Fighting back: Caltex launches food supermarket chain in Australia

The petroleum industry has fired a broadside in response to the growing incursion into retail gasoline sales by supermarkets worldwide.

Caltex Australia Ltd., one of Australia's top refiner-marketers, has launched a direct challenge to the country's supermarket chains by establishing its own supermarket food outlets.

The company opened its first store at Bondi Beach, Sydney, this week.

Traditional gasoline retailers, especially the branded marketing arms of refiner-marketers, have grown increasingly concerned over the rise of supermarket sales of gasoline in Europe and, most recently, in the U.S. and Australia. While the association of gasoline sales with those of food and sundries has become commonplace within the petroleum industry, that has largely been limited to small convenience stores, often in tandem with fast-food outlets.

A step up

Managing Director Ian Blackburne explained that Caltex is developing a new retail format that involves a convenient supermarket and fuel outlet under one roof, offering a full range of everyday needs at competitive prices.

The new format is a step up from convenience stores attached to service stations. Convenience stores are usually about 100 sq m in area and generally carry about 1,500 grocery items, with prices 10-20% higher than those in supermarkets.

Caltex plans to open a chain of outlets of 300 sq m offering fruit and vegetables, baked goods, delicatessen items, and 5,500 dry and frozen groceries. The prices will be set in direct competition with the supermarkets.

The company is responding to a move 2 years ago by the Woolworths supermarket chain to sell discount fuel. Blackburne says that Caltex supermarkets will be a head-on challenge to grocery retailers that have gone into gasoline retailing.

Caltex's supermarkets will also have gasoline pumps, but neither the stores nor the pumps will have the Caltex logo or branding. Instead they will be identified as IGA Everyday-a U.S. brand obtained under license from the U.S. grocery group's Australian licensee, Davids.

'Joining the enemy'

Interestingly, other gasoline retailers in Australia have decided to "join the enemy" rather than attack it.

Last December, Mobil Oil Australia and Coles Supermarkets (the main rival to Woolworths) introduced the first Fast & Fresh store in a Mobil outlet in what will be a 6-month trial of the joint operation.

In a separate venture, Caltex has also revealed plans to set up a pilot program of stand-alone convenience stores without fuel. These will be established in inner city and suburban areas, particularly in places such as inner-city shopping malls. This program will begin before mid-1999.