Tbe petro|eum retal|lng lndustry ln Asla and Mldd|e Last |aces

slgnl|lcant cba||enges. Wltb |ow product dl||erentlatlon, |ack o|

customer |oya|ty, coup|ed wltb lntense competltlon, due to
deregu|atlon, as ln |ndla, tbe varlous p|ayers wl|| try to galn
sbare |rom eacb otber. Tbls wl|| exert downward pressure on
marglns and |orce p|ayers to adopt new and lnnovatlve
strategles.
|ndla bas deregu|ated tbe prlclng mecbanlsm |or retal|
petro|eum, enab|lng new p|ayers to enter tbe market, wblcb
was once a |le|dom o| tbe pub|lc sector. Tbe entry o| new
p|ayers |lke Pe|lance, wl|| grow tbe number o| statlons |rom
exlstlng 19,OOO to over 23,OOO-25,OOO ln next 4-5 years. Tbls
wl|| reduce tbe average tbrougbput per statlon, and tota| |ue|
vo|umes per p|ayer. Wltb market determlned prlclng
mecbanlsm, prlces wl|| bave to be |owered, tbus reduclng
marglns |rom |ue| products.
|n UAL prlces are stl|| regu|ated by tbe government.
However, tbe current 3 p|ayers Adnoc Dlstrlbutlon, LPPCO,
Lmarat, tend to |ose money on retal| petro|, due to blgber
lnternatlona| crude prlces. A|so, by 2OO5 wben GATT comes
lnto |orce, tbe UAL market ls |lke|y to open up to |urtber
competltlon.
Potvoloun Rotailing - 1ho futuvo is now
|n Slngapore, tbe 4 |eadlng p|ayers Lxxon Mobl|, Sbe||, Ca|tex
and 8P, account |or over 95% o| tbe retal| |ue| sa|es.
Slngapore ls cba||enged wltb |lmlted geograpby |or addltlon o|
new statlons. Wltb |lmlted growtb ln number o| veblc|es, tbe
retal| |ue| vo|umes wl|| remaln stagnant, o||erlng |ltt|e scope
|or lmprovlng revenues and marglns.
Petro|eum Retai|ing Product or 5ervice!
|n growtb markets, tbe major lmperatlve sbou|d be to
lncrease pro|ltab|e revenues and market sbare growtb. Tbe
petro|eum retal|ers wl|| need to deve|op dl||erentlated va|ue
proposltlons, to lmprove revenues and tbelr bottom |lnes, by
adoptlng a customer |ocussed approacb and bul|d strong
brand equlty. To drlve revenues and marglns, tbe retal|ers wl||
bave to attract new customers or lncrease sbare o| tbelr
exlstlng customers' wa||et. Tbe |atter can be acbleved by
o||erlng non-|ue| products and servlces. Non-|ue| products,
wblcb o||er blgber marglns compared to petro|eum products,
enab|e companles to sustaln tbemse|ves, especla||y durlng
tlmes wben ol| prlces are blgb. Tbougb tbese products and
servlces bave been popu|ar ln tbe West, tbelr lmportance ls
belng recent|y |e|t ln tbls reglon. |ndlan |ue| retal|ers bave
started o||erlng grocery, |oods, |aundry |acl|ltles, |resb |oods,
etc. at tbe convenlence stores. UAL retal|ers are upgradlng
and addlng slml|ar |acl|ltles, to attract customers, and make
tbem spend more tlme and money at tbelr |acl|ltles.
Petro|eum retal|lng ls a product and servlce, wltb
dl||erentlatlon posslb|e ln eltber or botb areas.
Know your customer:
|n deve|oplng products and servlces, tbe key ls to understand
your customer. Segmentatlon ls a power|u| too| to be|p
marketers ldentl|y tbe requlrements o| tbe customers.

India UAE Singapore
Land Area (sq kms) 3,287,590 83,600 692
Population (mm) 1,045 3.5 4.6
GDP ($ bn) 2,660 71 112
Per Capita GDP ($) 2,545 20,286 24,348
Roads (kms) 3,319,644 4,835 3,066
Registered Vehicles (mm) 60.00 0.61 0.70
- mm ltrs 48,000 3,300 850
- $ mm 35,000 800 725
Avg price / ltr ($) 0.73 0.24 0.85
Retail Stations 19,000 630 222
Fuel consumption/vehicle (ltrs/annum) 800 5,410 1,214
Fuel throughput/station (mm ltrs/annum) 2.5 5.2 3.8
(All values in US dollars)
Key Ratios:
RetaiI FueI SaIes Market:
Key Indicators Comaprison

Por eg. Mobl| segmented tbe US petro|eum consumers lnto 5
segments:
Mobi|'s customer segmentation in the U5:
Mobl| ldentl|led tbe top 3 segments as belng tbe most
pro|ltab|e and deve|oped lts products and servlces to cater to
tbe target customers' requlrements. An exerclse to
understand tbe customer segments can go a |ong way |or
|oca| petro|eum retal|ers to ldentl|y tbe target segments and
deve|oplng tbe approprlate strategy. Cedar bas segmented
tbe retal| market ln Dubal, as out|lned be|ow:
Product and 5ervice Deve|opment:
Once tbe cbolce o| target segment ls ldentl|led, products and
servlces need to be tal|ored to tbelr requlrements. Tbe target
customer sbou|d drlve tbe va|ue proposltlon, |or botb |ue|
and non-|ue| products and servlces.
Fue| Based Proposition: |n tbe western markets, petro|eum
retal|ers se|| mu|tlp|e grade |ue|s based on tbe octane ratlngs,
wltb dl||erent prlces at dl||erent statlons, wbere tbe customer
can bunt |or a bargaln. |n UAL, wbere un|eaded |ue| ls tbe
norm, 2 grades are aval|ab|e, Octane 95 and 98. However,
tbe Octane 98 petro| accounts |or |ess tban 5% o| tbe over
3.3 bl||lon |ltres consumed.
Tbls cou|d be attrlbuted to
tbe 25% premlum over
tbe Octane 95 product
prlce, wblcb ls admlnlst-
ered by tbe government.
However, wltb tbe |arge
blgb-end car popu|atlon, an
opportunlty exlsts ln tbe
market to lmprove tbe
perceptl on o| product
superlorlty and lmprove
tbe bottom |lne. |n |ndla
too, wltb tbe lntroductlon o| strlngent po||utlon norms,
coup|ed wltb tbe growtb ln |arge cars, tbe superlor product
based opportunlty ls |arge. Tbe |lrst mover advantage needs
to be captured and caplta|lsed tbrougb a mlx o| customer
e d u c a t l o n a n d
marketlng actlvltles.
5ite 5ecurity:
Wltb expected new
c ompe t l t l on , s l t e
securlty ls tbe key. |n
UAL and |ndla, wltb
tbe expanslon o| roads
network, tbe exlstlng
p|ayers book tbe key
sltes, to beat |uture
competltlon. However,
deve|opment o| tbe sltes ls undertaken once tbe road
becomes operatlona|. Tbe cba||enge ls to use a sclentl|lc slte
se|ectlon mode|, to ensure tbat tbe slte ls pro|ltab|e once lt ls
operatlona|.
5ite Rationa|isation: Lven tbougb slte securlty ls
requlred, lt ls crltlca| |or managements to monltor
per|ormance o| tbelr exlstlng and new statlons. Loss maklng
statlons need to be ldentl|led, and correctlve actlons taken to
make tbem pro|ltab|e. || turnaround ls not posslb|e, lt ls best
to c|ose tbem and dlvert tbe resources |or otber sltes or
actlvltles.
5ite Upgradation: Tbe reglona| p|ayers bave rea|lsed tbat
bavlng an attractlve statlon, wltb |rlend|y sta||, and o||erlng a
Retai| customer segmentation in Dubai (Cedar Research)
range o| non-|ue| products and servlces, ls tbe key to get
customers to drlve lnto tbelr statlon. Dependlng on tbe slte
space aval|abl|lty, tbe varlous p|ayers ln |ndla and UAL bave
started renovatlng tbelr exlstlng sltes, to o||er an lnternatlona|
|ook and |ee|. Tbe cba||enge ls to prlorltlse tbe sltes tbat need
to be upgraded |lrst and wblcb cou|d start o||erlng blgber
contrlbutlon due to tbe cbange.
Non-Fue| Based Proposition:
To get a |arger sbare o| tbe customers' wa||et, non-|ue|
products and servlces are necessary. Non-|ue| revenues
contrlbute slgnl|lcant|y |or tbe petro|eum retal|ers US(39%),
Prance(25%), Lurope (15%). |n tbe UAL, lt averages 12%-
15% |or varlous p|ayers, and o||ers slgnl|lcant opportunlty |or
deve|opment ln tbe reglon, especla||y ln |ndla.
Tbe non-|ue| products and servlces can be broad|y grouped
lnto 3 categorles:
Convenlence stores (C Stores)
Auto Care Servlces
Ancl||ary Servlces
Convenience 5tores:
Tbe concept o| C stores tbougb re|atlve|y new ln |ndla, bas
got estab|lsbed ln tbe UAL |or past 3-5 years. However tbe
annua| average revenue per sq |t ln UAL ls $325 compared to
$55O ln tbe US and $8OO ln UK. Tbe average va|ue per
transactlon ln UAL ls |ess tban $3, compared to $6 ln tbe UK.
Factors contributing to the success of C stores
proposition:
Product mlx drlves tbe C-stores sbopplng. |n tbe UK,
Tobacco (37%), con|ectlonery & snacks (18%) and so|t drlnks
(8%) are tbe |eadlng categorles. |n tbe UAL, due to tbe wlde
aval|abl|lty o| clgarettes ln supermarkets, clgarette
contrlbutlon ls on|y 14%. |t wl|| be tbe same case ln |ndla,
wbere tbere are clgarette klosks at every nook and corner.
Tbe crltlca| lssue ls to o||er a product assortment tbat drlves
tbe target customer tra||lc. Tbls cou|d a|so be ln terms o|
o||erlng |resb grocerles, |resb |oods, co||ee, bot snacks, etc.
A|so, specla| promotlons ln terms o| dlscounts on blgb margln
products can drlve vo|umes (eg. Pountaln so|t drlnks).
Store |ayout and appearance attract customers to spend more
tlme ln tbe store. Tbls can be based on researcb to track tbe
movement o| customers, and bence tbe |lke|lbood o| tbem
plcklng tbe product. Slnce operatlng C-stores requlre
dl||erent set o| capabl|ltles ln terms o| supp|y cbaln
management and sourclng, tbe C-stores operatlons cou|d be
outsourced. |n UAL, a|| operators contract tbe |resb |oods
management to tbe |ood supp|lers wbo rep|enlsb stocks on
consumptlon and take back tbe unused stock based a|ter
explry date. A reduced rlsk mode| ls an a||lance or comp|ete
outsourclng, especla||y ln tbe branded bot |oods category |lke
plzzas, co||ee, burgers, etc.
Auto Care 5ervices:
Auto care servlces comp|ement tbe |ue| servlces. Tbese
lnc|ude |ube cbange, car wasb, wbee| & tyre servlces, car
upbo|stery c|eanlng, mlnor repalr servlces, etc. A|| o| tbese
contrlbute to tbe lncrementa| sbare o| tbe customers' wa||et.
Tbe car wasb and auto care average around 7% and 4% o|
tbe tota| revenues |or |ue| retal|ers ln [apan and US. |n tbe
UAL lt ls between 1%-2%. A|so, tbe |ube to |ue| vo|ume
ratlo ln UAL ls O.26%, compared to 1% lnternatlona||y.
However, ln tbe UAL lt ls observed tbat wbere tbese servlces
are aval|ab|e, tbelr utl|lsatlon ls blgb, tbere|ore, tbey sbou|d be
aval|ab|e at more number o| |ocatlons. |n |ndla tbese servlces
o||ered at tbe statlons are at a nascent stage, due to tbe
customers unwl||lngness to pay tbe prlce. Sma|| garage
operators tend to o||er tbese servlces at a mucb |ower prlce.
Tbe cba||enge ls to understand tbe customers' wl||lngness to

C stores
Success
Factors
C stores
Success
Factors
Store
Appearance
Store
Appearance
Pricing Pricing
Food Food
Service Service
Product Mix Product Mix
Distribution Distribution Layout Layout
Promotions Promotions
pay, and desl gn tbe servl ce, coup| ed wl tb rl gbt
communlcatlon to promote tbem.
Anci||ary 5ervices:
ATMs, |aundry |acl|ltles, |nternet access, mosques (ln tbe
Mldd|e Last), etc. get tbe customer to drlve lnto tbe statlon,
and lncrease bls spendlng. Lmarat (Sbaml|) and Lppco
(Tasjee|) ln UAL a|so o||er car testlng, reglstratlon, and auto
lnsurance |acl|ltles, wblcb are certl|led by tbe autborltles. Tbls
provldes tbe customer a one-stop-sbop |or tbe car's annua|
cbeck-up, and otber |orma|ltles, wltb tbe |uxury o| an alr-
condltloned |acl|lty, ln |ess tban 3O mlnutes compared to tbe
ba||-day at government |acl|ltles. Door-to-door servlce ls a|so
o||ered, wblcb requlres even |esser tlme.
Otber ancl||ary servlces cou|d be potentla||y o||ered to
lnc|ude courler servlces, car renta|s, etc, dependlng on tbe
customers' requlrements. Tbe ldea ls to make tbe petro|
statlon lnto a destlnatlon |or tbe customer vlslt. Petro|eum
marketlng bas a strong non-|ue| e|ement, wblcb can be
|everaged |or dl||erentlatlon ln a commodlty market
envlronment.

N
o
n

F
u
e
I

R
e
v
e
n
u
e

p
e
r

c
u
s
t
o
m
e
r
Confectionery
Cigarettes
Soft Drinks
Kiosk
Kiosk
Hot Foods
Fresh Groceries
C

S
t
o
r
e
Lube Change
Car Wash
Service Station
C Store
Auto Services
AnciIIary Services
Destination
N
o
n

F
u
e
I

R
e
v
e
n
u
e

p
e
r

c
u
s
t
o
m
e
r
Confectionery
Cigarettes
Soft Drinks
Kiosk
Kiosk
Hot Foods
Fresh Groceries
C

S
t
o
r
e
Lube Change
Car Wash
Service Station
C Store
Auto Services
AnciIIary Services
Destination
Customer Loya|ty Programs:
We bave been dlscusslng tbe subject o| acqulrlng/retalnlng
customers and understandlng tbelr requlrements. Customer
|oya|ty programs enab|e organlsatlons wor|dwlde to acbleve
tbese goa|s. Tbe |oya|ty program ensures tbat tbe customer
|lmlts tbe use o| competltors' |acl|ltles, due to varlous
lncentlves, wblcb are o||ered to blm. Second|y, lt can capture
tbe buylng bebavlour o| tbe customer ln terms o| tbe types
o| products, purcbase |requency, amount spent, |ocatlons
used, etc. Companles can use tbls va|uab|e data to
dl||erentlate and deve|op tbelr product and servlce o||erlngs,
based on tbe customers' requlrements, tbereby lmprovlng
revenues and pro|ltabl|lty. Pue| Cards are belng used ln tbe
UAL and recent|y ln |ndla, but prlmarl|y |or ||eet
management. |nvestment ln tecbno|ogy ls requlred, to |lnk a||
tbe |orecourt and non-|ue| |acl|ltles to a common data
system. Tbls lnvestment can go a |ong way ln understandlng
tbe customer.
Tbus, a strategy based on bul|dlng strong and dl||erentlated
va|ue proposltlons ls partlcu|ar|y re|evant |or petro|eum
retal|ers ln tbls reglon, wltb an opportunlty to bul|d revenues
and enbance pro|ltabl|lty.
Man|sh Kerwa|a |s Assec|are D|ecre -
As|a/M|dd|e asr, Ceda Censa|r|ng.
O||lces ln Prlnclpa| Cltles o| tbe Wor|d
www.ceoar-consultlng.com
|ndla
7O3 Nlrman Kendra
O|| L Moses Poad
Maba|axml
8ombay 4OO O11
|ndla
T +91 22 6661 98OO
P +91 22 6661 98O1
L lndla@cedar-consu|tlng.com
Mldd|e Last
PO 8ox 41785
11O2, A| Attar Tower
A| Maktoum Street
Delra, Dubal, UAL
T +971 4 221O444
P +971 4 2249454
L mldd|eeast@cedar-consu|tlng.com
Cedar Management Consu|tlng
|nternatlona| LLC
3OO Park Avenue, 17tb P|oor
New York, NY 1OO22, USA
T + 1 212 5726314
P + 1 212 5726499
L amerlcas@cedar-consu|tlng.com
Soutb Last Asla / Cblna
1O Wlndsor Park Hl|| Poad
Slngapore 5742OO
M + 65 9O68 5774
L seasla@cedar-consu|tlng.com
Cedar Tecbnomlc
118 S. C|lnton St., Sulte 37O
Cblcago, |L6O661
T: +1 312-575-9626
P: +1 312-575-9627