BP taps into retail seam to fuel profit

Managers from BP Oil UK were treated to a three-day trip to Disneyland Paris last week. But they were not there to have a go on the rides, wear Mickey Mouse ears or marvel at the wonderful world of Disney.

They were there to hear BP’s newly-appointed head of European retail, John Thomas, launch the next phase of the company’s ad strategy.

BP UK is following in the footsteps of its rival Shell and repositioning itself. This means it will be a convenience retailer first and foremost and a petrol retailer second.

Thomas was launching this new strategy and gave the managers a glimpse of the company’s first global advertising campaign since its merger with Mobil last year.

The campaign, created by Doner International and tailored for the UK market by Doner Cardwell Hawkins, takes convenience into a new dimension. With the help of Industrial Light & Magic, the Star Wars production company, the ad features sci-fi green BP lorries whose sides flap down to reveal a petrol station, and then, in toy transformer style, claws cars onto mobile forecourts to refuel and shop.

Tom, a young car passenger, dreams of these “transformers” and the “Dear BP, what if you could…” theme will be picked up in advertising and marketing material throughout 1998. Ads break in the UK on 16 February and will run for four weeks.

Transformers turn out to be the figment of a child’s imagination. Mobile forecourts are the ultimate in convenience shopping: that is the underlying message of the campaign.

Similar ads were aired in the US, Australia, New Zealand and South Africa at the end of 1997. They broke in the US, where BP is the third largest petrol station player. The ads have been tweaked for the UK – the car is righthanded, the child is seatbelted and the proposition more pronounced.

The UK forecourt convenience business is worth 2.8bn (Institute of Grocery Distribution). Shell, which pioneered forecourt retailing in the UK with its Select shops, estimates that non-fuel purchases account for up to 60 per cent of sales in certain service stations. BP refuses to give a figure for retail sales but it is certain that they are becoming increasingly important.

“We are building on the existing strengths of our brand and the extensive network gained through the joint venture with Mobil to position BP as the convenience retailer of choice,” says BP UK marketing manager Sally Bye.

BP also has to tackle the problem that it is perceived as an expensive petrol provider. Esso launched a head-on price war with the supermarkets and spent an estimated 200m on its Price Watch scheme. BP and Shell invested heavily in loyalty schemes and retail sites – Shell took over 445 Gulf service stations last December to add to its 500 dealer sites and 800 co-owned sites.

But BP seems months behind Shell in its programme. Why? The main reason is it spent last year rebranding Mobil forecourts and updating existing sites with the green and yellow livery, to achieve cohesion across the combined 1,600 sites. Drums, a 10m ad campaign on the theme of the merger, ran at the end of 1996. Bye claims the company is ready to enter the next phase of BP’s Brand Image Programme (BIP).

BP is seeking to position itself not simply as the petrol retailer of choice but the convenience retailer of choice. Oil companies are being forced to adopt a supermarket-like strategy – using cheap petrol as a hook to get customers in to buy tobacco, lottery tickets, food and the related goods which generate higher profits.

BP claims to be changing the whole momentum behind its communications programme. A communications strategy statement says: “The values that BP Oil UK is adopting are those of a multiple convenience retailer, rather than the unique approach to marketing that many oil companies assume.”

“We aim to become more customer-focused,” says Bye who was at Tesco prior to joining BP.

Petrol retailers do not have the floor-space to compete with supermarkets but they are trying to steal basket share as the venue for secondary and top-up shopping.

“Most people visit one place for primary shopping, then have one or two outlets for secondary shopping to stock up on milk or bread,” says Kevin Twittey, chairman of Triangle Communications which handles forecourt promotions for BP.

“The majors are closing down sites without sufficient space for shops and upgrading shops on existing sites. They have carwashes, shops, burger joints and even cash machines now,” says Williams de Broe oils analyst Peter Hitchens.

BP is adding to its food range through a link with Hays Distribution, to sell a greater variety of frozen foods. The idea is that people will pick up items on their way home.

Petrol retailers’ counter-attack on the supermarkets, which has snatched petrol sales from them, creates tension within joint ventures between the two sectors.

BP and Safeway will decide whether to roll out the pilot scheme for jointly branded forecourt shops at the end of the first quarter of this year.

It is not a foregone conclusion that the scheme will go ahead. Inside sources say that the BP and Safeway link-up was like a shot-gun wedding and both have pondered the efficacy of the deal ever since.

BP Oil (UK) ad and PR manager Louise Murphy says the aim of the joint venture is to share best practices. Safeway did not have petrol forecourt or convenience retailing experience. BP is anxious to learn about supermarket retailing and benefit from a well-known brand.

Loyalty schemes form another parallel with supermarket strategy. BP plans to enhance the Argos Premier points scheme inherited from Mobil. Last week, it appointed Claydon Heeley International to develop strategy for the scheme and Triangle Communications for retail promotions. Specific Premier Point offers will feature in the second phase of the ad campaign in April.

BP may link up with more partners on a project basis for themed Premier Points promotions. Bye reveals that a number of alternatives are under consideration. Summer holiday travelling is one possible theme. BP and Argos would bring in tactical partners to the scheme to provide holiday clothes, vouchers and weekend breaks in return for Premier points.

Shell will roll out its troubled Smart Card nationally in the near future. It has already extended the Smart points scheme to include all products in Select shops, except tobacco and lottery tickets.

“Convenience shopping is becoming our whole reason for being,” says Shell UK trading manager Jim Rands.

Analysts believe there is no chance of profit margins on petrol recovering to former levels, so forecourt shops are vital to the survival of oil companies’ retail operations. BP’s new campaign is recognition that it does not want to be left behind in the convenience store war.

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