New Retail Fuels Channel Strategies for the Next Round of Downstream Growth and Competition

To improve returns on capital, many of the world’s largest oil companies are actively reducing their direct investment in retail and focusing on their more profitable upstream operations. Over the past decade, global oil firms have reduced investment in their networks of company-owned retail sites and increased dependence on channel partners—retailers, dealers, and branded wholesalers—to own and manage sites, deliver fuel to customers, strengthen the oil companies’ brands, and provide a market to off-take product from refineries.

This restructuring of the industry’s distribution channel has generated valuable business results. Oliver Wyman’s experience suggests that there is considerable value at stake in restructuring the retail channel and refocusing retail support efforts to align to retailer preferences while taking out capital and reallocating operational spend. This includes a dramatic (often over 20%) increase in fuels volume that can occur after this refocusing of channel support strategies.

Yet these changes have also raised significant new challenges for downstream fuels executives as their strategies, marketing tactics, and mindsets need to fully shift from managing direct retail to competing in channel-partner-dependent markets. To surmount these challenges - and boost their companies’ bottom lines - managers must reexamine how they do business with retail channel partners.