Coles Express will begin to disappear from local petrol stations next month if fuel producer and retailer Viva Energy gains approval from the competition watchdog for its merger with On The Run, an upstart quick-service restaurant and convenience brand.
The fuel refiner is rapidly building a network of convenience fuel stores, occupying prime real estate nationwide, that it intends to rebrand under the OTR model. It also plans to roll out fast electric charge stations to diversify and future-proof its business against declining fossil fuel sales.
“We’re doing our network assessments and working out which stores we do first, so we can move on with that as quickly as we possibly can,” Viva chief executive Scott Wyatt said. “Fast forward maybe 20 years and clearly any retail service stations that are completely reliant on selling fuel … are going to find it difficult to survive.”
The deal is waiting on approval from the Australian Competition and Consumer Commission and Foreign Investment Review Board, expected by late September.
The South Australian-based OTR brand sells a blend of traditional convenience items, coffee, juices, hot food, ready meals and actively promotes pre-paid fuel and food sales through its app with loyalty discounts.
Viva Energy acquired the Coles Express retail convenience business in May. It covers more than 700 stores nationwide, but its bid to add OTR’s network of 205 company-owned and leasehold stores will boost its payroll to nearly 15,000 employees.
Wyatt said OTR’s sophisticated operation was an attractive model that generates about 70 per cent of its revenue from convenience sales, an inversion of Coles Express where convenience sales account for about 30 per cent.
“It will reshape the company,” he said. “It’s a massive shift for us. Selling hot food and running quick service restaurants and now service stations is something we haven’t done in the past. It’s all brand new for us. It’s very different from distributing and selling fuel.”
Fuel sales across Viva’s existing convenience network are still about 7 per cent below pre-pandemic levels, although they were up 4 per cent over the six months to June, the company said in a half-year update.
Wyatt said cost-of-living pressures, including higher petrol prices which are stubbornly above $2 a litre, were weighing on motorists. “To move from $1.60 to $2.20, because of lower exchange rates and higher oil prices, is obviously a big jump for people,” Wyatt said. “That alone is not the issue. It’s the cost of fuel on top of the cost of electricity, gas and everything else.”
Sales of jet fuel to airlines and diesel to mining and transport firms through Viva’s commercial and industrial arm rose sharply, by 15 per cent, as Australia’s aviation industry bounces back on the return of international travel.
Viva said it had been forced to delay the rollout of ultra-low sulphur gasoline, which it expected to sell through its bowser network by next year, until the second half of 2025. The company was required to upgrade its Geelong Refinery to meet federally legislated fuel quality standards that will be introduced next year to enable lower-emission vehicle technologies.
Wyatt said Viva would now lodge a waiver request with the federal government to cover the time gap. The $350 million investment to convert the refinery, the company’s largest in the past 20 years, was derailed by difficulties in sourcing parts for the facility, he said.