Get ready for no-frills petrol

If you’re a North Island motorist, you’re probably familiar with the ‘‘Gull effect’’. The Australian-owned company has shaken up the petrol market in recent years, forcing oil giants like Z Energy, BP, and Mobil to slash prices as competition heats up at the pump.

While Gull has had a huge impact on prices, some family-owned Kiwi companies are also getting in on the action.

Waitomo, a no-frills fuel company based in Hamilton, is growing rapidly across the country. NPD, a Nelson budget fuel retailer, wants to take on the market heavyweights in the under-served

South Island.

A no-frills effect is already taking hold. According to December 12 data from fuel price app Gaspy, Waitomo and NPD were the two cheapest operators in the country for 91 petrol.

Waitomo’s average price of 211c per litre, and NPD’S 212.6c, were cheaper than Mobil and Z’s 220c, BP’S 222.4c, and even Gull’s 213c a litre offering.

There’s every chance Waitomo or NPD could be coming to your town or city next.

So who are the upstart local businesses challenging the dominance of the oil giants? Are they here for good? And are Kiwis finally set to benefit from proper competition?

Waitomo is a long-established player in the fuel sector. The business was founded by the Ormsby family in 1947 and has been run by the Ormsbys for generations. Mobil once owned a stake in the company, before the Ormsbys reacquired control in 2002.

Throughout its history, Waitomo has mainly been a truck-stop business. But in recent years it has shifted towards retail customers, expanding as customers seek out petrol at lower rates.

Technology has helped Waitomo broaden its horizons. The introduction of unmanned pumps has allowed the company to roll out low-cost sites across the north island. With no need for staff, tills, and convenience shops, Waitomo has lower overheads and has been able to sell petrol at a cheaper rate than its larger rivals, so far at least.

Waitomo managing director Jimmy Ormsby describes his business as a ‘‘low-cost’’ competitor to the big corporations.

‘‘That doesn’t mean we cut corners,’’ Ormsby says. ‘‘But we have a low-cost model which looks at disciplined investments. Our new site in Rotorua opened this week on time and on budget. We only enter new sites we think are sustainable.’’

Ormsby says keeping costs down across the business helps to keep prices low.

‘‘There are no canopies on our sites, for example,’’ he says. ‘‘You might need a hat, filling up your car in the sun. We don’t worry about that. We stick to what we’re good at, selling fuel.’’

Ormsby says Waitomo focuses on the right locations and delivering fuel efficiently. He wants the chain to be the value player, but has to balance that with ‘‘making money for shareholders’’.

‘‘Economically, we want to make the right decisions on how and where we are investing, so we can deliver a sustainable and competitive fuel price,’’ Ormsby says. ‘‘Sometimes that will be more competitive, other times it won’t be.’’

The South Island marks the next phase in Waitomo’s land grab.

‘‘I’m excited about that market, because it hasn’t been competitive until recent times,’’ Ormsby adds. ‘‘Even with independents there, pricing has been high.’’

Ormsby refers to Jacinda Ardern’s comments about Kiwis being ‘‘fleeced at the pump’’: ‘‘The companies have been achieving margins [in the South Island] in line with the prime minister’s comments.’’

Like Waitomo, Nelson fuel company NPD has been operating for decades. Formed in the 1960s by the Milne family, it has undercut competitors in recent years amid a gradual expansion across the South Island.

With 67 sites, NPD is on an ‘‘aggressive’’ drive to open up new stations in the south. It has opened 11 this year, with a further two planned before Christmas, and wants to open 18 more in 2020.

NPD also relies on technology to deliver cutprice fuel. The chain also uses unmanned petrol pumps to keep down overheads and speed up its rollout of new sites.

Barry Sheridan, chief executive of NPD, says the company’s ‘‘lower operational and capital overheads’’ and ‘‘lean management structure’’ help to keep costs down. He says economies of scale have improved as ‘‘the size of our network grows’’.

What do consumers make of the petrol sector’s challengers? AA Petrolwatch spokesman Mark Stockdale says there have been ‘‘significant changes’’ in the retail market, and welcomes the new competition.

‘‘Motorists were used to BP and Shell, and hadn’t heard of these brands,’’ Stockdale says. ‘‘Now throughout the North Island, not only is there a

Gull in main centres, there’s a Waitomo or another of the no-frills brands. It’s providing a great deal more choice than motorists have been used to for decades.’’

A key question is whether the likes of Waitomo and NPD can sustain their aggressive assault on the big guns while remaining profitable. Both companies declined to share their annual profit figures for the last financial year.

Stockdale said petrol companies were operating at high margins by historic standards, attracting budget players to the market.

‘‘Businesses want to get into the market, and that’s why Gull and Waitomo are coming to the South Island. They know they can retail fuel lower than what’s on offer there, and still make money.’’

The emergence of no-frills operators comes amid pressure to drive petrol prices down. A Commerce Commission report published earlier this month found Kiwis pay too much for petrol, and recommended new regulation, and reforms to wholesale suppliers, to reduce prices. The report made little mention of the significant tax levied on fuel, however.

The Commerce Commission’s recommendations may take years to bear fruit in the way of government policy, so any price drops will be spurred by competition on the open market for now. Stockdale hopes budget providers can have a positive, long-lasting impact.

‘‘They’re providing a great deal more choice than our motorists have been used to for decades, and that’s a positive development,’’ Stockdale says.

The Gull effect may have taken hold of New Zealand already, but the no-frills effect has only just begun.