Routes for Expansion in the New Fuel Market

Q: What are FullGas’ strategies to boost its market presence against larger international brands?

A: Obviously there are large and extremely strong competitors in our sector, such as international giants like BP, as well as established national players with large coverage like Oxxo. Even some large international firms, such as Chevron, Repsol and Total, are considered small players in the Mexican market but are beginning to establish a formidable presence in the country. We are aware of the competitive market and we believe the best way to compete with these players is through extreme market segmentation. Since we lack the financial resources that these giants have at hand, we rely on the customization that we can apply to our services and brand in each different market within Mexico.

Our incursions into the Central American markets have highlighted for us the enormous diversity of conditions and circumstances within Mexico, which when analyzed in those terms can be seen as five or seven countries in other parts of the world instead of only one. With this in mind, we believe that we can use our manageable size to develop strategies that increase our adaptability to each market segment.

Q: As FullGas expands its presence beyond Mexico’s southeastern region, what areas appear most attractive?

A: From 2018 to 2019, the expansion of our coverage has been ongoing and constant, having grown from 70 stations to 107. In addition to our original concentrations in the Yucatan peninsula, two Mexican market segments appear extremely attractive and profitable to us, as evidenced by the fact that we have already begun opening stations and establishing a localized presence in each one. One is the Valley of Mexico, which incorporates both Mexico City and key economically relevant blocks of the State of Mexico. We have opened 15 stations in this area but these posed a considerable challenge from a regulatory compliance and permitting standpoint. The other attractive market is in the northern region, where we are present in Coahuila, Baja California and Sonora, and we are in the process of entering Chihuahua. There are many opportunities for us in this region in the short to medium term. We have also invested in Guadalajara, where we own five stations, and in Guanajuato, with two stations. These serve as exploratory investments to help us observe and analyze these segments. Within the northern cluster, there are two distinct market segments, with Coahuila, Sonora, Chihuahua and Baja California representing north, northwest; and the socalled other north, represented by the northeastern markets of Monterrey, Tamaulipas and, in a way, Durango.

Q: What is FullGas’ criteria for choosing the areas or regions with the most attractive expansion opportunities?

A: Many variables are considered when developing these plans. The main factors that impact our decision are infrastructure and supply management. In our southeastern hubs, we own our storage capacity and manage that part of the value chain ourselves so that we can apply economies of scale to our purchases from PEMEX and diversify our selling strategy. This allows us to not only fulfill the demand of our own stations but also to sell to other fuel companies and stations as well. In the country’s central region, there is a much larger volume of business. A Mexico City gas station is selling up to four times the national average, which makes having a closer relationship with PEMEX essential to successfully sell those volumes.

Q: How was your storage capacity and business affected by the recent fuel shortages?

A: In our southeastern storage centers, we have direct access to a number of Gulf of Mexico resources, such as the Progreso Port. This served as a shield from the fuel shortages that affected the rest of the country at the time. In that sense, we have had great luck because we benefit from a constant flux of tankers, in which we have maintained up to five days of storage in our tanks. Of course, there are many limits to the degree to which our positive experiences can be replicated or expected in other parts of the country, even within the southeastern region. We now have a 20km pipeline connected to the Progreso Port.

FullGas is a Mexican owner and operator of gas stations currently expanding its coverage throughout the country with a strong presence in Mexico’s southeast region. It offers its own product line and rewards program.