Sue Mitchell, 05 April 2016

Consumers will be able to pick up ready-made meals, bottles of wine, online purchases and dry-cleaning from Caltex service stations under ambitious plans by the fuel distributor to reinvent convenience retailing.

After completing its transformation from fuel refiner to distributor and marketer, and cutting ties with US parent Chevron last year, Caltex is close to finalising plans to become a major force in convenience retailing by augmenting its store network and supply chain infrastructure with new digital platforms, acquisitions, partnerships and joint ventures.

You’ll start to see different aspects of the new convenience concept over the next 12 to 18 months.

Julian Segal, Caltex CEO

Caltex chief executive Julian Segal says the company’s vision is to be the market leader in complex supply chain and the evolving convenience marketplace by delivering the everyday needs of customers through its networks.

Mr Segal told Fairfax Media that Caltex had no intention of competing directly against supermarket chains Coles or Caltex’s fuel partner Woolworths.

However, Caltex saw scope to significantly expand its food and beverage offer from pies, sausage rolls, coffee and confectionary to fresh foods, salads and pre-prepared meals that could be ordered from a new Caltex website or mobile phone app and picked up by consumers on the way home from work.

“By definition we will not be competing with the big supermarkets. The size of our stores means we’re going to focus on what the customer wants on the way to work or on the way home … but there’s a lot there we can provide,” Mr Segal said.

“It’s not necessarily all about groceries. It could be many other items,” he said, citing services such as haircuts, dry-cleaning and delivery of online purchases.

“We are looking at what is really important to the customer –  what are the most valuable things from a customer perspective from a convenience point of view.”

Customers may not even have to leave their cars to pick up and pay for purchases. Caltex is looking at technology such as number-plate recognition systems used by carpark operators for ticketless payments to offer the ultimate in convenience to busy commuters.

“Five minutes later you’ll be on your way,” Mr Segal said.

Caltex’s vision is encapsulated in a new corporate catchphrase, “freedom of convenience”, introduced to investors and staff after a strategic review last year.

“Convenience is not just in terms of what traditional convenience used to be. In our case it used to be delivering fuel and basic goods and tobacco,” said the Romanian-born former chemical engineer. “The role of convenience in customers’ lives is significantly wider than that.”

Caltex’s network of more than 2000 stores and service stations under the Caltex banner attracts more than 3 million customers a week and generates convenience retail sales of $1.2 billion. Its supply chain systems distribute products as diverse as fuel, motor oils and auto care products to packaged groceries and frozen and chilled foods across Australia.

Caltex plans to leverage these assets by creating a fresh food supply chain, either independently or in conjunction with partners, a digital platform that would allow customers to order goods online from Caltex and potential partners, and a new customer loyalty program.

“I don’t think we’re going to go into the manufacture of ready prepared food – there are quite a few people who are doing that – it’s a matter of identifying potential partners,” said Mr Segal.

He declined to say if Caltex was already in talks with potential partners. “It’s too early in the piece. In two to three months’ time we can talk with more detail,” he said.

Despite recent market speculation that Caltex could cut its ties with its fuel alliance partner Woolworths, Mr Segal suggested that Caltex might strengthen its relationship with the food and liquor retailer, which is significantly expanding its pre-prepared meals range after entering into a long-term partnership last year with Sydney-based food manufacturer Beak & Johnson.

“We have a very strong and long-term business relationship with Woolworths, it’s an important partnership for us, it’s an important partnership for Woolworths [and] I’m interested in evolving this alliance into an even better one as long as it’s beneficial to both parties,” Mr Segal said.

Mr Segal and chief financial officer Simon Hepworth said Caltex had sufficient balance sheet capacity to make sizeable acquisitions and would consider raising new capital to fund a “multibillion-dollar acquisition”.

Targets could include BP Australia, the Withers’ family’s 7-Eleven convenience store chain and City Convenience stores.

Mr Segal agreed that an acquisition of BP would “make sense” as it would enable Caltex to expand its core fuel network and supply chain capacity, but he was not aware if it was for sale.

Broker UBS estimated last year that Caltex could consider deals worth up to $3 billion, using to $500 million from its own balance sheet as well as new equity and debt. Caltex shares have risen more than 54 per cent in the last two years – from $22.09 to $34.11 – in anticipation of expansion.

Caltex expects to finish drafting the convenience retail strategy in two to three months then start work on execution plans.

“You’ll start to see different aspects of the new convenience concept over the next 12 to 18 months,” Mr Segal said.

Extracted in full from the Sydney Morning Herald.