SEAOIL expansion to focus on underserved markets

SEAOIL, already the country's largest independent oil company, is branching out toward the hugely underserved markets, mainly in the Visayas and Mindanao, in line with its plan to join the ranks of the major petroleum players by 2011.

Since it started in 1997, the Filipino-owned biofuel pioneer has grown its retail gas stations nationwide to 112, with 125 more set for roll-out within the year. In four years' time, the company is targeting a 500-station network, making it the third biggest in the country.

Based on its market study, SEAOIL said the current downstream oil sector is still largely underserved by the existing 3,500 retail stations scattered around the archipelago composed of more than 7100 islands. To address this need, the company will boost its retail presence nationwide, aided by its attractive franchising program.

While Petron, Shell and Chevron, the three major players, still dominate the liquid fuel retail market, their combined market share has decreased from almost 100% in 1996 to approximately 85% in 2006. In contrast, independent players - those that came in upon the deregulation of the downstream oil industry - have captured a steadily growing share of the petroleum retail market. As of end-2006, the combined market share of the independent players was 14.6%.

Since 1998, 62 independent players, including SEAOIL, Total, Flying V, Eastern Petroleum, and Unioil have invested heavily and built several hundred new retail stations. Based on Department of Energy statistics, the local gasoline stations of independent players increased from 112 stations in 1999 to 622 stations in 2006 with SEAOIL having the most number of retail outlets.

Due to SEAOIL's aggressive expansion of its retail network, especially in the underserved areas of Mindanao and the Visayas region, where it ranks as a strong player, it has been able to capture approximately 3% of the total industry market share.

In terms of market share of the independent players, it leads the field with a 17% market share. More than half (57%) of SEAOIL's existing stations are dealer-owned and operated; 36% are company-owned and dealer-operated; and only 7% are company-owned and operated. However, 68% of the outlets are in Luzon - particularly in Metro Manila - while its presence in the Visayas and Mindanao only comprise 5% and 27%, respectively.

The company said it is presently exploring expansion opportunities in Cebu, Davao and Zamboanga in order to better serve its retail network expansion in the Panay Islands and other strategic areas in the Visayas and Mindanao.

"Most of the development will be experienced in the Visayas and Mindanao region where prospects for growth are still vast," said Francis Glenn Yu, President of SEAOIL.

With the growing number of overseas Filipino workers (OFWs) looking to start a business, SEAOIL said it has experienced a great influx of franchising inquiries from this segment as well as from the emerging middle class.

SEAOIL said its innovative low-cost franchising packages have largely contributed to the expansion of its retail network. These franchising packages are among the most affordable in the Philippine oil industry and can be tailored according to an investor's available capital.

To provide a low capital option for interested franchisees, the company developed the SEAOIL Express Station with modular station design, the first of its kind in the industry. Furthermore, it provides support programs such as credit terms, company-shouldered branding initiatives, and margin support programs.

SEAOIL offers two forms of franchising packages: a dealer can choose to develop a station from the ground up under the DODO (dealer-owned and dealer-operated) option; or he may opt to franchise an existing station with proven revenue streams under the CODO (company-owned and dealer-operated) option.

Franchise fees range from P250,000 for Mindanao stations to P350,000 for Visayas and Metro Manila stations.

Under the CODO franchise option, investors may choose from two types of investment setups: under the straight lease franchise scheme, the dealer rents the complete SEAOIL Express Station from the company for a fixed amount each month; and under the cash bond franchise scheme, amounting to between P3-P5 million for CODOs, the dealer places with SEAOIL a cash bond at the start of his franchise which is returned at the end of the franchise period.

The flexibility of SEAOIL's franchise packages and its numerous franchise support programs, have earned it the 2006 Most Outstanding Filipino Franchise Award given by the Philippine Franchise Association and the Department of Trade and Industry. Due to the consumer-orientation of its products and services, the company has also been consistently awarded by the Consumer Union of the Philippines since 2004, the most recent of which is the 2007 Outstanding Retailer of Petroleum Products Award.

At present, the company is getting numerous inquiries and applications for sites that are available for franchising, with an average of a six-month waiting list for franchise applicants.