Caltex is looking to reinvent Australia’s “underdeveloped” convenience market, with the fuel giant to pilot a new convenience store concept over the next 12 months.
Caltex Australia CEO Julian Segal said the new store model takes “successful components from leading international markets” and will include barista coffee, fresh ‘grab and go’ food, quick service restaurants as well as non-food services such as parcel pick up and dry cleaning.
“Our analysis suggests that the Australian convenience market is underdeveloped compared to international markets such as the UK, Japan and the United States,” Mr Segal said.
Caltex will roll out pilot sites over the next 12 -18 months to “prove the concept before a wider roll out” under the guidance of a standalone project team.
“I think we are absolutely capable of coming up with a convenience offering that is new, novel, innovative and not trying to copy Woolworths or Coles in any shape or form,” Mr Segal said.
“If you look at Coles for example one of their key drivers is to push supermarket type goods in large quantities through their network, that’s not our strategy. We’re not trying to compete on that level at all.”
Freedom of Convenience
The investment into the sites is understood to be around $30 million as it part of the fuel retailer’s Freedom of Convenience strategy launched last year.
“The Freedom of Convenience is about reinventing the convenience concept. It’s about picking up elements of convenience that we’ve seen be very successful globally and combining them into something new that no one else is doing.”
More than 3 million customers visit a Caltex store each week, with Caltex’s total convenience sales around $1.1 billion. Victoria and NSW are Caltex’s strongest convenience markets, reporting sales increases of 6.5 per cent and 9 per cent respectively, while Western Australia performed negatively for the first six months of the year.
Last year Caltex launched a new store model in Heathcote, NSW with barista coffee, fresh meals and healthy snacks such as fruit following research undertaken by the company.
During its presentation Caltex said that while the Heathcote store is tracking at “several multiple percentage increases” and the company is “encouraged” by the results, the store doesn’t reflect the new convenience strategy and the “depth and width” of products Caltex will offer in the pilot stores.
Half year profit drops 15.2 per cent to $318 million
The announcement of the new store model follows the release of Caltex’s half year results, with the company reporting a drop in net profit of 15.2 per cent to $318 million in the six months to June 30.
Caltex’s after tax profit was up one per cent to $254 million for the first half of 2016. Revenue decreased 13 per cent to $8.5 billion.
According to Caltex, continued growth in sales of premium fuel grades Vortex 95 and Vortex 98, partially offset the long term decline in demand for unleaded petrol, including E10.
Total petrol volumes fell 2.2 per cent to 2.9 billion litres, while total diesel volumes of 3.5 billion litres were in line with the prior year.
Caltex opened eight new retail sites in the first half of the year, while four rebuilds were completed. Between 15 and 20 Caltex sites are targeted for minor site upgrades.
Electric cars won’t have impact until 2025
According to Mr Segal, electric vehicles won’t have an impact on Caltex for at least the next 10 years.
“It’s going to take to take quite number of years before you see a serious dent. I am talking about 15 – 20 years and beyond,” he said during the results presentation.
“Electric vehicles are not going to have any significant impact on our business.
“We’re very confident that we can keep on growing our business, the fuel business, the way it is. I think you’re starting to look at 2025 and beyond when [electric vehicles] might have an impact.”
He said the cost viability of replacing current vehicles with electric cars “simply won’t happen” over the next three to five years, labelling it “simply physically impossible”. However, the Caltex boss believes self driving cars present more of an opportunity currently than electric vehicles.
Mr Segal said the company wasn’t “putting its head in the sand” having previously been in talks with the now collapsed electric car company, Better Place. However, Mr Segal said at the time of the discussions a few years ago Caltex “took a different view to the uptake of electric cars to Better Place”.
“We’re keeping ourselves up to date but I feel very confident electric vehicles are not going to impact on us any day soon but we need to keep an open mind.”