Interview with Martin Lustenberger: "We are becoming a mobility retailer"

Martin Lustenberger, GM Licensed Markets at Shell, sits down with PetrolPlaza to discuss the benefit of having a global network of licensees, geographical areas of potential growth and new revenue avenues in today’s retail business.

As a Swiss national, Martin Lustenberger always had an interest in businesses with a global impact. He found in Shell an ideal match, traveling the world under various roles in what he considers a “very enriching experience.” After almost 20 years working for the international oil company, he now serves as General Manager for Licensed Markets and Director of Shell Brands International.

How many licensees does Shell currently have?

We have around 25 license partners in the retail segment covering some 50 countries. The Shell business is the number one player in mobility retail with over 44,000 stations across 80 countries. The licencing model covers 1 out of 3 stations of our global footprint. It is a critical part of our business. What is critical to our partners and ourselves is that, on the one hand, we have an extremely valuable brand (valued at $43 billion); and on the other, what our partners value is the overall package we offer them to be competitive in the market today and tomorrow.

What are the benefits of a global licensing model?

We have developed different platforms for licensees to communicate, either digitally or face to face. We have built a community. What is valid today may change in two years’ time so being part of a community that evolves, shares and learns from each other is ultimately the benefit of this partnership. The digital era is what enables us to build this community.

One of the advantages we have as Shell, being such a big player, is that we can bring all the knowledge and share what we learn from each other. That’s the power of scale and the benefit of being part of this family.

When thinking about entering a new market in the world, what are the key elements that you look at?

In the last years we have grown substantially in terms of sites and markets. It is clearly an aspiration to continue to grow - most of our licensees are trying to expand their business - but we also actively look to expand our footprint to other countries because there are a lot of places in the world that still do not have a Shell-branded site. When looking at growth, we grow with our trusted partners - a partner tells us that they want to expand to a neighbouring country or increase their footprint through an acquisition. The other part is when we look at a market more holistically and at the opportunities to go in. We look at broader market characteristics - overall size of the market, regulations and environment, the various players... We do a macro assessment before getting into detailed operations. That is more of a proactive growth approach.

Shell announced recently its plans to open 10,000 new sites by 2025. China, Mexico and India were mentioned as key growth markets.

Overall the 10,000-site growth is going to be a combination of the markets you mentioned as well as others and across different Shell business models. China, Mexico, India, Indonesia and Russia are markets where we expect a lot of growth. There is substantial growth expected in China where we already have a number of partnerships and joint ventures.

As a global company trying to strengthen your position in markets with huge state-owned or state-supported players, like China and India, what are the main challenges?

These countries are kind of hybrids where we already have a presence. Typically, emerging markets have big players often linked to the State. What we find is that the prospect of getting access to a trusted global brand is highly valued by customers. We see that in India, we see it in Mexico and in other places. The value that the Shell brand brings is leading to upsides for business partners who join us and customers really value having the choice. That is where we benefit from having the Shell brand equity, even in markets where we have never been present. If you look at recent examples, we have seen an increase of 50% and more in footfall after sites re-brand as Shell.

Another avenue for growth is the convenience segment at retail stations. You operate in some well-developed markets such as the UK and the Netherlands. How do you bring those discussions to your partners in more traditional markets?

We are moving from being a fuels retailer to a mobility retailer. That is definitely recognized by our licensees. We often support across different areas. A part of our proposition, or package, is giving them access to global expertise, best practices and all the tools that we use. As a company we benefit by the fact we have a large footprint and we can leverage the examples that we have across the world. We bring licensees to different sites across the world to learn from their peers. What is also quite important is that as a global business we progress in the convenience segment. As an example of our progress in the area, our Executive Vice-President, István Kapitány, received an award as the European Industry Leader of the Year by NACS [the award was handed to Kapitány at the last NACS Convenience Summit Europe].

There is a slight uncertainty when we look at the future of the traditional forecourt business as fuel sales will probably drop over the next years. Some experts believe petrol stations will have to reinvent themselves as transport hubs.

If you look at some of the trends, the role of petrol stations will be on perpetual change. What I see is that a retail site will no longer be a place where you only fuel up your car but (instead) a mobility hub which offers multiple services to customers. The locations themselves will remain critical but the offer will broaden. The number of locations may be impacted by the demand for services.

We are seeing how some Asian markets such as China, Singapore and Malaysia are leading the way when it comes to the introduction of new technologies such as digital payments.

Digital development goes at different speeds in different markets. By the way, also in Africa we have seen huge developments in this area. What we have seen is that you cannot have one system globally that works everywhere. You need to understand the needs of the market. We adapt to the customer needs of the area and learn from the different experiences. Adjusting those experiences to a new market is going to be a critical success criteria going forward. We go back to the scale benefit of being a company like Shell. We also learn a lot from our partners.

One of the most promising markets across the world is Africa. How do you see the development of this huge geographical area?

Africa is a massive continent with a lot of countries with different context and stages of development. Through our license partner Vivo Energy we are present in 15 countries with a Shell branded Retail Network, and ourselves in South Africa. There is a lot of countries where I see opportunities for growth and to establish a footprint with Shell. The Shell brand is very strong across the continent. If you look at the industry growth itself, we anticipate the continent to grow as a whole in the coming years. It is definitely an area where we have our eye on.

Interview by Oscar Smith Diamante