Recently, TNK-BP and its subsidiary Magistral—Card announced the launch of the program entitled “Unified TNK Fuel Card.” The TNK fuel card will become a single means of payment at all retail sites working under the TNK brand in Russia. The program is targeted at corporate car fleets, the owners of which are interested in using retail stations with unified standards of services and an extensive list of additional services (assistance on roads, car wash, tire filling, cafes, parking lots, and hotels on federal highways). Amir Feizulin, Vice President for Marketing in TNK-BP, spoke to RBK-Daily about other marketing initiatives of the company and trends in the retail fuel market.
— What is your strategy for the development of the retail business in Russia?
— The main priorities for the next two years are the two main cities – Moscow and Saint Petersburg, as well as the Moscow Region, including all key highways – Novorizhskoye, Minskoye, Leningradskoye, and Simferopolskoye. We are planning construction of 15 retail sites in Tver, investing more than 1.5 billion rubles in this region. In Saint Petersburg, our network in the next couple of years will comprise approximately 40 TNK and about 30 BP retail stations. We will also expand in the Leningrad and Rostov regions, Krasnodar Krai in south Russia, and other regions. In the next five years, we are going to build up our business in Tatarstan and Bashkortostan. In 2015, we will expand our network in Russia to 180 BP service stations and 930 TNK retail stations, including jobber stations.
— Will your pricing policy change?
— Since we work in the market environment, prices are regulated by the demand and supply interaction. We think that fair prices for fuel can only be formed via open trade on commodity exchange. It allows for transparent pricing – sellers and buyers meet on the trading floor and close a deal only if all deal parameters are good for both parties. TNK-BP currently sells approximately 20% of its fuel on commodity exchange. Our goal is to gradually move all sales of our oil products to exchange trading floors as the exchange trading mechanisms develop. Apart from that, exchange trade will help companies reduce their logistical expenses. Our marketing subsidiaries can independently go to exchange floors, buy fuels (and not necessarily from TNK-BP) and choose quality products from refineries closer to them than our own.
Why Gasoline Needs a Brand
— Why TNK-BP started to brand its gasoline? What does branded fuel means? It its composition different?
— Most importantly, a branded fuel is a fuel with improved characteristics. We research and identify the needs of our customers and form our offer accordingly. Each branded fuel contains a unique set of multifunctional additives. For example, the additives in PULSAR gasoline sold at TNK retail stations clean the engine and keep it clean, prolonging the engine’s run life. The set of additives for BP Ultimate builds up the engine power and increases the mileage per fueling. We are very careful about the selection of additives and conduct tests and analysis of fuels with different sets of additives, using the best laboratories in Germany and USA. We were the first company in Russia to start selling branded fuels. Statistics show that this approach pays off: about 35–40% of customers buying gasoline with octane grades 95 and 98 choose PULSAR or BP Ultimate. Our goal is to become the leader on the retail market by offering a new generation of environmentally friendly high-tech motor fuels developed using innovations and latest technology.
— Why do you offer different branded fuels at TNK and BP retail sites?
— We conduct market research and have a good understanding of our customers. TNK and BP have different customers with different requirements, and PULSAR and Ultimate are different products with different properties. BP customers require high-quality services, increased engine power, and longer mileage per tank. TNK customers are professional drivers who spend a lot of time on the road, using their vehicles to make their living. What they need is longer service life for their engines at a reasonable price. In the regions the TNK brand targets the premium consumer segment. For this reason, the multi-brand strategy helps us offer unique products to different customers according to their needs and requirements. We will continue to improve our multi-brand approach, introducing new services and raising their quality.
— Do you intend to introduce branded diesel fuel?
— We are now launching the Diesel Ultimate project. We plan to launch this fuel at BP stations by the end of this year.
Fuel for Races
— Why do you need the TNK Racing Team?
— I think there is a direct and vibrant link between races and fuels. We can test our innovations, new fuels, lubricants and additives in races in extreme conditions and see how they affect speed, power consumption, and engine run life. For example, recently the TNK Racing Team won two gold medals at the first stage of the Russian Touring Car Championship (RTTC) held in Kursk.
In addition to this, supporting our racing team is important because many of our customers are keen on motor sports and interested in the development of the automobile industry and new products on the market. In future, TNK-BP might start producing a special sports fuel for car races.
— Toyota was very apprehensive on supplying diesel cars to Russia. They said that they studied the quality of diesel fuel in the country and did not find it satisfactory.
— Historically, gasoline is more popular in Russia. However, the trend seems to be changing now. Consumer surveys show there is interest in diesel fuel and the demand will be rising. This is why TNK-BP is currently making considerable investments into refining to ensure high quality of diesel fuel. Diesel Ultimate will exceed the Euro-4 requirements and will meet some of Euro-5 requirements.
— In late 2009, Boris Gryzlov, Chairman of the State Duma, criticized the state of oil refining in the country and said that he is not sure where gasoline with octane number 98 came from to the gas stations. Can you comment on this?
A. In TNK-BP, production of gasoline with octane number 98 is a highly technological refining process. Of course, we support continued improvement of product because all off-spec and low-quality fuels are harmful for engines and the environment.
— How would you comment on the transition from Euro-3 to Euro-4? There has been no real switch to Euro-3 and the authorities in Moscow currently want to switch directly to Euro-4.
— We understand the reason behind the intention of the Moscow authorities to speed up the transition to the Euro-4 and support the strive to offer environmentally friendly fuels to customers. Output of Diesel Ultimate will be a confirmation of this support. Generally, gasoline with octane grade 95 and 98 sold at out retail stations in Moscow and the Moscow Region already comply with Euro-4 requirements. These octane grades account for about 60% of our sales in this region. We have adopted a program to improve the quality of fuel until 2015 with a total cost of $1.4 billion. This program will help our refineries meet the deadlines and requirements of the new technical regulation. Our key priority is to meet all environmental requirements. At the same time, there are still many vehicles in Russia running on octane grade 80, and unfortunately their owners cannot afford buying new cars. This should also be taken into consideration. We believe a balanced approach should be adopted, with a gradual transition to Euro-4 and Euro-5.