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

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

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

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  • 1. Downstream Retail Opportunities for Oil Companies & Hypermarkets By Shahzad Paracha
  • 2. Global Forecourts Opportunities & Challenges Mature Markets BRIC Economies  Demand Growth 1%  135% demand growth by 2030  Eroding margins (later stage of  Early Stage Markets market development)  India, China, Russia  Aggressive non-traditional  Opportunities competition  High cars per capita  Refining Margins Impact  High population & demand growth  Channel & network choices  Urbanization  Rise in disposable income &  Non-Fuel partnership choices – confectionery category Shell/Sainsbury, Exxon/Tesco  Competitive RCVP offerings  Balance of owned, Franchise & JV’s  Double digit premium fuels demand  Regional footprints via competitive  Transitional Markets fuel pricing & high margin & high  Brazil growth Convenience Retailing  Opportunities  3% Growth & Good RCVP & Retail formats in region  Premium fuels market development 2
  • 3. Percentage of Total Forecourts by country 3 Source : Energy Institute 2008
  • 4. Number of Supermarket Forecourts by Country - Dec’2008 4 Source : Energy institute 2008
  • 5. Forecourts Retail & Refining Margins 2008 Retail Gross Margins in 2009 & Average Gross Refining Margins NW Europe increase/decrease in 2008 Downstream Profitability: Retail/Ex-refinery price spread in p/lit 5 Source: Wood Mackenzie Downstream Oil Service 2009 Source: Energy Institute 2009
  • 6. Volatile Pricing & Weak Demand Average Retail Fuel price breakdown in Quarterly Road fuel demand changes in Western Europe @ 2008 Europe 2007–2008 Mature Markets Fuel Demand Growth ONLY 1% hence NEED to Capitalize Stores Propositions to raise Sales Per density, ROI & ROACE 6 Source: Wood Mackenzie 2009 Source: International Energy Agency (IEA)
  • 7. UK Motor Fuels Industry Motor Fuels Trading Oil Majors Vs Hypermarkets 1988 2008 Growth (%) Oil Majors Hypermarkets Forecourts Passenger Cars MF Forecourt 20 30 50 62 13 (Mln) share (%) MF Market Share MF Volume 62 38 15 38 153 (%) (000 Mln) Efficiency Index 1:1 1:3 MF Value (000 (E.I) 17 33 94 Mln) Interesting Trading Trend (1998 -2008): Oil Majors 30% Network rationalization for:  Slow MF Volume Growth due to high fuel efficiency of cars  Adapting later stage of market development  Low MF Value Growth Vs MF Volume due to:  Efficient & profitable network model – High ROACE 1. High VAT, duties &  UK #1 Efficient Network Vs EU average (ATP 4 Vs 2. 2% Fuels margins on Non-Premier Retail Fuels, 1.5 MLit/yr in EU) equivalent to 90% of UK demand 7 Source: Energy Institute / Retail Marketing Survey 2009 * Note: Estimates based on Industry trends & assumptions
  • 8. BREAKDOWN OF UK FORECOURTS 2009 BY GROUP ON MOTORWAY 8 Source: Petroleum Review 2009
  • 9. UK & EU Stores Retailing Opportunities UK EU 4 90 Forecourt Stores Demand (£ Bln) Stores in UK forecourts network (%) 25 Stores in EU Network Average (%) 80 UK Retail Demand (£ Bln) Forecourt Stores Demand (£ Bln) 40 5 Stores Avg Transaction Value (£) Demand Growth projections (%) 5-7 5 30-40 YOY Demand Growth (%) Average Margins (%) 40 Average Transaction Value (Euros) 5 Average Margins (%) 55% of Company Operated Stores Share 20 EU CR Projected Forecourt Stores Demand 2020 (£ Bln) 45%of BP, Shell, Exxon Mobil Share EU CR 50 BP, Shell, Esso Market Share (%) UK + Germany + France CR 50% of EU CR Sources Various: Energy Institute / Retail Marketing Survey, Mintel (2008 & 2009) 9 * Note: Estimates/projections based on Industry trends, assumptions on market size, consumption & average margins growth etc
  • 10. EU Forecourt Stores Statistics 2009 100 90 80 70 60 50 40 % of Network 30 with Stores Average Stores 20 Size (sqm) 10 0 10 Source : Energy Institute 2008 & 2009
  • 11. EU Forecourt Stores Statistics 2009 Source : Sources Various - Energy Institute, UKPIA 2008 & 2009 11 * Note : 2008 Actuals & projections based on industry trends, markets size, convenience retailing and disposable income growth rates
  • 12. EU Forecourts – Growth & Savings Opportunities Average number of washes per year Consumer perception of car wash options 12 Source : Energy Institute/Retail Marketing Survey 2009
  • 13. Customer Motivation Fuel Management Savings Initiatives 13 Source: Energy Institute/Retail Marketing Survey 2008
  • 14. Oil Companies & Hypermarkets : Non-Fuel Priorities (in Mature Markets)  Low Fuel Margins & 30% network rationalization  Insight Focussed RCVP Initiatives – 1998-2008 for high ROACE Development & Execution with KPI’s:  Current CR penetration 17% of Total CR • Brand share of preference  Target CR & £20 Bln industry by 2020 • Value for money perception  Monitor Retail Customer Compliance • customer loyalty/penetration,  Raise compliance rate of Category Management • Sales density (£/sqm), Implementation • Average transaction value  Improved Supplier relationships • Shopper marketing  Card Payments & terminals, huge gap in • Mystery Motorist Program demand Vs actual • Brand Tracker  Locations – Store locations on customer insight not property deals.  Improve Returns on Promotional Spend via  Desired Customer Experience Offer • More targeted promotions • Store concepts/formats/product • Wider customer coverage standardization & consistency • More precise Sales Volume & Value • Improved branding planning • Site, network operations & CRM • Monitor compliance • Supply chain management 14
  • 15. Vending at Forecourts EU Forecourt Opportunities & Target Markets for Suppliers - Vending Proposition
  • 16. Vending at Forecourts • Consumers used to paying for fuel at the point of purchase • Lost impulse purchase occasions as consumers no longer need to enter store • Snacks are impulse purchases and low cost added spend vs cost of refuel • 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 capitalize loss opportunity from Pay at Pump & raise Sales Density (£/sqm) • Part of Forecourts Retailing CVP Implementation Program in Key Markets within EU 16
  • 17. Examples of Vending 17
  • 18. Mars Market Entry Target Markets 1. UK 2. France 3. Germany 4. Ireland • 40% of EU CR Source : Sources Various - Energy Institute, UKPIA 2008 & 2009 18 * Note : 2008 Actuals & projections based on industry trends, markets size, convenience retailing and disposable income growth rates
  • 19. Oil Majors & Hypermarkets Expansion: Focus on Downstream CR Opportunity for Suppliers CR: Convenience Retailing
  • 20. EU Fuel Declining Margins – Capturing Customer Footfall Oil Majors & Hypermarkets EU Alliances – Successful Pilots 20
  • 21. Successful South Asia Alliances BP –Sinopec (China) China consider C-store concept Total –PETRONAS (Brazil 21
  • 22. Global brand trends in Middle East in Fuel & Non-Fuel Retailing Source : Circle 22