Sonol CEO Nir Galili
Sonol CEO Nir Galili: Forcing gas stations to lower profit margins will declaw competition. Photo by Itzik Ben-Malki
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For years, Israel's gasoline retailers were fighting fang and claw over buying gas stations. Now, the no-holds-barred competition has moved on to the price of gasoline, says Nir Galili, chief executive officer of the Sonol chain.

The gas station chains were "competing wildly," to use his phrase, over the price of gasoline to passing customers, but mainly over the price of diesel, and prices to car fleets, Galili said yesterday.

However, competition could find itself shackled anew, since the state was forcing the gas stations to settle for narrower profit margins, he added.

The state has ordered the companies to lower their maximal profit margins by 25%. Sonol subsequently reduced its average discount to customer-clubs and car fleets from 30-35 agorot per liter down to 20-25 agorot per liter.

Following the state's move, Sonol had reopened all its discount-fuel contracts with organized client groups, Galili said. The only contract to remain untouched was the one with the Hever club of reserve army officers that expires in a matter of months anyway. Nor did the company change its terms of business with government clients such as the Israel Police, where the contracts stipulate specific prices.

Galili predicts that the edict, lowering the gas retailers' margins, will lead 10 full-service Sonol gas stations to convert to self-service. As things stood, about 100 of the company's 191 stations around Israel offered only self-service options, he said.

What this means is that Sonol will halt all hiring, though it won't necessarily be laying off any employees.

In addition, Sonol is negotiating to lower the price of leases it charges for privately-held gas stations run by other individuals using its brand.

In contrast to the dire picture Galili paints of the state of the direct-gasoline sales market, he waxes chirpy about the growth at Sonol's chain of convenience stores. Not all its stations sport Sogood convenience stores, but 164 of them do. The Sogood stores served more than 30,000 customers a day on average, and turned over NIS 20 million a month, Galili said.

The Sonol management anticipates that the Sogood chain will achieve turnover of NIS 243 million this year, compared with NIS 206 million in 2010 (the chain finished the year with 151 stores ).

Moreover, the average "basket" of products people bought at the convenience stores had been constantly growing, Galili said.

Yesterday, meanwhile, Sonol launched a new gasoline product - Gold 95 - after the company invested about NIS 2 million in its development. Branding will be achieved through an advertising campaign at a projected cost of NIS 5 million - more than double the amount put into development.

The product was developed in collaboration with the international company Lubrizol Corporation - Specialty Chemicals.

During the months to come, gasoline sold at Sonol stations will be augmented with the new product, at no added cost to the consumer. The company claims it will reduce gasoline consumption by reducing friction in car engines.

The new gasoline product had been tested by Prof. Eran Sher of the Faculty of Engineering at Ben-Gurion University of the Negev, Galili said. Sher's tests indicated that the additive would reduce fuel consumption by about 4%, and reduce emissions of nitrous oxide by 20%.

According to Galili, the bottom line is that the new fuel will reduce the emission of greenhouse gases by about 4%, Sher found.