Operating a petrol station can be a lucrative business in Hungary

The so-called “color” petrol stations, which belong to big oil companies, sell far more petrol and diesel than theprivately-owned “white” stations. The Hungarian Petroleum Association (MÁSZ), consists of Mol, Shell, OMV and Normbenz (under the brand name Lukoil), and a few other smaller chains. Beyond the 1,080 petrol stations within MÁSZ, there are also roughly 800-900 independent owners operating one or two petrol stations, as well as some closed stations.

Profitable Business

The members of MÁSZ sell about 3.5 billion liters of fuel annually.

At an average price of HUF 400 per liter, this equals HUF 1,400 billion in revenues. Also, with each liter of fuel sold, an additional HUF 20 is generated from the sales of non-fuel products (coffee, sandwiches, newspapers, etc.). This implies a typical HUF 15.000 fill-up will generate an additional HUF 750 spent at the register. If annual fuel sales reach HUF 1400 billion, this 5% extra spending on non-fuel products and services amounts to HUF 70 million per year. No wonder the quality of food and beverages is so important for the owners.

Highways and Villages

Depending on location, the profitability of any one filling station varies. A station by a busy highway operating 24/7 may generate 50 to 200 times more revenues than a station in a small village that is open limited hours.When fuel sales from independent station owners are added to the MÁSZ stations, the entire industry sells approximately six billion liters of fuel each year.

To visualize this tremendous quantity of fuel, consider how there are 3 million cars on the road at any given time.

This means an average of 2,000 liters of fuel are sold per car each year, generating about HUF 2400 billion in annual revenues.

However, this visualization is not strictly accurate, as buses carrying people and trucks hauling freight also contribute to the overall consumption of fuel.

Competition

Some fuel distributing networks don’t disclose their annual profits but they all disclose their sales figures. The biggest player in the industry is Mol, followed by Shell. OMV is third, and Normbenz (under the brand name Lukoil) is fourth. Agip, a sizable Italian network, was acquired by Mol a few years ago. This purchase raised the number of filling stations owned by Mol above 500. Combined, their share of overall sales is more than twice the size of Shell, which runs about 210 stations. This also compares to OMV with around 170 stations, and Lukoil with roughly 70 stations.

How a filling station network evolves over time within a country depends on a number of market influences. These include the size of the network’s fuel delivery fleet, the market population it serves, and the distances it needs to cover to maintain fuel supplies. Highly-populated urban areas, such as Budapest, will have many stations, often times located across the street from one another. Less populated rural markets, such as the northern part of Norway, support many stations that are spread far apart over a large area.

The number of potential customers per station varies in any given network. It is estimated that approx 2000 petrol stations operate in Hungary, or one station for every 5,000 citizens.

Among the European Union, only Romania has a thinner network. Switzerland and Luxembourg offer one station per 2,500 people. Greece offers one station for every 1,500 inhabitants.

Such direct comparisons can be complicated, however, as many Greek stations also serve their community as a general store.

Looking at the number of stations per area, the situation is quite different. In the densely-populated Benelux area (Belgium, the Netherlands, Luxembourg), there are between 85-100 filling stations per thousand square kilometers (30x33 km). This compares with an EU average of 40 stations, while in Hungary this figure is only 21. In large but sparsely populated northern countries such as Sweden, Norway and Finland, there are only 5-6 petrol stations per thousand square kilometers. Densely-populated urban areas reflect the European average, but in the sparsely populated north one often has to drive 50-70 kilometers just to find a filling station.

An interactive map by the Lechner Knowledge Center shows that more than 75% of the road network in Hungary has a petrol station located within 8 kilometers or less.

The largest distance to reach a filling station from a township is 37 km. The map doesn’t show the filling stations at closed industrial parks or privately owned ones. Network consolidation, takeovers, openings and shutdowns are also quite common.

The importance (and as a result, the value) of filling stations is increasing. In times when grabbing consumers’ attention is getting ever more difficult and shopping is shifting to online platforms, petrol stations may be the last shops that customers physically and regularly attend.

How to Enter this Business

Operating a petrol station can be a very profitable investment. However, the franchise rights of a station at a good location may cost hundreds of millions, or sometimes even billions. Starting a petrol station from scratch can be a difficult task. Those wishing to start one on their own can contact several service station building companies which, beyond applying the proper technology, can also help in securing the right permits.

This effort, however, requires a good deal of advance preparation. Many complex regulations exist that require operators of petrol stations to properly store and handle hazardous and flammable materials. Certification and continuing compliance to these regulations can be very costly. Among the permits issued by ministries and authorities are building, commissioning and maintenance (operating) permits that must be renewed at least every three years. Even in the event of a shutdown, a permit for demolition may also be needed. This industry is not for those who dislike taking high risks to secure high rewards.

There is also a need for a business plan as, prices may have dropped in recent years, the layout/design can still cost HUF 50 million.

But first one needs to decide whether to join a large network as a franchise partner or try solo.

Both have their advantages and disadvantages.

Building a petrol station within a franchise system is more expensive due to design and minimal service requirements. Accounting is fairly restricted as well. But in return the operator can enjoy the benefits of centralized marketing and well-established product lines.