Family continues battle for petrol independence

Family operated and WA-based Gull Petroleum has met the serious challenges of a highly competitive industry with vigour. As major retail chains now fight for some of its market, the company is gearing up for yet another battle. Julie-anne Sprague met with Gull Petroleum executive director Neil Rae to discuss the company’s  growth and future direction.

FEW people would know as much about taking on the giants of industry as the Rae family does.

They have tackled the multi-national-dominated oil industry for 27 years with their Gull Petroleum — a business that began as several leases of second-hand service stations which has turned into a flagship of the independent retailing sector.

In doing so, they have become somewhat of a multi-national of their own, with a reach extending from Perth to New Zealand.

The company has been in complete Rae family ownership since 1984 after Fred Rae bought out his partners who founded the business with him in 1976.

Along with son Neil and son-in-law Ian Green, Fred Rae has fought off the mighty major oil companies and become a pin-up story for independent operators battling against the clout from the big end of town.

And Gull Petroleum is poised to do battle yet again as they await the entrance of Coles Myer in the petroleum retail market.

According to Neil Rae, who is Gull Petroleum’s executive director, it is not an absurdity to assume the company could become a supermarket retailer.

“There is an interesting irony here. When we started we sold spare parts and others now do that. Supermarkets pinched motor accessories and sold them as general merchandise. Then we sold their goods. Now they are going to sell petrol,” he said.

“There is an opportunity to get in and compete. We like a fight that’s what we do. What’s to stop us buying a big lot and putting a supermarket there?”

Gull Petroleum operates over 100 sites in Perth, Canberra and New Zealand and has been extremely vocal in recent years over new WA regulations that Mr Rae claims significantly reduce the ability of its 80 WA sites to be competitive.

A $20 million fuel off-take facility lies dormant in Kwinana as the company sits back and waits for the government to change legislation that dictates the type of fuel it can import or until an offshore refinery can provide “clean fuel” at an economic price.

Gull Petroleum is still considered a big player in the WA market, which is testimony to the Rae family’s ability to rise to the challenges before it.

Their story began when business-broker Fred Rae came across some entrepreneurs wanting to lease some abandoned major oil company petrol stations.

“He (Fred) met these guys in a brief stint as a business broker. He sold them the leases but asked them why they didn’t buy the things given that on his calculations they were better off buying them. Their reply was they didn’t have the money,” Mr Rae said.

“He came home and said ‘I’ve bought this company and you are a director and you are now in the petrol business.’ That’s how it started in 1976.”

Fred Rae went into business with his former client but it became apparent the two parties had very different futures planned for the company.

“We quickly realised that these guys were true entrepreneurs and their vision was fine but we saw bigger potential,” Mr Rae said. “My father spoke to me about how I felt about buying these guys out in 1984. We did that. At that stage we had about 20 sites and not much freehold land.”

It was at this point that the little known independent operator signalled their intention to forge a business in the petroleum industry.

Neil and his father set about buying petrol station sites, rather than leasing them, and very quickly the big oil companies started to apply some “friendly” business pressure.

“Buying sites was a much more substantial commitment. It was a high-risk strategy because we invested heavily and were locked in for the long haul,” Mr Rae said. “But we thought it made more business sense. We were investing in the industry whereas before we were operating within the industry.”

The pair believed they could offer consumers a better choice in the market and embarked on a discount-petrol strategy to position themselves as either the same price or cheaper suppliers of fuel in WA. However, Gull Petroleum’s fuel supply came from the hands of its competitors.

“It was competitive back then but in different ways. We were very much at the mercy of major oil companies from the supply side of things but they were poor operators of site so the opportunity to compete was greater,” Mr Rae said. “As we started to grow, the screws got tightened on supply.”

Mr Rae said the tactics employed by its conglomerate industry members were questionable.

“It was never about money — it was ‘we don’t have any’. They said that to try and curtail us,” Mr Rae said.

“Fuel was hard to get and that continued. They’ve tried to control our destiny.”

The alternative for the Raes was to find about $20 million and build a facility that would allow them to import fuels and break their dependence on supply from Australian refineries owned by multi-nationals. It also meant the possibility of increasing pressures.

“Whenever an independent had attempted to import, it seemed a coincidence that fuel prices on shore would plummet,” Mr Rae said. “People who tried before us failed.”

Raising capital and increasing the market volatility were two very good reasons for the company not to invest in the off-take facility but the father and son duo decided to back themselves, and the consequences were startling.

“We had been paying a premium for fuel. When we imported, the economics became better,” Mr Rae said.

The company virtually doubled in size and the experiment prompted the expansion into the NZ market where it now operates 28 sites.

Legislation introduced by the Court Government and continued by the Gallop Government has hindered Gull’s WA operations, according to Mr Rae.

It’s $20 million fuel-tanking facility now lays dormant and its discount-price market position had to be revised. Mr Rae said the 24-hour rule (that is administered by FuelWatch) has forced them to change their marketing strategy and consumers are paying the ultimate price.

“Are you buying it any cheaper? No. We built our reputation on being a company where people could drive to Gull and fill up knowing it would be the same price as the competition but more often than not it would be cheaper. They introduced a regulation that takes that away from us,” Mr Rae said.

“We have to register our fuel price at 2pm today and you are not privy to the competition. The theory behind it is that it will lead to cheaper petrol prices. The reality is that the approach to pricing is very different and there isn’t the opportunity for Gull to respond to the lower pricing of a competitor. The next day we can but we are 24 hours without good business. We’ve changed our marketing. Now we have to market to FuelWatch.”

Mr Rae suggested that his and other oil companies use the profile of FuelWatch to market low-volume sites that allow its brand to stay in the mind of the consumer. Also impacting on the Gull Petroleum business is a virtual monopoly on supply of fuel Mr Rae said.

The family has recently recruited Warren Ferrell to the new role of general manager to help in the future development of the company.

“The road has not been smooth, and as long as the Government introduces regulations and changes then the business is constantly challenged,” Mr Rae said.

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