VENTURES: Engen Quickly Turns Corner
Recent Western Cape Business News
CAPE TOWN-head office oil giant Engen is changing the recipe for its forecourt retail presence.
In early May Engen clinched an agreement with franchise specialists Retsol that will see the bakeries inside its well known Quick Shop outlets converted to Corner Bakeries.
It’s quite a major brand shift as there are more than 500 Engen Quick Shops scattered around SA of which almost half hold ‘unbranded’ bakeries inside the premises.
The franchise conversion will take up to two years.
The Retsol arrangement, of course, is not new. Retsol – which also holds brands like Juicy Lucy, Chicken King and Ola Milky Lane - has managed the Engen bakery network since 2007. It is the largest forecourt bakery network in South Africa.
Retsol has also raised the possibility of raising the presence of Equatorial Coffee, one of the company’s other franchise brands which is already available in more than 90 Engen sites. Indications are that this presence could be doubled within the next six to 12 months.
The Retsol deal is interesting from the perspective of Engen not preferring to go into a relationship with mainstream fast food brands like Wimpy, Nandos or Steers.
The Retsol deal also coincides with the intention from Pick n Pay to up the ante in its Express store arrangement with oil giant BP.
At a recent presentation Pick n Pay CEO Nick Badminton said options for an aggressive roll-out of Express was under consideration.
The company, which opened five new Express stores in its last financial year, said these convenience stores continued to trade above expectations.
Engen is also beavering ahead on another front. Last month it announced that, on the eve of the 2010 World Cup, it is to further tempt its 1 200 service station dealers to offer the convenience and security of credit card refuelling.
“Currently at 1.75%, credit card transaction fees erodes a significant part of the dealer margin on fuel, leading to a loss on earnings from such purchases,” says Engen retail marketing manager Pierr Roodt.
Roodt says to remedy the situation, Engen has decided to share the burden of banks’ transaction costs halfway with its dealers, over the World Cup period which will significantly improve dealer profitability on credit card fuel sales. After some internal deliberations, Engen is now ready to incentivise its dealers who are willing to accept credit cards by subsidising half of the nett impact to dealers on transaction fees.
Roodt says a successful run could lead to Engen increasing its retail fuel sales on credit. For now, the deal is valid for the months of June to September, after which the company will review the programme and its results.
“This initiative will ensure that Engen, in partnership with its dealers, is leading the way in providing a service to foreign tourists during the World Cup, while stimulating volumes for the dealers,” Roodt says.
Roodt points out that not all Engen service stations accept credit cards, as the retailers are still entitled to refuse acceptance by law.
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