Interview with Gazprom Neft Regional Sales Director Alexander Krylov

How is Gazprom Neft filling network developing in the Russian market?

I will say without exaggeration that at the moment our company manages one of the most efficient and developed distribution networks in Russia. In 2012, Gazprom Neft became the largest supplier of light oil products on the domestic market, with a 21.6% share. One of the key areas of the company's work is the development of the retail network of Gazpromneft filling stations, which includes 1.3 thousand stations in Russia and the CIS.

Recently, the global information and research company Nielsen conducted a survey of several thousand motorists in dozens of Russian cities. A quarter of respondents, answering the question “What is your favorite filling station?”, named Gazpromneft, and this is the highest result among all networks. The number of customers participating in the On Our Way bonus program, which is already 3.3 million, testifies to consumer confidence in the brand.

The success of network development is evidenced not only by the results of various studies, but also by a significant increase in sales of the filling station network, which over the past year in Russia amounted to 34% and reached 6.6 million tons. Other production indicators also increased. Sales of gasoline reached 4 million tons, and diesel fuel - 2.4 million tons, that is, they increased by 26% and 51%, respectively.

As a result, we almost reached our strategic goals for 2020 by the end of 2012, and we were faced with the question of revising the strategy. Previously, we were focused on increasing the scale of the business and building a strong brand for the Gazpromneft filling station network. This phase has already passed. The new strategy is based on increasing the efficiency of each individual filling station and the network as a whole. To achieve new ambitious goals, a project was developed to reorganize the company's sales business.

Tell us more about the reorganization project and its goals…

The reorganization has already begun and involves the separation of the wholesale and retail business. Instead of sales enterprises registered on a territorial basis, eight subsidiaries appeared. Each of them is responsible not for the region, but for the type of business: wholesale or retail sales, quality control, transportation, fuel storage, corporate customer service.

The main goal of the reorganization is to improve the efficiency of sales and corporate governance. We plan to achieve this effect by simplifying and enlarging the sales structure. In addition, the financial results and performance of each type of business will be easier to track. The division of wholesale and retail is also in line with FAS initiatives, and Gazprom Neft is the first oil company to carry out such a reorganization. As a result, we plan to achieve even better results both in the Gazpromneft filling station network and in the wholesale business.

How will the new structure be arranged?

To manage wholesale sales, Gazprom Neft registered Gazprom Neft-Regional Sales in St. Petersburg. This company has four branch clusters: the central branch in Moscow, the Ural branch in Tyumen, the West Siberian branch in Omsk, and the East Siberian branch in Kemerovo. Gazpromneft-Regional Sales is engaged in the sale of petroleum products to small wholesale customers and regional logistics. The Central Wholesale Cluster became a pilot one and started operating in April 2013. The Ural and Siberian clusters started operating on June 1, 2013.

The reorganization of retail sales began in June 2013 with the merger of oil products supply enterprises into three clusters: central in St. Petersburg, Urals in Yekaterinburg and Siberian in Novosibirsk. Thus, only 3 enterprises will manage retail sales throughout the country, and hence the network of Gazpromneft filling stations: Gazpromneft-North-West, Gazpromneft-Ural and Gazpromneft-Novosibirsk. For customers of the Gazprom Neft gas station network, the reorganization will go unnoticed - only the name of the company on the cash receipt will change.

Is the station rebranding complete?

Almost all of our filling stations have already been brought under the single retail brand Gazpromneft. In total, in Russia from 2009 to 2012 we built 95, reconstructed 255 and rebranded 462 filling stations. This year, we continue the reconstruction of the chains acquired in the capital, which previously operated under the brands MTK, Mosnefteprodukt, Korimos, and plan to complete it by the end of 2015. In total, we will reconstruct 68 filling stations, of which 33 will begin to operate as automatic ones, that is, without the constant presence of personnel .

It is important that the matter is not limited to just changing the sign. All new Gazprom Neft filling stations are equipped with state-of-the-art technological equipment to ensure a high level of environmental and industrial safety. At the stations, we monitor air quality and soil conditions. They are equipped with automatic fire alarm and fire extinguishing systems, storm sewer treatment facilities, vapor recovery systems, double-walled tanks that prevent oil products from entering the ground.

How is the gas station network developing in the CIS countries?

Our gas stations operate in Tajikistan, Ukraine, Kyrgyzstan, Kazakhstan and Belarus. Each market is different. For example, in Kyrgyzstan, the formation of a network has been completed (116 stations under the Gazpromneft brand are in operation), and we have focused as much as possible on improving the level of service and quality of services. The network is actively developing in Kazakhstan. 41 stations have been purchased and built in this country. In Tajikistan, we have 25 filling stations, in Belarus - 40. In these countries, the number of filling stations will also increase.

Last year, we entered the Ukrainian retail market of petroleum products using a franchising scheme. Now there are four gas stations under the Gazpromneft brand on the Kyiv-Odessa highway, which meet the uniform standards and requirements of our network. Our specialists regularly check the quality of fuel and the level of service at the Ukrainian gas stations of Gazprom Neft. At the same time, we are exploring the possibility of creating our own distribution company and our own network of filling stations in this country.

By the way, if we talk about the development of the network, I would like to know how successful the launch of related products on the market is?

Generally speaking, the release of goods under your own brand and their sale at gas stations is one of the important trends in the development of related business. Such products become a tool for promoting retail brands. At the same time, the company can strictly control their quality, ensure constant availability in stores and optimal retail prices.

Gazprom Neft produces goods under two of its own trademarks - the Gazpromneft filling station network and the G-Drive premium fuel brand. At the same time, I want to emphasize that Gazprom Neft has developed a strategy according to which the sale of related products at gas stations will not only make the filling station network more attractive to customers, but also become an effective retail business. By 2020, the share of sales of non-fuel goods and services should increase several times, and income from related business should cover a significant part of retail operating costs. There are grounds for such a strategy: in 2011, revenue from the sale of related products and services at Gazprom Neft filling stations in Russia increased by 65%, in 2012 by another 49%.

How successful are you promoting branded fuel?

Today, G-Drive 95 premium gasoline is sold throughout Russia. At those gas stations where it is sold, its share in sales of 95th gasoline is 30%. The high results of promoting this fuel allowed us to bring G-Drive with an octane rating of 98 to the market. Its sales started in March 2013 in Yekaterinburg and the Sverdlovsk region. Also this year, the G-Drive premium fuel brand received the Brand of the Year/EFFIE.2012 award, which is awarded to the most successful projects in the field of creating and promoting brands in their product categories. Another important milestone in the promotion of G-Drive fuel was the conclusion of a strategic partnership agreement with Nissan. This was an important decision for us, as a result of which Gazprom Neft became the exclusive supplier of G-Drive fuel for the first refueling of Nissan vehicles. In just one year, we will refuel about 50,000 cars manufactured at the plant in St. Petersburg with new generation fuel, and, upon opening the gas tank, the owner will immediately see a sticker “Nissan recommends G-Drive fuel”.

What is the sales volume of natural gas motor fuels in 2012? And how many gas distribution stations does the company currently have?

Liquefied hydrocarbon gas (LHG) - more than 93 thousand tons, and compressed natural gas (CNG) - about 8 thousand tons. Now in Russia the share of LPG and CNG consumption in the structure of motor fuels is relatively small and does not exceed 4%.

In the future, until 2020, LPG consumption may grow at approximately the same pace as the consumption of liquid motor fuel. As for CNG, the main potential for its consumption is concentrated in large metropolitan areas, especially in Moscow and St. Petersburg. CNG consumption by 2020 may grow 10 times from the current level, that is, up to approximately 4 billion m3 per year.

LPG is sold through the Gazprom Neft gas station network in the Moscow, Tver, Nizhny Novgorod, Omsk, Sverdlovsk, Kemerovo, Novosibirsk regions, in the south of the Tyumen region, in the North-West region and in the Krasnodar Territory. At 89 of our stations you can fill up your car with gas. 85 stations sell LPG and 4 CNG. We are planning to put into operation multi-fuel filling complexes (MAZK) - with gasoline, diesel and gas motor fuel. The first such MAZK Gazpromneft opened at the end of 2012 in St. Petersburg. Several more filling stations will open in the Central and North-Western regions, including along the M1 and M10 federal highways.

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In an economic downturn for companies operating in the consumer market, maintaining customer loyalty becomes especially important. One of the largest players in the Siberian fuel market, with its own production base in the region, is the Gazprom Neft filling station network (GPN). It is widely represented in the Omsk, Novosibirsk, Kemerovo regions, and the company is also actively developing in neighboring regions. Alexander Krylov, Regional Sales Director of Gazprom Neft PJSC, spoke about how to keep a buyer on the fuel market, competition and marketing costs.

- How much competition has increased in the fuel market over the past year?

In a crisis, competition always increases, the seller's market turns into a buyer's market. Players are more aggressive and seek to win a client with the help of a pricing policy.

If you drive through the regions, you can notice the dominance of one or another network of gas stations. For example, in Omsk, Novosibirsk, the GPN gas station network prevails, in the Altai Territory - Rosneft. There may be a feeling that the territories are divided among large corporations. What are you guided by when making a decision to promote the network in a particular region?

Our network of filling stations sells our own fuel, so the location of Gazprom Neft's refineries is of primary importance to us. The easternmost of them is the Omsk Oil Refinery, which provides gas stations in the Siberian Federal District with gasoline and diesel fuel. This plant is one of the most powerful and modern in the country, and we, in turn, can guarantee the safety of the factory quality of fuel to gas station customers thanks to a transparent logistics scheme and control at every stage of delivery.

Last year, Gazprom Neft entered the Altai Republic with its filling station network and increased its presence in the Krasnoyarsk Territory. Why these particular regions?

We consider both the Krasnoyarsk Territory and the Republic of Altai to be promising for development. At the end of 2015, we leased 14 stations in the Krasnoyarsk Territory, and now we have to evaluate their effectiveness. The Republic of Altai is one of the most popular areas of domestic tourism. The flow of motorists coming to local resorts from neighboring regions and beyond is increasing year by year. It can be said that we are meeting the needs of our customers, because the issue of the quality of fuel and service for those who traveled hundreds or even thousands of kilometers behind the wheel of their own car is a guarantee of a comfortable journey.

- What market share does the company have in Siberia today?

In the retail segment - 30%. At the moment we have 390 filling stations in the Siberian Federal District.

- Under the conditions of the crisis, according to your observations, did the purchasing power decrease?

With the slowdown in the pace of economic development, the solvency of the population naturally decreased, and this could not but affect consumer behavior. The price factor has become more significant, but at the same time, people have learned to appreciate quality, so the most relevant is the ratio of price and quality.

- If there is no way to announce a significant discount, how can you attract a buyer?

Trust, I guess. Too much discount means you overcharged the price in the first place. The bonuses that we return to our customers as part of the loyalty program are a kind of gratitude for the choice and trust. And these figures are directly proportional: the more you buy from us, the more you save.

Since the beginning of 2016, you have updated the loyalty program platform, and if many companies give their customers loyalty cards, you decided to sell them. What conditions attract customers to you?

In a month and a half, we have sold more than a million new bonus cards "On Our Way", and there are more and more people who want to buy them, in some places we even have a deficit, which we promptly pay off. Unlike loyalty programs such as airlines, where miles are not always easy to turn into tickets, our bonuses are real money that can be converted into goods and services at any time. The principle is this: you spend money, we return part of it to you as bonuses, for which you can purchase both fuel and goods and services at our gas stations.

We are not the only ones on the market, the situation is absolutely market, the client chooses from the whole variety of offers. When a person buys a card, we know for sure that our program is in demand. And if a million cards were bought in a month, it means that it is also popular. And, of course, the fact of purchase means that the person will use the card. Of that million, 85% have already made purchases with the new card.

Over the past year, we returned more than 6 billion rubles on cards. in the form of bonuses. Loyalty costs us dearly. But on the other hand, customers have experienced real, not mythical benefits.

-Does the bonus program make a profit or do you write off expenses for marketing?

You overestimate our marketing budget. Moreover, we understand that no coffee and buns at gas stations can lure you if the fuel is bad. The network of Gazpromneft gas stations guarantees the preservation of the factory characteristics of the fuel supplied from the company's own refineries, and that is why people come to us to refuel. And since they're here, why not offer them something else? And it's not just profitable, it's a serious part of the business. With proper planning, related products and services should fully cover the payroll of employees, and in some cases the gas station would be profitable even without fuel. As for the results, in two years we have grown by almost 50% in this area, and we even joke that we have one of the largest chains of so-called “convenience stores” in Russia.

- What are your plans for the development of this segment? You already have co-branded products.

Now, at the stations of our network, we sell over 200 products under three of our own brands. The first is Gazpromneft. Basically, these are basic related products of daily demand. G-Drive - products from the premium segment that are associated with our branded fuel. DriveCafé is our third brand. In terms of sales of G-Drive energy drinks, we have long overtaken all competitors - in the best periods we sold up to 80 thousand cans per month. We began to compete with Red Bull on the shelves of our gas stations. So the idea was born to make a joint product, which was implemented. The launch of Red Bull for G-Drive in 2015 set a global precedent for co-branding with Red Bull and caused great controversy. We do not plan to stop there and will present new products under our own brand in the near future.

Has your marketing spend increased? How did the company change the strategy of its behavior in the market under the influence of the crisis?

We have kept our traditional activities, such as federal promotions for customers with good prizes. Literally last week, we summed up the results of the winter campaign "Refuel like a champion!", in which 6 car enthusiasts from different regions of the country received trips for two to Sochi. Two of them, by the way, are Siberians.

Moreover, as you know, we have a unique channel for promoting G-Drive premium fuel. This is motorsport. In 2015, for the first time in the history of Russian motorsport, the G-Drive Racing team not only climbed the podium, but became the FIA ​​WEC world champion in endurance racing. Thanks to the success of the G-Drive Racing project, we have been able to reduce the cost of its implementation by up to 30%. But this is not due to forced savings. It's just that our sports success has made the project attractive to sponsors, it has turned into a brand that generates income.

- According to your assessment, is the retail division of the company ready for the crisis?

Back in 2008, I realized that the issue is not in the crisis, but in your ability to adapt to new conditions. What's going on in the market right now? People and companies are becoming extremely conscious about their spending. They choose the best at the best price and really analyze all the available offers. Either you offer the buyer a competitive product, or he will leave. They don't leave us. Rather, on the contrary. This means that we are doing everything right and will try to get through the difficult economic situation without losing a single client.

PRIVATE BUSSINESS

Krylov Alexander Vladimirovich

Born March 17, 1971 in Leningrad. In 1992 he graduated from LMU (Leningrad), in 2004 - the Faculty of Law of St. Petersburg State University, in 2007 - Moscow International Higher Business School "MIRBIS", MBA majoring in strategic management and entrepreneurship. He also received an MBA in oil business from the Stockholm School of Economics.

From 1994 to 2005, he worked in senior positions in the Russian-Canadian JV Petrobuild, CJSC City Real Estate Center, CJSC Alpol.

Since 2005, he has held the position of Deputy Head of the Sales Directorate at Sibur LLC. In 2007, he moved to the position of head of the Gazprom Neft Oil Products Supply Department. Since December 2009 - Director of Regional Sales of Gazprom Neft.

In October 2014, he received the Aristos award, becoming the first in the Best Commercial Director nomination.

COMPANY PROFILE

PJSC Gazprom Neft

A vertically integrated oil company whose main activities are the exploration and development of oil and gas fields, oil refining, and the production and marketing of petroleum products. The proven hydrocarbon reserves according to the SPE (PRMS) classification of the company amount to 1.44 billion tons of oil equivalent, which puts Gazprom Neft on a par with the 20 largest oil companies in the world.

The structure of Gazprom Neft includes more than 70 oil producing, refining and marketing enterprises in Russia, countries of near and far abroad. The company processes about 80% of the produced oil. In terms of oil refining, it is one of the three largest companies in Russia, and in terms of production, it ranks fourth. The company operates in the largest oil and gas regions of Russia: Khanty-Mansiysk and Yamalo-Nenets Autonomous Okrugs, Tomsk, Omsk, Orenburg regions. The main processing facilities are located in the Omsk, Moscow and Yaroslavl regions, as well as in Serbia. In addition, Gazprom Neft is implementing production projects in Iraq, Venezuela and other countries. Gazprom Neft's products are exported to more than 50 countries and sold throughout the Russian Federation and abroad through a network of its own distribution companies. The network of filling stations of the company includes almost 1.75 thousand stations in Russia, the CIS countries and Europe.

Interviewed by Alina Ilyina

Alexander Krylov:

“Most startups are not ready to be entrepreneurs”

RODION BOLOTOV

nikita careful for inc.

Alexander Krylov: “Most startups are not ready to be entrepreneurs”

RODION BOLOTOV

nikita careful for inc.

Gazprom Neft has launched the second StartupDrive program for transport and logistics startups. In the company itself, the accelerator is seen as part of a large innovation project that has been developing for several years. In an interview with Inc. Regional Sales Director of Gazprom Neft Alexander Krylov told how the company has learned to develop its employees into entrepreneurs and what the accelerator will give start-ups.

About digitalization: data and fuel are the basis of the ecosystem

Gazprom Neft has always been interested in digitalization. Every oil company has two major components: upstream and downstream. Upstream is exploration and mining. Downstream - processing and marketing of finished products. In fact, these are two companies under the same brand: different processes, different employee profiles, different corporate culture. But since there has always been a struggle for business efficiency, digitalization both there and there began when it itself appeared. « number » .

For me, the digitalization of a company consists of two components: people and technological readiness to implement new ideas. And my goals as a manager were to provide the IT infrastructure and the data team, create the organizational environment for data and digital innovation, and change the corporate culture. The latter is especially true for the middle level of management.

Digitalization and business automation are different links in the same chain. At first, with the help of digital, we automated production and business processes, then we began to collect and store data, and now we are learning how to use it. For example, all predictive analytics is based on the correct use of data.

The client on the road is our main value. We will pack and deliver the fuel where and when it is needed. And today the digital client lives in his smartphone. He chooses the supplier who offers him the most convenient and most personalized service. And our task - build an ecosystem for it, provide an expanded range of services and goods. We need a guaranteed distribution channel that will allow us to ship products daily. You need to know your customer and keep him in the channel. Therefore, we do not just supply fuel, now it is important for us that the client does not experience problems on the road.

We have always understood that data is the future of business. This is a story that can be called "Quality Data as a Service", our readiness to quickly respond to the market with flexible tools based on Big Data and Business Intelligence. Ability to make decisions based on data. The ability to do new things at the lowest cost. It is a matter of survival and flexibility, efficiency and time-to-market for new products.

The more data we collect about our customers, the better we get to know them and the more personalized our offers. For example, at first, with the help of digitalization, we made it easier for truckers to refuel. And then we found out that they have a lot of needs on the road that we can satisfy based on our platform: park, fill up AdBlue (fluid, reduces emissions of harmful substances from a diesel engine) or windshield washer fluid, use a toll road, sleep in a hotel or stop by a tire shop. All these functions already constitute a full-fledged ecosystem, it is no longer just an app for selling fuel. The result was a platform for the interaction of different market participants.

Gazprom Neft and data

2011. Launching the key data management system as a management reporting skeleton. Master data is reliable information about customers, products, contractors and vehicles. Qualitative benchmarking of indicators for all regions immediately gave a tangible result in efficiency.

year 2013. Launch of a unified BI system. Thanks to Business Intelligence, a single terminology, common data marts and an environment for the exchange of analytical ideas for all departments have appeared. Over 4 years of development, the BI system of the company's sales business has become one of the most functional in Russia, and the internal BI Competence Center has replaced external contractors with its own expertise in creating flexible analytics.

2018 year. Launch of the data lake. Complex analytical initiatives, data arrays accumulated over many years and the involvement of external sources required the creation of an infrastructure for Big Data. The “data lake” processes all client transactions and calculates client segments, analyzes mobile application logs and customer feedback, examines video surveillance data at stations, incidents on the way of a product from a factory to a customer’s tank, including even such things as a fuel truck driver wearing a seatbelt or not. The Data Science Competence Center appears, and the search for efficiency based on advanced mathematical models begins in analytical sandboxes.

2019 year. Data governance and Data literature projects. Data management is the basis for the democratization of data and the sustainable development of complex analytical solutions. Full integration of Data governance with the "data lake" provides reliable control over the origin of data and analytical models, up to the introduction of elements of artificial intelligence, when the algorithm makes a decision for a person.

Our data processing and analytics systems are ready to build complex solutions that will allow you to extract additional value from them. The "data lake" and the data management system are the basis for development, for new management models and new products. Already, 50% of all analytical projects and initiatives are being implemented on their basis, in 2020 there will be 75% of such projects. This is our material part for further innovation and development of client ecosystems.

The next step is the full development of solutions based on the data we have accumulated. In my understanding, in order for these solutions to appear in the company constantly, it is necessary to build an effective system for working with innovations, which will both attract new ideas from outside and help develop the proposals of the corporation's employees.

I believe that most business innovations should be initiated by the people who run the business. Each production is a unique process that only those who work on this site understand. They know the features of the equipment, the strengths and weaknesses of production, they see opportunities for growth. So we came to the need to develop domestic entrepreneurship.

About domestic entrepreneurship: it used to be worse

It is important that company employees know that everything they come up with can be easily tested, developed and implemented in the process. For me, an internal entrepreneur is a person who is not indifferent to his work, who tries to make it better and more efficient.

The innovativeness of a corporation and its willingness to take risks depend, first of all, on top management. A large company is a risk-off model by default, but risks can be minimized by creating "sandboxes", special zones allocated for piloting new solutions.

The corporate entrepreneurship model in « Gazprom Neft» developed in stages. First, we launched the "Idea Factory" format: employees formulated ideas, a special committee identified the most viable of them - and then they tried to implement them. However, not all good ideas could be fully implemented, because the employees were not removed from their production plans. The introduction of innovations required additional employment, and people lacked both motivation and time.

Then we moved on to the next format of work - once every 3 months, any employee can propose a project for a pitch. During the pitches, they compete with each other, and if the project is approved, then its author becomes the owner of the product. He gets a little money to develop an MVP and test a product hypothesis in a business environment and shows the result on the next demo. Then we make a decision on the development of the project. It is important that now the product owner is relieved of his routine duties, thus we stimulate his entrepreneurial abilities.

In addition, 2 years ago I divided the business into two circuits: Run and Change. Run, as the name implies, - it is the current streaming activity of the business. And Change is a kind of laboratory, our agile cluster, where teams become micro-businesses, with their own P&L (profit & loss report), create and improve their products, attract third-party developers. Naturally, both the horizons and the approach to work are changing.

When we launched the pitches, there was a bias towards ideas rather quickly,- people brought ideas, made pitches, but did not yet bear responsibility for the result for the business. As a result, there were ideas for the sake of an idea, with unpredictable results. We realized that both Run and Change are two sides of the same entity. Innovations must not only be invented, they must be conveyed to the client, made part of the business.

Previously, we rejoiced at the very appearance of initiatives, because there were none. When there were enough ideas, we taught our internal entrepreneurs to take responsibility, introduced KPIs. If you want your idea to be noticed, be ready to achieve certain business indicators and be responsible for them. Now, if an employee proposes an idea for a mobile application, he must make certain commitments: the number of downloads, the number of sales or transactions. If the indicators are not achieved within three months, we at a meeting of a special commission analyze what successes are and whether it makes sense to continue working further. If the indicators are unsuccessful, the project is closed.

Filling stations.GO: from 9 thousand to 4 million liters of sales per year

December 2018. Gazprom Neft launched the AZS.GO app, which allows you to pay for fuel at the stations of the Gazprom Neft network. The application was developed for 4 months, at the start it was supported by 100 gas stations in Moscow and St. Petersburg. In the first month of work, 9,000 liters of fuel were ordered through gas stations.GO.

December 2019. Every month, 4 million 200 liters of fuel are ordered through gas stations.GO. The number of orders is growing monthly by 20 - 30%, the active audience of the mobile application is more than 300 thousand users. Online payment for refueling is available throughout the Gazprom Neft network in Russia.

About startups: look not for money, but for scale

In my understanding, the banking business in Russia is less competitive than the fuel market. We operate in a highly competitive market where 4 large companies are fighting for their customers. Therefore, in addition to our own teams - micro-businesses within the company - ideas should be looked for in the outside world, in the world of entrepreneurs and start-ups, including in related fields. For us, the ability to work with startups is a matter of efficiency and competitiveness.

I have seen a lot of startups lately, none of them are ready to be an entrepreneur. In Russia, few start-ups grow into a business, because start-ups do not yet have the necessary skills: they do not know how to manage a project, calculate the economy, and do not know the legal subtleties. And I believe that one of the most important tasks of large companies is to help startups acquire these skills, to make their business sustainable.

You need to come to us not for money, but for scale. According to my feelings, the main problem of a startup is that they most often do not have a unit economy. They have an idea, the market demand is confirmed, but there is no scale. Our task is to give them a scale, so in April of this year, on Cosmonautics Day, we launched the first set in StartupDrive, an accelerator for startups. 200 companies participated in the selection, 5 Russian startups involved in developments in the areas of cargo transportation, taxi, car sharing, evacuation, transport insurance became the finalists. We plan to integrate two companies - Cartaxi and Rent-a-ride - into our platform soon.

StartupDrive 2.0: open set

StartupDrive by Gazprom Neft has launched recruitment for the second acceleration program for startups in the areas of logistics, cargo transportation, online services for drivers, carsharing, gas station infrastructure and retail technologies, as well as other products related to the transport market.

The selection to the program is open, potential participants can apply through the official website www.startupdrive.ru. Open admission to the program will be supported by Disruptive.vc and will end on December 20, 2019. Selection results will be announced on January 24, 2020. A three-month intensive will be held by 10 startups.

We do not work with ideas, so we expect at least an MVP from accelerator participants. It is important for us that a startup has a mature MVP and that the need that this MVP fills is confirmed by users. That is, they must have confirmed product hypotheses, a mature MVP and, preferably, first customers. At this stage, we understand that we can help a startup refine its product, grow its user base, and improve its business. If there is no product, helping it develop and enter the market is a long process.

We are interested in helping startups that have the potential to develop our business and its ecosystem. We strive for horizontal business diversification by providing customers with new related services that are not directly related to the gas station network. The acceleration program gives an understanding of how interesting the product is to users, our customers. After the completion of the first acceleration program, it became clear that the format was successful for the company and for startups. Therefore, I repeat, our goal is to scale a startup, not invest in it, although I do not exclude this possibility if we are interested in the business model of a particular startup.

The acceleration program keeps our employees in good shape, developing internal entrepreneurship. People begin to look more broadly at things, at the client and his needs, and begin to see opportunities to meet these needs.

Long-term partnership, for example as a minority shareholder. The company will give the startup a resource: a client base or special conditions for cooperation.

What is the current situation in the retail market of motor fuels?

I would say that the situation is not easy. The market has changed: since the end of last year, it behaves atypically. It was during the period that has always been the most profitable for retail - and these are the last and first quarters - this year the margin went to the peak. Literally. We did not have a loss in retail even in the first, most difficult, quarter. But we also earned, to be honest, a little. I regard the current situation more as a reason to mobilize and a kind of test. For this reason, we changed the model of organization of the sales business so that it would be possible to work in any market conditions.

What happened? Why has the market changed so dramatically?

The market is changing primarily due to the amount of oil products. This year, the product on the market has become smaller. Why did it happen? Because several factors played at the same time. First, the next stage of the introduction of the tax maneuver has begun. For the most part, Russian refineries have undergone modernization and increased the depth of processing. But there are still plants in the country where the share of fuel oil in the total balance of oil products reaches 40%. For them, a new round has become critical - processing has become unprofitable. They began to cut production for the domestic market. Exports - whether crude oil or diesel - have become more profitable for them.

All this happened against the backdrop of a number of factories leaving for scheduled repairs and reconstruction. But if the market was ready for the planned reduction in volumes - reserves were created in advance and measures were taken to replenish the missing resource, then it was not for an additional one.

There are fewer products on the market. The wholesale price has gone up. Retail margins have collapsed. The increase in the excise tax on fuel exacerbated the situation.

Do you think it's long term?

I don't think it matters a lot whether it lasts or not. Marginality in retail is small in principle. We start from this. For example, both in the States and in Europe, the retail margin of gasoline has not exceeded 6–8% for a long time. This is offhand. In Russia last year, the margin of gasoline in retail was 11% on average for the year. This year, we can say that we have approached the international standard. But here it is important to understand that margin is not yet income. This is, roughly speaking, the difference between the purchase price and the sale price to the end consumer. It "protects" all the direct and indirect costs incurred by the gas station. At best, 2-2.5% goes into the profit of the retail business. This is if we are talking about EBITDA margin.

A natural question arises: are these 2% worth the money and effort that an oil company spends on developing its own retail network? Still, retail is not the main business of VIOCs.

We don't ask ourselves that question. You understand, we have a continuous production. If there is no sales, production stops. And our own retail network is, first of all, a guaranteed sales channel. In America, oil companies just came to the conclusion that 2% is not a reason to maintain their own retail network. Therefore, they eventually abandoned their own retail. But they could afford it. Because they can guarantee constant sales by long, ten-year contracts with the owners of points of sale.

But in Europe the situation is different. There is more stringent antitrust regulation. In the European Union, for example, the length of exclusive contracts for the supply of fuel to dealers is limited to five years, as far as I remember. Therefore, in order to guarantee itself a constant supply, the oil company needs stations to be owned. Even where large hypermarkets such as Carrefour and Tesco entered the fuel market and effectively deprived them of profitability in the retail sector. In order to somehow compete, oil companies had to seriously deal with the efficiency of their own retail chains.

And in Russia, which scenario seems most likely to you?

I'm not ready to speak for the entire market. For ourselves, we see the solution in finding a balance between the guarantee of constant sales and the costs associated with its provision. Our task is to sell the maximum volume with minimum costs. This problem is solved at several levels. First, at the level of organizational and managerial decisions. This is when costs are reduced, for example, by transferring functions for servicing stations to outsourcing. And additional traffic and income are generated through the development of a non-fuel component - a cafe, a store, and so on. The next level is more subtle. To manage costs and attract additional traffic, we use a partner resource. The next level is digital. This is the creation of a single technological platform for all sales. We used almost the entire resource of organizational and managerial decisions. Now we are closely starting to work with partners and create a sales platform.

What do you mean by working with partners?

I mean involving partners in the operational management of our own stations. After the reorganization, we see profitability not just in every channel. We see the profitability of each object - that is, each individual gas station. And the reasons why one station has a high profitability, while another has a low one. This gives us the opportunity to calculate the optimal operation model for each station - depending on the location, traffic and market. These are fine tunings. There is a pool of stations that operate as efficiently as possible under our own management. There are stations that will be more efficient if they are switched to automatic mode. And there are stations for which the optimal solution is to give them to a partner for operational management.

This approach to managing a pool of own stations is a common global practice. This is exactly the path that European oil companies took at the time. For example, BP itself operates only a third of its stations. The remaining stations are operated by partners.

How exactly do you plan to involve partners?

We have chosen three basic models for working with partners. The station is transferred to the management of the dealer. The station is transferred to the management of a professional retailer. The station is transferred to the operational management of an individual entrepreneur. Each of the models has its own nuances. But the principle is the same for everyone. The company manages the revenue side - fuel supplies, and the partner manages the expenditure side - the operation of gas stations. At the same time, the partner is directly interested in both the growth of pumping and the reduction of operating costs. Because his income depends on it. We have been running pilot projects since 2014. We are satisfied with the result. Let's see what the effect of scaling will be. In any case, we are not going to transfer all our stations to partners. Only those that the partner can manage better than we can, for one reason or another.

Are there any fears that partners will not be able to provide the company's service quality standards, and the product itself? No wonder they say - if you want to do well, do it yourself ...

We reserve the quality control of fuel and service. It's not even discussed. All partners are subject to a strict condition - they must comply with our internal operating standards.

We control all stations that operate under the brand name of the Gazprom Neft filling station network in the same way, according to a single corporate standard. Regardless of who manages them - we or a partner.

One more question arises: the company has a very well-developed competence in “management of ancillary business”, and has its own successful non-fuel brand. Why do you need a professional retailer? Is there a contradiction or even a conflict of interest here?

There is no contradiction. There are two complementary stories. A professional retailer operating in the industry, in any case, has more capabilities and competencies in terms of organizing the work of the store than an oil company. It can qualitatively change the supply of goods at the station. And this is additional traffic and additional liters of the sold product. We do not give all the stations to the management of retailers. Only those whose location allows the store at the gas station to be converted into a “convenient store” format with an expanded range of products, including fresh products. We can do it on our own. The question is why. A professional will do it better and at a lower cost. This is first.

So you think that the future in fuel retail lies in the development of the non-fuel component of the business?

The non-fuel business is a private matter. The key story is elsewhere. We started the conversation by saying that fuel retail is a low-margin business. Its profitability directly depends on how efficiently the company manages costs. Therefore, the future - it is obvious - for a solution that will allow you to reduce costs by a multiple. And I believe that there is such a solution - this is a sales platform. We have a manufacturer - an oil company. There is a product. There is a consumer. There is a filling point. There are partners and other interested parties. The platform I'm talking about is a digital platform where any of the market participants instantly receives the solution they need. The consumer receives the product on certain conditions. Partner - a contract for the management of the station. Third-party gas station - a contract for the supply of fuel. Etc. And the oil company - the owner of the platform - receives sales. At the same time, volumes grow multiple - due to the speed and number of transactions. And the costs are minimal.

We have all the main components of the business component of the sales platform. Actually, these are all our businesses - not only retail, but also small wholesale, and corporate sales, and delivery, and storage, and transshipment, and quality control. With the technological component it is more difficult - after all, the degree of automation and penetration of digital technologies needs a very high one. But we are already working on this.

So. As soon as we combine the business and technology components into a single ecosystem and provide access to it from the external loop, we will create a sales platform. Once we create it, we will change the landscape of the market. Of this I am convinced. Because it's a completely different level of cost control. Now unattainable.