The $1.785 billion sale of Woolworths’ fuel business to BP is awaiting approval from the ACCC and Foreign Investment Review Board, with completion expected no earlier than January 2, 2018. Meanwhile, the company’s strategic partnership agreement hints at what’s to come.
Woolworths entered into binding agreements on December 24 to facilitate the sale of its 527 Woolworths-owned fuel convenience sites and 16 committed development sites to BP.
The acquisition will add to BP’s existing network of 350 company-owned retail sites across Australia and is expected to deliver a fuel and convenience store and loyalty offer unlike any other in Australia.
Rewards and redemption
It is proposed that BP will become a cornerstone partner of the Woolworths Rewards program. Once established as such a partner, BP will be granted automatic redemption status. BP has, in turn, agreed to offer base point-per-dollar Rewards Points on all in-store merchandise (excluding fuel) in line with the way Woolworths Rewards works in BWS and Woolworths supermarkets, and offer point-per-litre Rewards Points with all sales of BP’s quality fuels.
For the first time, Woolworths’ Everyday Rewards cardholders will also be able to redeem points at the register as discounts on purchases at BP.
In order to preserve and expand the 4¢ per litre (cpl) fuel discount offer, which is a key component of Woolworths’ loyalty offering, the parties will enter into a minimum 10-year redemption agreement.
Under the terms of the redemption agreement, Woolworths and BP will commit to maintain and equally fund the issue of 4cpl fuel discount vouchers under the same conditions as today.
BP will maintain the 4cpl fuel discount offer at the existing 527 Woolworths fuel and convenience sites and expand this offer to additional BP sites. This is expected to increase the proportion of those Woolworths supermarkets with a nearby fuel redemption offer from around 75 per cent to 80 per cent.
Metro food offering
Woolworths and BP plan to address the unmet needs of ‘on-the-go’ customers by expanding and enhancing Woolworths’ Metro offering. The focus will be to draw on the scale and capabilities of the Woolworths food business to provide customers with a strong seasonal selection, with an emphasis on healthy options as well as a wider range of convenience and grocery items, including salads, soups, sandwiches and bakery products.
Initially, BP and Woolworths plan to launch a ‘Metro at BP’ pilot program across 16 BP fuel and convenience sites, allowing both companies to test their offering and generate customer feedback. A second phase will involve the expansion of the Metro at BP format across as many as 200 sites.
BP has a strong track record globally of teaming up with leading supermarket operators to deliver fuel and convenience offers, having successfully rolled out this type of model in nine countries, including with Rewe Group in Germany and Marks & Spencer (‘Simply Food at BP’) in the UK.
Caltex Australia, which has a 3.5 billion litre fuel supply arrangement with Woolworths, had previously made a conditional and confidential proposal to Woolworths to acquire its fuels business and continue the successful fuel alliance.
Responding to BP and Woolworths’ announcement, Caltex CEO Julian Segal said: “While we are naturally disappointed that the successful fuel alliance will come to an end, it’s important that we exercise financial discipline in pursuing growth. That growth must be in the best interests of Caltex shareholders.”
Caltex says it will continue to provide “reliable and high-quality fuel supply” to Woolworths and its customers until regulatory approval is given for the Woolworths-BP partnership and the transaction is complete.