Richard Pearson – Caltex Executive General Manager, Convenience Retail

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Appointed in August 2017 as Executive General Manager Caltex Retail, Richard Pearson is accountable for leading the transformation of Caltex’s retail and consumer fuel business.

Richard has worked in retail and consumer goods for 20 years in Australia and the UK, with a broad range of leadership experience across commercial functions.

Before joining Caltex, Richard was a member of the leadership team at Coles Supermarkets where he was most recently the supply chain and strategy director.

In the UK, Richard worked for some of the world’s largest and most respected organisations, including Asda-Walmart, Procter & Gamble, and Royal Bank of Scotland.

He holds a Bachelor of Arts degree from Cambridge University.

Convenience World’s Managing Editor Lorna Gloria spoke to Mr Pearson in an exclusive interview about the Caltex business, new offer, key challenges and the market.

How is Caltex performing, and how is competition faring in the market?

It’s really competitive. It’s a very dynamic market. Lots of people are trying to realise the convenience opportunity. I think it’s well known that the convenience market in Australia is relatively underdeveloped compared with some other markets. I think

Caltex is at the forefront of new development. New formats are really exciting, such as The Foodary, and I’m really positive that Caltex is leading the way in the new convenience world.

Caltex launched its ‘Freedom of Convenience’ concept in 2016. Can you discuss the details and the progress since its launch?

It’s really a motivating call to action for the organisation. One of the things that really attracted me to Caltex was that the business has realised that it needs to change and is putting the infrastructure and the investment in place to deliver that change. Freedom of Convenience really recognises that the fuel market is undergoing lots of change and therefore Caltex can’t keep relying on selling petrol in the medium and longer term as consumer habits change. The very simple objective is to build a shop offer that gives people a reason to come to our sites, even if they’re not filling up with fuel, and that’s what we’re all about.

How is Caltex evolving to meet the needs of convenience and food-to-go shoppers?

We’re doing lots. The investment in the Nashi sandwich chain is one example of where we’re looking to get into new markets. We’re really excited about how that’sgoing and taking that offer into the Sydney market. We’re opening some standalone Nashi shops in Sydney in the coming weeks [early December]. Yesterday [October 16] we opened a non-fuel standalone convenience store at Wickham train station in Newcastle, NSW, under The Foodary brand, which is obviously a huge departure for the business in terms of having a shop without a fuel forecourt.

We’re opening a brand-new truck- stop offer at Altona North in Victoria next week [November 2], which will be completely at the other end of the spectrum in terms of a huge offer for that market.

In general, The Foodary, of which we now have 15 sites, is a really bold departure from what Caltex has done before. We’re really optimistic about how it’s going; performance is strong so far, but we’re learning a lot. You’ll see a lot more in that space going forward. To summarise, we’re trying many new things, we’re approaching the convenience opportunity from many different angles, and I think that gives us a really good reason to be optimistic and confident about where we go with that.

Since launching your new convenience hub The Foodary in February, what has been the response from customers, and can you give us an update on The Foodary’s offer and progress?

Customer reaction to The Foodary has been really positive. They recognise that the in-store environment is very different and customers have responded really well to that.

On a like-for-like basis, in terms of sales in those sites, the growth ranges from between 20 and 50 per cent, which tells us that the customers are buying into the new offer. There’s a lot more presence of fresh food in those stores, which is something you’ll see a lot more of as well, and feedback on those ranges has been good. The barista-coffee offer has been well received – customers enjoy the fact that they can get a really good cup of coffee in those sites. The other services we provide there, such as parcel collect, etc, in the spirit of making life easy for our customers, are getting a really good reaction. So there’s lots to be positive about, lots of learnings. It’s not perfect, but we think we’re onto a winner there. You’ll see a lot more in that space next year as well.

How is Caltex working with suppliers to ensure a first-to- market offer?

We’re doing lots of work with our suppliers in many different ways to improve our offer. Launching new products in this channel is hugely important; it always has been and always will be. We’ve got one or two products at the moment that we’re taking on a unique basis, such as Frozen Oak [chocolate slushy], which is a good example of where we’re working with the suppliers to develop a different product, a new product, and launch it through our network.

But it’s not just about new products – we’re working with suppliers to offer our customers better value, better fresh food, and healthy choices throughout the store.

I think what suppliers want more than anything is growth, and we’re in a really good position to offer suppliers growth, more volume. I’m really positive and optimistic that we can form some really strong partnerships and work with our suppliers to develop the convenience offer and generate growth for both sides of the table.

What are the key challenges facing the market and how is Caltex addressing them?

I don’t think it’s any secret that the future of petrol sales and fuels in general is under pressure, so that’s a very mature market. And as electric vehicles become more popular and that market grows, it’s simply imperative that we develop an offer that [encourages]our customers to come to our sites for things other than just fuel. My intuition tells me technological developments happen faster these days, so we’re seeing that as a big call to action and using it as a positive driver to say we have to move faster, and we have to change things quicker than maybe we would have done in the past. That’s why you’re seeing developments such as The Foodary and our moves into fresh food and everything else – so that we give our customers a great offer, whether they’re filling up with petrol or not.

It’s been two years since 7-Eleven made headlines when Fairfax revealed instances of franchisees underpaying wages and doctoring payroll records. The Fair Work Ombudsman (FWO) has also raised concerns about the wage-payment practices of some franchisees within both the Caltex and United Petroleum networks. Has Caltex engaged with the FWO to address this? And has Caltex since introduced measures to combat underpayment and increase compliance activity?

We have. We’ve engaged frequently, and there’s actually a meeting this week with the FWO, so we have a strong, healthy dialogue with them. The key point is that we’re a very strong values-driven organisation, and we want to do the right thing. We’ve got a very robust, strong program in place to deal with any franchisee malpractice that’s out there, and we stand behind that. There’s lots more work to do. I’m really confident we’re doing the right thing, and we’ll work with our franchisees through this process, but I’m really happy that the business will come out in a stronger place at the end of it.

Having previously worked with Coles and Coles Express, what have you learned about Caltex and the sector?

My overall take on the retail market – not just around Coles or Coles Express, but when any retail market goes through the level of change we’re currently seeing in Australia – is that it’s the businesses that are the most focused on customers that will win. That was certainly the ethos that underpinned the transformation at the Coles organisation since the Wesfarmers acquisition. It’s the ethos that we buy into at Caltex. Customers will make or break the success of our transformation into a convenience retailer, and we need to be relentlessly focused on what our customers need from us and doing an even better job of meeting those needs and serving our customers brilliantly. If we do that, I’m very confident we’ll succeed.

What personal philosophies drive you in business?

There’s a couple that are really relevant to where we’re at with Caltex at the moment. First, I’ve got a very strong motivation to pursue excellence, and we’re in a place right now where just doing things a little bit better isn’t enough. We have to completely transform our offer and really set ourselves a benchmark on a global scale at Caltex. We have to seek to achieve world-class standards and become a world-class convenience retailer. That’s a very strong part of my personal philosophy, which I think is very relevant at Caltex at the moment. Second, I come from a world of professional sport [cricket], where team work is everything. In a business as complex and in a world as fast-changing as this sector is right now, it’s absolutely imperative that our teams work really well together. In my leadership style at Caltex, one of the things I’m really focused on is how we can get each separate part of our business to join up and work really closely together, and communicate really well, so we can deliver seamless plans to our customers. Those couple of things are really important to me and will really make or break how successful we are as a business.

What single thing (technology, trend, regulation, etc) do you think will have the biggest effect on the Australian petrol and convenience industry in the next few years?

As I touched on earlier, the single biggest change that’s coming is the reduction in reliance on fuels – that’s the single biggest catalyst to motivate us to change and improve our offer to our customers. That’s happening, it’s happening fast, and it’s happening in other markets we’re looking at. So we’re very conscious of that, and we see that as an opportunity because the retailer that plays to that opportunity faster and better than the others will be a winner in this sector. That’s where Caltex wants to be.