More Kiwi cities set for cheaper fuel

Author
Business Desk,
Section
National,
Publish Date
Wednesday, 15 May 2019, 10:17AM
Fuel retailer Waitomo is eyeing further expansion. (Photo / File)
Fuel retailer Waitomo is eyeing further expansion. (Photo / File)

Discount fuel retailer Waitomo Group expects to open five to six new outlets annually as it builds out its national network.

The Hamilton-based company yesterday opened its southern-most fuel stop in Upper Hutt. It will open an outlet in Wellington in July, and in Christchurch later this year. That adds to unstaffed fuel stops established this year in Hamilton Central, Papamoa, Rotorua and under construction in New Plymouth.

Director Jimmy Ormsby says openings this year follow a bit of a lull in 2018. But he says the company now has a more consistent pipeline of potential sites in development and should be able to deliver up to half a dozen new sites annually.

Refining its retail offering in recent years and taking a more disciplined approach to site selection has enabled the company to take a more "cookie-cutter" approach on new outlets.

"It's taken quite a lot to get to this stage," he told BusinessDesk.

"You're never going to see a fuel stop on every corner" but there is still ample room for growth, he said.

Competition in the retail fuel market is currently being investigated by the Commerce Commission. The government ordered the market study after last year, accusing the major firms of "fleecing" consumers.

But more than 20 brands operate in New Zealand with smaller players, like Waitomo and Caltex Australia-backed Gull, adding 35 new sites nationally during the past year, Z Energy noted earlier this month. That added about 2 per cent to retail capacity at a time petrol volumes fell.

Waitomo, started in 1947 to supply commercial customers, now has about 65 mostly upper North Island outlets including diesel-only truck stops. It sells more than 200 million litres of fuel annually, which continues to be supplied by former shareholder Mobil.

About half that volume is sold to commercial customers and that remains an important part of the business. Ormsby says the firm's initial expansion outside its home region was due to demand from its business customers, which had also grown and needed wider coverage for their operations.

Providing broader coverage for the firm's commercial fuel card holders remains a factor in its selection of new sites, as does a genuine desire to develop a nationwide offering.

Volume and margin remain key drivers of any fuel business and the firm will continue to expand its commercial sales as it offers cheaper fuel to householders, who like the convenience of self-service, lower prices and buying from a New Zealand firm, Ormsby said.

Maintaining a consistent North Island price – except places like Auckland where the regional fuel tax applies – also makes life easier for commercial customers.

"It's important to retain a strong commercial offering," Ormsby said.

Chief operations officer Simon Parham says the firm has five to 10 potential sites at various stages of investigation.

While the firm remains under-represented in the lower North Island, Parham says there is still room for growth in greater Auckland. The firm will open more outlets in the South Island, but the smaller population and longer travelling distances there mean it will likely focus on metropolitan areas first.

Well-located sites, with high traffic volumes and safe road access, are not easy to find and the firm is strict in selection and development to make sure new capacity doesn't add to overheads, he said.

"That's how we can offer a good consistent, sustainably competitive price to our customers."

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