Thanks to the deregulation of retail petrol prices in June last year, fuel retailing companies are finding themselves thinking out-of-the-box to stay ahead of competition. Brought on a level-playing field by deregulation of petrol prices, these companies, public and private sector alike, are roping in noted non-fuel retail brands at their retail outlets amid rising competition.
For instance, oil retailing public sector unit (PSU), Indian Oil Corporation (IOC) recently joined hands with quick service restaurant (QSR) chain, McDonald’s to set up its retail food chains at its petrol pumps. The company has also partnered with PVR Cinema to have a cinema house at the company pumps.
Further, private sector oil retailer, Essar Oil Limited (EOL) has also entered into partnerships with over 20 non-fuel brands including Amul, Pepsi, Western Union Money Transfer and Bosch to enhance its brand value and attract increased customers to its petrol pumps. The company has been betting big on non-fuel retailing options lately.
“EOL is increasing non-fuel retailing activities in its current portfolio of retail outlets to provide an additional source of revenue for its franchisees. EOL is also in talks with retailers in the food and beverages, agro products, telecom and banking/finance segments to set up points of sale at its outlets,” said Thangapandian Srinivasalu, CEO – marketing, EOL. Nearly 460 outlets of the company’s total 1381 retail outlets have non-fuel retailing capabilities. Another oil PSU, Hindustan Petroleum Corporation Limited (HPCL) is also looking to provide its customers a one-stop shop experience by focusing on convenience stores and restaurants. In the latest addition to the company’s non-fuel retail operations, HPCL will join hands with Indian Railway Catering And Tourism Corporation (IRCTC) to set up restaurant chains along the highways. “We will be tying up with IRCTC for opening up food counters and restaurants at our retail outlets located along the highways. First such counter will come up in next one-two months,” said a top HPCL executive.
Revenues have been growing from the non-fuel operations of the petrol retailers. Indian Oil has achieved non-fuel revenues worth Rs 83 crore for the year 2010-11, up by around 15-20 per cent over the previous year, while HPCL’s revenues from non-fuel retail operations increased by 16 per cent to Rs 37 crores for the year 2010-11 against Rs 32 crores for 2009-10.
Apart from revenues, companies are more interested towards drawing larger share of business with increased branding. “The tie-ups with FMCG and restaurant brands would add quality to the services and increase customers at the petrol pumps. This will also enhance the brand value of the company. The focus will remain on the national as well as local non-fuel brands for tie-ups in coming months,” informed an executive from Indian Oil.
Industry analysts look at the non-fuel business with a note of caution. Mayur Matani, sector expert at ICICI Securities, said, “Non-fuel retailing model adopted by several of the petroleum retailing companies in India is new and requires time to establish itself as a profit center for the companies. The trend has been there in Europe and the US for several years, but in India it is difficult to estimate about the future profitability of this model. Although it would help companies on establishing their brands.”
Industry insiders believe the model of non-fuel retailing coupled with malls or cinema could do well on the highways or at the smaller towns than in metros. Lack of such retail and entertainment facilities in such places would offer more opportunities to these companies, allowing them to yield more returns and witness increased footfalls, industry insiders opine.
Source : Business Standard