Margot Cairnes interviews Caltex chairman Greig Gailey about the massive changes taking place at Caltex as the world moves to the mass adoption of electric cars.
Last year Greig Gailey took the Caltex Board to Silicon Valley so they could be well versed on digital disruption and what to expect in the future. It is not digitalisation however, that has led to huge changes in Caltex, but the prospect of a long term decline in demand for Caltex’s main product, petrol.
Increasing fuel efficiency and eventually the advent of mass market electric and self-driving cars has put the oil industry on notice.
This led Caltex leadership to step back and look at how the wide range of skills that the company possessed might be deployed to counter these risks. Amongst its many assets, Caltex has extensive well-placed real estate with lots of parking. Caltex is already a major player in the convenience retail space but the Board and management are convinced that there is a significantly untapped opportunity to better meet evolving consumer demand with a wider service offering and a strong focus on fresh produce.
“People are shopping more frequently and buying smaller baskets.” Greig says, “Convenience is changing and we needed to reposition ourselves to be ahead of the wave.” A realignment of the convenience offer meant that Caltex needed new skills and an active program was launched globally to secure these.
Improving the Customer Experience
A major initiative is underway to fine-tune the convenience offer. A third pilot site is currently trading at a revamped Caltex service station in Concord in Sydney. Rebranded The Foodary, the site has a wide selection of fresh foods, Sumo salads, Barista coffee, Simon Johnson products, Harris Farm fruit and vegetables, laundry and parcel pick up services. It also has open dining spaces.
Digital apps allow customers to order food before they arrive or at the pump. Should you buy petrol you are now able to pay using your mobile phone without coming inside.
Caltex is working hard to change expectations. Gailey comments, “People don’t associate fresh food with service stations.” Caltex is actively looking to partner with or acquire related businesses which will enable it to further enhance the offer. It recently acquired the Melbourne high street chain of Nashi sandwich and salad bars.
Improving the use of customer data
Caltex understands that digitalisation is changing the customer interface and is working hard to make things more efficient and less painful. As Woolworths and Coles have shown, big data is allowing retailers to better tailor their offer to customer needs and likes.
A Caltex loyalty program is in the planning and regular Foodary customers will soon be able to receive tailored SMS messages informing them of specials and favourite products. Grieg believes that digitalisation will increase customer expectations but it will also give more power to the seller to better meet customer needs and secure increased margins. He also thinks that social media is shortening trends and necessitates the need to be constantly changing.
The ‘Future’
Convenience is not the only asset in the Caltex armoury with opportunities to confront the challenges of the future.
Caltex is a major international trader, storing and responsibly moving significant quantities of potentially dangerous products across the wide expanse of Australia. How might these skills and assets be more widely deployed? How might Caltex position itself differently as electric and self-driving cars begin to impact its traditional business?
Greig questions, “Will we see a future where, like mobile phones, we won’t own our cars. Will we rent driverless cars which will be at our beck and call”?
Caltex does not yet have all the answers, and probably never will, but it is not sitting idly and waiting for the future. In March 2016 Caltex acquired 20% of Car Next Door which seeks to be the Uber equivalent to the traditional car rental companies.
Vision and cultural change
All of these challenges demand a huge culture change within Caltex. “You are constantly trying to change the organisation in terms of attitudes and approach. We do this with culture change initiatives, revised organisation structures and more dynamic office configurations. In many cases you need to change the people you employ and the whole way you interact with your staff. You need to do all of this while you are still managing and building your traditional business which Caltex believes will continue to make good money for many years yet.
Constant reinvention of the corporation is the way of the future. Grieg says this can be motivating though challenging and risky. “In trying to move ahead to where the consumer is you are trying to second guess where the market is going. Yes you might get the offer wrong. But if you don’t try you will certainly never get it right”.
About Greig Gailey
Grieg Gailey is Chairman of Caltex Australia, ConnectEast and the Australian Advisory Board of Canada Steamships. He is a past President of the Business Council of Australia.Greig has extensive oil industry experience having worked for 34 years at British Petroleum Company (BP) where he held various positions throughout Australia and offshore.
After a 3-year stint as CEO of Fletcher Challenge Energy (New Zealand) Grieg joined Pasminco Limited as CEO. I worked alongside Greig as he transformed Pasminco from a failed corporate to relisting on the ASX as Zinifex Limited. He then set about restructuring the lead and zinc industry globally through the creation of Nyrstar and eventually Oz Minerals. As an economist, Grieg is committed to creating value and is a champion of change.