20/01/2004 - 21:00

Adding fuel

20/01/2004 - 21:00


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MY research for last week’s editorial on petrol prices gave me reason to call the RAC for comment on the issue.

MY research for last week’s editorial on petrol prices gave me reason to call the RAC for comment on the issue.

One of the questions I asked the motoring club was whether it had ever considered going into petrol retailing itself – especially with Mobil reported to be seeking to sell 18 stations in WA.

The answer, disappointingly I thought, was a flat “no”. The reason I was offered was that there isn’t enough margin in selling fuel to justify the RAC entering this field.

I left things at that until this week, when my thoughts returned to the reasoning behind that decision.

Should low fuel margins be enough to discourage an organisation such as the RAC from tackling the fuel market? While I am not naive enough to think that even not-for-profit organisations such as the RAC shouldn’t try to make money, there are other reasons why such a move could benefit both the organisation and its members.

It certainly isn’t an issue to the major retailers – Coles Myer and Woolworths – which are both challenging the oil companies for a share of the petrol business.

These companies are even cutting the price of petrol, eroding the margin on that product even further.

Both these supermarket chains believe that discounted fuel will induce customers to shop with them.

Even if they are using fuel as a loss leader, they see an opportunity for profit.

Like the retailers, I can see some good strategic reasons why the RAC would be a worthy participant in this business.

p Firstly, it would simply be a new member service which, coupled with discounted fuel offers, could help the club increase its membership from its existing 500,000 vehicles – if growth is a target. One thing every RAC member does is buy fuel at some stage.

p Importantly, as a bulk fuel purchaser it would have deeper understanding of the fuel business and, depending on its scale, it could be a more powerful advocate of motorists’ rights by bargaining for cheaper petrol for them. This is another membership benefit which, like its current lobbying activity on behalf of motorists, doesn’t derive a direct profit for the RAC but still sits comfortably with its core business. It’s a bit like the retail version of the Democrats’ pledge of ‘keeping the bastards honest’.

p Some of the RAC’s mechanical checking services could be farmed out to the service stations, bringing them closer to its market.

p And, anyway, who says petrol stations don’t make money? Fuel might not attract high margins but many of the items purchased with petrol do. In addition, such retail venues would offer the RAC further opportunities to sell their existing product suite of roadside assistance, finance and travel, plus any new offers they might have on the cards. I believe, the RAC brand, in this respect, would be a very attractive proposition to consumers.

Perhaps, like the banks, the RAC is averse to such bricks-and-mortar delivery of services but, as a newcomer to such a business, it could be very selective about the sites it chose to create a serviceable network for members, potential new members and the driving public.

Let’s hope that, as the RAC considers future strategies, it investigates my gratuitous suggestion further.

Saving time

IT”S a topic that comes up every summer – the fact that WA can’t grasp the benefits of daylight saving like most of the rest of the world.

While I admit this has gone to three referendums and there are unique issues with our climate, there is also evidence that lifestyle patterns are changing and a little more light in the evenings would be welcome.

Adding an extra hour to the blunt end of the day would have had an additional benefit for the WA Government this year – it would have been easier to encourage power users to hold off on taking those showers and cooking dinner as Western Power wants consumers to do. The drama over pipeline maintenance would be laughable if it wasn’t so serious. At least it proves how vulnerable WA is with a single major energy source – an unusual point for a pipeline owner to prove, I would have thought.

However, that problem could be relieved, in part at least, if Geoff Gallop instituted emergency laws for the overhaul period and let us enjoy daylight saving just for a week or two.

C’mon Geoff.

Slim ’n trim

WITH all the talk of fad diets and obesity, how on earth does a fat-busting business like the Metabolism Centre go under so quickly?

It defies belief that this company could compete with a few other WA-listed players for the title of shortest-lived float. It will be interesting to watch this one.

Steel the one?

VERY rarely does an industrial supply company become a household name but you have to hand it to Midalia Steel for bucking that trend.

With that in mind, last week’s announcement of Midalia’s purchase by Onesteel probably jolted home a little harder than it normally would, as another WA company bites the dust.

With the price undisclosed and CEO Geoff Midalia keeping mum for the time being, I can only speculate on the reasons for the sale. Had he had enough? Was the market turning? Was he getting out on a high? Were there private pressures?

The story behind a sale can be interesting subject matter – and a lesson for others.

Maybe that ad campaign was part of a strategy of building a brand and maximising the exit price. I can vouch that the former was successful, even if I don’t know the details of the latter.



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