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Recent weeks have seen further developments in the Australian fuel retail sector. The sector was set alight in the middle of last year, when Coles Myer, in response to the success of rival Woolworths’ Plus Petrol operation, launched an alliance with Shell that enabled it to introduce its own fuel discount scheme across some 584 sites. Not to be outdone, Woolworths hit back with a new joint venture of its own with Caltex in August 2003.

It has now been announced that following trials in 41 Caltex petrol stations co-branded Caltex Woolworths at the end of last year, the two partners have finalised arrangements for the national expansion of the fuel discount scheme to around 450 sites. According to Woolworths CEO Roger Corbett, the retailer is taking a very significant step by extending its petrol offer to customers nationwide. "Our popular offer to customers of spending AUD30 (USD22.48) or more in Woolworths/BIG W stores to receive four cents off per litre of petrol will now be extended across the nation," he stated.

Under the final arrangements, the 305 existing Woolworths sites will become jointly branded, while Caltex expects that it will co-brand more than 130 of its sites near Woolworths stores. The Caltex sites involved in the arrangement will include company-operated sites and franchisees selling fuel under a commission agency agreement. In addition, the rebranding of the Woolworths sites to Caltex Woolworths and the rollout of the additional Caltex sites as co-branded stations will commence immediately and will completed as soon as practicable.

Following this announcement, Foodland, the fourth largest retailer in Australia, confirmed that it had completed a deal with ExxonMobil for the purchase of 16 Mobil service stations in Western Australia. Additional details have not been released although it is thought that most of the 16 sites will incorporate a grocery store operation supplied by Foodland, while the retailer is to launch its own discount petrol scheme.

All of the leading grocery retailers in Australia now have some sort of presence in the petrol sector. As well as Coles Myer, Woolworths and Foodland, the country’s third largest retail force, Metcash Trading, also launched its own discount fuel offer in September 2003. Under the scheme, consumers who spend more than AUD30 (USD18.45) at any IGA store in Queensland will be reimbursed AUD0.04 (USD0.02) for every litre of fuel purchased. If successful, the programme will be rolled out to the remaining 1,000 odd IGA supermarkets across the country in the "near future."

The rush to offer fuel discount schemes was kick-started by the success of Woolworths’ foray into the petrol sector in 1996. Between 1999 and 2002, petrol sales rose by 262% to reach AUD1.7 billion (USD0.9 billion), or 6.5% of total sales. In addition, the fuel discount scheme also boosted sales at its supermarkets by between 1% and 2%. Woolworths' success did not go unnoticed and for the likes of Coles Myer, the introduction of a fuel discount scheme of its own was essential.

The movement of the grocers into the petrol sector coincides with the trend amongst the major oil companies to slowly withdraw from forecourt retailing, in order to focus on core upstream extraction and refining operations. In addition, they need the brand strength and expertise of the grocers in order to entice customers into their forecourt shops. This is not just happening in Australia, but across the globe – see the recent developments in Japan and the USA for example. However, the Australian grocers have been amongst the most aggressive in making inroads into the sector. In this highly competitive environment, further expansion by the leading retailers is likely.
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