It was a long time coming – but here is my first post on this blog.
The chosen subject of my disdain is the Russian oil company Lukoil.
Now, the notion that Russian oligarchs may not be exclusively concerned by maximising shareholder value is probably uncontroversial amongst my educated readership.
That Big Oil isn’t number one in consumer marketing is also probably common ground.
BP, Esso, Totalfina, you name it…. they’ve got the dirty stuff that goes into people’s gas tank, but their attempts at being loveable remind you of the embarrassing uncle that everyone tries to ignore at the wedding party – but never quite can.
Yet Lukoil have taken this to a new level.
Apparently, Lukoil is the second largest public company (after ExxonMobil) in terms of proven oil and gas reserves. That sounds impressive. (I got it from Wikipedia so it must be true)
Until recently, I only knew of Lukoil as a retail concern in Latvia, a country I have the fortune and misfortune to have a certain connection to (fortune, because it is populated by some of the hottest chicks on the planet; misfortune, because their record of economic management is lamentable – but that’s for the next post).
What was not my surprise (as we say in French) when I saw this brand unexpectedly pop up in my “native” Belgium (I have my reader’s sympathy already)?
On 19 December 2006, LUKOIL agreed to buy 376 filling stations in six countries in Europe from Texan concern ConocoPhillips. About half of them were in Belgium. At that time, these facilities were operated under the Jet brand.
Now petrol stations are pretty boring. Whether it is conceivable they be more interesting than they are, is open to idle speculation (of the type that will fuel this blog). But within this boring universe, Jet, in Belgium, was kind of funky. They had nice yellow and blue colors, and they had a funky shop attached called Yelloh! (their exclamation mark, not mine). It had some cooperation with GB or Carrefour, local supermarket chains. It was expensive but convenient, and certainly an improvement on the kind of fuel station stores that devoted half of their shelf space to lubricating oils.
Vagit Alekerov (what kind of a name is that?), Lukoil’s President, claimed that “this deal is in support of the Company’s downstream strategy, which among other things envisages LUKOIL’s plans to considerably expand its retail chain in Europe and sell products with added value”.
I suppose that refined petroleum has added value, but presumably that wasn’t what he was referring to.
The stores in question have recently been rebranded Lukoil. In red and white livery (Russia’s national colors, of course). Whether white is intentional in daylight advertising one never knows. The stores have been rebranded – wait for it – Shop. With an oildrop in place of the “o”, as in the Luk(o)il logo itself.
“Today’s announcement represents a significant step in achieving our asset disposition program, and we are pleased the transaction supports the business direction of both companies,” said Jim Mulva, chairman and chief executive officer of ConocoPhillips.
In other words, “Boy, are we glad to be rid of that!”. But the price was high: ConocoPhillips increased its interest in LUKOIL to 20 % (25% of the company is in the hands of management).
Jet in Belgium was positioned as a discount fuel retailer, but not the cheapest in the (highly regulated) market. It endeavored to attract price-conscious consumers by its brand and added services in the store.
Now, I have visited a ShOp. And it indeed sells products with “added value”. Indeed, it might single-handedly undermine the printed pornography retailing industry. Not only does it have a wide selection, but it is open much more convenient hours. So much for adding value.
And so much for a tale of throwing customer capital out of the window. I need hardly add that being Russian, which Lukoil flaunts, might gain you votes at home (they still vote there – for the moment); it doesn’t get you customers abroad.
Yet I understand that Lukoil wants to take pride in its Russianness. Indeed the Russians, for all their pride, want nothing more than to be loved.
The question is, can this be reconciled with commercial realities? And do they even care?
I am a huge Russophile. If there wasn’t such a captive population of Slavic beauties in Latvia, I surely would have headed even further East to seek them out. But I also love the guys. No, not incipient bisexuality – just an appreciation of something authentic that we in the West have lost.
To rebrand Mother Russia would be a dream. It must be the country on this earth which achieves the least return from its immense cultural assets.
But sticking with Lukoil. What is their positioning? I don’t know what its brand represents in Russia, and I wouldn’t dare to pronounce. However in Belgium, they have given up the “customer intimacy” positioning of Jet, but without challenging the discount positioning of pure-play discount retailers. In short, they are nowhere.
They have thrown a good deal of customer capital out of the window, purely, I guess, on ideological grounds – they want to be perceived as Russian, and they want to be loved. Unfortunately, they do nothing to achieve this outcome. In the meantime, the visceral fear of Russia cultivated in Europe during the Cold War (a few Marxist intellectuals aside), and the resentment of dependence on them for energy are hardly likely to stimulate sales.
What could they do?
Rethink what the country – and the brand – stands for.
Personally I think Russia represents fashion, avant-garde, camaraderie, edginess, creativity, a human dimension. I don’t associate it with crude materialism, authoritarianism, dourness, criminality, vodka and Matryoshka dolls.
I may be in a minority of Western intellectuals to still have this romantic image. But the truth is, of course, that – just like anywhere – both aspects are true.
So if Lukoil is the self-appointed ambassador of Russia in Europe (and, indeed, North America), it needs to know what myth it buys into.
For all the fear of Russia, it is a country which has always exercised immense fascination for the European soul. This is so since the Dark Ages. Europe is hungry for Russia – but Russia never comes.
Here, then, the opportunity for Lukoil – if it must be Russian (and if it need not be, it would still be Jet), then showcase what is best.
