Oil prices are down, environmental concerns are up, and Tesco could be on the verge of radically reshaping the independent forecourt market. To help make sense of it all, Petrol Retailers Association chair Brian Madderson weighs in on the future of forecourt retailing.
THE future is unwritten and that’s a sentiment that’s particularly true to the world of forecourt retailing, with myriad factors from Saudi politics to Westminster whims impacting on retailers at the coal face – and that’s before starting on the proposed Tesco acquisition of Booker.
Brian Madderson, chairman of the Petrol Retailers Association certainly seems to think there are plenty of things for forecourt retailers to keep an eye on, starting with what on Earth is going to happen to diesel demand.
Looking at the diesel market from the New Labour years, Madderson reckons then chancellor Gordon Brown’s rejigging of vehicle excise duty rates in 2001 fired the starting pistol on an uptick in demand for diesel that seems to have sailed right through to the Volkswagen emissions scandal of 2015, which may have thrown a significant spanner in the works for the future.
“We are seeing a relatively sudden emergence of demonization of diesel for health reasons and this clearly gives government quite a problem,” said Madderson, suggesting that while a previous UK Government was responsible for sparking the rise in diesel demand, diesel drivers could be penalised for purchasing such cars, although how government will respond to pressure to reduce the volume of toxic emissions produced by diesel vehicles remains unclear.
“Going forward, there are all kinds of possible penalties from city centres who may increase parking charges for cars, increase or introduce congestion charges for entry into the city for diesel cars and other diesel vehicles, so the market in terms of where we’re going with fuels is perhaps in a little more turmoil than I remember in recent years,” he said.
Whatever the government decides to do to reduce emissions of nitrogen oxides –which can act not only as a greenhouse gas but also as an immediate environmental toxin – will have implications for forecourt retailers, raising questions for the future.
However, despite these questions, Madderson reckons the future of conventional fossil fuels is still largely secure, and he highlighted the relatively low uptake in electric vehicles as compared to sales of new petrol-powered cars as evidence of this.
Madderson suggested that with the UK currently home to around 37m vehicles powered by fossil fuels, the conventional fuel market still has a “long way to go”.
“Last year for instance only 35,000 pure electric vehicles were registered, compared to about 2.7m diesel and petrol cars. So, although that might have been double the figure in terms of electric vehicles registered in the previous year, it’s still only a very small percentage of the total,” he said.
Beyond the pumps, Madderson reckons there could also be major changes to the way forecourt stores operate in future, influenced not just by changing consumer habits but also by Tesco’s ongoing attempt to acquire Booker.
Almost all of the big convenience brands have now got some presence on UK forecourts.
As things stand, he said the UK independent forecourt market operates with approximately 50% symbol stores, but warned Tesco’s proposed Booker takeover could complicate things.
The Tesco acquisition is currently under scrutiny from the UK Competition Commission, with a fair few hurdles still to hop, but should the deal get the green light it could lead to a real sea change for the independent forecourt market, possibly leaving only Spar and Nisa as the remaining big beasts of independent forecourt retailing (and that’s without considering a potential Sainsbury’s buyout for Nisa).
“There is now a good deal of turmoil in the future of the convenience brands. Of course what we have seen recently is big stores teaming up either with oil companies or with dealers to franchise out their brands for convenience stores on forecourts. You’ve got Sainsbury’s Local with Eurogarages, you’ve got Tesco Express with Esso, you’ve already got BP with Marks and Spencer, you’ve now got Rontec with Morrisons Daily, MRH with Co-op and Shell with Waitrose.
“Almost all of the big-name convenience brands have now got some presence on forecourts cross the UK. Where’s that all going to end?” he said.
The exact future of forecourt retailing is definitely anyone’s guess for the time being, but Madderson reckons even though there’s sure to be change on the horizon, things are still looking good, with demand for fuel continuing to rise.
