The Caltex Turnaround - Driving a Fresher Future on Forecourts

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The Caltex Turnaround - Driving a Fresher Future on Forecourts

June 13, 2011

14 June 2011, Cape Town, South Africa: As a retailer, how do you achieve an increase in turnover of 40 percent year-on-year while the sector reports negative growth? Throw in some fruit and veg through a strategic partnership that breaks the mould with a savvy presentation of on-the-go healthy convenience. Just ask Chevron South Africa, who did just that with its retail brand Caltex and is now also reporting an increase in fuel volumes of between eight to ten percent after partnering with local entrepreneurs. 

The entrepreneurs in this instance are Brian and Mike Coppin, the men behind the highly successful Fruit & Veg City brand in South Africa, and now also the Freshstop convenience store brand at Caltex service stations.

In the highly-regulated petroleum industry, competing for retail growth on price is not an option. Instead, forecourts use their fuel quality, facilities and customer service to build loyalty and drive fuel volumes. Caltex comfortably owns the premium fuels category for which Caltex and Chevron customers around the globe pay a premium based on Chevron’s unsurpassed Techron additives. However it wasn’t competing strongly enough in the convenience store sector. 

Comments Teresa Booth-Oliveira, Products GM of Chevron South Africa, “In trend with the practices of the 90’s, we created our own Starmart brand of convenience stores which was effective in an era where the ‘garage shop’ was a simple, but basic add-on to the fuels offer. As the concept of time and convenience became more important to our customers, we identified the opportunity to introduce a higher level of FMCG expertise into the store. Mid 2009 we scoured the international and local markets for a potential partner that provided the critical corporate fit and could bring something exciting and new to the Caltex station. 

“As a global company, we investigated various partners which included the international super-retailers, all of whom recognized the opportunity to grow their own portfolio footprint and leverage our significant network presence for their brand growth. At the time, Fruit & Veg City were on an impressive growth path and we saw value in partnering with this strong local group who intimately understood the South African FMCG environment. I believe there was special value in combining the local smarts of this smaller entrepreneurial group with the global corporate culture of Chevron – and it’s delivered beyond all expectations. 

“We developed an aggressive roll out plan, which relied on an as yet unmatched conversion time of 20 days per site - which raised some eyebrows as to do-ability - and we announced the new Alliance with Freshstop in July 2009 with the rollout of 4 pilot stores in the Western Cape. Our consumer research over the pilot period showed that 97 percent of competitors’ customers to Caltex said the new Freshstop store was one of the reasons they visited the site. Less than 2 years later, Brian’s expert teams have converted an amazing 50 stores to the Freshstop brand already and we have seen an average increase of eight percent in our fuel volumes on converted sites.”

Adds Brian Coppin, co-founder and managing director of Freshstop, “In the store on the other hand, we are reporting an increase of 40 percent year-on-year growth in turnover after the conversion to Freshstop and a 12 percent increase in footfall, while the convenience store retailing sector report constantly declining turnovers of minus six percent. Our Freshstop franchisees are pleased with their added income streams and we have plans to roll-out a further 50 stores by December 2012.”

Wednesday 15 June 2011 marks a landmark in convenience store retailing as Caltex and Freshstop open their 50th forecourt convenience store, effectively achieving in under two years what the retailing industry on average takes five years to achieve. Interestingly, the Windermere store in Durban was also opened 75 years ago, at the time that Caltex launched as a brand globally, by the Bouffe family who still own it. 

Today, there are more than 4,600 service station forecourts, both company-owned and franchised. Competition is steep. 

According to Peter Noke, the National Director of the South African Petroleum Retailers Association, this niche industry is in the throes of rapid evolution, which has placed new demands on those business owners who populate it. “The profile of the service station operator has changed dramatically during the past decade,” he says.

“Business demands in the modern service station and convenience centre environment calls for sophisticated levels of business acumen, and that accounts for the fact that so many service station owners today are tertiary-qualified business professionals in the marketing, management and engineering fields.”

Coppin on the other hand attributes success to the highly flexible business and franchise model, unique to the partnership which provides ultimate adaptability and with the current track record, shows that success might be far more easily attainable.

“Our modular franchisee and retailing system allows franchisee partners to deliver compelling service offerings to South Africa’s rainbow nation. Freshstop is equally at home in a township such as our recently launched Khayelitsha store as it is in the heart of Sandton. Our scalability coupled with the fact that South Africa was ready for a healthier alternative to the traditional ‘cokes and smokes’ convenience store offerings has driven success.”

Booth-Oliveira says the future of fuel retailing depends on the ability to present a full site offer to the customers which respects wallets, time and car engine needs. “By leveraging Freshstop’s flexibility and supply chain prowess, we are able to tailor the Caltex site offer to suit the specific needs of the community demographic in the area, take some of the pain out of the grudge purchase and acknowledge an economic environment which demands a price and value conscious offer. Competitive price discounts and the consistent quality of our fresh offer will send a strong message to our competitors that it’s no longer acceptable to over-charge in the C-Store market. Healthier fast-food options will always be one of our strategic drives and is already bringing busloads of young school children to our stores for healthier convenience choices at great prices. 

“Chevron’s vision is to be the global energy company most admired for its people, partnership and performance. Through this particular partnership, we’ve stepped up to the plate and executed strongly against a strategy which recognises that we excel in the arena of unsurpassed fuels technology and crude to customer supply chain management, but it’s best to have our convenience stores in the capable hands of the FMCG experts. By partnering with this local visionary and extraordinary team of entrepreneurs, we’ve turned the South African c-store environment around and are simultaneously delivering our customers with cleaner engines, improved service and healthier hearts,” concludes Booth-Oliveira.

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