Total Jamaica says dealers have to share some costs
Published:Friday | April 1, 2011 | 12:00 AM
Mark Titus, Business Reporter
Gordon Craig, managing director of Total Jamaica, has dismissed as false reports that his company has been increasing the markup to its dealers beyond the suggested prices by Petrojam.
Reports had suggested that the company was phasing in an 80 cent surcharge on its dealers.
Craig, however, acknowledged that some dealers experience what he called 'periodic' hikes in their rental cost.
The French-owned company has grown its network of stations to 56 since its Jamaican entry in 2004 through acquisition of the National chain and, more recently, the Esso assets.
On Wednesday, the company launched a new range of premium fuel products at Devon House - the Total Premier Additive, developed by Total's research and development team in Europe for diesel and 87 and 90 gasolene, inclusive of E10 formulations.
Total said the diesel additive was a first in the Jamaican market.
Total Jamaica owns a majority of its outlets - Craig would not say just how many.
The Trinidadian, who has been employed to the French-owned oil firm for over 21 years, said all the outlets under the Total brand are maintained by his company and that the letter circulated to the dealers was to initiate discussion on how the company could recoup some of the US$11 million that was spent over the past two years to refurbish the outlets.
The company just completed upgrades at New Kingston, and is currently rebuilding the station at Manor Centre.
"The recent reports in the press that Total raised pump prices 70 to 80 cents above what Petrojam recommends is not correct," Craig told the Financial Gleaner.
"We spent all this money in the last two years on new lights, pumps, new shops and everything - all our suppliers - so we have to look to increase our prices to our dealers marginally, but it was a letter for discussion."
Still, Trevor Heaven, president of the Jamaica Gasolene Retailers Association, says his organisation has received a number of complaints from members about Total's policy and its impact on the gas price offered at their pumps.
"They are very concerned, because their customers are now complaining about the higher than normal cost for fuel," Heaven said.
But Craig argued that with the company faced with increasing costs and having invested heavily in upgrading the outlets, "the dealers who are benefiting from more customers, more businesses, , more sales", have to bear some costs.
The stations owned by Total are run by selected dealers under an operating lease agreement.
"Rentals are increased from time to time based on the commercial realities of the market, because we provide the facilities, we maintain the facilities, we replace all equipment. The dealers are not faced with any of those facility costs," said the MD.
"So on an annual basis, we review what's happening with commercial properties in the market in general, and in some cases have not increased the rental for several years, while, in some cases, have had annual increments, but they are always in line with what the market is doing," he said.
Total Jamaica stakes a claim to 30 per cent market share. The Texaco Jamaica assets are up for sale by its American parent, but Craig says Total has no plans for further acquisitions.
"If we do any other acquisition it will be organic growth, so if there is a new housing development and we think it is viable to build a station or an individual selling a station, it might be considered," he said.
Craig would not say how much has been invested in their Jamaican operation to date, saying only that it was "hundreds of millions".
Asked about the returns on the investment, he said: "Ideally, most corporate operation would set a benchmark of 15 per cent, but I can assure you it is far lower than that right now. Even though world prices have been driving it up, the margin of the dealers, and Total, have been compressed over the passed two years."