Petrochina expands uSmile convenience brand

December 1, 2009

Petrochina, the trading arm of the China National Petroleum Corporation (CNPC), is expanding its uSmile convenience chain on the forecourt.

Speaking at Insight’s Future of International Convenience Retailing event in London this autumn, Tian Jinghui, vp of Petrochina’s marketing company, said convenience was a growing concept in China.

“Fastness is driving rapid development of c-stores and we aim to be the leader,” he said.

CNPC operates in 40 countries around the world and has 34 subsidiary businesses. It manages 18,000 gas stations and serves 6m customers and 1.8bn cars annually.

The uSmile brand was developed in collaboration with CBX and launched in 2008. Like the CNPC logo, it is red and yellow - the colours of the Chinese national flag - and conjures up a smile.

According to Jinghui, it has fun, positive image and is aimed at the younger generation.

“The customer is the fashion-conscious and stylish customer,” he said.

Jinghui said uSmile provided a one-stop shopping experience offering local food, prepared fruit, cooking oil, water and dairy products.

Time saving is of the essence, said Jinghui, so stores are located in convenient locations. A store has been piloted near the train station in Bejing, for instance, and non-fuel is reported to have grown rapidly.

Business is also growing as a result of an increase in the number of vehicles on the road.

Jinghui reported the number of cars in China has doubled and new vehicle sales are estimated to top 11m in 2009, up from 6.1m.

Petrol customers are typically male, accounting for 70% of shoppers and are aged between 20 and 39 years old. Female shoppers, however, buy groceries and only a quarter - 24% - of male shoppers buy groceries when they petrol, said Jinghui.

In terms of key categories, tobacco accounts for 19.5% of store sales (foreign entrants, however, are not allowed to sell tobacco products), soft drinks for around 20% and confectionery for 7.2%.

Jinghui reported on the consumers’ key requirements of c-stores versus supermarkets.

“Chinese customers are more concerned about quality, environment, service and fastness in convenience versus variety and low prices in supermarkets,” he said.

Petrochina has surveyed customers attitudes to the services provided by c-stores.

Jinghui said they appreciate the proximity of the stores and that there is no need to park. They like year-round opening and longer opening hours - 16-24 hours a day. They also like the fact they can pay utility bills at the stores and buy stamps, he said.

Despite their popularity, convenience stores still only account for 9% of the market in China and the sector is becoming increasingly consolidated as a result of acquisitions, said Jinghui.

He reported Petrochina is collaborating with Sinopec, the China Petroleum & Chemical Corporation, on non-fuel business; benefiting from Sinopec’s existing tie ups with McDonald’s and KFC.

Combined the two companies operate 10,000 gas stations with non-fuel activities, said Jinghui.

At the end of 2008, Petrochina had announced five petrol joint ventures with plans for 2,300 gas stations focusing on c-stores. It currently operates 1,300 stores.

Jinghui highlighted six top trends for c-stores:
one-stop service station
convenience
fast food service
services eg car wash
electronic payment
service - self-services

Compared to other markets, Chinese customers are not yet ready to accept complete self-service and are still served by cashiers, he said.

Jinghui concluded by presenting a snap shot of China’s economy, which has been in growth since its open policy of 1978.

GDP is over 10%, he said. “Even in 2008, we still had 9% growth.”

Jinghui said growth was driven by export and investment but the top driver was consumption, accounting for 45.7% of the growth.

Despite volatility in 2008, Jinghui said the market was improving in 2009 and he expected steady growth in the second quarter of 2010.