Sunday 17 December 2017

Pumped up for a battle: Maxol's incoming boss on the future of the forecourt

Brian Donaldson is about to become chief executive of a company in a major battle for market share. He spoke to Gavin McLoughlin

Brian Donaldson
Brian Donaldson
Gavin McLoughlin

Gavin McLoughlin

It's tough out there in the petrol station world. Topaz has bought Esso's Irish business and has a hungry new owner, while Applegreen is also in expansion mode on the back of its recent stock market flotation.

Leading the charge for Maxol will be Brian Donaldson, a 50-year-old Co Down native who's taking over as chief executive in May. He's replacing former Ibec president Tom Noonan, who has led the company since 1996. He's got a €30m war chest for this year alone, and he's bullish about the company's future.

"We know that our competitors are very well-funded. We're equally well-funded and certainly we're up for the challenge. We've very deep roots in Ireland, we've very strong foundations, and certainly we ain't going anywhere. Our objective is to get bigger, stronger and better."

Originally from the village of Comber in Co Down, Donaldson is something of a Maxol lifer. This October he'll reach his 30th year with the business.

He studied Business Studies at the University of Bradford in the 1980s, largely specialising in finance and international marketing, before coming back to Northern Ireland and taking up a graduate trainee position with the company in 1986, looking at customer profiling and consumer habits and behaviours.

Later he became an area manager, then a retail manager, then general sales manager for Northern Ireland, then group marketing manager for the island of Ireland.

Now he's group general manager, and weeks away from the top job.

"I used to consider myself as the young fella in the company, and now I'm becoming one of the old fellas in the company," Donaldson says.

He's drawn up a strategy covering the period to 2020, and expansion is at the heart of it.

"I've created a 2020 vision for the business, for the next five years. That strategy very much focuses on extending our company-owned network, and also attracting new independent dealers who own their own sites to our brand.

"We've been investing very heavily from 2012, the strategy is a continuation of that but certainly what we hope to achieve by 2020 is to build the company-owned network up to a total of about 120 properties. Those are largely freehold assets, because we're very much in the business of actually owning the asset rather than taking leases, because we like to have control and we also like to have the value into our balance sheet.

"This year alone we have budgets committed to around €30m, that will see the opening of hopefully seven new locations under the Maxol brand... the vision going forward is to expand our network, extend our reach, into all of the key population centres.

"As we speak, we've been working very hard in terms of identifying sites for the future, particularly those would-be larger footprints, looking at anything from one to four acres in size. Those could be located close to the main motorways, some of them are within heavy residential areas.

"At the same time, we're looking at our existing company-owned network of which we have 110 properties, and we've been buying up additional land that adjoins a good number of sites - so in other words we can have the opportunity to develop and extend the offering there, certainly within the next three to five years."

One of the major trends within the business as a whole is the development of the petrol station's retail offering. Recently it introduced a fresh food brand - 'Moreish'. Maxol has had a long-time partnership with Mace, and now it's working on bringing other well-known brands into the fold.

"The other side of our business really in terms of strategy is to make sure that we deliver what consumers want. We've been doing a lot of focus groups, listening to consumers in terms of what they want," Donaldson says.

"We believe it's very important to provide for today's consumer the value, the choice, the range, so that they can come into our stores and buy, and go home and actually prepare a meal for the family. A lot of our competitors don't actually provide that range or choice or value, so it's very important that we don't walk away from what we've built up really over the last 20 years with those partners.

"What we've been doing is investing very heavily in relation to our fresh food offer. In late 2013 we created the Moreish fresh food at Maxol concept, which we've now extended to about 22 stores.

"Certainly the objective is to extend that to 40-plus stores within our company-owned network. And also we're considering how we make the Moreish franchise available for Maxol independent dealers who own their own sites.

"At the same time, we also are working with indigenous Irish talent in terms of food brands. Our latest concept - which opens at Mulhuddart on the M3 as you head towards Blanchardstown - is a concept which will have our very first food court style, and that's basically going to have all of the best Irish food service brands all under one roof.

"We're partnering with Chopped... Mulhuddart will be the first store to have the Chopped concept, which will sit alongside our own Moreish traditional cafe deli. We're also partnering with Supermac's - another famous Irish brand - and with Insomnia.

"The vision that we have for our business is how we extend those food franchises into a good number of our company-owned stores... it's very much about moving the business forward, making sure we stay close in terms of what the consumer actually wants, raising our brand profile, and also making sure that we keep ahead in terms of trends and try to become the innovator in terms of the forecourt convenience sector.

"I've always had a passion for retail... I'm very much a people person. The strategy for our business is to continue to innovate within retail, to continue in terms of showcasing the best in Ireland, because it is important that we support the local economy as best as we can."

Entwined with that is a push to grow the company's fuel card business, in order to get more drivers on to the Maxol forecourts around the country.

Matching Applegreen with an IPO is not currently on the cards, however.

"At this stage, the IPO is not something that we would consider - the business itself is owned 100pc by the McMullan family. We're now seeing the fourth generation from the McMullan family join the board, which is Thomas and Barry McMullan.

"Really the vision for the business is certainly to keep it within control of the family, and also to grow that business through our own cash reserves, the profits that we make in the years ahead, and also we have already secured funding arrangements with the financial banking institutions to support that strategy.

"As a market, it's extremely competitive and that's not going to change. And really what we're looking at in terms of how we redesign and reshape our model, it's about making sure we create destinations.

"We've got a very clear vision, and already we can see that our business is getting stronger. We're certainly getting bigger, and we're becoming much more relevant to the consumer. The perception of Maxol is very different today to what it would have been three years ago."

Something else that's very different from three years ago is the oil price. Drops in oil are customarily accompanied by complaints that the price of petrol at the pumps doesn't follow to the same extent.

Donaldson puts it thus: "People always look at crude oil prices and say: 'Well, if prices are down or prices are up, that's a direct correlation in respect of what's likely to happen at the pump.' But crude oil prices are only one element of what makes up the retail price.

"Today, government taxation on petrol would account for 70pc of the price at the pump, and 65pc of the price of diesel. That's down to the excise duty, it's down to the Nora (National Oil Reserves Agency) levy, it's down to the carbon tax, it's down to the biofuel obligation, which is going to increase.

"Crude oil is traded globally in dollars, so you're always going to have that exchange element. You can then have reasonable differences in terms of supply and demand - and ultimately retailers set their own pump prices. It's very much down to how they wish to manage the volume against the margin they take from fuel.

"If they decide to work for very little margin, they gain the volume. Others say: 'Look, I've a certain level of operating overhead costs, and therefore that's the kind of margin I need to derive from my fuel sales.'"

The company is also monitoring the development of cars powered by alternative forms of energy. If electric cars continue to develop, then the company and its rivals are likely to take a hit when it comes to fuel sales.

The growth of retail sales will help to offset that, but Donaldson needs to watch the space closely. He's commissioned a paper from a UCD academic to see how Maxol might be able to develop within the electric vehicle market.

"There's no question that electric vehicles will probably grow in number, it's just down to estimating what percentage they will get to over the next 10 to 15 years.

"I think they will have an impact in terms of the fossil fuel element, it's just determining what percentage that will be," Donaldson says.

"It's all about technology and advances in technology in making the vehicles competitive, and equally whether they'll have the distance.

"Will they be able to go 200km? There's lots of things there in the mix."

'You have to be open, honest, and direct'

The best piece of business advice I've gotten is...

"It came from my father. You have to be open, honest and direct with people, but you've got to do it in a particular style. That way, you can bring people with you."

The book I'm reading is...

"What I'm reading at the moment is a book by Ivan Yates, he gave it to me about a year-and-a-half ago. I was at a Retail Excellence Ireland debriefing meeting in the Kilkenny Shop near Grafton Street, and he was signing copies. I'm a little bit of the way through it."

My music taste is...

"I'm a great fan of The Police. I like U2, and I like a lot of pop music too. I'm a dreadful singer, whereas my wife and daughter are good singers. They can play the piano and so forth, whereas I've none of those skills."

My hobbies are...

"I like golf. I used to play an awful lot of golf when I was a boy. I got down to a handicap of nine - but it's no longer nine today I can assure you! I would be an avid watcher of rugby, and I like reading the newspapers. They keep me in tune."

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