Kuzminblog

Changing the world for better... at least the world of gas stations)

Why retailer needs its own chain of gas stations?

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On 03.03.2016

In Gas station chains - non-fuel businesses

Walmart to create its own network of filling stations

What is more important for a modern gas station- gasoline or store? For western retailers this issue has beenresolved long ago. Fuel sales attracts more buyers, increasing efficiency and allowing the store to recoup substantial part of the costs for the maintenance of core business. In the Russian consciousness gasoline has the added value that is not comparable to any “related” business. The top priority for any manager of Vertically Integrated Oil Company will be the fuel. Why? Because the fuel is a staple of any oil company focused exclusively on oil production and refining.

In the West there always have been the retailers owning gas station chains. Thus it is not surprising that the development of its shops and cafes is considered by them as a priority business. (Couche-Tard, Costco, 7-Eleven, Tesco). The combination of classic retail and gas stations works well at improving the traffic in shops in terms of attracting additional customers. In Russia, such a model was implemented by “Lenta” and Neste without unified business management center, each of the partners was to manage their part of the project. But we must remember that Walmart is the world’s largest business network, the scope of future reforms is impressive.

You want something done well – do it yourself

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Coffee anti-franchise or long live individuality!

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On 18.02.2016

In Gas station chains - non-fuel businesses

The article on “anti-francise” became one of the most popular materials of www.vc.ru over the past week! Thanks to everyone who showed their keen interest and participated in the discussion in the comments. Below are a slightly abridged translation.

Coffee anti-franchise or long live individuality!

I got interested in the theme of the acquisition of various franchises after my close friends, whose children have grown up to the age of an earning money to live independently, several times invited me as a business consultant, waiting for an expert to answer the question: “To take or not to take the franchise? And if we take it, which one?”.

The younger generation which does not get disconnected from the social networks, found it a tempting offer to open a franchise as their own business – a “coffee to go” sales point. This idea has been picked up on the web-site “VKontakte. For parents, it is encouraging to hear that the children want to “develop their business by buying a franchise that guarantees success”, but our generation can’t be fooled by these tricks. Our “internal filter” was originally set up to fight the tempting offers from the category of “Pay me and become rich”, being affected by business experience in the 90s. It was curious to see what “VKontakte” had to offer. Alas, the more I studied the issue, the more i got turned away from the idea of such a franchise.

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The processing company as a tool for business processes’ automation of gas stations’ non-fuel businesses

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On 04.02.2016

In Gas station chains - non-fuel businesses

Non-fuel businesses of gas stations are typically a cafe and a shop. Chains of gas stations in terms of the traditional retail have too many specific features.
For example, for a “normal” cafe selling 100 cups of coffee a day is nothing special, no big deal. Whereas to the gas station it is a landmark achievement.
Same thing happens with the store sales – each individual station’s sales volume is small, impressive numbers add up when hundreds or even thousands of stations are summed up. But there is a problem of a different level. For example, a station can make the order of 500 rubles, you can imagine a store that makes such a small order? The station normally doesn’t have a warehouse that can store the goods a month or two ahead of its coming to the shelves. Even common practices for the retail sector, such as “ADR” system, for the gas station are a great progress. Gas station chains don’t have efficient logistics partners or system of regular merchandising, and for retail professionals it is a different reality for sales, with different principle of pricing and different accents, rather than at the now habitual discounters retail chains, gathering in their stores most of the Russian customers.

Automation is the solution of your problems
RusHOLTS has been delivering the goods to gas stations chains for more than 15 years. During this time, step by step and through local implementation of projects, the company created a single unified instrument for Supply Management.
We started with the system “ADR”, which takes into account the internal organization of businesses of large gas stations chains. For example, the presence of 3-4 accounting systems in the infrastructure of a chain.
Gradually we worked through the automation of other business solutions. For example, we completely reformed the category “Cafe”. If done right, the coffee zone achieves rapid economic effect, because every third non-fuel sale is coffee. We have summed up the basis for the concept of “quality coffee” and defined the conditions under which 9 out of 10 visitors to the gas station say that coffee is good.

In the context of gas stations only flow-process model of coffee beverages sales is functional. In this case, 70% of the taste characteristics of coffee depends on the settings of the coffee machine, the rest – the quality of the coffee blend and the human factor.
So we recommend customers using automatic coffee machines, a special coffee blend for automatic coffee machines, certified service center and remote monitoring via BMS Coffe Control system.

IT-solutions from BMS – is the first and important step towards creating a system of “smart gas stations”, the analog of “smart home” systems. BMS Coffee Control takes into account the number of drinks sold, sets formulation, captures cases of coffee machines’ breakdown, keeps the record of maintenance work, makes recommendations to remedy the situation, or automatically creayes repair applications. The staff is deprived of the opportunity to “forget” to wash the machine, fill in the coffee beans in the coffee machine or sell drinks for cash without the reciept.
For several years, the remote monitoring of coffee machines has grown into a complex cloud IT-solution – BMS Cloud.
Now specialists are working on the automation of merchandising, creating their own solution – the “Atlas of gas stations’ chain”.
All of these programs are in demand by the gas stations, and add up to one big solution, which we call ” processing company for non-fuel business of gas stations”. Processing in this case is a great tool for managing a pool of suppliers, contractors and service logistics company serving the chain. Processing company arranges activities of suppliers by automating the orders fulfillment and monitors the completeness of these orders automatically, too/

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Express-coaching for top officials in 30 minutes

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On 29.12.2015

In Gas station chains - cafe, Gas station chains - non-fuel businesses, RusHOLTS

This conversation has been translated in English with some abridgements. Full version >>

Line personnel from procurement departments is recommended to refrain from reading.

Alexander Kuzmin is an expert with over 20 years in non-fuel business of gas stations and the implementation of projects of its reorganization. With this huge experience, Alexander is ready to offer the plan for the changes to the chain of stations of the federal scale in just 30 minutes.

His partner in this conversation is the head of federal chain which is bringing together more than one thousand stations located over the entire territory of the Russian Federation. In our dialogue, he will be called the Leader.

Leader: Alexander, you promised to tell me about the most important changes that I need to carry out so that customers perceive our stations on a par with the best European chains. And you promised to do so in just 30 minutes.

Alexander Kuzmin: Before you begin the conversation i would like to clarify what are the specific goals you want to achieve?

Leader: For over the last five years there has been a significant strengthening of the position of vertically integrated oil companies, whose major shareholders are various state-controlled structures. In the eyes of the vast majority of Russian citizens oil companies and their corresponding chains of gas stations are clearly perceived as being a part of  the “state”. All attemps to prove them otherwise had the opposite effect.

Alexander Kuzmin: In simple terms, Russian drivers should take your gas station as being the same as “cool” foreign ones. Is that so?

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Gas stations’ non-core businesses processing – customer’s opinion

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On 14.12.2015

In Gas station chains - non-fuel businesses, RusHOLTS

Pain-in-the-assLESS or “Three in a boat: men, poverty and dogs”*

 

 «I have known a Russian learn Chinese within six months. English! they learn it while you are talking to them. The children play at chess and study the violin for their own amusement.

The world will be glad of Russia when she has put her house in order»

Jerome K. Jerome

The soviet film “Three Men in a Boat” perfectly captures the spirit of Jerome’s novel, although there’s a little that’s been left from the original masterpiece. The road sets a special mood and genre of ironic travel writing is very close to my working mood. The irony is the best way to survive the road adventures both for a traveling person and for the host country. There’s no such thing as perfect road, car, gas station, caf? in this world.  Instead there are cozy and clean, minimalistic and heaped up, making part of a chain or solitary places. You want to go at one gas station, the other one you want to pass.

“When we got to Datchet we took out the hamper, the two bags, and the rugs and coats, and such like things, and started off to look for diggings. We passed a very pretty little hotel, with clematis and creeper over the porch; but there was no honeysuckle about it, and, for some reason or other, I had got my mind fixed on honeysuckle, and I said: “Oh, don’t let’s go in there! Let’s go on a bit further, and see if there isn’t one with honeysuckle over it”.

History repeats itself several times, and the characters of Jerome were nearly left on the street without an overnight stay. Do you think that drivers choose gas station somehow differently? I can talk about the “rational” choice of the people for hours.

Contemporaries did not accept Jerome’s prose as the “real literature”, and yet hundred years later readers are still smiling over the adventures of his characters: they have the charm of spontaneity. It would seem that the Russian people should feel closer to “Journey from St. Petersburg to Moscow.” By the way, I can describe the exact location, range and volume of fuel sales, call the management and staff by their names, remember caf?’s menu in almost all of gas stations located alongside the road which once was traveled by Mr. Radishchev. What Thames and adventure of the George, Jim and Harris trio mean to me? But it seems that the irony is closer to my heart and soul than social satire. I smile once again, re-reading the description of the process of packing the road basket, comparing it to the formation of commodity matrix of a store in gas station and “heroes” of economic reports are no longer extras in a sad play staged day after day, not understanding the overall meaning or their own role.

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Remote coffee machines monitoring – Saving 2 billion. Part 4

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On 26.11.2015

In Gas station chains - cafe, Gas station chains - non-fuel businesses

Part 4. Remote monitoring of coffee machines

Dmitry Petrov: It’s not the first time I hear from you about the remote monitoring of coffee machines – what’s that?

Artem Astafurov: Remote monitoring and control system is designed to bring together in a single control network an unlimited number of coffee machines installed on your chain of filling stations, regardless of their location. The main functions of this system will be the remote control of the settings, on-line monitoring of technical condition, collection of statistical data, as well as the exclusion of the risks of abuse and / or unskilled actions by gas stations’ personnel and service engineers.

In addition, the remote monitoring system allows timely identification and prevention of attempts to change coffee machines or data-sensors settings. If you try make any unauthorized changes, the system automatically restores the specified configuration parameters, and in case of disconnection of hardware and software module, it will immediately report violations in accordance with information algorithm (sending notification in an agreed format – in the form of SMS or e-mail to the list of responsible recipients).

Dmitry Petrov: I.e. instead of choosing the “best” of beans, you are suggesting installing yet another IT-solution?

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Customer service

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On 20.11.2015

In Gas station chains - cafe, RusHOLTS

The way to a man’s customer’s heart is through his stomach. The girls also love a cup tasty coffee, and the long journey makes everybody equal. The role of the caf? at gas station is to provide a tasty meal!

Gas is the same and let’s say it is equally good or even great everywhere, but we brew some gourmet coffee and will treat our customer with tasty buns, and now he’s here to stay with us. Real life experts are rubbing their hands as if they were saying “Wait ‘till we’ll tell you”. And indeed they do tell a never-ending story about customer service.

Recently I have found on the Internet one such story.

It happens that two experts are looking at the same situation from different angles. It does not change the components of the situation – poor customer service is still being that way. But an expert on corporate culture sees a way out in the education of adults, which is a hard task. From where I stand it seems to be as one more validation of propriety of non-fuel business automated straight-line organization. I swear, half of the dialogue between the well-known business coach Konstantin Kharsky and an unknown employee of the gas station would not have happened even if only the business process was organized properly.

This is an audio recording of this story. >> 

I do not know the cost of a liter of gasoline

Drivers often choose the gas station not because of the cost of a liter of gasoline – over the last few years the prices in most gas chains have been almost identical. Chains are competing via related services.

If the driver can fill a full tank or refuel it at 1000 rubles – this is a good and profitable customer. This man before this whole story had no particular preference, but chose this particular chain as it  guaranteed the quality of fuel and related services. Pretty ordinary course of conduct of our time.

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Remote coffee machines monitoring – Saving 2 billion. Part 3

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On 13.11.2015

In Gas station chains - cafe, Gas station chains - non-fuel businesses

Part 3. «Doing like everybody»

Dmitry Petrov: Me, as the top-manager who must make decisions, so far I’m just confused by your comments. To clarify the question: “Where do I begin to quickly improve the performance of my coffee business? What do the market leaders do in this matter?”

Alexander Kuzmin: A standard way for the Russian CEO would be “doing like everybody”, but, alas, it’s not always the right one. I can not advise you any approach from those that are currently used by the leading retail players of the fuel market of the Russian Federation (as of 2014).

Take, for example, the competitive selection of coffee beans, commonly produced in the largest Russian chains of filling stations. In my opinion, this is a clear indication of misunderstanding of the very essence of the coffee business in filling stations.

Now it looks like this: the organizers of the selection committee shall convene a tasting, which includes 5-6 casual office staff workers. Each of the contenders for the supply of coffee beans prepare drinks, the Commission is trying them and fills the scorecards. By the results Commission determines whose coffee is most delicious. Such a choice is still based on the criteria of “like – dislike” and on a small sample of unprofessional respondents. Often these random people have no idea about the rules and methods of coffee tasting. For example, one member of such “commission” had to call an ambulance after tasting as the “expert” seven cups of espresso cups and five Americano cups in a row. The man simply had a heart attack. And you want to rely on his assessment of thirteenth’s cup of coffee taste?

But the real absurdity of such tastings that you evaluate the taste of the drink obtained only on the coffee machine, which the applicant brought to you.

Even if you require applicants to use a machine, installed on your gas station, then any other coffee machine of the same model with a slight change of settings will produce drinks with completely different taste from the same coffee blend. And none of the managers is able to control what configuration has one or another coffee machine installed at the station. The stations are spread over hundreds of kilometers – who and how will check the identity of the machine settings and uniform flavor of coffee? How to assess compliance with the real taste with which bidder has won the competitive selection? So lots of coffee machines, lots of taste options for coffee drinks, and all these variations have nothing to do with the one that you tried during the selection and you have no means of monitoring the process, except to drive around the stations and try coffee yourself. What is the sense in such a tasting?

Now, about the criteria for selection of coffee beans. Typically, as the object of selection a vague notion of “coffee bean” is used, without specifying the parameters of the blend even by arabica-robusta ratio. Using this, cunning bidders from the “famous” coffee companies use a “premium” blend of 100% Arabica, which has the average market price of 1200-1400 rubles per kilogram, and after winning the tender they supply chain of filling stations with a blend containing 60% or more of Robusta with average market price of 600-750 rubles.

Dmitry Petrov: I agree, tenders are very often meaningless and are only used to “drag” the right bidder to win. So I’ll just ask – do I have to choose a supplier of coffee beans? If necessary, how to do it?

Ksenia Van de Kamp: Supplier of coffee beans has to be chosen. But you do not need to arrange any meaningless performances for that. You or your appointed managers should just select one of the possible suppliers of high-quality coffee beans, agreeing on the price of supplies. At the same time you should be aware that the “quality beans for the automatic coffee machines” is a special kinds of roasted coffee that are the same from year to year and the content of aromatic components is supported regardless of the constantly changing environment in which new crops are ripening in the regions of coffee growing. To do so, frying companies need to procure blends with regard to the content of aromatics in each acquired batch of coffee beans. I.e. company-applicant must have the volume of purchases equal to the thousands of tons of coffee per year – it’s the only way to provide the production of blends suitable for the use in automatic coffee machines without the need for constant adjustments to their settings.

With all the abundance of frying companies there are very few that can actually comply with this requirement – no more than ten in the whole world. First of all, it is the leaders of the world coffee market in terms of sales – Dow Egberts, Mondelez, Lofbergs Lila …

If you want to select a supplier of quality coffee beans – invite representatives of five world leaders to negotiate and define the supplier by a better quotation on the coffee beans for automatic coffee machines. For your network you must choose one, universal blend suitable for black coffee (espresso and americano) and coffee with milk (cappuccino, latte). Practice shows that the optimal composition of such a universal blend should have arabica-robusta ratio of 80/20.

Dmitry Petrov: Can I select from the Russian providers offering premium coffees at better prices? Or even change the vector, drawing attention to the so-called “fresh-roasted coffee”, widely represented in our market. Personally, I think fresh-roasted coffee is quite a good idea.

Ksenia Van de Kamp: Yes, you can. But then, the task of achieving the same coffee taste at all gas stations of your chain becomes impossible. Here in North America, it is not considered a “bad behavior” to show the consumer the weaknesses of your rival, so let me tell you straight – Russian suppliers of coffee in the HoReCa segment tend to offer their own brands of coffee blends masked as European trademarks and not-fitting for the use in automatic coffee machines. Non-fitting in terms of achieving the same taste of coffee drinks at all gas stations, regardless of their location.

(Note. In 2015 RusHOLTS made a special coffee blend for automatic coffee machines under our customer’s private label. 1,5 years before this round table we sought the development).

“The Secret” of ensuring the same fermentation of coffee beans – the purchase of a special blend from a major supplier. Uniformity of coffee machines settings can only be achieved with the help of remote monitoring – there’s no other way.

Remote coffee machines monitoring – Saving 2 billion. Part 2

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On 06.11.2015

In Gas station chains - non-fuel businesses

Рart 2. You propose to replace “the art of the barista” by an automated technology?            Part 1.
Alexander Kuzmin: Absolutely. Gas station caf? is not a glamorous coffee shop. Business of gas stations is a continuous-process model, in which customers have a clear request for the speed of service delivery and quality of products offered. The staff caters to the flow of the gas station’s customers hurrying about their business who want to spend a minimum of time to refuel their car and do not plan to “linger” in the limited space of a gas station. Therefore, making coffee at the gas station is “entrusted” to automatic coffee machines, despite their high cost in comparison with manually driven ones.

Ten years ago, “premium” filling stations segment had a brief period of time during which the leader of the Moscow market had tried to use manual espresso machine, but later abandoned it in favor of a super automatic one. For you, the quality of the coffee beans is primarily determined by whether it is suitable for the use in professional automatic coffee machines installed at your gas station.

Dmitry Petrov: Why do you talk only about super automatic machines? It seems to me that a good coffee is an “alive” beverage and it only should be made manually. At least, this is the kind of coffee I prefer to drink. This usually determines my choice of coffee. You propose to replace “the art of the barista” by an automated technology. Will the result of such a replacement instead of a fragrant invigorating drink be a taste that only remotely resembles the taste of a “real” coffee?

Alexander Kuzmin: Your question already contains part of the answer. At the station works personnel without any special training as barista. Making coffee manually is not a part of their job description, so gas station operators do not have neither time nor the necessary qualifications.

Short-term training for staff will not solve the problem, because it gives only a superficial understanding of the topic and does not provide results of equal quality drinks throughout the whole chain. Let alone of an equally high level of quality. Therefore, the only solution for the given conditions is the use of professional automatic coffee machine which is properly configured and capable of producing required quality of the beverage in the required amounts with minimal staff’s participation in the preparation and service of the coffee machines.

Ksenia Van de Kamp: Business of selling coffee is based on repeated purchases. We, in the US market, see that the mass consumer is inclined to assess the quality of the coffee only in terms “tasty – tasteless” or “like – dislike”, so competitive opposition is won not by the one who beautifully describes the wonderful taste and quality of a coffee blend, but by the one who offers the solutions allowing to form in consumer’s mind a steady clich? “at gas station of this chain they always serve a delicious coffee” or even better – “coffee – it’s that particular gas station”.

Probably for this reason, among the participants of our round table there are no traditional suppliers of HoReCa, whose marketing is based on a long and futile arguments about the “unique” properties of coffee beans offered by them, which the end user is often simply fail to appreciate. We are focusing on another issue – how to ensure the quality of the coffee at all stations of the chain, to ensure repeatability of taste, in fact – how to make the customer think that it was at the stations of the given chain he liked coffee the most. And not to disappoint in this sense. After all, only 5% of visitors to the cafe at the gas station can be classified as true gourmets, who already know in which coffee shop their own personal coffee “guru” work and perceive gas station coffee as a reasonable compromise. The remaining 95% of customers are not interested neither in geography of coffee grains from which a purchased drink is made, nor in the sacrament of roasting. Even the starting year of manufacturer’s coming into market doesn’t matter. At the heart of their interest is still the same taste and smell of the coffee, as well as the ability to quickly get a flavored drink and be on their way.

By the way, the same demands to coffee are generated by office workers who can not leave their posts for a coffee break. Perhaps that is why it was so easy for us to work with Artem’s company – IT-specialists have always loved coffee and know the price of automatic systems. Our proposal to work on the remote device for management systems to ensure the quality of the beverage in the caf? at the gas stations was accepted with predictable enthusiasm.

Remote coffee machines monitoring – Saving 2 billion… Round table in the office of RusHOLTS

By

On 29.10.2015

In Gas station chains - cafe, RusHOLTS

Рart 1. The secret of success are not the coffee beans, but the type of coffee machines and proper setting

Much has been written about the gas stations – it is a unique segment of the market, interest in which won’t disappear as long as there is a need to fill cars with the fuel. According to the standard classification businesses of any gas stations network are divided into two main categories – fuel (fuel) and non-fuel (nonfuel) ones.

“Cafe at the gas station” not only creates the “atmosphere” of the gas station, but also has a huge business potential that has yet to open on the Russian market. Indicative is the experience in Europe, where sales of non-fuel products account for about 60% of the overall gas stations’ profits. The Russian players have this figure in the range between 5 to 20%. There is some work to be done.

Interestingly enough, gas station is the only place where the business linked with the global product №1 (oil and oil-based products) is closely related to the business linked with global product №2 – coffee. So it is not surprising that these two businesses, each in their category are the main sources of profits for gas stations. Without going into the intricacies of stock prices and the prices of green coffee beans, we decided to discuss the development of this category in the domestic market and to answer the question of how the modern Russian gas station managers might enhance the effectiveness of coffee-related businesses of their chains.

This round table was attended by:

Alexander Kuzmin – an expert who has spent more than 20 years in non-fuel businesses in Russian and foreign gas station networks;

Ksenia Van de Kamp – managing partner of BMS (USA);

Artem Astafurov – Managing Partner, Senior Vice president of DataArt (USA);

Moderator – Dmitry Petrov;

Dmitry Petrov:  Today we have a rather unusual audience to talk about coffee – there are no famous barista or traditional suppliers of coffee grounds for HoReCa market among us. Instead we have an expert on non-fuel businesses for gas stations, innovative marketing specialist and IT-manager of a global level company, a rather peculiar team of participants to discuss a business, traditionally surrounded by an aura of mystery and magic of coffee aroma. Don’t you think?

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