Case Study Ril Petrol

Industries Limited

CaseStudy: Reliance Petroleum Retail

By: GarvitGarg IIPM, Bangalore

Case Description • RIL had accounted for around 3% of the total petrol pumps operated in the country. • Owned 1432 pumps • 900 were owned by the company and the remaining were dealer owned • Gujarat with 246 outlets, followed by Maharashtra (160), Uttar Pradesh (132), Andhra Pradesh (129) and Rajasthan (107)

Cont.. • RIL entered the petrol pumps business in 2005 • Selling the fuel at a marginally higher price compared to the petrol pumps run by government-owned oil marketing companies like IOC, HPCL, and BPCL. • Did good business because of good quality fuel in the right quantity and provided customers with additional services like windscreen cleaning, car washing, etc.

Cont… • In 2006-07, RIL sold the fuel at a price matching the governmentowned outlets due to fall in crude prices in the international markets • Gained 14% market share

Year 2005-06

The Industry Observed a Paradigm Shift Fleet services Efficient fleet operations Emergency services Vehicle tracking MIS services

Quality and Quantity Through technology

Reliance’s Uniqueness

Drivers Loyalty Food Showers and Toilets Secured Parking

Superior customer experience Courteous service Convenient payment mechanisms

Q&Q through use of technology enhanced customer satisfaction.

Quantity & Quality Assurance at Reliance

 Replenishment

 Comprehensive

system linked to stock monitoring at RO  Product (tanker) filling by bulk meters and automated process

sealing mechanism  Vehicle (tanker) monitoring and tracking system

 Company owned and managed inventory  Central monitoring of bulk stocks through automatic tank gauging at the ROs  Online monitoring and reconciliation of stocks and sales  Remote diagnostics of key components in dispensing units

 Accurate preset premix deliveries to 2/3 wheelers  Electronic calibration of metering assembly of dispensing unit for accurate delivery

Technology based process make Q&Q a reality from end to end in an integrated format

Rewards & Recognitions Reliance Petroleum Retail  Innovative Retail Concept of the year – Franchise India Awards 2005  Franchisor of the year – Franchise India Awards 2005  Innovation & Technology in Franchising – (The Reid & Taylor Awards for Retail Excellence ) at The India Retail Summit 2005  Retail Concept of the year for Reliance Truck Stops – Retail Awards at India Retail Forum 2005  Golden Peacock Award in the category of Eco – Innovation for Truck-Stop as a concept – WEF

Story Changed by mid 2007

Change in Market • Rise in Crude oil prices • Differences in the price became pronounced • Sales gone down

Competitor’s Analysis • Public Sector sold the fuel at a price lower than their cost of production • Public sector sold the petrol at a loss of Rs 13.97 a litre and diesel at a discount of Rs 20.97 per litre. • Subsidies by the government • This revenue loss is made up by the Government through issue of oil bonds and subsidy share from upstream firms like ONGC and GAIL

Impact on Reliance • Increased the Price by 6 Rs for petrol & 14 Rs for Diesel • For being competitive they sold at a lesser rate then cost of production • Lost around Rs.3 on a litre of petrol and around Rs.6 on a litre of diesel • One more interesting Fact is Reliance couldn’t use the fuel from its two refineries at Jamnagar in Gujarat because they have been converted into only-for-exports units

Story Ends… In May 2008, Reliance Industries Limited (RIL), one of the largest private sector companies in India, owned by Mukesh Ambani, announced that it was shutting down all its petroleum retail outlets (RO) after incurring a loss of Rs. 8 billion in 2007-08.