Record-high earnings for Marketing and Sales
Marketing and Sales took several major initiatives during the year, including an expansion in Norway and various initiatives to build customer loyalty. The combination of satisfied customers, a higher market share and record-high earnings resulted in a balanced business.
The Marketing and Sales segment operates Preem’s station and bulk operations. This includes a nationwide service network with over 570 service stations for private and commercial traffic and a distribution network for direct sales to corporate clients and distributors via depots.
Stronger profitability and satisfied customers
Marketing and Sales increased its share of the Swedish fuel market in 2016 from 29.5 percent to 30.5 percent. The year's customer satisfaction survey revealed an average index of 76, Preem’s best result ever. Our high index for both private customers and corporate clients indicates a healthy, long-term balance, which promotes long-term profitability. The Marketing and Sales segment reported very strong 2016 earnings, in spite of a volatile commodities market, with an operating profit of SEK 590 million, compared to SEK 422 million last year. This increase in earnings was driven by multiple factors in conjunction with our overall aim to maintain a balanced business:
Preem has optimized price and product control by delegating responsibility to a single unit instead of spreading the task among units. This change was made in 2015 and we reaped the full rewards of it in 2016.
New card business model
Preem MasterCard is one of the best cards in the industry and gives customers great value. With Preem MasterCard, customers get Sweden’s highest fuel discount and a one percent bonus on everything in other stores. The card does not have any annual fee. The introduction of Preem MasterCard lowered Preem’s costs by SEK 22 million.
Preem took several loyalty-building initiatives that reduced the outflow of customers and thus stabilized its customer portfolio. One example is the Såifa Rewards program for professional haulers with offers such as insurance and discounts on vehicle-related purchases.
New stations launched
A major transformation of Preem’s station network is under way in order to ensure long-term competitiveness. In 2016, Preem opened 7 new stations and closed 13 stations in locations with declining demand. Additional stations will be introduced in 2017, both as Såifa and as automated and full-service Preem stations with a focus on big cities.
Stronger effect of communication
Preem has strengthened its sustainability position substantially in prioritized target groups, a result strongly linked to its new communication concept, the Theory of Evolution.
Largest in renewable HVO fuels
An important part of the increase in profitability is due to the increase in sales of fuel with renewable content, including the world’s first Swan labeled liquid fuel, Preem Evolution Diesel+, along with Preem Evolution Diesel, Preem Evolution Gasoline and Preem Evolution LPG. The percentage of renewable content in the total fuel volume sold by Preem in Sweden is now 19.5 percent, which is significantly above the market average of 18 percent.
Expansion into new markets
Preem entered the Norwegian market in 2016 and it is estimated that we had already won a market share of over five percent in the relevant segments for full-year volumes by the end of the year. A strategically important partnership was initiated with the UnoX Group, giving us access to 154 stations for commercial traffic throughout the country and for selling Preem Evolution Diesel. Our objective is to take the position as the most sustainable fuel company in Norway.
Continuing growth in 2017
The three overall focus areas of our strategy – Renewability, Sustainability and Profitability, will serve as the basis for the future investments of the segment. We will strengthen our value proposition to customers, take and retain the position as a sustainable company and enhance the company's competitiveness and market presence via focused activities. The greatest market challenge for Preem and the industry is to satisfy the high demand for renewable products, while the supply of renewable raw materials is limited. But we have a strong position thanks to our own production of fuel with a high renewable content, such as Preem Evolution Diesel with tall oil, a residual from the Swedish forest industry.