Executive Summary

Petrol forecourt retailing in the UK is embarking on a period of major change. Over the past 4 years, competition from supermarkets, price wars and the increased cost of oil on the international market has forced one in five stations out of business. In its search for reduced costs, the market has recently witnessed a major merger between BP and Mobil, and another involving Elf and Gulf Oil is expected to be ratified shortly.

To generate extra profit, the industry is focusing on the forecourt shop and pressure is now on to develop chains of high volume `superstations', with bigger forecourt convenience stores which offer a wider range of fresh and frozen food, groceries, convenience meals and other services.

Some of the oil majors, like Esso and Shell, are enlarging and redeveloping existing forecourt shops. Others, such as BP/Mobil and Elf, are testing new store concepts through alliances with major grocery retailers such as Safeway and Somerfield. Some smaller oil companies and independent dealers are turning to franchises with convenience specialists like Alldays, or symbol groups such as Spar, in order to compete.

Key Note estimates that in 1996 at current prices sales from forecourts in the UK totalled £21.3bn, an increase of 12.5% against 1994. Of this, £2.8bn (13.1%) represented the volume of sales from some 6,000 forecourt shops, a contribution which has more than doubled over the past 3 years.

Looking ahead Key Note is predicting that, by the end of 1997, total forecourt sales in the UK will reach £23.17bn at current prices and will increase by the end of 2001 to £33bn (an increase of 42.4%). Of this total, £5.17bn (15.7%) will be attributable to sales of non-fuel items through forecourt shops.

The industry awaits a response to this initiative from major grocers such as Sainsbury, Tesco and others. A view being expressed by some industry pundits suggests it would be better for the oil majors to concentrate on forming alliances designed to allow the major food multiples to install and run the larger convenience store/supermarkets on forecourts, while the oil companies themselves concentrate on fuel sales.

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