Mexican Retailer Targets Control of Biofuel MarketBy Peter Appleby | Thu, 09/03/2020 - 09:35
Q: How has the recent economic and health downturn impacted Wascon Blue’s goal of become a leading biofuel retailer in Mexico?
A: The health crisis has brought disruption across all markets and the biofuels market has been no exception. This crisis has given us the opportunity to learn, to grow as a company committed to its clients and the future and to look for innovative ways to improve our process and reduce costs. Through resilience and leadership, Wascon Blue has kept its family whole and is committed to creating a positive impact when it is most needed. We continue to believe that with hard work and dedication from all at the Wascon family, we can and will become the leader of biofuels in Mexico. We are confident that although it will take time, the market will recover and Wascon, alongside Mexico, will emerge stronger than ever.
Wascon Blue has two stations and like most traditional gas stations, sales have dipped between 40 percent and 60 percent in comparison to previous months. Among other factors, this is due to the decrease in vehicles on the road due to the government’s call for the general population to stay indoors to slow the spread of COVID-19. We expect the situation to remain static throughout Q2 and early Q3 because we do not foresee a recovery of economic activities until late Q3 and early Q4 2020. As Latin America emerges from the reactive phase and enters into the recovery phase of the pandemic, and as governments begin to ease restrictions, this should result in much-needed economic stimulus.
Our core business is to supply high quality gasoline at competitive prices. Despite a dip in sales, we have been able to maintain a stream of revenue from biofuel sales to gasoline stations that are not being supplied by PEMEX. As local fuel supply shortens, many of these gas stations have had to look for alternatives, including other local and foreign suppliers. In this respect, our competitive pricing and high-quality fuel has played a critical role in securing these sales.
A crucial aspect during the pandemic has been to look for ways to improve and make our internal processes more efficient. This includes maintaining our pre-pandemic pricing by producing our own gasoline mix. Even with the lower prices in the market, the discount we offer has helped increase our customer numbers throughout the pandemic.
Q: How were UNAM and IPN involved in the creation of Wascon Blue’s Blue Power E10 gasoline?
A: Blue Power emerged in 2012, stemming from the understanding that although there are clear benefits of adding ethanol to gasoline, there were also negative aspects. Some of these are the piston pressure resulting from ethanol, NOx emissions and the potential corrosion of car engines. Hence, we knew the market needed something that could facilitate the integration of ethanol into gasoline; however, all the available additives and formulas did not meet our standards. As a result, we set out to develop our patented formula with special additives.
Our challenge was to develop a product that reduced the damage to cars and that was also an environmentally friendly choice. With ample experience in the oil and gas industry and vast knowledge in German engineering, we set about creating this blend. We knew that our quality needed to meet the highest standards, which is why Wascon Blue signed an agreement with IPN to carry out trials in its highly respected laboratories.
By the end of 2016, we had a product that was tested and had delivered strong results. As we needed to make sure we had the best possible output, we also asked the prestigious Universidad Autonoma de Mexico (UNAM) to test our product. The university conducted its own trials using nanotechnologies, applying nanoparticles that had already been tested and approved by ASEA.
Blue Power E10 officially was introduced in 2018. Nevertheless, we had many problems getting E10 to market because big players within the gasoline market were reluctant to buy from a small unknown company. We then looked into having our own gas stations to offer the product. In 2019, we opened our first of two stations.
Q: How is the company planning to expand its network of gasoline stations?
A: As a result of the success we had with Blue Power E10, and offering higher octane levels than other gasolines in the market, we set out to create Regular E10 with 90 octane and Super Gasoline with 95 octanes. We are happy that our products offer the same quality that can be found abroad, like in California where lower sulfur restrictions are in place.
The most important part of this process was to develop a maximum-quality product at the lowest possible price. We introduced the second Wascon Blue station in Queretaro only six months after the first one in Morelos. This station started as an unknown white flag station but as customers began to fill their cars with our gasoline and saw the resulting savings and higher miles per gallon they were getting, they returned and became our regular customers. Our gasoline represents approximately 20 percent savings, which is a lot for local consumers. We provide more value per mile and our clients understand and appreciate this.
This success led to us sign a contract with a group that manages a network of over 40 stations in Queretaro. Sales at our WB flagged station have seen a tangible increase over the past months despite the pandemic. The Wascon Blue brand is making more money than any other station this client has in Queretaro. We are planning to reflag its remaining 39 stations with the Wascon Blue flag. This reflagging will begin this year and we expect to have converted around 20 stations to the Wascon Blue flag by the end of this year. By the end of 2021, we expect all the stations to have been converted.
The success we have had in Queretaro is bolstering our goal to expand elsewhere. For example, in Mexico City, we now have an interested group that manages five stations, each selling more than 1 million liters of gasoline per month.
Q: How does the company intend to supply this growing demand, considering the alternative fuels it offers?
A: Having 60 Wascon Blue stations would mean we have enough consumption to produce our own gasoline. It is very difficult to find fuel on the national market that meets California requirements of having 20 percent fewer aromatics and containing only 20ppm of sulfur.
We have already invested a great deal of money in technologies to produce our own gasoline and have plans for four bio-distilleries, for which we have already completed the basic engineering. Our goal is to produce 100Mb/d per day at each distillery. We are producing around 1Mb/d in one distillery and we need to achieve 20Mb/d for the stations in Queretaro.
Q: What is restricting the growth of the retail sector in Mexico?
A: In general terms, the market for gas stations has been commandeered by PEMEX due to the profits it could offer stations. At the beginning of the previous government, PEMEX was offering a price of around 60 cents lower than its competitors. The retail market was liberalized, so every station was able to fix its own price. This meant that stations increased profits from 60 cents to MX$1, a figure that has doubled during the current government. Therefore, when the crisis hit, the high prices remained even though the market price fell. For example, you could buy at MX$13 per liter from PEMEX but the pump price was being offered at MX$19 per liter.
Wascon Blue is a Mexican producer and retailer of biofuels for the automotive market. Founded in 2009, the company currently manages two gasoline stations offering three types of premium and regular biofuel