Australian Broadcasting Corporation TV PROGRAM TRANSCRIPT: "THE 7.30 REPORT"
Broadcast: 19/07/2004
LOCATION: http://www.abc.net.au/7.30/content/2004/s1157378.htm
Supermarket deals fuel independents' demise
Reporter: Tim Lester
KERRY O'BRIEN: As Australia's two giant retail chains slug it out for dominant market share across the food industry, petrol has become vital element in their strategies.
Coles and Woolworths are now powerful forces in fuel.
There's a growing bond between the supermarket trolley and the family car, with shoppers converting their dockets into discounts at the bowser.
Woolworths today unveiled another big quarterly profit result, and while analysts were nervous about the bottom line on petrol, Woolies could boast petrol sales for the year of more than $2 billion.
The Australian Competition and Consumer Commission (ACCC) authorised the food and fuel deal, but has reserved the right to pull it if it shapes badly for consumers.
Well, fuel independents are now worrying loudly about their futures and a competitive market with the threatened eviction of Australia's biggest independent fuel importer from one of our largest petrol ports.
Business and economics editor Tim Lester.
TIM LESTER: It's another sign the supermarket docket phenomenon is changing Australia's fuel business forever.
BARRIE JACOBSON, MANAGING DIRECTOR, TRAFIGURA AUSTRALIA: We're the only independent importer into New South Wales and in Victoria we import well.
TIM LESTER: Barrie Jacobson manages Trafigura Australia, the country's largest independent fuel importer, whose lease on its Port Botany terminal in Sydney finishes next month.
Trafigura wants to extend but Barrie Jacobson says the terminal owner won't negotiate.
BARRIE JACOBSON: We've been trying to talk to Vopak, who own the terminal, about an extension to that contract or a new contract from September this year without success.
RON BOWDEN, SERVICE STATION ASSOCIATION: The terminal at Sydney and Trafigura's access to it is vital to ensure that independents remain viable in this state and continue, can continue to give competitively priced fuel to motorists.
TIM LESTER: The New South Wales Service Station Association says its members' only alternative to dealing with the major oil companies will be lost if Trafigura goes.
RON BOWDEN: Their options for getting supply would be reduced to the extent that they could only go to an oil company and the oil companies would then realise that they had no effective alternative competition and they could charge whatever they like.
TIM LESTER: And the likely effect on pump prices?
Well, that's a matter for debate.
BARRIE JACOBSON: Well, I think in the long-term it will have a massive impact.
IAN McKENZIE, SHELL AUSTRALIA: Trafigura has been a player in the Sydney market.
It's supplying principally Woolworths.
The major suppliers to the independent retailers are the local refiners, Shell and Caltex, that's always been the case, and I'd expect it to continue to be the case.
Therefore, I wouldn't see much impact on pump prices at all.
TIM LESTER: Whatever the impact, Trafigura has been squeezed by Australia's love affair with grocery fuel dockets.
Until last year the company supplied Woolworths but then the giant grocer aligned with Caltex, a response to the Coles/Myer/Shell alliance.
Trafigura says its Sydney throughput slumped by two-thirds when it lost the Woolworths contract.
And its rent at Port Botany is based partly on the throughput.
The great grocery onslaught into fuel has made it a much less attractive lessee.
And guess who's now almost clinched the new lease on Trafigura's 65 million litres of Port Botany storage?
BARRIE JACOBSON: We hear via the grapevine that it's likely it is Shell.
TIM LESTER: It is Shell.
Late today, the oil giant confirmed to the 7.30 Report negotiations for the space are at an advanced stage.
IAN McKENZIE: We want to lease 65 per cent of Vopak's storage in Botany.
That will give us the ability to directly import jet fuel into the Sydney market, supplementing production from our refinery in Sydney, and that will greatly increase the reliability of supply to Sydney airport.
TIM LESTER: But Shell only needs some of the Trafigura storage for jet fuel.
The rest?
Well, that's extra capacity the company needs because the Coles/Myer alliance has been so successful.
IAN McKENZIE: From Shell's point of view, the deal with Coles has been very successful.
Customers are responding very positively to the offer of quality fuels at convenient locations, at discounted prices.
GRAEME SAMUEL, CHAIRMAN ACCC: There are a plethora of these schemes that are running throughout the marketplace.
Who's benefiting?
The consumer.
TIM LESTER: For now, the ACCC continues to applaud shopper dockets.
It claims to have had notifications of more than 100 different customer offers from fuel company and grossers.
The concept having won the competition regulator's approval in a February report.
Are you confident now, five months later, that shopper docket schemes are not anti-competitive?
GRAEME SAMUEL: The shopper docket schemes are constantly under review.
We don't just review those once a year or once every two years or whatever.
They're constantly under review because as the law currently stands, those shopper docket schemes have been authorised by the commission but that authorisation can be removed in the event that we were to find at any point of time that the public benefits are associated with the schemes, consumer discounts were offset.
PAUL ANDRONCOUS, SERVICE STATION OPERATOR: There wouldn't be too many service stations that aren't affected by this whole emergence of the supermarkets into the market.
It's devastating.
TIM LESTER: We visited independent operate Paul Androncous at one of his suburban Melbourne stations last year as Coles Myer entered the market.
His fears then have now been realised.
The big entrants are selling below cost and cruelling his business.
PAUL ANDRONCOUS: Both Woolies and Coles have been very aggressive on the price board and basically selling at the terminal gate prices which is the price that we get it for out of the terminal and offering four cents of.
That not making any money but neither is anyone else.
RON BOWDEN: We've done some tracking of the Shell Coles network and for the month of June, if you throw in the shopper docket discount of four cents a litre, that network across the random sample of sites was selling petrol at below Shell's price for 70 per cent of the month.
TIM LESTER: The independents from station owners to the major independent importer want the ACCC to act.
PAUL ANDRONCOUS: Now we've got a situation where we can't even trade fairly, we're not asking for handouts, just want a fair go.
GRAEME SAMUEL: At this point, we are not satisfied that there is a potential anti-competitive structure developing within the industry.
TIM LESTER: By the time you find there is, if you find it, mightn't the horse have bolted, mightn't there be too many closed independent service stations to make this market competitive?
GRAEME SAMUEL: Well, I think we tend to get to these issues long before the horse bolts.
We tend to find out, through our economic analysis and through our studies overseas, what the real prospects might be into the future.
TIM LESTER: The regulator is now investigating the Trafigura case and says its inquiry will be broad.
GRAEME SAMUEL: Clearly issues such as shopper docket schemes and their influence on competition in the market place will be a factor.
IAN McKENZIE: The ACCC has looked at these deals extensively and we're happy to answer any questions they have.
They have come to the same conclusion that we have, which is that the entrance of new players, like supermarkets, into fuels retailing increases competition and is good for customers, both in the short-term and the long-term.
RON BOWDEN: Certainly we believe that over the next three to four years, 3,000 service stations in Australia will go to the wall.
TIM LESTER: And without the competition, what then?
Will the new age of fuel have delivered motorists cheaper prices or just fewer places to fill up?