Viva Energy’s acquisition of a major South Australian service station chain gives consumers the first glimpse of what’s in store for Coles Express.
On Wednesday, Viva Energy announced it will acquire OTR Group from Peregrine Corporation for $1.15 billion.
This comes after Viva Energy, which already ran Shell-branded servos, bought Coles Express service stations for $300 million last year.
At the time of the Coles Express acquisition, it was announced the 710 nationwide stores would be rebranded after the deal is completed.
The OTR sale gives a clearer picture of what that rebrand will look like.
Coles be gone
When Coles Group is no longer pulling the strings behind Coles Express stores following their transition to Viva Energy in this year’s second quarter, the latter will look to distance itself from the supermarket brand.
A major part of that will be rebranding the stores.
In this week’s announcement, Scott Wyatt, Viva Energy CEO and managing director, said OTR will become the company’s flagship convenience brand and will replace the Coles Express brand over time.
TND understands only Coles Express stores with a ‘suitable footprint’ will be will be rebranded under the OTR banner; others will be rebranded under a yet-to-be-announced sub-brand.
It is currently unclear if Coles will continue supplying products for its former Coles Express service stations following the rebrand.
If not, it will be a significant departure from the precedent set by Woolworths, which continues to supply its products to Ampol and Caltex following the sale of its 540 fuel convenience sites to EG Group in 2019.
Focus shifts from fuel
OTR is a major South Australian – and migrant – success story, which began in 1984 when Fathi (Fred) Shahin bought a single Adelaide petrol station after fleeing with his family from civil unrest in the Middle East.
Today, the OTR Convenient Retail network comprises 205 stores under the OTR brand, including 174 integrated fuel and convenience stores, and 31 stand-alone stores.
More than 90 of those stores incorporate quick service restaurants (QSRs) such as Hungry Jack’s, Subway and Guzman y Gomez, many of which include drive-throughs.
OTR also has a growth pipeline of 90 sites, largely outside of South Australia, which will be developed into new OTR stores over the next few years.
This will aid Viva Energy’s goal to be Australia’s leading convenience retailer by establishing more than 1000 stores.
Mr Wyatt singled out OTR’s “superior” convenience offerings, including its QSRs, while indicating the focus of Viva Energy’s service stations will shift from fuel to retail.
The move has a good basis; OTR generates more than $3 billion in annual revenue, with more than 70 per cent of earnings coming from non-fuel sources.
“As our stores increasingly become retail destinations, we expect convenience earnings will grow and reduce our dependency on traditional fuels,” Mr Wyatt said.
Consumers want convenience
The Retail Solution founder Roger Simpson told TND the convenience sector is competitive, with the likes of 7-Eleven, Coles Express, Ampol and others offering consumers more choice.
The combination of the rising cost of living and busy modern lives means consumers want their products cheap and fast.
This has motivated supermarkets to invest in the convenience-style market with smaller metro stores, and is encouraging service station operators to offer a wider range of good-quality food products.
“The food offering is becoming better and better, and particularly [there’s] a big focus in Australia around coffee, and … BP do coffee pretty well,” Mr Simpson said.
“I think there’s some really good options for customers now.”
But this venture is not a guaranteed recipe for success, as BP and David Jones learned the hard way when BP service stations integrated David Jones Food stores shuttered in 2021, after launching in 2019.
The 35 dual-branded sites across New South Wales and Victoria had initially been promoted as high-end convenience hubs, boasting 350 products, fresh items like sushi, sandwiches, rotisserie chickens and gourmet pre-prepared meals.
But OTR convenience has a pretty solid history of success, with OTR convenience sales per store averaging $3.9 million.
The acquisition of OTR by Viva Energy is pending regulatory approval by the Australian Competition and Consumer Commission and the Foreign Investment Review Board.
After completing its acquisition of OTR, Viva Energy plans to acquire Liberty Convenience, according to the company’s ASX release on Wednesday.
