As I've written previously, Caltex Australia Limited (ASX: CTX) is rapidly transitioning from a refining to a retailing model with its petroleum businesses.
So it's not surprising to find that Caltex wants to rebrand its service stations in its own image, and maximise the exposure of its Star symbol in the eyes of consumers.
In a joint announcement to the market yesterday, Caltex and Woolworths Limited (ASX: WOW) announced that Caltex would be rebranding the 131 stations it operates with the Caltex symbol, leaving Woolworths with 502 petrol retailing sites.
92 of the Caltex sites will be rebranded as 'Star Mart' or 'Star Shop' convenience stores, and will continue to offer the Woolworths fuel discount redemptions.
The remaining 39 sites, which are close to existing Woolworths Petrol sites, will exit the alliance and stop offering the Woolworths fuel discount. The transition phase for the changes has begun already, and is expected to finish at the end of December.
In the first six months of next year, an additional 12 Star Mart shops will open and offer the Woolworths fuel discount, taking the total number of discount-offering sites to approximately 104.
Woolworths' General Manager for Marketing stated that the company has no plans to close any stations as a result of the new arrangement, and informed the market that Caltex remains as the exclusive supplier for all Woolworths diesel and petrol.
While sales from the Caltex sites will no longer be included as part of Woolworths' annual results, the changes will not have a materially adverse impact on the company's performance this year.
Readers who have been watching Woolworths and Wesfarmers Ltd's (ASX: WES) petrol retailing businesses will have to look more closely at the former's results this year, since a smaller number of petrol stations will naturally lead to a decline in volumes sold and may not necessarily reflect market performance. Hopefully management will include some kind of 'underlying' measure to reflect actual sales volumes of petrol for Woolworths-only sites.
With our supermarket petrol chains essentially competing for a stagnating pool of petrol sales – total Australian petrol sales growth from 2010-2012 was only 2.1% (total, not p.a.) – I believe that both companies are reaching the end of their potential growth opportunities in this area.
Rising sales of non-petrol items notwithstanding, I have been querying for a while what exactly Woolworths intends to do with its petrol businesses, and wonder if a resurgent retailer like Caltex could provide the answer.
Might Caltex be interested in purchasing Woolworths' petrol retailing arm?
Unfortunately it would be hard to convince both players of the benefits as Woolworths will be reluctant to sell while competitor Coles still offers petrol retailing, and Caltex doesn't stand to gain much since it already provides all of Woolworths' petrol anyway.
So there probably won't be any big changes to the petrol industry any time soon, but in the meantime it's a small plus for Caltex shareholders and no real change for Woolworths' ones.
