Caltex Australia is studying a name change to reflect both its position as the nation’s only Australian-controlled fuel retailer and its new retail strategy that will rely much less on petrol sales as transport markets are disrupted over the next decade.
The brand and convenience strategy reviews have been spurred by last year’s 50 per cent stake sale by US oil giant Chevron whose exit, says chief executive Julian Segal, makes the ASX-listed Caltex a wholly Australian company and, therefore, a standout in a fuel supply sector with a growing presence of foreign traders such as Vitol and Trafigura.
It also comes as predictions grow that global petrol and diesel demand will peak this year in the face of growing use of biofuels, natural gas and electric vehicles.
“Caltex is the only major (fuel company) that is investing in growth that is specifically focused on the Australian market,” Mr Segal told The Weekend Australian. “We are an Australian company, which is a fact I’m not sure many people realise.”
The lack of awareness was evident in a recent parliamentary inquiry, where chief financial officer Simon Hepworth was grilled by a senator on who his board reported to before another senator set his fellow committee member straight — that, despite its US name, Caltex was a wholly listed Australian company.
It is not hard to understand why many people associate Caltex with big foreign oil. The Caltex brand came out of the California Texas Oil Company, a joint venture between Texaco and Chevron in 1936. The brand was kept when Chevron took over Texaco in 2001 and still operates in Asia and South Africa.
With Chevron now off the register, the name has little relevance to the Australian company and does not reflect where Caltex Australia wants to take its retail strategy.
Mr Segal said Caltex’s sole focus on Australia made it different to recent entrants Viva Energy, whose largest shareholder is Dutch trading giant Vitol, and Puma Energy, whose biggest shareholder is Vitol’s compatriot, Trafigura.
“These are companies that operate globally, moving between products and geographies,” Mr Segal said. “I’m not being critical of traders, but for continued reliable and competitive supply of fuel, you do need a major company focused on Australia.”
Caltex Australia operates the Lytton oil refinery in Brisbane that makes transport fuels, a wholesale marketing business that imports and supplies fuel, and a retail petrol station network that accounts for about 5 per cent of revenue. The company shut down its Kurnell refinery in Sydney in 2012, converting it into an import terminal as part of an increased focus on fuel distribution and marketing.
Since Caltex announced the closure in July 2012, the share price has more than doubled, from around $14 to yesterday’s close of $32.54, giving it a market value of $8.49 billion. Shares hit a record $48.8 hit in April after a surprisingly strong 2015 for the refining sector but have come back as refining margins returned to more normal levels.
Chevron’s exit has allowed Caltex to address coming disruptive forces in transport, such as Uber and self-driving cars, by investing in a long-term change in convenience strategy, one not focused just on selling petrol. Its retail review should be finished in the next few months and is expected to see new stores rolled out early next year to capture what Mr Segal says will be a significant shift in consumer behaviour in the next five to 10 years.
“Today, people come to us because they want transport fuel, and there is a bit of convenience,” he said. “Caltex in the future will focus on the convenience of the customer; one of the components will be transport fuels, but by no means will this be the biggest component.”
Mr Segal said that with 3 million customers a week visiting Caltex petrol stations, and with the rise of Uber and, further out, self-driving cars, there is an opportunity to “reinvent” the concept of retail convenience.
“We understand in today’s world that people have very little time and convenience, so whether it be food they need to eat on the go, get delivery of parcels they couldn’t collect, or pick-up dry cleaning, many, many aspects of today’s life that consume significant time can be easily resolved by our very convenient location capabilities, which we are looking at developing over the next few years,” he said.
The potential for Uber and self-driving cars to challenge the traditional notion of cars being owned by the individuals who use them has led Caltex to take a 20 per cent stake in car-sharing start-up Car Next Door.
Mr Segal describes the $2.5m investment as a research and development spend that will help Caltex get an understanding of evolving trends.
“It’s fair to say a significant number of people will not feel the need to own a car and we took the stake in Car Next Door because we believe things are going to change significantly in mobility in the next five to 10 years,” he said.
“Transport fuel will still be a part of our offering, and the core of our (broader) business, but the retail business is going to become bigger and bigger.”
Boston-based consultants Lux Research yesterday put out a report estimating that 31 per cent of global vehicles will run on alternative fuels by 2030. It says combined global petrol and diesel fuel demand has peaked and will fall by 20 per cent by 2030, with petrol taking the biggest hit, as demand for electric and natural gas vehicles increases and biofuel use grows.
“Oil’s dominant position in transportation fuels has proved impregnable for more than a century, but real threats abound now,” said Brent Giles, Lux Research director. “Major players need to diversify to maintain their long-term competitiveness.”
CFO Simon Hepworth said Caltex had been looking closely at its brand as it firmed up its retail strategy — labelled “freedom of convenience” — with the help of global consultants.
“The perception of Caltex being a US oil company affiliate is not one that will resonate with our strategy,” he said.
Mr Hepworth points to New Zealand’s Z Energy, the business formed after local investors bought out Shell’s fuel distribution business and floated under the rebranded name, where Z stands for Zealand. “It is a business that is seen as one of their own and supported by the local population,” he said. Mr Hepworth said Caltex had spent months with a global consultant’s retail experts studying convenience formats from around the world, including North America, Britain, Japan and Europe.
Extracted in full from The Australian.