How to take advantage of the move to E10

What would you do with another 34,000 litres of premium grade fuel sales at your station?

The move from E5 to changes how a potential 600,000 or more car owners buy fuel, as they cannot (well, should not) put E10 in their engines, creating increased demand for premium unleaded that is still E5 and can cater for all petrol cars.

This creates an opportunity for retailers to take another look at their premium grade pricing. Whilst some of these cars will be classic and already pumping in V-Power and Ultimate from tier one brands, others will have to make the switch.

Those with older models not fortunate enough to own a 1961 Jaguar E-Type Roadster will be looking to keep their costs down. This might mean a change in habitual buying patterns.

Let me be clear about how much volume we are talking about here. If we assume 400,000 (⅔) cars are not already using premium grade fuel and with some simple maths we can work out that they use approximately 700 litres of fuel a year on average, totalling a whopping 280m litres.

Even if you split that between every station in the UK it’s 34,000 litres per station annually that could be moving to premium grade fuel, though the true scale of this increase is not yet known. This number is likely to be higher on a per site basis because of:

• Reduced super grade offering on smaller retailers and supermarket sites.
• A contested drop in fuel economy, with the government claiming 1%, but research from What Car? suggests that it can be upwards of 10%. 
• Higher ethanol content in petrol can make it harder to turn over an engine from cold.
• It can also contribute to leaks/erosion. 

It’s fair to say that the public’s perception of this change is going to have a big impact.

By paying closer attention to premium grades, retailers have seen over 20% increases in profit from them. So how can you take advantage of this additional volume? You have two clear options:

1. You can lower your premium grade price to try and drive more people to your site. Unfortunately, in most cases you won’t be displaying this on your pole sign, so some sort of advertising (display or social media, for example) might be needed.
2. You can raise the delta between your regular and super grades to gain additional margin on this expected additional volume. Tier 2 and 3 brands are likely to be sought after by price-conscious consumers, so you can still increase your margins whilst offering a cheaper option against those with Tier 1 canopies. This not only helps maximise your profits, but you could even use the additional profit to subsidise your regular grade fuel and give something back to your current customers!

E10 is only one of many market changes as retailers have faced challenges such as fluctuating oil prices and volumes alongside continued market consolidation.

Retailers are finding new and unique ways to combat these obstacles and fuel pricing has become a handy lever to determine both volume and profitability during a rollercoaster couple of years.

As the market continues to change, it can be difficult to know what is the right move for your business when it comes to fuel pricing.

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This is why we’re offering a free Fuel Pricing Health Check to all UK and Irish retailers, so you can answer:
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• Am I making the right pricing decisions?
• Have I got the right data in front of me to make these decisions?
• Am I taking the opportunity to employ best practice strategies for my sites?

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Click below to get started!

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