Business Irish

Sunday 18 November 2018

Out of the forecourt and into your fridge: Maxol's future plan for food

Maxol lifer Brian Donaldson wants to move the company brand away from petrol and into food, writes Gavin McLoughlin

Maxol chief executive Brian Donaldson pictured at the IFSC in Dublin. Photo: Arthur Carron
Maxol chief executive Brian Donaldson pictured at the IFSC in Dublin. Photo: Arthur Carron
Gavin McLoughlin

Gavin McLoughlin

The food business has much better margins than the fuel business, so for the modern petrol station company, filling bellies is becoming more important than filling tanks.

Maxol boss Brian Donaldson wants to turn the business he runs into the Avoca of his industry, by creating a brand that stretches beyond the forecourt into people's fridges.

The company is working on a plan to bring its food branding into line with its fuel branding - moving away from BWG's Mace as the name above the door when you enter a Maxol garage shop.

"We've done two trial stores... and the results have been very encouraging and very positive," Mr Donaldson says. "We'll be extending our name and label to milk, bread, cheeses, fresh produce, snacks.

"What we're looking at in terms of our in-store offering is almost trying to set that Avoca-type standard in terms of the ingredients and the quality of ingredients that go into our sandwiches, our prepared meals.

"And, as well, it's about the provenance of those ingredients... we're trying to connect into local supply chains through our strategic partners BWG Foods and Henderson Group."

With moves towards electric cars putting downward pressure on the industry, Mr Donaldson is looking at ways to future-proof Maxol through diversification.

He said Maxol has set aside "quite a chunk of money" to fund potential acquisitions, some of which are outside core areas.

"Obviously in terms of the forecourt and convenience sector there's going to be a lot of challenges, particularly if there is a move to electric.

"So what we're looking at is where the business will be in 2030. You need to start putting your strategy in place now.

"What we're looking at is: do we go into new energy markets, do we take ourselves onto the high street, do we start looking at standalone dry sites, do we look at taking a food franchise and taking that to the high street, do we look at supply chain and actually strengthening our supply chain by taking a shareholding?

"We're looking at everything. I think it would be wrong of me to focus purely on what we're doing [at the moment]."

The company has got some stiff competition. Circle K - until recently known as Topaz - has a Canadian owner with deep pockets and is undergoing a high-profile rebrand. Then there's Applegreen, which has the luxury of accessing the public markets if it wants to do major acquisitions. It's got its sights set on foreign expansion.

Another rival is Valero Energy, the owner of the Texaco chain. Asked if the company's structure (it's privately owned by the McMullan family) means Maxol has a hand tied behind its back, Mr Donaldson disagrees and counters that he believes it's an advantage.

"We're very agile, we can make very quick decisions. We're very balance- sheet driven and thankfully we're well- financed. We have an adequate fighting fund for what we need to do, both in terms of our existing core business and also for where we may wish to diversify."

Alongside the threat of electric cars comes a threat from an area that may not automatically spring to mind. Car-washing is an important part of the Maxol business, Mr Donaldson says, and he reckons that black market operations are eating into legitimate businesses' revenue.

"We believe there's a lot of illegal car-washes out there where people are operating on land which hasn't got proper drainage. They're probably not using the right chemicals, which can be quite corrosive.

"They could even be using labour that isn't paying any PSRI. I think this problem, in terms of the water restrictions that are currently in place, highlights another area where legitimate business could be unfairly targeted in terms of using their car-wash centres when you have all of these illegal places up and running."

Establishing a licensing system run by a central agency is the way forward, rather than having councils liaise with operators, Mr Donaldson believes.

A native of Comber in Co Down, Mr Donaldson is something of a Maxol lifer. He's worked at the business for more than 30 years, having started as a graduate trainee and taken on roles ranging from marketing manager to retail manager to area manager.

In that sense, there can be few if any people who know the business better. Knowledge of the past and present doesn't necessarily provide knowledge about the future, but Mr Donaldson has a background in examining consumer behaviour from his very first role at the company.

They've taken on a number of data analytics experts in order to inform decisions about what they should do at individual sites. Mr Donaldson is planning to overhaul 70 stores this year and is beginning to look at what should be done with the more marginal sites in the company's network.

Some may become food-only - so-called "dry sites". Others may be fuel only, and still others may be sold off or used to build apartments, Mr Donaldson said.

All of this is part of his focus on growing the business in whatever way presents the opportunity for the best growth.

"You need to have an open mind to your business," Mr Donaldson says.

The Government's plans to boost infrastructure spending should present an opportunity for growth but, as things stand, it's difficult for the company to find attractive new sites.

Mr Donaldson says site owners' expectations are perhaps a little bit ahead of where they should be, and expresses a warning to companies who take on sites at high leases - Maxol prefers to own its stores as freehold.

"Say in 10 years' time, you've invested in a long-term lease at very high market rentals, then you find that the adoption of electric vehicles is much greater than you've anticipated - you could be sitting with a problem."

"You need to be able to replace the income from lower fuels through food service."

The company is carrying out research on how fast electric cars are being taken up, and how customers who use electric cars behave. The faster the rate of change, the more challenging it will be for companies like his to cope with the shift.

But, in addition, modern cars are more fuel efficient which puts downward pressure on sales too.

In coping with these changes, Mr Donaldson says the company is "probably more ambitious than we've ever been". He attributes this to the support from the McMullan family, and does not see an IPO or sale of the business as the right move "at this stage".

"They're very committed to the business... my brief is to grow the business, to drive efficiencies in the business, and we've some very ambitious targets."

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