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Summary
- Major European oil conglomerates are eyeing increasing their investment in the snacks and groceries at their retail outlets
- Shell is planning to expand the footprint of its retail networks by more than 20 per cent to 55,000 locations globally by 2025
- BP is eyeing to increase its outlets by about 50 per cent to 29,000 by 2030
Amid the mounting pressure from governments and investors to cut carbon emissions, major European oil conglomerates who are struggling to meet the shareholders’ expectation, are now eyeing to increase their investment in the snacks and groceries at their vast network of filling stations, which promises a better profit proposition.
Many European oil firms are investing in renewable energy which has been impacting their profits of late, as the amount of investment made outshines the amount of returns in this segment.
The common belief is that even with the fastest of electric vehicle chargers, customers will have plenty of time to move around the place and do some shopping. This has led the oil firms such as BP Plc (LON: BP.) and Royal Dutch Shell Plc (LON: RDSA) to look for the lucrative alternative way that will boost their overall returns.
Keeping in view this value proposition, Shell has already revealed its plan to expand the footprint of its retail networks by more than 20 per cent to 55,000 locations globally by 2025. On similar lines, BP is eyeing to increase the number of outlets by about 50 per cent to 29,000 by 2030, including the expansion of its electric vehicle (EV) charging outlets to 70,000 points.
Another oil and gas conglomerate Total is also planning to expand its EV charging outlets in Europe to 150,000 points by 2025 from the current 18,000.
The oil majors feel these initiatives will enable them to have access to millions of customers data, and they can devise the sales idea for shoppers in small regions, town and cities across the world.
Covid paves the way
The coronavirus outbreak with consequent lockdowns resulted in fewer travels within the cities and restrictions on overseas travel. This impacted the fuel sales worldwide, and oil conglomerates had to face economic hardships in terms of sales revenue from fuel.
However, the sale at the petrol station who were having convenience stores witnessed strong growth. For instance, Shell’s retail segment (also called marketing) reported the best quarter to 30 September, registering $1.6 billion in adjusted earnings and contributing 60 per cent of the company’s overall earnings.
Emma Delaney, the head of customers and products at BP, reportedly said that many people shopped online during the COVID-19 pandemic and also at the local stores situated at filling stations.
Also read: BP and Shell share prices at 25-year low: Does this call for investment in oil stocks?
Road ahead
Certainly, in the present scenario, the retail sales have opened an avenue of better profit other than the sales from fuels for the oil conglomerates. Most of the retail stores are already having collaboration with renowned grocery brands. Like, BP has an association with Marks & Spencer in the UK, while Shell has a collaboration with British celebrity chef Jamie Oliver to provide a variety of deli food. Also, food deliveries app such as Deliveroo and Uber Eats drove convenience sales during the COVID-19 pandemic.
For oil conglomerates, the sales from their retail networks contribute to a smaller portion of profits in comparison with oil and gas production. However, going further, even if they ramp up their retail push, they are going to face ferocious competition from the existing supermarkets.
