1. 1 Fueling Growth in Petro-Retailing: New Business Opportunities

2. 2 Presentation Overview Define the key drivers of change Define the key drivers of change Identify key imperatives for Indian Petro Retailers Identify key imperatives for Indian Petro Retailers Discuss the new business opportunities which will emerge in Petro Retailing Discuss the new business opportunities which will emerge in Petro Retailing

3. 3 Drivers of Change

4. 4 Our assessment of the regulatory environment indicates that Petro retailing will undergo significant change across the value chain  Increase in refining capacity is transforming India from a net importer to a net exporter of petroleum products  Decontrol of petroleum products marketing  Possible replacement of the Oil Coordination Committee (OCC) with a downstream oil & gas regulatory body  Disinvestment of the government’s equity in petroleum refining and marketing companies  Entry of new domestic and multinational players into the sector

5. 5 We also leveraged our international experience and understanding of the Indian consumer to identify learnings for petro-retailing in India Sample List Petro retailing and Retail clients Indian market insights Indian retail market understanding Market Research

6. 6 Currently there are some stark differences in the Indian market compared to the more developed markets n Quality interpreted as ‘no adulteration’ n Quantity interpreted as getting the right amount of fuel, i.e. integrity n Price is not a differentiating factor n However, as the Indian market evolves, Parameters such as integrity of fuel quantity and purity are likely to become hygiene factorsParameters such as integrity of fuel quantity and purity are likely to become hygiene factors Consumer needs will change and require changes to the value propositionConsumer needs will change and require changes to the value proposition n Quality interpreted as impact on fuel efficiency and engine performance n Quantity is not a parameter for consideration n Price is a very important factor Indian market US market

7. 7 Distinct psychographic consumer segments are emerging in India Each consumer segment represents a potentially profitable target group Prestige seeker Trust Seeker Routine Chore doer Time Poor Higher emotional needs More brand conscious Stereotyped as “self-made” Potential target for international or premium brands Unique to emerging markets such as India Driven by a strong desire for integrity and by strong relationships with the retailer A typical late adapter, price and quality conscious Petroleum purchasing is seen as a ‘drudgery’. Seeks additional vehicle repair and maintenance services. Indulges in monotonous routine jobs Strong need for locational convenience and other non- fuel related services. Characterized by his need for quick service and convenience. Likely to be a professional, 24X7 worker

8. 8 Insights into the differing needs and behaviours of the Indian consumer indicate that clear opportunities exist for petro-retailers “I buy from the pump because I have a good relationship with the owner…” Over 50% of consumers say … “The brand of petrol is not important to me…” Less than 10% of consumers will use a cybercafe at a petrol station Taxi and truck drivers want ‘dhobi’ services 90% of consumers… “Don’t fill up the tank at a station…” 45% of car owners have shopped at a convenience store in New Delhi

9. 9 Strategic Imperatives for Petro Retailers

10. 10 Given the opportunities and changing consumer needs, there are three key imperatives for retailers How to build a unique and sustainable competitive advantage ? How to attract new customers ? How to capture a greater share of customer’s wallet ? How to build a unique and sustainable competitive advantage ? How to attract new customers ? How to capture a greater share of customer’s wallet ?  Develop in-depth consumer insight (Know Your Consumer)  Build offering around the target consumer  Build a strong brand proposition  Develop in-depth consumer insight (Know Your Consumer)  Build offering around the target consumer  Build a strong brand proposition Key Issues Imperatives Focus on “Topline” growth

11. 11 Developing in-depth customer insight is essential pre-requisite to brand building and acquiring market share Generation F3 Fuel, food, fast M/F < 25 yrs True Blues M/F Station loyal Cash Road Warriors Middle-aged men High mileage Premium Price Shoppers All demographics Regular Homebodies Females w/children Local station Mobil Brand Identity  Rational levers High performance Reliability Service  Emotional levers “It’s meant for me – high performer” “It puts in my hand the latest technology” Psychographic Consumer Segmentation - USAExample

12. 12 Retailers will need to create differentiated offerings depending on the needs of the target segment Breadth of offerings Store Appearance Service Convenience Image Price Basis of Differentiation Food Distribution Levers for differentiating a non-fuel offering OR Petro-retailers in India will need to adapt global business models to suit the local environment

13. 13 Successful brand-building strategies will evolve from “product” related features to “service” related features Product related features  Quality ?  Quantity ?  Location Service related features  Personalized Consumer experience Speed of service Attendant disposition Station Ambience Brand building linked to customer maturity The recent experience of campaigns in India bear testimony to the effectiveness of brand building

14. 14 New Business Opportunities

15. 15 Value added products and services Sale of Value Added Fuels High volume – low margin businesses In the next few years, opportunities in petro retailing will arise in three key areas In short, “revenue enhancement” is the key

16. 16 A fuel-based differentiation strategy will result in a more profitable product mix A strong consumer brand image… “Good Performance” … delivers a more profitable grade mix Illustration : Leading American petroleum company Premium grade Intermediate grade Regular Sale of value added fuels There is a need to create a differentiation around “premium” fuels

17. 17 Non-fuel products and services will also generate additional revenue streams in the future…… Non Fuel Contribution of Petroleum Retailers USA Revenue 38.6% Profit 65.8% USA Revenue 38.6% Profit 65.8% France Revenue 28% Profit 40% France Revenue 28% Profit 40% Value added products and services Convenience Stores Food Service Ancillary Service The critical issue is to develop product assortment to drive both “traffic” and “consumer” purchases

18. 18 Price based differentiation strategy could also become a useful tool in the long-term High volume, low margin businesses QuikTrip Operating Model Chain of over 300 C-store format petroleum stations in 9 states in US Known to provide excellent service, quality petrol at much lower prices Discount quality petroleum to drive volumes – sells 75% more gasoline per gas station per year as compared to the majors Stores limited categories of food/snack/beverage items – available only in fast turnaround SKUs – ensures competitive pricing and delivery of the ‘freshness promise’ through strong backward integration Might not work in India in the short-term because of low non fuel sales Petroleum marketers in India would need to develop other consumer hooks such as “consumer experience” to build customer loyalty

19. 19 In conclusion..… The next generation petro-retailer will adopt a consumer centric organisational model aligned to a distinct value proposition “Cookie cutter” approach won’t work in India – a key to success will be to adapt international models to suit the local environment Retailers who best understand and satisfy their target consumers latent needs will have a sustainable competitive advantage There will be clear opportunities to build strong brands around service and customer experience; value added fuels and non-fuel products & services Price-based platform will be powerful in the Indian context in the long term, but the challenge will be to deliver it profitably