As competition tightens, oil firms detour into non-fuel business

For oil companies, competition no longer stays in the arena of getting a bigger share in the Philippine retail fuel market.

This as 2017 saw petroleum firms expand their non-fuel related businesses to stay more relevant to consumers amid heavy traffic in most road networks.

Latest data from the Department of Energy (DOE) showed that the entry of new oil companies and the expansion of existing industry players in the past seven years have eroded the market share of the country’s top three major oil firms.

The three major oil, players, namely Petron Corp., Pilipinas Shell Petroleum Corp. and Chevron Phils. cornered 55.9 percent of total demand, while other industry players and end-users captured 35 percent and nine percent, respectively, as of end-June 2017.

In 2010, the three major oil companies got 77.2 percent market share of the total demand, while other players cornered 22.8 percent.

The DOE data also showed a longer list of other oil companies being monitored by the agency, from just 14 as of end-2010 to 22 to date.

Oil companies continue to pour in funds to expand their retail station network, but it is also noticeable that some of the players are diversifying their businesses outside fuel retailing.

Perhaps the biggest mover in the sector is independent oil player Phoenix Petroleum Philippines Inc., which is part of the growing business empire of Davao-based businessman Dennis Uy.

Phoenix Petroleum has acquired the local operations of Japanese convenience store chain FamilyMart to expand its non-fuel related business.

Brought into the country by the tandem of Ayala Land Inc. (ALI) and SSI Group Inc. and of Japanese partners FamilyMart Co. Ltd. and Itochu Corp., FamilyMart is seen to complement Phoenix Petroleum’s retail fuel business.

The acquisition also marks its entry into the fast-growing domestic convenience retail market.

With 67 stores in Luzon, the company sees FamilyMart as an excellent platform on which it can establish and grow its presence in the high-margin, fast growing consumer retail space, and leverage on potential synergies with its affiliate companies.

As of end-September, the company completed 523 Phoenix retail service stations, making it the fourth largest fuel retailer in the country, based on DOE data.

While the Japanese convenience stores can add more offerings to its gas stations, the focus on FamilyMart is to address the lifestyle shift of Filipino workers from commuting to dorming, Phoenix Petroleum COO Henry Albert Fadullon said.

“Although there are opportunities in service stations, our priority is to put them in central business districts,” he said.

“There is a shift in lifestyle from commuting to dorming. You stay too long in transit…it’s untenable. When you move from commuting to dorm- ing, you typically go one bedroom, one bed. There’s no place for you to cook, eat.

That is why we believe, by positioning the FamilyMart stores in central business districts, where people traditionally commute now dorm, you have an opportunity to serve their lifestyle needs,” Fadullon said.

FamilyMart offers a range of products and services that include ready to eat or fast food items, convenience store items, auto-loading, bills payment, and ATM services.

Fadullon said the company looks to add more food options in FamilyMart to be able to accommodate the needs of the working class.

This follows the original service being offered by the FamilyMart stores in Japan.

“And if you reformat the store from CVS (consumer value stores) to more food, then you have more options for people to eat or take something ready to eat,” Fadullon said. “What is more important is to provide better, more compelling options.”

Apart from the convenience store, Phoenix Petroleum plans on acquiring more non-fuel related business that can complement its retail stations.

“We could have auto repair shops, quick service restaurants,” Phoenix vice president for external affairs Raymond Zorrilla said.

While Phoenix Petroleum has started its venture into the convenience store and food business, Pilipinas Shell Petroleum Corp. said it was first to introduce the concept of integrating a 24-hour convenience store into a service station in 1993.

Called Shell Select, it offers a wide variety of food and service for on-the-move customers, ranging from snacks, beverages, tobacco, groceries items, non-food groceries, and in-store services.

The first branch was in Shell North Luzon Tollway service station and there are now over 100 Select stores out of 1,014 retail stations all over the country. It remains as the country’s second largest oil player with a 20.7 percent market share.

But Shell did not stop from there. The oil firm continued to expand its Select store services and offerings by bringing in Deli2Go cafè brand which offers an exciting selection of affordably priced and well-thought-out meals, coffee and quick snacks that are made fresh and restocked daily to satisfy the needs of motorists.

While this first debuted in 2015 in the Shell Select Julia Vargas service station, the Deli2go offer became more heavily marketed this year, mostly over the radio waves while in traffic.

“Deli2go focuses on delivering delicious, quality and quick food service as it aims to answer the desire for quality, tasteful food and coffee in the convenience store environment. The brand envisions a place for Filipinos to buy fresh food and coffee at reasonable prices,” said Millicent Ngo, Shell’s convenience retail manager.

To-date, Shell has 40 Deli2go stores in various formats—some inside Shell Select while a few are standalone.

Apart from food offerings, Shell continues to invest in oil change and car maintenance services in its retail stations.

Currently, it has over 250 locations at different Shell stations nationwide. This year alone, it opened 38 new lube bays.

Trained by the Don Bosco Technical Institute (Makati) in lubrication services and modern engines, Ngo said Shell’s mechanics are more than qualified to perform safety checks and maintenance services on vehicles.

“Our retail mission is to enable better life’s journeys for our customers, and so we aim to establish every Shell station as an oasis for drivers, with a wide variety of offers to address various consumer needs- fuel and non-fuel. We want to provide quality products (fuels) and world-class service (lube bays, service champions), while providing convenience (Turbo Toilets, Select/Shop) for different customer needs,” she said.

This year, PTT Philippines Corp.—the local unit of Thailand’s largest petroleum company—also brought in its home-grown coffee shop brand, Café Amazon, in its Subic-Clark-Tarlac Expressway (SCTEX) service station in the last quarter of 2016 and has started its full-blast expansion this year.

Apart from the continued economic expansion, the company has taken note of the Philippines’ growing love for coffee that’s why it decided to open its coffee shop in the country, said Anusorn Preugpaibul, PTT’s non-oil business expert.

“With a strong economic growth and consistent increasing coffee consumption in the Philippines, there are large opportunities for PTT to enter and capture shares in the Philippines coffee market,” he said.

“In such a foreign-friendly environment here in the Philippines, we would like to bring this for Filipinos and expats here alike to have the opportunity to experience our Café Amazon quality products,” he added.

Launched as part of its strategy to diversify its business outside of the oil business and to provide complete experience to customers, PTT said Café Amazon has become Thailand’s No.1 coffee brand.

The firm eventually branched out its coffee shop brand to other areas and countries like Cambodia, Laos, Myanmar, Japan, and recently, the Philippines.

Now it has more than 1,850 stores in Thailand and in other parts of Asia, including one in Japan.

“Café Amazon was launched as part of PTT’s strategy to diversify its business outside of the oil business. This forms part of PTT’s intention to complete the journey of a customer when they enter into a PTT gas station. Customers can fill up their tanks, use the comfort room and refresh themselves with our Café Amazon drinks and pastries before continuing their journey,” Preugpaibul said.

PTT currently has a total of 120 stations in the country, 15 of which are in Metro Manila and the rest are outside the National Capital Region, while there are 15 stations in Visayas. It corners 1.3 percent of the total market share.

Apart from the SCTEX station (Tarlac), it now has Café Amazon branches in its station in Dasmarinas (Cavite), in SM North Edsa-Annex (Quezon City), in Pulilan station (Bulacan), Lubao station (Pampanga) and EDSA Veterans station (Quezon City).

The company is investing P500 million in the Philippines, and part of which is to open 200 outlets of Café Amazon in the next five years. This year, PTT targets to open 12 Café Amazon branches.

“We target to open in both inside PTT gas stations and outside PTT gas stations such as malls, commercial buildings, etc.,” Preugpaibul said.

PTT also ventured into convenience stores with “Jiffy” brand, dimsum restaurants with “Hua Seng Hong” brand, fried chicken with “Texas Chicken” brand and doughnuts with “Daddy Dough” brand.

Apart from Café Amazon, the Thai firm also brought into the country its convenience store brand.

“PTT Philippines has brought its convenience store brand, Jiffy, into the Philippines with its first convenience store located within our PTT Belfast Avenue gas station,” Preugpaibul said.

While Seaoil Philippines Inc. has not ventured beyond fuel retailing, it has collaborated with CityMall, the mall development arm of DoubleDragon Properties Corp., to provide a mall stopover for motorists going north in its SCTEX station, its biggest outlet and its first along an expressway.

CityMall houses food joints such as Jollibee, Mang Inasal, Highlands Coffee, Potato Corner and Shakey’s as well as shops like Theresa’s Pasalubong Center, Mayat Malagu pasalubong shop and 7-Eleven convenience store.

“We have come a long way from 1987 when we established our petroleum storage facility and since 1997 when we started our fuel retailing business,” said Seaoil CEO Glenn Yu.

To date, it has over 400 stations nationwide located as far north as Aparri all the way to the south in Sarangani. DOE data showed it is the fifth largest oil player with a 5.5 percent market share.

As the the country’s biggest oil refiner and marketer, Petron has the widest range of offering in the market with its convenience store synergy with parent firm San Miguel Corp. (SMC) and its various motor care services available in its retail stations.

It has over 2,900 service stations to-date and has a market share of 28.6 percent as of end-June 2017.

Petron must be cooking up something since company officials declined to comment on The STAR’s queries.

However, the company said on its website that it envisions every service station to be a motorist’s oasis.”

“Besides having friendly personnel serving our premium fuels, many of our service stations provide automobile service checks, restrooms, convenience stores, specialty shops, ATM machines, and in our bigger stations, an array of restaurant options to choose from,” it said.

Some Petron stations house San Mig Food Ave., SMC’s convenience store which opened shop in 2012. It has a total of 172 branches to-date, composed of standalone and those located within Petron stations nationwide.

Some stations also have Petron Car Care Center (CCC), which offers various automotive maintenance and repair services to the motoring public such as lubrication, engine works, chassis repair, tire services, washing and undercoating, cooling system maintenance and airconditioning and electrical repair and maintenance.

“CCC customers can then be assured of ‘casa-like’ quality of parts and service at affordable costs,” Petron said.

It also offers a specialized maintenance service for motorcycles in its Petron MotoCenter.

Oil firms are expected to continue to dedicate more funds in non-fuel related businesses with the dawn of higher fuel excise tax next year after President Duterte signed into law the first package of the tax reform program.

Beginning 2018, there will be excise tax on liquefied petroleum gas (LPG) of P1, diesel fuel of P2.50, and regular and unleaded premium gasoline of P7 from the current P4.35.

Petroleum companies will be compelled to have more offerings and services to motorists as Manila ranks as the third worst city in Asia in terms of traffic, based on a commissioned by ridesharing company Uber.

Based on the study, Manila spends the third longest average time stuck in traffic every day at 66 minutes, next to Bangkok with 72 minutes and Jakarta with 68 minutes.