IN 2000 THE UK HAD ONLY ONE RETAIL DEALER GROUP WITH A SITE NETWORK OF 100 SITES. NOW THERE ARE FOUR – WITH THREE ESTABLISHED SINCE THE MILLENNIUM – ALL HAVE NETWORKS IN EXCESS OF 200 SITES
Now with a total of 1,400 sites these four groups represent 17% of the UK’s network and 26% of independent dealer outlets and supply around 17% of the country’s forecourt fuel requirements.
How the retail market was rationalised
Rationalisation by the oil majors has enabled this transformation of the retail market’s landscape. In all the transactions below, there was/is a requirement for the acquirer(s) to enter into a product supply agreement of 5 years’ duration and a branding agreement to use the seller’s brand/imaging.
Following acquisition of Mobil’s European downstream interests in 1997, BP’s network of company owned sites increased to circa 900 outlets. Comprehensive rationalisation over the past 10 or so years has seen its sites decline to just over 300, a figure viewed as its core long term network in preferred geographical locations.
In 2010 Esso elected to adopt the US branded wholesaler (jobber) model for not only its UK business but also Benelux and France, selling its owned UK network (with the exception of 200 Tesco alliance outlets)in geographical clusters to independents. The final tranche of south/south east of England sites being completed in 2015.
In 2011 Shell purchased 254 former Total sites from the acquirer; as part of a subsequent rationalisation Shell divested 250 outlets to achieve a total owned/leased network of about 550 sites. In 2015 the sale of 185 sites was completed.
Reviewing its European asset portfolio, Texaco’s owner, Chevron, decided to dispose of its entire UK network of 260 owned/leased sites in 2005, around half were acquired by Somerfield (now Co-op).
JET divested its entire owned/leased estate of around 200 sites in 2001. Acquired by Fuel Force which subsequently went into liquidation, the outlets dispersed to a number of different owners including Somerfield and Murco.
In addition to the above rationalisation programmes, two integrated refining/marketing companies – Total in 2011 and Murco in 2015 – have exited the UK retail market and divested their site networks.
Opportunities and not standing still
By any standards, the expansion/emergence of the big four in recent years has been both substantial and significant in terms of driving consolidation of the market and its competitive landscape.
Certainly, within the UK it would appear that the lion’s share of site rationalisation by the traditional majors has now run its course except for a few relatively minor tweaks.
It is therefore likely that the focus of the four large groups will switch to optimisation of existing networks; consideration of opportunities in mainland Europe or Ireland; enhancing the convenience store offering – by the end of 2016 Euro Garages will increase its on site Subway stores from 100 to 175 and MFG is to partner Morrisons to pilot convenience food at 5 sites. It is also conceivable that one or more may contemplate development of its own forecourt brand/logo and possibly make this available to other independent dealers. One way or the other, they will not be standing still!!
MRH (Malthurst Retail Holdings)
MFG (Motor Fuel Group)
The advance of the Big Four since 2012
A feature common to all four companies is the involvement of private equity groups which hold varying levels of interest in each. The interest of private equity groups would suggest that these companies constitute attractive propositions, at least over the typical time horizon in which returns are viewed.
Established in 1997, MRH’s co-founder Graham Peacock is still the company’s CEO. The first big advance was achieved in 2004 with the acquisition of 125 owned sites +180 dealers from Q8’s GB retail/commercial fuels businesses. A significant number of sites have since been purchased from BP and Texaco and more recently under the branded wholesaler programme two tranches of Esso’s network have been acquired. Most sites are BP or Esso branded with some carrying JET or Texaco logos. A Torq own brand has been developed for some outlets in Scotland.
Started under venture capital ownership in 2007, in late 2014 MFG acquired Murco’s fromer 228 owned/leased sites along with the contract management of around 225 Murco dealers. These sites have been rebranded to BP, Texaco and JET. In 2015 90 sites were acquired from Shell.
In 2001 the Issa brothers, who still run Euro Garages, started with one site in Bury, Lancashire. Expansion has been rapid in recent years and includes two tranches of Esso sites. In 2015 alone 104 sites were acquired from Esso (south/south east cluster) and 68 sites from Shell. Sites are branded BP, Esso or Shell.
Rontec was created by Gerald Ronson as a vehicle to acquire Total’s UK retail/commercial fuels business (488 owned/leased sites) in 2011; 254 were subsequently sold to Shell. A tranche of Esso sites was acquired under the branded wholesaler programme, these and the former Total sites are Esso branded whilst those of sister company Snax24 are BP branded.
By and large, the big four’s networks are represented across much of the geography of Great Britain.
In terms of network size these four companies are substantially larger than the next largest groups which run networks in the 50-60 size range; those in 8th,9th and 10th place having 25-30 outlets each.