Technology at scale key to Z Energy's future growth

Friday 3rd May 2019

Deploying new technology at scale to provide better services will be a key part of Z Energy’s future growth, chief executive Mike Bennetts says.

New Zealand’s biggest fuel retailer spent about $10 million in the past year on a range of digital initiatives – including a mobile app for its Caltex chain and improved data analytics and automated marketing – to help leverage its scale and nationwide reach.

Chief executive Mike Bennetts noted that retailing of any type is increasingly going to be mobile-based, yet Z and BP are the only fuel retailers to have apps in the market.

The firm’s apps for its Z and Caltex brands have been downloaded by more 380,000 customers and usage is improving, he said.

Fastlane – an “exciting, challenging and frustrating” development, which has been more than a year in the making – uses number plate recognition technology to automatically bill app users. It has now been rolled out to 41 mostly Auckland outlets.

The firm’s pre-order and pre-pay coffee is also available at 117 sites – including all the firm’s tier-1 and -2 outlets.

“This isn’t just about selling more coffee,” Bennetts says.

Once the platform is working really well it can be scaled to sell other products, he says. In future, customers should be able to pre-order whatever they want, drive up in the Fastlane, and have it delivered to their window.

“That’s the direction that we are going,” Bennetts told investors and journalists yesterday. “And that’s very easy for me to say and very challenging for our teams to operate and execute and that’s why it’s not going to turn up tomorrow.”

The Z group sold about 45 percent of the country’s petrol and diesel last month in a market where petrol volumes fell about 1.5 percent in the past year – due in part to high pump prices in mid-2018.

As well as Mobil and BP, the firm faces increasing competition from smaller, niche players – including the likes of Gull, Waitomo and Nelson-based NPD. Collectively, the industry added 35 new fuel sites in the past year – 32 of which were fully automated – increasing retail capacity by about 2 percent.

Longer term, Z also expects to see more of the light passenger fleet powered with electricity. It has invested in biodiesel and is eyeing hydrogen as options for heavy transport.

In that environment, Bennetts says the firm remains continually focused on productivity gains, while also looking for new areas for growth.

It doesn’t expect its 70-percent-owned Flick – a power retailer specialising in half-hourly pricing based on spot wholesale electricity costs – to break-even until the 2021 financial year.

But energy costs are a major household concern and the firm plans some bundled fuel and power offers in the second half of the current financial year, Z Energy’s corporate general manager Lindis Jones says.

Bennetts says bringing the company’s Pumped loyalty scheme in-house was another important change for the business during the past year that will allow it to be more consistent in the types of offers it makes to its customers and customers of its partners.

“You will see more activity from us over the next year or so as we seek to consolidate our position around loyalty and, again, make our scale work for us.”

Bennetts says $19 million of savings achieved last year and another $22 million expected this year are enabling the company to ‘stand-still’ in an earnings sense while freeing up capital for reinvestment and returning more to investors through dividends.

The firm’s work on customer experience “we would expect to start providing some earnings uplift after that,” he said.

“If the market continues to build out capacity at 2-3 percent per year in a market that is declining by 2 percent, actually staying where you are, with a lower capital employed, is a fantastic outcome,” he said.

“It’s going to be way lower risk if demand is going to drop off in the latter part of the next decade.”

(BusinessDesk)

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