Last Stop On Your Way Home

What is a retail station? It should be your last stop on the way home where you buy a newspaper, a bar of chocolate for the kids – and fill the tank of your car. It is a place where you can depend upon choice and genuine high quality in everything – fuel, food and services. In essence, this is the concept that TNK-BP’s Retail team has been putting into practice over the past five years across many locations in Russia and in Ukraine.

Retail operations in TNK-BP stand out. The team sits in a separate building, people are brisk and confident, and market expansion has been galloping over the five years since the company’s inception in 2003. TNK-BP has entered new, lucrative regions of St. Petersburg and the south of Russia, and expanded in Moscow and Kiev. After a strategy overhaul, the renovated TNK brand offers a new level of service, look and feel. A broader range of fuels, products and services at BP-branded stations in Moscow has made it a leader in sales among BP-branded networks worldwide.

TNK-BP retail stations in Russia

“It should be difficult to compete with us,” muses Alexander Kaplan, Vice President for Marketing, TNK-BP. TNK-BP’s Downstream team, of which Retail is part, is a notable success in TNK-BP’s corporate culture: an amalgamation of sparkling international and Russian talent, jointly motivated by “willingness to be a winner and positive competitiveness,” as one of the Marketing leaders puts it. It’s a place where people want to work, all sorts of careers are possible, and creativity and healthy ambition are appreciated and rewarded.   

How did it all start?

A senior TNK manager emerges from the hatch of a tank and fuels his military machine. “Even tanks can get fuelled at TNK stations,” the voiceover says, and the TV ad ends. That was almost ten years ago, at the beginning of TNK and its retail business. After that, TNK managers received the nickname “tankmen,” and the TNK brand launched its offensive in Russia’s retail fuel sector.

At the time, the leading innovative know-how was the jobbers’ programme under which independent retailers agreed to use the TNK logo and exclusively sell TNK gasoline in exchange for agreed prices.

This arrangement gave retailers guaranteed fuel supply, while TNK gained market share for its products and raised brand awareness and reach.

By the inception of TNK-BP in late 2003, cooperation with the jobbers had helped TNK to establish a broad presence in Moscow, and in numerous regions in central Russia and Ukraine. In the meantime, BP-branded stations had developed a separate presence in Moscow under the operatorship of Petrolcomplex, a joint venture between BP and Russian businessman Shalva Chigirinsky. The BP-branded network has existed since 1996 and was noted for the high quality of its fuels and outstanding service and choice in its shop.   

The people who made TNK and BP brands a success joined forces in the Retail leadership team in TNK-BP. Different corporate cultures, strong egos and proud and separate histories – that sounded like a recipe for disaster but turned out as an excellent example of a multicultural team in TNK-BP.

People say happy families are easy to tell because family members share the same view on important things. People in TNK-BP’s marketing are exactly the same – and their direct quotes speak better than many words. The leadership of this business function was answering a simple question: What are you proud of and how did you manage to achieve this?

Alexander Kaplan has no doubts in saying, “The secret of success is a good team with the right balance of Russian and international specialists. It is also in the flexibility of our strategy which rests on geographical and quantitative expansion, bringing new fuels to the market. Finally, it rests on separating functional businesses, like B2B, bitumen, bunkering and lubricants, which create additional value.”  Alexander headed the downstream division in TNK before the merger and was the driving engine of the firm’s success. In TNK-BP he has headed the Marketing division and is very much associated with its unstoppable expansion to different regions and major inorganic acquisitions.

Amir Feyzulin, Vice President, Regional Marketing, echoes the head of the Marketing team: “Today, using the BP experience, which, in my view, is invaluable, we have added our more professional approach to fuel sales and to the way of introducing all good things that BP has – probably, in a more disciplined way – as business in Russia is tougher, people here are more exacting and less trusting. People are just a bit different in Russia, and you need to take all these specifics into account.” Amir was part of the team that led the jobbers’ project in TNK, headed retail performance unit for Moscow in the first years of TNK-BP and is now in charge of all regional expansion.

Avril Conroy ran Petrolcomplex, the operator of the BP-branded network in Moscow, and she is now Director of Marketing and Brand department responsible for promotion of both TNK and BP brands in Russia and Ukraine. “I worked in BP before I came to TNK-BP, and I’m a retailer more than an oil businessman. I don’t think I really understood how to sell fuel until TNK-BP. I had concentrated more on the marketing side, or on the operational side of the retail business, rather than getting the two together. I think we’ve become a much better oil company and a much better retailer. BP probably brought the retail piece and TNK brought the oil piece, in my view.” 

Didier Casimiro has played a prime role in delivering the new TNK offer and upgrading services at BP stations. He is now working as Vice President, Business Marketing and New Business Development. Didier puts the chemistry of working together down to the fact that “through the tensions, people came to respect each other’s strengths rather than disrespect each other’s weaknesses.... We understood complementarities in relationships, skills and capabilities. Respect for each other grows much quicker out of success rather than from failure.”

Five years and five brands ago

Tony Considine, Executive Vice President Downstream, calls TNK-BP’s Marketing a “strange animal.”  At the inception of the company in 2003, TNK-BP inherited five branded networks: TNK, BP, SIDANCO, ONAKO and Slavneft – the latter through its 50% equity ownership in the oil company of the same name.

The role of a strong retail arm could hardly be overestimated: It’s the window to the outside world, the ultimate link in the value chain of an oil company. 

Having analyzed the strengths and weaknesses of the various inherited brands and having assessed the market trends, a strategic decision was taken to focus on two brands – TNK and BP – and head for expansion, both geographically and within key regions.

The first strategic objective was to expand the footprint of operations in Moscow for the BP brand. The company has identified seven customer segments in the market place in what was internally called “the premium end.” Those customers were earmarked “brand believers” with a focus on what they perceived as the best brand. In Moscow “brand believers” can make up to 20% of the retail customer group according to company estimates. The second customer group was labeled internally as “time-starved professionals”: People who want good-quality fuel and the efficient use of a range of other services like Internet banking over a cup of coffee. The markets in St. Petersburg and Kiev were also identified as having a high percentage of those two segments, and were defined as target areas for future expansion.

The second strategic objective was revamping the TNK brand. This brand appealed to two sets of customers who were broadly described as “professional drivers”: People who spend a lot of time every day in their car and who primarily want reliable fuel quality and quick and efficient service.

Consistency was the key challenge. Although expansive, the TNK-branded network lacked consistency in the way the offer was formulated, in the quality of fuels and sites, levels of service and the brand image.

The company identified four growth markets in Moscow, St. Petersburg, the Krasnodar region in Russia and Kiev in Ukraine. These markets are the four primary areas of retail expansion for the company. In addition, there are several regions in Russia and Ukraine where the company’s brands hold strong positions which the company will continue to maintain and refresh.

“The new strategy not only transformed the network. It turned around profitability by a factor close to three from the middle of 2005 when we started its execution,” says Tony Considine. “How did we achieve this? We achieved this by motivating people with clear performance contracts, with targets on the key drivers in the business. In particular, we introduced retail margin and non-fuel income as specific target measures per site.”

The adopted strategy resulted in an action plan. Tight competition and ongoing consolidation in the retail market dictated that TNK-BP had to execute many steps simultaneously to maintain a lead.

Things to do included drafting network plans for the primary regions; gradual divestment of lesser-quality sites along with keeping the same number of sites in the portfolio through new investment; developing a new offer for the TNK brand and upgrading the BP brand; all the while pursuing value-adding acquisitions.

For professional drivers

TNK-BP marketing specialists and a leading international branding agency spent 2004 and 2005 on developing the concept, format and presentation of the TNK brand.  

The New TNK Offer project targeted consistent repositioning of the TNK brand across the whole spectrum of its geographical presence. There was a change in visual language associated with the “orange dots” design, redesigning many means of communications such as advertisements, the look of uniforms and fuel trucks.

It also included extensive people training – and now the company boasts a dedicated Retail training academy. All groups of staff at the company’s service stations undertake refresher courses every three months.

Considering the significant number of jobbers in the TNK-branded network, the company has recently developed a new contract for jobbers which requested compliance with visual standards, health, safety and environment (HSE) and operational standards.

In the middle of 2006, TNK-BP launched implementation of the New TNK Offer on a grand scale. That year, retail teams transformed 69 sites. In 2007, 148 TNK-branded sites received the new look and feel. Towards the end of 2009, the transformation of the target number of c. 370 sites will be complete.

“It was very exciting to deliver the new TNK offer, to see the change, the transformation from the old Soviet-style service station out in the regions to a beautiful—looking building that stands out like an oasis when you drive somewhere like Saratov or Ryazan. … It’s made an enormous difference,” says Avril Conroy.

In her opinion, working with the TNK brand is more difficult because you face more competition than in the BP segment.

There are different ways of taking the new TNK offer further. The company is considering ideas of self-service at the site, including a snack bar with “freshly-made soup and real sausages made of authentic meat.” 

The idea of continuous improvement is very much behind the approach of TNK-BP’s marketing team.

“Success, in my view, lies in constant development, the ability to perceive the current needs of the customer, and even the needs of which the customer is not yet aware. We should also educate the customer, knowing his psychology. You must always be a step ahead of the market,” says Amir Feyzulin.

BP customer: “I like visiting a BP station. The service is of a high standard. Not only can I fill the car, but I can also buy something or have a cup of coffee. Visiting BP station turns a routine procedure of filling the car into a pleasant experience.”
TNK customer: “TNK stations have now become more modern with a brighter color scheme. This attracts attention.”

Fuel sales increase at a TNK-BP retail site after introduction of the new TNK offer

Upgrading BP

In TNK-BP’s first 2 1/2 years, the BP-branded network in Moscow strengthened its reputation as the city’s favourite service station. It enjoyed a hefty 14 mln litres average throughput, more than any other BP network anywhere. The 49 BP Moscow sites sold more fuel than all of BP’s sites in Germany. The Wild Bean Cafе and the BP Connect convenience store were increasingly popular.

ВР Personality

Nevertheless, the company made a strategic decision to “refresh” the network and add value to the BP brand in Russia.  Firstly, TNK-BP focused on the fuel. The management agreed there was an opportunity to launch green fuels in Russia, introducing an advanced product which BP had deployed in other markets, BP Ultimate.

Research carried out jointly with BP showed that there was a market for Ultimate in Moscow. In September 2006, the company launched sales of Ultimate A95 and A98 gasoline grades with a number of promises to the customers regarding fuel efficiency, better engine performance and lesser environmental impact. The initial target was to sell c. 30% of A95 gasoline in the Ultimate variety. The actual result is that 50% of A95 sales are Ultimate.

Manufacturing of the Ultimate sub-brand in Russia became possible thanks to the modernization of TNK-BP’s Ryazan refinery. High-quality gasoline is now produced with the help of the VGO hydrotreater unit and the alkylation unit, which deliver the lowest aromatics and benzol content. After blending in special additives imported from BP’s strategic partner BASF, Ultimate gasoline is supplied to BP-branded stations in Moscow.

In 2006, TNK-BP created a partnership where the BP brand joined together with other high-value brands to offer more to customers in the form of the Malina loyalty card – the first of its kind in Russia. This loyalty card is about knowing your customer, his or her psychology, needs and preferences, and tailoring specific offers and promotions to them.

“In terms of cost efficiency and profit, this is the highest performing BP network in the world. Measured by volume, we increased our fuel sales by 60% between 2005—2007 on average per site,” says Tony Considine. “Today, this operation is predominantly run by the Russian staff, with one former BP employee.”

% revenue increase vs. previous year at BP sites

Expansion routes

Building a strong retail presence in the identified markets of Russia and Ukraine remains a mid-term priority. “According to TNK-BP’s five-year business plan, the company is implementing a large-scale retail expansion programme,” says Alexander Kaplan. “Last year we acquired in the order of 150 retail stations, five depots and over 100 fuel trucks in the key markets of Moscow, the Moscow region, St. Petersburg and Kiev.” Company insiders call those transactions unique for the Russian retail market, both quality and size. The acquisition will raise the efficiency of retail fuel sales and is of strategic geographic importance.

Another project retail managers are proud of is establishing the first sites in Rostov, and now more broadly in the booming Krasnodar region, home to Russia’s 2014 Olympic Games. 

This operation first started in Rostov through a joint venture with a number of local partners. Now the jv (TNK-Yug (TNK-South)) has the largest market share in Rostov and aims to build a network of up to 70 TNK-branded stations in the Krasnodar region, supported by two dedicated depots.

Moving to St. Petersburg is another major development which the company wants to progress both organically, by participation in land auctions, and inorganically through acquisition. The company would like to see both its brands present in “the capital of the north.” The strategic priority is to establish 20—25 BP-branded sites and about 40—45 sites operating under the TNK brand.

Company marketing professionals acknowledge that St. Petersburg is a difficult and demanding market where our brands are not yet known or accepted. The company has launched  four new-look TNK stations, five BP-branded sites, and plans to bring that number to 11 by the end of the year.

Apart from difficulties, there are pleasant surprises in St.Petersburg also. “The BP Connect store has been yielding simply amazing results,” says Amir Feyzulin. “We are bringing in food and products two or three times a day – instead of the daily delivery.”

A Zen proverb says: “The journey of a thousand miles must begin with a single step.” TNK-BP’s Retail team has made several important steps on its road to long-term success. Bon voyage!

ТНК-ВР retail network

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  Last Stop On Your Way Home (803 KB)