December 23, 2009

Attention: Ms. Elaine Wagner, Clerk of the Board

Letter of Comment re: Gasoline Promotions

The Retail Gasoline Dealers Association of Nova Scotia (RGDA) has been a voice on matters affecting the gasoline retailing industry since 1948. The RGDA welcomes the opportunity to comment on the issue of gasoline promotions within the Industry.

Gasoline promotion is not a new issue. There is a long and difficult history of oil-company-sponsored games, gimmicks, give aways and promotional activities associated with the retailing of gasoline. What is new, however, is the emergence of off site and unrelated cross merchandising of food and groceries with gasoline. As well, there is now a local hockey team in Sydney that cross merchandises ticket sales with gasoline discounts.

While it is evident that the use of promotions do not increase the total volume of gasoline sold within the Industry, promotions have always, and continue to, create costs which must be absorbed by retailers or consumers or both.

The RGDA recognizes that high reward promotions do transfer volumes from one oil company to another however many retailers express concern that efficiency and levels of service to the motoring public continue to be negatively impacted by the use of such promotions. With the devolution of full service and growth of self service and with the rapid growth of onsite convenience stores, coffee shops, pizza parlours, etc… the demands on gasoline retailers are far more complex now than ever before. As an example, there has become growing instances when retail outlets have been targeted by criminals who are quick to take advantage of retail environments where employees are excessively busy multi tasking with customer store purchases, order taking as well as managing a busy self serve console. Increasingly many employees find it necessary to ask customers what their purchase was in order to charge them. This has resulted in a growing trend of gas and dash or drive offs and is extremely costly.

The additional attention employees must pay to administer gasoline promotional activity only further exasperates this situation.

Provincial legislation in 2007 recognized this trend and required that the retail gasoline industry respond to new violence in the workplace safety requirements for workers, especially those working after hours.

Many retailers throughout the province support the use of promotions and, of course, oil company operated sites are usually opinion neutral. The RGDA is not opposed to gasoline promotions.

The RGDA does however have concerns about the evolution and rapid growth of cross merchandising activities involving retail gasoline outlets with off site businesses such as Sobeys and Cape Breton Screaming Eagles and whatever might be next. Recently, an RGDA board member stated that cross merchandising gasoline with funeral parlours may be the next promotion.

While legislation in Nova Scotia requires that all costs associated with oil-company-sponsored promotional activity must be included in the wholesale price, promotions inevitably create costs for retailers either directly or indirectly.

Petroleum Products Pricing Regulations in Nova Scotia have provided a huge degree of transparency into retail gasoline pricing. However, some of the new off site promotional discounts on a cents per litre basis, especially from Sobeys’, often equal or, on occasion, have exceeded regulated retail margins. This promotional activity creates considerable confusion to the public as to how much margin a gasoline retailer actually makes. Furthermore, in the case of Sobeys, and Cape Breton Screaming Eagles the traditional method of promoting gasoline sales i.e. purchase gas and receive a reward, has now changed to purchase foods or hockey tickets and receive discounted gas as a reward.

As promotional activity in the province appears to be becoming more rewarding to the motoring public and, at the same time, primarily centered in urban markets, the migration of rural Nova Scotia consumers to urban markets will undoubtedly continue to grow. It therefore follows that the network of retail gasoline outlets, not having access to such cross merchandising opportunities, will continue to shrink and will continue to have a negative impact upon availability and quality of service, not only for local motorists, but certainly for tourism around the province.

Considering that the retail gasoline industry is one of the largest, most highly visible and important sectors of the Nova Scotia economy and, as well, considering the new and growing attitude towards energy conservation, greener and more environmentally responsible business behavior, it appears almost contradictory to inflate the price of gasoline to cover costs associated with encouraging the motoring public to buy more or, as in the rural to urban scenario, consume more gasoline.

As already stated, many retailers throughout the province recognize the need to support promotions to remain competitive. For this reason the RGDA in unable to make any reasonable recommendation other than complete elimination of all promotional activities.

We trust this information is helpful and thank you for the opportunity to comment.