Gas stations battle using coffee

The nation's top two oil suppliers probably never imagined that they would be selling lattes and blenders in the course of operating their service stations, but that is what they are doing.

Ever since a price war broke out in 2002 when relative newcomer National Petroleum Corp (全國加油站) slashed prices in an attempt to capture market share, the companies have been forced to seek creative methods of attracting customers.

National Petroleum entered the market in 1989, thereby spurring a spate of competitive price wars and giveaways between it and its rivals, state-run Chinese Petroleum Corp (CPC, 中油) and Formosa Petrochemical Corp (台塑石化).

In 1999, the company sought to garner loyal customers with membership cards that offer cash rebates and discounts to cardholders. The company says these tactics have been proven to work.

Within 15 years, it has opened over 80 gas stations nationwide and secured over 75,000 members.

"Like the high-tech industry, the oil market is entering a micro-margin era, and therefore it is necessary to diversity the range of our operations," National president Tsai Chia-chang (蔡佳璋) told the Taipei Times yesterday.

National Petroleum now plans to upset its two bigger rivals by forming strategic alliances with a slew of retailers, such as Tsann Kuen 3C (燦坤), President Chain Store Corp (統一超商), Dante Coffee Shop (丹堤咖啡) and Eastern Home Shopping Network (東森購物).

Under the partnership, National Petroleum will provide discounts and coupons for daily necessities, electronic appliances and coffee instead of the tissue and bottled water.

Besides helping boost gasoline sales, non-gasoline business is becoming a large slice of company revenue, thus raising the prospect of an even larger price war.

With strong backing from Jih Sun Bank (日盛銀行), which issues National Petroleum's credit cards and financed several million dollars in marketing fees for the company, National Petroleum last week announced a discount measure that was tantamount to cutting its fuel prices by NT$2.5 per liter, and diesel fuel prices by NT$1 per liter at all of its service stations.

The promotion is set to be in effect for the entire year. Chinese Petroleum, Formosa and smaller competitors such as Mech-President Corp (統一精工) have no choice but to cut their prices whenever National Petroleum launches a price war and stocks up on gifts with which to lure customers.

National Petroleum reported revenue of NT$13.4 billion last year, up from NT$11 billion in the previous year.

Non-gasoline business accounted for 36 percent of its earnings, a number that Tsai said he hopes to continue increasing.

Commenting on its smaller rival's flexible marketing strategy, Liao Tsang-long (廖滄龍), Chinese Petroleum's deputy director of industrial relations division, said gas stations may no longer be expected to be merely gas retailers.

"But the product itself is still the most important element in running the business," he said.

Chinese Petroleum has 1,694 gas stations nationwide.

"Many consumers still stick with us despite the incentives provided by competitors. This is why we hold up to 70 percent of the market share 15 years after the opening up of the oil market," Liao added.

Matiz Lin (林明憲), a public relations official at Formosa Petrochemical, refused to comment on competition with National Petroleum. National began buying its gasoline and diesel products from Formosa Petrochemical in 2001.