South Africa’s food retailer, Pick n Pay, and petroleum company, BP, have combined forces in a pilot programme set to change the face of petroleum retailing and convenience shopping in South Africa.

While a formal agreement between fuel and convenience retailers is not new to South Africa, what is different about this agreement is that Pick n Pay will not only retail convenience goods on the service station forecourt, but will also retail fuel. BP will act as landlords and as fuel wholesalers, with Pick n Pay as the franchisee.

The two companies, which signed a memorandum of understanding in July, will open two pilot sites in the Cape by the end of 2008.  Roll out will be dependent on success of the model, but both companies are confident the joint venture will bring multiple benefits not only to the two companies, but especially to South African customers increasingly pressed for time and in search of efficient and affordable convenience retailing.

The roll out would involve further expansion concentrated on BP’s top national sites, with the existing BP Express stores being phased out.

Diesel will be discounted from the first day of trading. Petrol, which remains strictly regulated by government, will be sold at the prevailing price until such time as government loosens its control on fixed prices.

The new convenience stores will be known as Pick n Pay Express, and will stock just over 1,500 lines, staying open 24/7.

The agreement brings into play key strengths of both businesses, and will fulfil the need for Pick n Pay to expand its small store format while creating new entrepreneurs and ensuring the sustainability of small businesses.

In terms of the agreement between the companies, which involves both existing and potential new sites, BP is to act as landlord and fuel supplier, and Pick n Pay is to act as the tenant, operating both the forecourt and the on-site Pick n Pay Express convenience store. Where an existing BP franchisee has tenancy, the franchise agreement will, by agreement be converted to a Pick n Pay Express franchise.

Pick n Pay Express stores are intended to replace the current BP Express stores, offering a range of Pick n Pay fresh and convenience items, specifically identified to meet the needs of convenience shoppers, including a Wild Bean Café.

“This is one of the most exciting retail initiatives in which Pick n Pay has become involved in many years, and will be an important part of our plans to increase our convenience offering to our customers, which is an area of great potential growth,” says Pick n Pay CEO Nick Badminton. “Our research has shown that our shoppers want more convenience, both in terms of ease of shopping and location – and Pick n Pay Express, in conjunction with our other small store formats, will give them just that.

“BP is South Africa’s most admired fuel retailer and by entering into a partnership with them, we will be able to offer our customers the essentials they need, where they need them – in a one-stop offering. And in these times of skyrocketing fuel prices, we believe that motorists will leap at the opportunity to buy discounted diesel. Our chairman, Raymond Ackerman, has for decades promoted the idea of selling discounted fuel – and while we by law cannot sell cheaper petrol yet, we will be allowed to sell cheaper diesel.”

Says BP’s CEO, Sipho Maseko: “BP has been acknowledged by customers as a leader in fuel and convenience retailing and this is due to our focus on providing innovative solutions for customers through our fuel and convenience offers. This partnership with Pick n Pay is yet another proof point of our passion with innovation and with keeping our leadership position in the forecourt channel.

“It will be a logical build on the strong platform that BP Express has created but we are convenience that partnering with Pick n Pay will take our offer to greater heights. BP will focus its core capability on maintaining our leadership in fuel.

“In addition, our agreement paves the way for extensive enterprise development through the building up of existing and new franchisees, particularly in small and medium-sized business development, and it holds great promise for the advancement of black economic empowerment. 

“This agreement, therefore, represents a win-win situation for all stakeholders: Pick n Pay and BP can maximise their business opportunities, consumers benefit in terms of convenience and fuel prices, and entrepreneurial development gets a welcome shot in the arm.”