Arguably it was the single most fraught issue in retailing over the past two decades – shopper docket fuel discounts, which helped underwrite the emergence of the two dominant retailers, Coles and Woolworths, to control close to half of the national retail sales of petrol.
The value of that position of strength was on display last week with the sale by Woolworths of its petrol business to BP for $1.8 billion as the troubled retailer tries to revive its flagging fortunes.
For Caltex, the loss of the contract to supply Woolworths will see its share of retail fuel sales shrink from a combined 42 per cent, when including the lower-margin volumes supplied to Woolworths, to just 18 per cent, while BP will bulk up to an estimated 39 per cent of the national market from its present share of 15 per cent.
Perhaps unsurprisingly, faced with the loss of volume Caltex has been talking down the merits of the Woolworths business, arguing that shopper dockets are no longer the drawcard they used to be when it was a common sight for shoppers to make multiple transactions at the cash register so they could maximise the number of shopper dockets so they could receive the fuel discount at the retailers affiliated petrol retailer.
"We are seeing a decline in supermarket fuel redemption volumes," it said when announcing it was the underbidder for the Woolworths business, but it refrained from elaborating when questioned for more detail.
Russell Zimmerman, executive director of the Australian Retailing Association, said the emergence of Aldi as a significant force in supermarket retailing with a highly focused product offering at prices aimed at undercutting the major retailing chains, along with the lower oil price, had eaten into the competitive worth of discounted fuel offers.
And then there are the fuel monitoring websites which can highlight any number of petrol stations in your neighbourhood with cheaper fuel than you can get under the discounted fuel offers from Coles and Woolworths.
"A lot of people aren't as fixated on the dockets as they once were – and the fuel discounts have come down," said Mr Zimmerman.
"Also, petrol stations which do not have the shopper docket discount are often cheaper than those who do, so that incentive is not there."
Oil price watched
Any future rise in the price of oil could revive the popularity of the dockets in the future, he said, but at least for now it is less of an issue now than it was.
"It's a watching brief," Mr Zimmerman said of the likely impact of the switch to BP from Caltex in supplying Woolworths-branded petrol stations.
"If Woolworths doesn't own the outlets its difficult to offer more than 4¢ a litre discount."
In a paper for the Melbourne Business School, Stephen King, a former professor of economics at Monash University who is now with the Productivity Commission, argued the shopper docket discount served to distort consumer behaviour.
"In the case of supermarket-gas deals ... bundled discounts of unrelated products should be regarded with suspicion," he wrote in a paper with fellow academic Joshua Gans.
The last time the retail industry was up in arms over the discounts was in 2013 when Coles and Woolworths ramped up their fuel discounts, offering 8¢ a litre, and occasionally more, during 2013 and 2014. The ACCC forced a ceasefire, late in 2013, to limit the discount to 4¢ a litre, and apart from a brief outbreak in early 2014, the 'ceasefire' has remained in place.
With the change over to BP from Caltex to take a year to come into effect, Caltex has snapped up assets in Victoria and New Zealand to limit the loss of volumes, and there is also the chance it could continue to supply some Woolworths outlets. There is also talk it could be on the lookout to buy more assets.
"BP does not have sufficient distribution in Sydney and Melbourne, and currently uses Mobil (Victoria) and Vopak/Vitol (NSW) import facilities," Citi analysts told clients in a research note following Wednesday's deal, "at which sufficient spare capacity does not exist for Woolworths volumes".
"The options for BP would be to spend money on capex (to replicate Caltex's current network) or alternatively pay to use Caltex's established network."
The Citi analysts reckon up to 20 per cent of the Woolworths volume may be divested to win ACCC approval for the deal, which could flow to Caltex or other suppliers.
In 1997 the market share of non-branded independents was estimated at 20 per cent of sales volumes, which had risen to around a quarter a decade ago. At the same time there has been a decline in the number of petrol stations, from around 20,000 in the early 1970s to around 8000 at present, although volumes sold per outlet has risen.