This week’s interview of the week is with Álvaro Granada, General Mexico, BP Downstream where we discuss their strategy to tackle growing competition in Mexico’s fuel market. BP Downstream is the product and service-led arm of BP, made up of three businesses. Refineries, logistic networks and fuels marketing businesses, together with global oil supply and trading activities, make up its integrated fuels value chains (FVCs).
Q: What factors make BP Downstream a unique player in the Mexican fuel sector and how are you tackling competition?
A: We opened our first gas station in 2017 and were the first multinational to venture into this sector in Mexico and the response from customers surpassed our expectations. We were also the first multinational to have a supply contract with PEMEX, the first international player mixing additive to fuels in the local market, the first ones offering a differentiated product, also to have exclusive supply in white trucks from PEMEX and to apply the company owned and Dealer owned business model in Mexico. We consider Mexico key to our global strategy since it is about the sixth-largest fuel market in the world. In particular for BP Downstream this is an interesting market and we look forward to becoming leaders here.
Q: How has the Mexican market received BP Downstream’s introduction of additives?
A: We launched an exclusive additive under ACTIVE technology unique of BP that helps keep engines clean by protecting critical engine parts from harmful deposits. It provides better functioning and is new to the local market. Truth be told, introducing additives to the local market has been challenging due to their novelty for Mexican consumers. The additives sector is complicated, mainly since it normally operates at scale. Nevertheless, we have signed agreements with PEMEX to mix our additives before fuels reach our stations and we are confident about the product’s opportunity for growth in Mexico. The logistics side is still an area of opportunity we will work on going forward.
Q: How have you advanced in your plans to become one of the three leading downstream brands in Mexico?
A: Our plan is to establish 1,500 stations in the next five years and we are progressing steadily in that sense. Over the course of the past year, we have opened 200 stations in 13 states in the country, reaching 350,000 clients on a daily basis. We expect to have 500 fully operational stations by the end of this year, creating appetite for growth and meeting our expectations in every segment. The reception we have had from customers has been crucial to this mission. We try to offer the highest-quality products and show people they will obtain the best products and the best services. We have introduced best practices, world-class customer service and the guarantee that we will meet safety standards.
Q: What steps has BP Downstream taken to consolidate its business here and what lessons has it learned?
A: When I first came to Mexico my main objective was to improve the market opportunities for BP. I can attest to the accelerated progress we have enjoyed; things have evolved quickly over the past year and we have undergone a significant learning curve. We have also grown to employ close to 1,000 people. One lesson we have learned since we started operations in Mexico is that growing at a fast pace and operating at the highest standards is a challenge in itself and we must overcome this challenge successfully. The second lesson has been maintaining our promises to our clients to make sure they receive what they are expecting.
Q: How would you assess the infrastructure in Mexico and how do your local partners help you increase your market share?
A: We decided to work with PEMEX as a strategic partner in the short run and could potentially extend that partnership for many years to come. Our agreements have worked smoothly and we have created successful partnerships with them for our service lines. Part of our long-term plan is to invest in infrastructure here, to bring our own products and to foster long-term relationships with PEMEX and other partners in the industry. We rely heavily on our partners and therefore it is necessary to have different options to take into account supply and distribution. Infrastructure levels still have a long way to go and they should be greater, especially if we take the country’s size in population and market share into consideration.
Q: How would you describe the future of BP Downstream in Mexico?
A: We want to become the brand of reference for Mexican consumers in service and product service. We want them to identify BP as the reflection of high-quality services and products in the Mexican market. We have ambitious expansion plans, with a projection of opening 3,000 new stations globally, of which 1,500 will be in Mexico. The fact that half of our physical expansion projects involves Mexico shows the commitment we have to this country and the reach we will have in the local downstream industry.
This is an excerpt from the 2018 edition of Mexico Oil and Gas Review. If you want to get all the information, plus other relevant insights regarding this industry, pre-order your copy Mexico Oil and Gas Review or access our digital copy.
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