Opportunities

Average number of washes per year Consumer perception of car wash options

12Source : Energy Institute/Retail Marketing Survey 2009

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Customer Motivation Fuel Management Savings Initiatives

13Source: Energy Institute/Retail Marketing Survey 2008

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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

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Vending at Forecourts

EU Forecourt Opportunities & Target Markets for Suppliers - Vending Proposition

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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

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Examples of Vending

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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

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Oil Majors & Hypermarkets Expansion: Focus on Downstream CR

Opportunity for Suppliers

CR: Convenience Retailing

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EU Fuel Declining Margins – Capturing Customer Footfall

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Oil Majors & Hypermarkets EU Alliances – Successful Pilots

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Successful South Asia Alliances

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BP –Sinopec (China)

Total –PETRONAS (Brazil

China consider C-store concept

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Global brand trends in Middle East in Fuel & Non-Fuel Retailing

22Source : Circle