The PetrolPlaza audio version is presented to you by UNITI expo 2021, the leading retail petroleum and car wash trade fair in Europe.

English Español Mark Truman, EdgePetrol: “In these times you need a strong hold on your data”

PetrolPlaza speaks to Mark Truman, Chief Revenue Officer at EdgePetrol, about their expansion to the U.S., why their fuel pricing software is more important than ever, key differences between the UK and U.S. markets and, of course, COVID-19.



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Q. When did EdgePetrol decide to move over to the United States and what are the main goals with this expansion?

After launching in the UK in September 2017 we grew very quickly and want to continue that expansion. In the UK, half of the top 50 independent retailers are EdgePetrol clients as well as two of the market’s major oil companies. We got to the point half way through last year where we had spoken with the majority of the serviceable market and in order to continue our growth we assessed two options – going to Europe or heading to the U.S. 

Our first thought was to move into Europe as we are already present in Ireland and travel-wise it makes more sense. Coincidentally I had a holiday to New York planned in April where a couple of breakfast meetings led to talking to Ken Shriber of Petroleum Equity Group, who loved what we were doing and convinced us that US station owners would too. We tested this this theory with a few retailers and the response was fantastic.

Q. Once you had found your partner in Petroleum Equity Group what were the next steps?

Ken knows the market inside-out and put us in touch with four savvy operators across four states who agreed to pilot the US product. This gave us the confidence to commit and we began selling the product to early adopters who will receive the completed version in September, including Hough Petroleum, a well-respected distributor in New Jersey. We have opened a New York office and I am personally hoping to relocate with my family once the current situation improves.

What we loved about the US is that a large portion of the market is family-owned that want full control of their pricing and therefore have resisted traditional pricing software, opting to use spreadsheets instead. This works great for them; these are savvy business people who understand their business better than anyone. We are just looking to provide them the tools to maximise this process and this attitude provides us with a great opportunity.

Q. What fundamental differences do you see between the UK and the U.S. fuel retailing market? 

There's a big cultural difference, particularly in attitude towards technology. There are more companies like our client base in the UK; businesses are never happy with the status quo and they strive to do better every day. There is a buzz an excitement around new products that gets you excited every time you show your solution to someone. If you can help them better their business, they want to know.

There are also more routes to market, such as Below the Line Club, which is a retailers’ club that work together to find the best solutions on the market for their members. Events are well attended and frequent and there are multiple industry magazines to increase market awareness. We've had more inbound queries from the U.S. in three months than we've had from the UK in three years. 

EdgePetrol software aplication
EdgePetrol software aplication

In the UK and in Europe we've spent a lot of time identifying and contacting customers. Now the focus is purely on understanding their business and showing value to the product. It's a fundamental shift in the way we work. 

Product-wise it presents more of a challenge. There are 50 different states with different tax systems. They have more grades; more variety and our target client tend to have more competitors with aggressive pricing strategies. Big volume companies are trying to sweep up the volume of the local market with their pricing strategy and this impact is stronger due to the typical consumer’s level of price sensitivity.

Q. So you see a difference in how smaller retailers compete with the major chains.

In the UK around 40% of the volume goes to 4 big grocers (Asda, Sainsbury's, Tesco and Morrisons). If you are a price sensitive consumer, you are probably going to get your fuel from a nearby supermarket. The other players compete by brand and convenience – a modern BP station with a nice convenience shop for example can pull in higher volumes than a cheaper station down the road. The numbers tell you that 60% of the population enjoy those aspects of their gas-filling experience.

Therefore, whilst the culture in the UK is to sit a couple of pennies above the grocers to cover the costs associated with being a smaller operator, culture in the US is to try to compete with the big networks. Retailers will try to match a Wawa, or even beat them and it often becomes more of a volume game. We try to work with the customer to have a scope of their whole network. For example; if you are being squeezed at some stations then what exactly is the impact and how can you make up that volume or margin in other locations?

In other words, we are focused on companies that want to have full control of their prices. Keeping it simple, we provide accurate, timely and accessible insight so that they can make the best possible pricing decisions. 

Q. With the current context of uncertainty due to COVID-19 and the huge drop in oil prices, how does a service like yours fit in? 

The usage of our service has shot up since the start of the crisis. The more uncertainty there is, the more you need to have a handle on your data. A key benefit of EdgePetrol is that we connect to the cost prices, meaning we are able to display a weighted, blended, cost-price margin. That change in cost of product varies as the market moves. Recently we've been seeing 20 cents per gallon differences between today's replacement cost and the blended fuel in the tank. We have been described as a ‘Godsend’ by more than one retailer in the last month.

Q. We have to discuss what seems to be the only relevant topic right now. There’s been a massive drop in sales due to the lock down policies being implemented. What effects will this have in the fuel retail market? Will the crisis affect the supply chain at any stage? 

You have a very interesting energy market at the moment. Supply ramped up globally as demand was dropping due to a strategic move by Saudi Arabia to increase production. This has led to huge price drops and massive long positions globally. This oil needs to be stored somewhere, so we’ve seen people storing this additional oil in VLCC (very large crude containers), which is very expensive. So, whilst the price of a barrel is very low right now, not all of that cost will be passed downstream to gas station owners and consumers. In terms of supply there shouldn’t be any issues as demand has been so heavily impacted.

From an individual station owner perspective, it is important to be savvy and have a very strong hold on your data. Margins are moving quickly and there is less volume to go around. Whether the large PE-backed businesses will accept a big hit to their EBITDA or strive to chase margin/volume to cover the shortfall in growth is yet to be seen. Some smaller businesses will suffer, this is the sad reality of the situation, but those who prosper will be the ones who are able to manage this new state of volume and margin.

 

Interview by Oscar Smith Diamante 

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