Global giant arrives - special profile and evaluation of the EG Group

Euro Garages are one of the worlds fastest-growing forecourt operators, quickly becoming known for their innovative approach to forecourt trading and establishing high-profile partnerships with BP, Esso, Shell, Starbucks, Subway, Burger King, Greggs and Spar.

Zuber and Mohsin Issa, founders and co-CEOs of EG Group, were jointly named the 2016 NACS Insight European Convenience Industry Leader of the Year during the NACS Insight Convenience Summit — Europe in London in June 2016.

Back then, little could NACS and Insight imagine just how relevant their accolade to the Blackburn, Lancashire-based business would be in the coming years. A couple of months earlier, I had the opportunity to interview commercial director, Ilyas Munshi, for the March issue of NACS Magazine. The article was subsequently published in the April edition of Global Convenience Store Focus. At the time, the ‘fledgling’ business had assimilated sites from both Esso and Shell, which doubled its existing estate to the grand total of 341 locations.

Fast track 24 months - just two short years - Euro Garages is now commercially recognized in the marketplace as EG Group and is now poised to own and operate circa 4,500 sites across Europe and the US, realizing ground breaking asset deals and has enabled them to move into new markets and territories.

Patrick Mitchell-Fox, senior business analyst, IGD, says:“In the UK, Euro Garages’ success has been about acquiring and investing in high-traffic petrol stations and turning them into convenient stores that meet the food and drink requirements of motorists. It is likely that the forecourt operator will apply a similar strategy to their international markets, but this expansion is at an early stage and there is still everything to play for.”

So, let’s take a look at the Euro Garages enterprise journey and evaluate how it’s been catapulted into the big time - to operate on the global convenience and forecourt stage, with a hand in the world’s largest fuel convenience market - the US - now complementing its European platform.

International Aspirations

Euro Garages embarked on their international growth trajectory in October 2016, when the UK-based business joined forces with European Forecourt Retail Group (EFR) in Benelux and France to become a European leader in the petrol forecourt retail sector. The move combined EFR’s fuel expertise and international experience and Euro Garages effective commercial convenience model underpinned by successful brand partnership with leading global retail brands. The merged group became perfectly placed for future commercial growth.

The union created a leading independent forecourt retailer in Europe with c.1,450 locations and 8,500 employees. Together, Euro Garages and EFR would be serving more than 6 million customers a week though the management and operation of leading retail brands including BP, Esso, Shell, Texaco, Carrefour, Greggs, SPAR, Louis Delhaize, Starbucks, Burger King, Subway, KFC, Pomme de Pain and command annual revenues of around €6bn.

Synergies and determined approach to sharing best practices, for example, leveraging EFR’s fuel purchasing and distribution expertise and international experience while benefiting from Euro Garages expertise in successfully managing brand partnerships and delivering retail excellence.

ExxonMobil Strategic Partnership

Business expansion has been rapid and it’s been gathering momentum for a while. In Europe, it’s been underpinned by a key strategic partnership with ExxonMobil.

EG Group and ExxonMobil have partnered successfully, initially establishing a branded wholesaler model in the UK and then France. More recently its signed similar agreements in Italy and Germany, following the acquisition of petrol forecourts.

In January this year, EG Group and ExxonMobil further cemented their partnership by announcing plans to convert several hundred stations in the Benelux to the Esso brand during 2018, making EG Group ExxonMobil’s largest retail fuels customer.

Italian Investment

Seven months later, in June 2017, EG Group announced it had reached an agreement with Esso Italiana, a ExxonMobil company, to purchase 1,176 Esso branded service stations, located in several Italian regions.

In December 2017, EG Group appointed Salavatore Bianca, a former Esso executive, as country manager for Italy, to lead the strategic development of the petrol forecourt retail convenience offer in Italy and on 15 February 2018 it completed the Italian deal, taking over 1,100 Esso service stations and around 100 fuel supply contracts for third party sites in Italy.

Italy is a new European market for EG Group and, according to the company, the acquisition facilitates an opportunity to secure further assets in the Italian market.

EG Group plans to take its tried and tested business model and apply it in other markets. It will review the network in terms of retail potential, initially partner with and invest in a few locations with recognised global and local retail brands; understanding the market dynamics and consumer perceptions with a view to then having the confidence to accelerate growth and development across Italy.

EG Group said it will actively engage and work with local brands, especially in terms of food-to-go, that have aspirations to franchise and grow. Reflecting the habits and demands of the Italian consumer is going to be critical to success, it added.

Mohsin Issa said: “This announcement marks the start of the expansion of EG Group into Italy and other new markets during the course of 2018. For me, strategic brand partnerships are going to be important for the growth of EG Group in Italy.

“Through our customer knowledge, insight and experience across Europe, we understand that people value time and are continually looking to access retail locations that satisfy multiple customer missions and provide excellent welfare to motorists.

“Our business model enables customers to access a world-class fuel, convenience store and food-to-go offer. We have a local management team who will help shape our Italy investment.”

The Italian market has a dedicated leadership team in place that will operate from the Da Vinci Business Centre in Rome. The site network will be further supported by regional offices in Milan, Turin, Bologna, Catania, Bari and Naples. EG Group has 96 employees working in Italy, some of whom transferred from Esso and others have been recruited for specific roles.

Gianni Murano, Esso Italiana lead country manager, said: “Through this strategic partnership with EG Italia we have now completed our conversion to the new business model and we expect to see great results. The partnership combines EG Group strength as a fuels retailer and its unique backcourt expertise with our high performing Esso fuels and marketing proposition. We will leverage our respective strengths to build a platform for growth and deliver to consumers a valued experience at Esso-branded service stations.”

The German Deal

In late November 2017, EG Group announced plans to buy approximately 1, 100 Esso branded service stations in Germany from ExxonMobil, which will be transferred and integrated into its existing network in Q4, 2018. The move, coupled with the Italian sites, took the EG Group network to around 3,500 stations across Europe (https://retailvision.tv/?p=754).

For EG Group, entry into Germany was a natural progression for the business. Mohsin Issa again: “The German market offers us great growth opportunities and is the logical extension of our business throughout Europe. We already operate service stations in France, the United Kingdom, the Benelux countries and Italy. As a result, and through other recently announced acquisitions, we have established ourselves as one of Europe’s leading service station operators.”

For ExxonMobil, the conversion to a branded wholesaler in Germany, follows suit in other markets.

“Our conversion to a branded wholesaler model in Germany is consistent with ExxonMobil’s approach in other European markets with the objective of growing the Esso brand,” said Florian Barsch, managing director of ExxonMobil Central Europe Holding in Hamburg. “Our long-term strategic partnership with EG Group will leverage our companies’ respective strengths and continue to provide Germany’s consumers with a reliable supply of high quality ESSO fuels.”

EG Group will continue selling ExxonMobil-supplied Synergy fuels and Mobil-branded lubricants at the ESSO-branded stations and has also committed to investing in the car wash and shop business in Germany.

Again, it’s EG Group’s symbiotic approach to fuel and non-fuel operations, which appealed to the oil major; as Alexander Hentschke, retail sales manager for ExxonMobil in Germany, states: “EG Group impressed us with its future- and growth-oriented concept for the ESSO brand, convincing us that this is the appropriate decision to make in helping expand the brand and continue to provide a good experience for our customers.”

Commenting on EG Group’s ESSO takeover in Germany, Christian Warning, NACS and Insight representative for the German speaking markets, said: “I am excited to see how EG will adapt their successful model and change the current German ESSO sites from a fuels and CTN+ (Confectionary, Tobacco, Newspaper) shop offer into a real ‘foodvenience’ destination with the fuel offer as the retail add on.

“As far as I have known the EG Group, they know their customers in depth and are retailers by heart. They are fueled with passion on operational excellence and that is why they need the same turnkey solution brand partners to bring their UK drive-thru innovation onto German soil.

“Looking at their ferocious speed to market, some of their global brand partners will have an appetite to grow in the German market as easily as in the UK, the Netherlands, France, Belgium, Italy and now the US; and I am sure they are ready to roll out their operating model as soon as they have taken officially over the ESSO network.

“Following the EG Group ‘foodvenience’ journey since the very beginning in the UK, I am convinced the management team is able to learn from the mistakes of companies like Walmart, Intermache, Ahold and Starbucks and their failed market entries into Germany.

“However, they need to have an eye on the specifics in Germany such as our ‘away from home’ phenomena of 47,000 bakery shops, which serve a high percentage of immediate consumption sales for Germans who are on the move.

“The density of supermarkets in Germany - with 339 stores per one million inhabitants versus 113 in the UK - may also necessitate a different grocery retail offer to the one EG Group currently provides in the UK. A grocery retail brand might not provide sufficient differentiation, whereas a German-style bakery offer could be a USP; just like Greggs at EG Group’s UK sites. However, I am sure the Group will be smart enough to find the right local enablers to support their success story in Germany, as well as potential new markets.”

United States Entry

Now, for the first time, customers in North America are set to experience EG Group’s market leading operating model.

On 5 February 2018, EG Group announced plans to buy Kroger’s convenience store business for $2.15bn, subject to regulatory approval.

Kroger’s convenience network spans 762 sites in 18 states and includes 66 franchise operations. The stores employ 11,000 associates and operate under the Turkey Hill, Loaf ‘N Jug, Kwik Shop, Tom Thumb and Quik Stop banners. In 2016 the business had sales of $4bn and sold 1.2 billion gallons of fuel.

As part of the transaction, EG Group will establish its North American HQ in Cincinnati, Ohio and continue to operate stores under their established brands.

“This is an exciting time for EG Group, the entry into the US market presents a fantastic opportunity to deliver a successful retail offer to consumers across the various states,” said Mohsin Issa.

According to EG Group, Kroger presents a fantastic foundation to overlay its retail experience and know-how in the US - the deal took its estate to circa 4,400 stores across Europe and the US.

“Our business model is simple but effective – EG Group is creating a stronger relationship between consumers and leading retail brands they want to access,” said Zuber Issa. “In the US we aim to create a retail environment which delivers convenience, provides value and serves as a retail destination offering excellent welfare to motorists who live and work near our petrol forecourt convenience retail stores.”

Like Europe, North America is an important strategic market for the EG Group and the business is an acknowledged and respected player; as Mike Schlotman, Kroger’s executive vice president and chief financial officer, testifies: “EG Group is a recognized international petrol forecourt convenience operator and they have a commercial model which clearly looks to enhance the consumer offer by working with leading retail brands customers know and trust,” he says. “This transaction is good for our associates across the country and for our headquarter city of Cincinnati. Throughout the process we were impressed with the EG Group’s professionalism, investment commitment and more importantly their understanding of the US convenience retail market.”

Mitchell-Fox at the IGD reckons EG Group’s US expansion looks assured: “EG Group’s expansion has been rapid, creating a big business very quickly and spread over several different markets,” he says. “This adds an extra layer of complexity and requires the leadership capability to make things work across a diverse range of geographies. In addition, EG Group’s investors will expect good results in quite a short timescale. However, if the UK business is anything to go by, I’m confident the US business will be a success. The key in this market will be to learn about how the US market works before introducing too many changes,” he says.

More Netherlands Expansion

While Kroger gives EG Group access to the world’s largest fuel convenience market, its strategy to be Europe’s leading independent forecourt retailer show no signs of letting up either.

Hot on the heels of the Kroger deal, EG Group announced plans to buy 93 Esso branded sites in the Netherlands from NRGValue Holding. The deal cements EG Group’s market leader status in the Netherlands with a total of 595 sites and sees the Group’s total estate jump to nearly 4,500 sites.

While the Esso company-owned sites have achieved consistently strong fuel volumes, they are now poised to further benefit from the deployment of EG Group’s complementary high quality non-fuel branded retail offer.

Mohsin Issa said: “This is a great opportunity for EG Group to reinforce its existing position as a leading independent forecourt operator in the Netherlands. I believe that our expertise in investing in an effective branded non-fuel retail offer provides room for significant growth across the NRGValue portfolio. We are focused on delivering a world-class fuel, convenience store and food-to-go offer which exceeds consumer expectations.”

It’s no surprise that EG Group plans to continue in a similar vein and review all strategic options going forward in order to maximise value for shareholders and deliver growth for brand partners.

Mitchell-Fox at the IGD believes EG Group can unlock further growth in both Europe the US: “There is plenty of potential in Europe for significant development of the food and drink offer on many petrol forecourts, providing a great opportunity for growth,” he says. “In the US, there are lots of opportunities for further acquisitions as forecourt retailing is a big and still quite fragmented market.

Local Commitment

Back in the UK, meanwhile, new head offices are planned for Blackburn, Lancashire; and on schedule to open during 2019. The choice of location itself showcases how grounded the EG Group business remains, despite its international ambitions.

Zuber Issa said: “We are pleased to secure planning permission for the new office space. As you can appreciate, a business our size and global standing is regularly advised to move to a major city; many times to London or Manchester, however, we are proud of our Lancashire heritage and to date have resisted such suggestions.

“We see the advantages of being in Blackburn as it is our home, we like living in the town and we remain fully committed to having our main base here and seeing local people succeed along the phenomenal journey. We are also really looking forward to having something special in Blackburn to host international visitors.” I have a gut feeling those NACS and Insight convenience industry leaders could be doing plenty of that.

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Fiona BriggsFiona Briggs Freelance retail business journalist

Fiona is an experienced journalist and editor, writing exclusive content for GCSF. She is founder of retailtimes.co.uk. She contributes regularly to NACS Magazine and writes articles on omnichannel shopper trends for Radial. Fiona is available for commissions at fionalbriggs@gmail.com

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