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Potential for Another 6,000 Gas Stations Nationwide

Antonio Roldán - Oilnova


Peter Appleby By Peter Appleby | Journalist and Industry Analyst - Mon, 04/27/2020 - 17:37

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Q: How is Oilnova applying its international experience to the unique conditions of the Mexican market?

A: Oilnova’s international experience is broad, and can be applied to the Mexican context. The company began in Spain in 2007 and successfully expanded from Andalucia across the country. Throughout Spain, we have focused on guiding clients in the buying and selling of gas stations. The company moved to the Moroccan market in 2013 and we have been able to work with about 80 percent of gas station brands to increase the profitability of their assets and improve in their market. Among the innovations Oilnova helped introduce into the Moroccan market was the inclusion of restaurants, shops and car washes at gas stations. The Moroccan gas station owners had an antiquated vision of what gas stations could be and the market was stagnant. We helped revise designs to modernize each gas station’s service offering and explained to our clients that the highest margins were in these novel additions.

In 2014, Oilnova moved into Latin America after signing a consultancy contract with Distribuidora Uruguaya de Combustibles (Ducsa), which belongs to Uruguay’s state-owned company Administración Nacional de Combustibles, Alcoholes y Portland (ANCAP). With this strategic alliance, we were able to expand our retail consultancy in South America. As a result, we were contracted by Total in Puerto Rico to analyze the margin of its 218 gas stations and to create an incentive system for the company’s retail personnel. We have also worked for Total in the Dominican Republic, where we also provided services to Puma Energy.

From here, we entered Mexico. Oilnova has a strong relationship with ONEXPO and I was invited to its first conference in 2017. We know Mexico and its retail market, which is growing and hosts some 12,800 stations nationally. We believe there is room for another 6,000–7,000 stations countrywide.

For a new brand moving into the country, it is a challenging market. The private sector is responsible for about 29 percent of the gas stations in the country. This is a number that has grown considerably since the liberalization of the retail market, but it should grow more. We believe the private sector should target a minimum of 50 percent market share over the next few years. Oilnova helps guide a brand’s journey into the market here. We are not the type of consultancy that simply provides macro outlooks. We do this and more. We are deeply involved with our clients.

Currently, Oilnova’s focus is in the center of the country, with a particular focus on El Bajio, Mexico City, and the State of Puebla, because this is where the majority of brands entering Mexico are focusing. Our focus will change in line with that of our clients. When they have a larger and more consolidated market share, they will look elsewhere in the country.


Q: What are the unique services that Oilnova delivers to its clients in Mexico?

A: We are able to identify opportunities for our clients very quickly and enable agile movement and decision-making within this competitive, fast-moving market. We see a great deal of opportunity for those Mexican business owners wanting to move away from retailing under the PEMEX brand. In the current market, many Mexican consumers prefer a foreign brand, either in terms of the retailing station or the gasoline brand itself, rather than PEMEX. When small to medium-sized gas station operators come to us wanting to move away from PEMEX, we can guide the company and provide connections to other major world retail brands now present in Mexico and that are interested in expanding. We provide these key aspects – coordination and management – that these businesses may be lacking.

While in other countries we provide consultation for the purchase of land to build new retail facilities, this method is too slow for the current phase that the Mexican market is in. The length of time this purchase process takes reduces the dynamism of a company in a time when speed is important to consolidate its presence. For the stage of the market Mexico is in, it is preferable to buy or rent a premise directly as this delivers quicker transfer.


Q: What are the most important aspects of the contemporary gas station?

A: We see the initial differentiator being the appearance and modernization of gas stations in Mexico. Today, some stations appear neglected and the level of technology does not match a modern retail market. That will change as the market becomes more robust.

Another factor is likely to be the importance of payment methods, loyalty cards and affiliate programs that will provide benefits to customers who are loyal to a brand. Other markets in Mexico have already demonstrated the value of loyalty cards, so this will grow among gas stations. Repsol’s implementation of its Solred card in Spain has been a massive success over the 15 years it has been in operation and can serve as a point of reference for companies here. Major Mexican retailers like Oxxo already employ this method and have enjoyed strong results.

Additives are a similar story. As the market has opened up, customers are finding brands other than PEMEX that they like. Additives, and the benefits that they provide the client, are another differentiator that will grow in importance as customers look for more value from their purchase.


Q: What are the defining features of a successful gas station?

A: Location (preferably urban), quality in customer service (training employees to achieve excellence in customer service is key), loyalty tools, fuel price, non-oil services (the more services, the more variety and number of customers go to the station) and fuel quality. The location is vital to build trade, but also to reduce the running costs associated with its daily upkeep. When a station is located close to or is accessible to an urban area, then it already has a market. The quality of gasoline is vital for individual gas stations to compete in this local micro market. Simply put, if a higher quality gasoline is priced reasonably within proximity, customers within reach will go there. The types of payment accepted are the third major factor. When companies use credit or debit card payments, the market naturally shrinks. This is because the company must increase prices slightly based on the commissions of cards.


Q: How can Mexico grow its number of gas stations to provide enhanced accessibility to consumers?

A: In Italy, gas stations sell an average of 1.4 million liters worth of gasoline per year. In Spain, that increases to above 2 million, while in Mexico it is more than 5 million. There are some gas stations here that can sell between 60 million and 70 million each year. This shows that the Mexican market is very strong and that it can clearly support a growth spurt in the number of gas stations. It is likely that Mexico could support a further 12,000 stations to effectively double the current capacity. The problem is that there are not that many available locations. Mexico City is generally well supplied with stations and it is difficult to find available spaces for new ones, while in other parts of the country it is easier to find new spaces. This drastic difference between regions is something to work on.

If we compare Mexico with other markets, we should have 12,000 more stations, but in Mexico there are not so many new quality locations that have a reasonable sales. However, I would say that there could be 5,000 new stations with average sales in liters that are worth the investment. Many of those available spaces are located in the central states, including the State of Mexico and the region of El Bajio, which is another reason we are focused on that area.

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