(REUTERS) – If more vehicles are going to be powered by electricity, what is going to happen to the ubiquitous petrol stations?
The head of Thailand’s biggest petrol station network is betting US$1.5 billion (S$2 billion) that motorists will soon be stocking up on a different kind of fuel – coffee.
That is the sum that Ms Jiraporn Kaosawad, chief executive of PTT Oil and Retail Business (PTTOR), is placing on rolling out thousands of coffee shops at home and abroad, along with other non-oil businesses, as global auto and fuel players gear up for a future dominated by electric car growth.
A month on from Thailand’s biggest initial public offering of the year, Ms Jiraporn’s plans for the Cafe Amazon business – already the No. 1 Thai coffee shop chain – present PTTOR’s take on the task facing oil majors from BP to Total: How to maximise profit from fuel networks as drivers of the future wait for their electric vehicles (EVs) to be charged up.
These strategies are dependent on mass-scale take-up of EVs, now being promoted by governments and international organisations as one key to capping and ultimately reducing the emissions that stoke climate change.
“Our investments and partnerships have to build on the company’s strength, and align with consumer demand,” Ms Jiraporn told Reuters recently. “Charging EVs takes about 20 minutes. While you wait, you can have a meal, buy things in the service station.”
PTTOR has 2,000 petrol stations across Thailand and plans to add another 500 by 2025, while ramping up the number that are equipped with EV charging points to 300 by next year from just 30 now.
That surge will come as the Thai government seeks to implement plans to have 1.05 million EVs on the road by 2025, up from current levels of about 200,000.
To be sure, PTTOR’s expansion plans beyond oil require heavy investment, with oil business still accounting for 90 per cent of its revenue. Some point out that its dominance within Thailand will not do anything per se to further its international ambitions.
“The retail business has had a competitive advantage in Thailand,” said Maybank Kim Eng analyst Kaushal Ladha. “This advantage, of course, will be significantly reduced if it goes to international markets.” Still, PTTOR has deep pockets and strong backing.
State-owned energy giant PTT has a 75 per cent stake in the company after it raised US$1.8 billion in its listing last month.
Ms Jiraporn said PTTOR’s plan to invest 74 billion baht (S$3.16 billion) over five years to expand will be heavily skewed towards non-oil operations, which last year carried an operating profit margin of nearly 20 per cent, against a skinny 1 per cent to 2 per cent for oil sales.
“The investment will be heavily used in the first two years,” she said, with 65 per cent allocated to its non-oil business, overseas expansion, and new ventures, while 35 per cent would be for oil.
Though not alone, coffee is the company’s best-known product line outside oil.
Cafe Amazon started out in 2002 as outlets offering coffee, cookies and other goods for motorists at petrol stations, before expanding into a 3,000-store Starbucks-like chain, including shopping mall and standalone outlets. PTTOR’s goal is to expand that to 5,200 in the next five years, Ms Jiraporn said.
Abroad, it operates an outlet at Singapore’s Jewel Changi Airport as it seeks insights into adapting business for international customers. It also counts branches in Cambodia, Japan, Oman, Vietnam and China.
PTTOR’s investments beyond coffee include 500 million baht for a 20 per cent stake in an organic food restaurant, Ohkajhu, and it has announced a partnership for cloud kitchens – spaces where restaurateurs cook meals solely for delivery – with a food delivery platform, Line Man Wongnai.
For investors, though, the main point of interest and appeal in the PTTOR model remains the retail network of stations that can provide more than petrol.
“The attraction is the station, not the oil,” said prominent Thai investment guru Niwes Hemvachiravarakorn, who does not own shares in PTTOR.
“The petrol stations have become a centre for travellers, and through this, they can add products and services continuously to expand the business – use the real estate to sell fried chicken,” he pointed out.