Shell tied in neck and neck race for top spot with Total

Vivo Energy, the retailer of Shell-branded fuels in Kenya, has closed the market share gap with top rival Total Kenya as per newly released data for the year ended December.

The Petroleum Institute of East Africa (PIEA) oil market data shows that Shell’s share of local fuel sales rose to 19.1 per cent in 2014 compared to 17.2 per cent in 2013.

This narrowed its gap with Total Kenya, whose market share in the same period dropped to 20 per cent from 21.7 per cent.

Vivo’s rising market share, which has seen it replace KenolKobil as Kenya’s second largest oil marketer, has been attributed to the company’s aggressive marketing and expansion of its distribution network in the country.

The company in 2013 opened 10 new fuel stations in major towns including Nairobi, Thika, Kiambu, Kakamega and Machakos.

It opened another 19 fuel stations last year in towns like Kisii, Meru, and Embu. This raised its total branch network in the country to 137.

“The opening of more outlets has given customers more access to our brands,” said Vivo’s chief executive Polycarp Igathe, in an earlier interview.

A wider footprint is critical in driving sales of products like diesel, petroleum and kerosene to motorists and households. The bigger oil marketers have more retail outlets compared to their smaller rivals.

State price controls have tamed price wars among the fuel companies, making market presence and strategic locations key factors in winning customers who don’t have to seek bargains at various outlets.

READ: Oil marketers protest against Vivo’s imports

The oil marketers’ profit margins are capped by the Energy Regulatory Commission (ERC).

Besides motor vehicle fuels, the other major market share driver is bulk sales to small independent oil and heavy consumers including emergency power producers and airlines.

A bigger market share boosts earnings through high sales volumes. KenolKobil, which pulled out of unspecified “low-margin businesses,” saw its market share drop to 13.2 per cent from 13.8 per cent in 2014.

The oil marketer did not give details on the low-margin businesses it is curtailing. The retail segment enjoys less profitability compared to wholesale where sales are directed at large buyers such as emergency power producers.

KenolKobil is now ranked third in terms of market share, marking another step-down for the oil firm that for a period became the largest for the first time in 2011 after beating Total.

The Nairobi Securities Exchange-listed firm, which has recently focused on cost-cutting and asset sales, is expected to announce its 2014 results in the coming days.