Coffee, cookies and electric cars: Thai fuel giant bets billions on gas station of the future

[webfact]

A cup of Cafe Amazon coffee is pictured in Singapore's Jewel Changi Airport March 27, 2021. Picture taken March 27, 2021. REUTERS/Dawn Chua

 

By Chayut Setboonsarng

 

BANGKOK (Reuters) - The head of Thailand's biggest gas station network has $1.5 billion that says motorists will soon be stocking up on a different kind of fuel - coffee.

 

That's the bet that 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 near future dominated by electric car growth.

 

A month on from Thailand's biggest initial public offering of the year, 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 near future wait for their electrics cars to be charged up.

 

These strategies are dependent on mass-scale take-up of electric vehicles (EV), 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," Jiraporn told Reuters in a recent interview. "Charging EVs takes about 20 minutes, while you wait you can have a meal, buy things in the service station."

 

PTTOR's network now stands at 2,000 gas stations across Thailand: it plans to add another 500 by 2025, and to rapidly ramp up the number that are equipped with EV charging points, to 300 by 2022 from just 30 currently. 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% of its revenue. Some point out that its dominance within Thailand won't 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 Pcl retains a 75% stake in the company after it raised $1.8 billion in its listing last month.

 

MORE THAN GAS

Jiraporn said PTTOR's plan to invest 74 billion baht ($2.39 billion) over five years to expand will be heavily skewed toward non-oil operations, which last year carried an operating profit margin of nearly 20%, compared to a skinny 1%-2% for oil sales.

 

"The investment will be heavily used in the first two years," she said, with 65% allocated to its non-oil business, overseas expansion, and new ventures, while 35% would be for oil.

 

Though not alone, coffee is PTTOR's best-known product line outside oil.

 

Cafe Amazon started out in 2002 as outlets offering coffee, cookies and other goods for motorists at gas 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, Jiraporn said.

 

Abroad, it operates a store in 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% 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 gas.

 

"The attraction is the station, not the oil," said prominent Thai investor Niwes Hemvachiravarakorn, who doesn't own shares in PTTOR.

 

"The gas stations have become a centre for travellers and through this they can add products and services continuously to expand business – use the real estate to sell fried chicken."

 

($1 = 31.0000 baht)

 

(Reporting by Chayut Setboonsarng; Editing by Kenneth Maxwell)

 

-- © Copyright Reuters 2021-03-29

 

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[Bluespunk]

1 hour ago, webfact said:

That's the bet that Jiraporn Kaosawad, Chief Executive of PTT Oil and Retail Business (PTTOR), is placing on rolling out thousands of coffee shops at home and abroad,

Just what the world needs, more coffee shops...

[Enoon]

 

56 minutes ago, Bluespunk said:

Just what the world needs, more coffee shops...

 

In the case of Thailand at grossly inflated cost relative to incomes.

 

2019 price for their medium black coffee was (is?) 55baht (about 16% of Thai daily minimum wage).

 

That's the equivalent of paying £10.12 (approx 16% of UK minimum wage) for a cup of the same at a similar UK franchise..........about 4 times as much as it actually does cost.

 

It's just one example.

 

Thai people pay relatively more, for all sorts of goods, in Thailand, than people do in the UK.

 

 

[Pattaya Spotter]

1 hour ago, Enoon said:

 

 

In the case of Thailand at grossly inflated cost relative to incomes.

 

2019 price for their medium black coffee was (is?) 55baht (about 16% of Thai daily minimum wage).

 

That's the equivalent of paying £10.12 (approx 16% of UK minimum wage) for a cup of the same at a similar UK franchise..........about 4 times as much as it actually does cost.

 

It's just one example.

 

Thai people pay relatively more, for all sorts of goods, in Thailand, than people do in the UK.

 

 

Americanos and cappuccinos cost me 25 baht at "Sevens" All Season's Coffee...and a nice cuppa it is too.

[starky]

I could say what I thought of Amazon coffee and their grand plans but it potentially could be seen as defamatory 

  Would also be keen to hear what the owners of all those petrol stations would have to say knowing that their petrol stations are not about selling petrol.

   Does he truly believe people gather at petrol stations not for the petrol but for the lovely coffee and fried chicken. 

[Ombra]

16 hours ago, Bluespunk said:

Just what the world needs, more coffee shops...

More mediocre coffee shops

[gunderhill]

Last  thing I'd  want to be next to is a bunch of Thais  slurping coffee, thank goodness for home charging, in the meantime bought two new diesels.

[newnative]

14 hours ago, starky said:

I could say what I thought of Amazon coffee and their grand plans but it potentially could be seen as defamatory 

  Would also be keen to hear what the owners of all those petrol stations would have to say knowing that their petrol stations are not about selling petrol.

   Does he truly believe people gather at petrol stations not for the petrol but for the lovely coffee and fried chicken. 

     I think you're missing the point a bit.  When my partner and I travel we always look for a PTT station to gas up, if one is available.  For us, they are simply offering a superior product than the other gas stations.  Usually the facility is newer, larger, well-kept, with often a small food court in addition to the Amazon, and often a 7-11, as well. We can grab a bite to eat at one of the food stalls and a snack or coffee at the convenience store.  They often will also have the cheaper E85 gas that we like, which some gas station brands don't carry at all.  Of course, people stop for the gas as the main reason, but as long as we're stopping we like the added things we usually find at a PTT station, especially when we are travelling.  

[PETERTHEEATER]

I can see it now. A huge facility on the coast near Bangkok producing different grades of liquid coffee. Giant tanker trucks hauling the product across the country and filling the tanks at PTT stations. Uniformed female pump attendants filling driver's mugs alongside colleagues dispensing gasoline and diesel.......????

[starky]

7 hours ago, newnative said:

     I think you're missing the point a bit.  When my partner and I travel we always look for a PTT station to gas up, if one is available.  For us, they are simply offering a superior product than the other gas stations.  Usually the facility is newer, larger, well-kept, with often a small food court in addition to the Amazon, and often a 7-11, as well. We can grab a bite to eat at one of the food stalls and a snack or coffee at the convenience store.  They often will also have the cheaper E85 gas that we like, which some gas station brands don't carry at all.  Of course, people stop for the gas as the main reason, but as long as we're stopping we like the added things we usually find at a PTT station, especially when we are travelling.  

Uh. I think they are actually talking about gearing up to when they won't be selling gas and see every pttor as being an ev charging station. So yeah pttor is a great gas station it's where I go but am I going there if they aren't selling gas? No. And how many ev charging stations do you think are required? Did you read the article? Would you go there if they aren't selling gas?  Heavily skewed towards non oil operations what ya reckon that means? 

  Of course non of this happens until Thailand becomes the EV hub of the universe probably next year.

[Caldera]

On 3/29/2021 at 7:40 PM, starky said:

I could say what I thought of Amazon coffee and their grand plans but it potentially could be seen as defamatory 

  Would also be keen to hear what the owners of all those petrol stations would have to say knowing that their petrol stations are not about selling petrol.

   Does he truly believe people gather at petrol stations not for the petrol but for the lovely coffee and fried chicken. 

 

I don't see your point. I know plenty of Thais who stop at PTT stations just to buy coffee at Amazon. Others stop for both. I think having both on offer is a winner.

[Puccini]

Filling up the tank of a an ICE (internal combustion engine) car from near zero to 100% takes a few minutes and you stay in your car while this takes place.

 

Charging the battery of an EV (electronic vehicle) from 20% to 80% takes considerably longer and you are free to walk about, drink a coffee, eat a snack or a full meal, do some shopping, etc during this time.

[RichardColeman]

I don't like coffee. And I guess it's hard to make the Amazon logo with a swirly t-bag

[SoilSpoil]

On 3/29/2021 at 7:40 PM, starky said:

I could say what I thought of Amazon coffee and their grand plans but it potentially could be seen as defamatory 

  Would also be keen to hear what the owners of all those petrol stations would have to say knowing that their petrol stations are not about selling petrol.

   Does he truly believe people gather at petrol stations not for the petrol but for the lovely coffee and fried chicken. 

Well, that's exactly what's happening.  Good coffee, 7-11, free and clean toilets, Export shops, food markets, and so on. Thai gas stations are fantastic, compared to decades ago.

[Ralf001]

If I have to sit there for an hour or two whilst my car charges I'd prefer a beer and massage than coffee !

[Denim]

6 hours ago, Puccini said:

 

 

Charging the battery of an EV (electronic vehicle) from 20% to 80% takes considerably longer and you are free to walk about, drink a coffee, eat a snack or a full meal, do some shopping, etc during this time.

 

You forgot grow a beard.

 

These new stations will need a lot more land to accommodate  the hundreds of charging points they will need during Songkran and other public holidays.

[connda]

It will be interesting to see the day come when it will take a vaccine passport to fill up with gas, LPG, or get an electric charge not less a coffee.  Coming soon I believe.