Fuelling change

Frank Gleeson, retail director, Topaz and chairman, Retail Ireland

ShelfLife's Convenience Champion of the Year 2012, Frank Gleeson reveals more about his efforts to tackle Ireland's illicit tobacco and fuel trade and what his 'day job' as retail director of Topaz entails

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Frank Gleeson, retail director, Topaz and chairman, Retail Ireland

While petrol and diesel escaped any increases in the recent Budget, prices are already so high and margins so tight on fuel that the retail arm of the fuel business is becoming increasingly important.

Speaking about how the forecourt business has evolved in the past 20 years Gleeson rates the fuel side as "an important part" of the business as opposed to it being the core. "Fuel is an important element as is the convenience part so they are now on an equal footing in my mind. Your fuel prices, your coffee, your standards of merchandising and service, even your toilets have to be fantastic or otherwise you won’t get repeat business. 

"I think the forecourt convenience business in Ireland is world class. When I look at some of the competitors we’re up against, they are very tough to beat and they are continually innovating – Appegreen, Spar, Centra."

While he says that the Topaz offer is well developed, he believes the company’s strength lies in its ability to execute the business, maximise return on investment and offer top class customer service. "You can build beautiful stores but you’ve got to make money. Our Cashel site isn’t the biggest in terms of motorway sites but it’s the most efficient. We push a lot of volume through it and make a lot of money per square foot. It’s about efficiency around your assets and maximising your investment return."

Gleeson undertook substantial research during the planning stages of the Cashel site by visiting sites in Canada, North America and Europe to unearth the best practice and found that in-line stations [identical sites located on opposite sides of motorways] weren’t being invested in after 20 years because they weren’t making money. "I discovered that all of the guys who had been operating the in-line sites had actually gone to interchange sites [sites built at a junction to service traffic in both directions] which were operating at the edges of towns."

Plans are currently underway to build new interchange sites in Portlaoise and in Neenagh and there are approximately ten others in the pot that are quite well progressed. "Some of them are in planning, some are in property negotiations and others are on the drawing board," he revealed. 

Changes in the fuel industry

In the last five years, all the big fuel multinationals have exited the oil business. Most recently Texaco sold its Irish and UK business to Valero, a US player, primarily a refinery and a retail business, in 2011. This gives Valero its first foothold in the European market.

While the industry is going through a period of change, this is an obvious opportunity for Topaz to acquire and build on its current business. Gleeson explains: "Shell is gone, Statoil is gone, Texaco has been sold. The only one left is Esso, and do they really want to be here? I don’t know. They are exiting out of most of their mature markets and selling their assets off. There are always rumours that they will sell their Irish assets but you wouldn’t know who to believe."

"Texaco has the second biggest network in the country so they still exist but with the sale having gone through to Valero last year it’s hard to predict what will happen there. All I know is from a Topaz perspective, we have a strategy to grow our retail business so we are going to invest in company operated sites and we’ve grown five in the last couple of months. We’re also going to grow our dealer business which we’ve grown about 20 of in the last 12 months. So it’s good growth."

Topaz Cashel: "You can build beautiful stores but you’ve got to make money. Our Cashel site isn’t the biggest in terms of motorway sites but it’s the most efficient"

Formation of Topaz

Topaz came into existence in 2006 when the Statoil and Shell businesses merged. Gleeson was working with Statoil when this came about and was made retail director of Topaz with responsibility for rebranding and developing the brand. "It was an exciting opportunity for me to participate in the biggest brand relaunch in the whole country. In the last five years we’ve been growing the business on the retail side quite dramatically.

"At the moment we’ve got about 220 dealer sites and we will have 120 company operated sites in the next couple of weeks. It’s been fantastic growth for us and the retail business probably generates more than 50% so it’s a very big portion of the Topaz business."

Early career

Gleeson’s career began when he joined Xtra-vision 25 years ago and worked his way through the ranks from store manager to group sales manager. He made the move into the fuel business when he joined Statoil in 1995 as an area manager when the company was setting up their CoCo (company owned, company operated) business. They had opened three stores under this guise and were looking for someone to come in to drive expansion. "I spent five years building CoCo from three up to about 16 stores," says Gleeson. "Then an opportunity came up with O’Brien’s off licence group. They wanted to revitalise and rebrand their business so they head-hunted me into that business as general manager and I grew the chain probably by 150/200% over a four year period. Then Statoil gave me a call asking me to come back because they’d grown the company operated stores to about 50 and they were struggling to manage it so I went back in as head of retail CoCo and then within a year or two I was looking after their overall retail business as well."

Retail Ireland 

Being appointed the chairman of Retail Ireland two years ago was a major milestone in Gleeson’s career because it highlighted the importance of his role in the industry. "It was a great opportunity to drive the retail business on and give us a bigger share of the voice," he says. "I think we’re a bit ignored and we don’t get our just desserts in terms of government, legislators and the public in general. I’m quite passionate about the work I’m doing with Retail Ireland because it’s for the industry. Obviously it benefits Topaz, so in a rising tide all boats will lift."

Through his work as chairman of Retail Ireland he’s met with the government on numerous occasions to brief them on the size and scale of the problems facing the retail trade and possible solutions to these issues. "The difference about our report and our focus is essentially, we’re not just having a moan, we want to give them solutions that are cost effective and easy to execute."

He says that the government and opposition parties seem very interested in some of their ideas but the key thing is to get a few of them executed. "Everyone I speak to knows we’re down 30% in the last three years and that the industry is on its knees. They know we represent 15% of the total workforce. They know that we buy five billion euros worth of goods from the food and drink suppliers so as a combined entity, the food and drink and the retail represents 30% of all jobs in the country so there are some fairly significant statistics there. 

"The other key thing that I have been highlighting at every meeting, is that 85% of Irish retail shops are small local shops. So this is an Irish indigenous business that is hugely affected by the Irish economy. The big issue we have as an industry is that consumer sentiment has been in the toilet for the last 2/3 years and it’s not really improving; the savings rates are far too high – people are saving in excess of 15% of salaries. I believe the VAT hike of 2% went in too soon, it didn’t need to go in for another 12 months and has had a detrimental effect on some key categories so we’re seeing some decline in categories that we don’t want to see."

The black economy

Gleeson says that he estimates the black economy to be costing the sector and government €850 million a year. The categories to be concerned about are tobacco and fuel smuggling. "With illicit tobacco there’s not enough enforcement, either at the point of entry or on the ground. The other biggie for me is fuel laundering.

"There has been a huge increase in fuel laundering in the last two years. Primarily because with the 50c differential, it’s actually hugely lucrative and with the price [of fuel] going up so high in the last 12 months, people are actually prepared to take a chance. It causes two problems; One is it takes legitimate volume out of the market and secondly it gives the customer a false view that price is lower than it should be and that retailers are profiteering, which they are not. The margin on fuel is very low – 3 to 4 cent."

The introduction in the Finance Bill of a new licencing regime, will help this problem, says Gleeson. "From 1 February there will be Know your Customer ROM (Revenue Online) reporting. You will have to show where your product came from and the suppliers of your product will have to show where the product went to. That’s a significant step forward. However it still needs much more enforcement." 

"My view on it is very clear, I would equalise the price between green diesel and road diesel and give a rebate system to farmers. Then you don’t have to worry about dyes, you don’t have to worry about laundering because there are no opportunities. The onus would be on the farmer to claim back."

Cost of doing business

The other big bug bear Gleeson has is the cost of doing business in this country. "There are significant cost problems in retail in that our rents and rates have not reduced broadly speaking. Not an easy subject – the rent one – we know the government aren’t going to do anything about it because they can’t. All they can do is get IRBC and Nama to play ball with tenants that are struggling and then the market will reset itself over a period of time as people go in or out of business. 

"Rates need to be set at levels that are sustainable but that again is a huge cost agenda. We just need to see the county councils running their businesses more efficiently, the way retailers have to run their businesses to stay alive. We’ve had adjustments in our business but I don’t see that happening in the county councils."

He is also fighting the potential sick pay cost that is looming as he says that retailers simply can’t afford it. "Whatever about multinational and pharmaceutical businesses where they have significant profits, retailer don’t have enough profits to be able to pay what is an owners scheme. Let’s face it, they want employers to sort out what is a government problem. They’ve a bigger absenteeism problem with the public service so they need to sort that out and talk to us later. We can’t afford it."

NACS

Aside from his work with Retail Ireland, Gleeson also sits on the main board of NACS, the international trade association for convenience and fuel retailing based out of Washington with a global membership in 100 countries. He says the benefits of this are that you get to meet all the big international players. "I attend 4/5 meetings a year abroad where you go to presentations and you see what’s coming down the road in terms of the future of fuel in 20 years or what legislation is happening like the plain packaging on cigarettes in Australia."

He describes himself as being in the "getting things done space" but says that things move slower in government than he’d like so he has to keep pushing the agenda. 

It’s evident that Gleeson is hugely passionate about the many issues facing the industry and those in the trade can be thankful that they have a man with this level of energy and enthusiasm for the job working on their behalf.

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