Persuading Mexicans to Love the Gas StationWed, 01/18/2017 - 15:13
Q: As Mexico’s fuel market is liberalized, what new opportunities are created for Gallástegui Armella?
A: The liberalization process started in 2013 before the Energy Reform, when a group of fuel entrepreneurs asked us about the possibility of distributing PEMEX fuel under another brand with a different image and name. Our legal research determined there was no law preventing this and the Ministry of Energy later confirmed this. We registered our brand as La Gas. But the process toward a free market was not as easy as anticipated, since secondary laws were passed and we had to wait for clarification. In 2015, it was finally established that fuel entrepreneurs were allowed to distribute fuel under other brands.
President Enrique Peña Nieto determined that from April 2016, those who met certain requirements could import fuel but the lack of storage and import infrastructure was an obstacle. As a result, since February 2017 PEMEX must lease part of its infrastructure so that fuel companies can transport fuel from the northern border. The full process of liberalization will occur throughout 2017. Fuel entrepreneurs will then begin competing in two main arenas: service and price.
We worked with PEMEX and Onexpo as a permanent adviser. Since the market’s opening we have worked with some brands in the creation of their franchise networks. Today we have La Gas, Hidrosina, Oxxo Gas, Petro-7 and OctanFuel, among others. New chains are emerging and we can help them with our knowledge about this industry and our experience in franchising.
Q: What challenges do companies face when franchising gas stations?
A: The challenge for new franchises is to become strong and offer differentiating elements for the consumer. One study found that one task Mexicans hate is going to the gas station, so a big challenge is making that experience more pleasant to attract clients with good service. This will be the main differentiator because I do not think prices will vary greatly. They will be determined by the oil price, taxes and import prices.
Companies should also invest in creativity to provide added value to consumers. When people start seeing new brands, they will be loyal to the brand that provides the best service. The market opening also brings other opportunities such as complementary businesses. Before the reform, PEMEX regulated the businesses that were present in a station. The franchise sector is enthusiastic because they know they have opportunities to expand. Soon we will see banks, more sophisticated cafes and small restaurants in gas stations and people will decide which gas station they will visit based on these services.
Q: What are the challenges regarding regulation and the legal framework for these companies?
A: The law has to have a great deal of foresight. CRE and antitrust watchdog COFECE plays important role in this. They need to regulate a market of franchise networks that will compete against each other and with other, independent businesses. The authorities also face the challenge of improving regulations as the market evolves without inhibiting its development.
Q: How significant is this new business division for Gallástegui Armella?
A: We want to focus on what we know how to do well. We have more than 25 years of experience in supporting franchises with more than 1,300 success stories. We have a very important geographical presence, with 22 offices across the country and offices in Central America, the Dominican Republic, Colombia and Ecuador. A big market for franchise networks lies with the 8,000 small fuel entrepreneurs that want to be part of the new market. We must not forget PEMEX, which will continue as a major player and will compete as it should have competed a long time ago. Our goal is for more people to get involved so that we can create a competitive and free oil and gas industry where the primary beneficiary is the consumer.