Aral Ag Business Information, Profile, and History
The value of the Aral brand name, its very high brand recognition of over 90%, and its excellent market position were decisive in the choice of Aral as the future brand name of the German service station business.
History of Aral Ag
Aral AG, under the parentage of Deutsche BP AG, is Germany's largest operator of gas stations. With a network of roughly 2,500 gas stations in Germany, the company holds a market share of about 24 percent. Through sales at its convenience stores, Aral sees itself as Germany's fourth largest fast food chain and ranks 16th among the country's retailers. The Aral retail brand is present beyond Germany's borders in Luxembourg and the Czech Republic. In 2002 Aral became a wholly owned subsidiary of Deutsche BP AG, the German subsidiary of the British mineral oil group BP plc.
Brand Name Fuel Spurs Growth in the Early 20th Century
The rise of Aral parallels that of the automobile in Germany in the first half of the 20th century. However, its history may be traced as far back as 1898, when automobiles were rare and 13 coal mines in the western German Ruhr region founded a marketing association for benzene--a by-product of producing coke from coal. The association, named Westdeutsche Benzol-Verkaufsvereinigung and headquartered in Bochum, sold benzene mainly to chemical and paint producers, as well as manufacturers of fuel for lighting fixtures. The 13 members companies agreed on annual production quotas and sold their product exclusively through the marketing association. After several reorganizations, the association was renamed Benzol-Verband (B.V.) in 1918. By that time, 75 benzene factories had joined the organization.
After World War I, Germany, like many countries, saw the rapid rise of the motor car. The number of motor vehicles in the country climbed from roughly 21,000 in 1906 to 300,000 in 1924. B.V. had tried marketing benzene as a substitute for imported gasoline before the war. Although the public endorsement of B.V.'s benzene fuel by the brother of the German Emperor and automobile-enthusiast Prince Heinrich von Hohenzollern helped garner attention, the endeavor failed. Motors at the time were simply not designed to smoothly absorb benzene's high-energy content. Meanwhile, chemist Walter Oswald was conducting experiments in B.V.'s laboratories, trying to formulate a new kind of gasoline that contained benzene. In 1924 he came up with a mixture of gasoline and benzene which he named Aral. The name combined the first two letters of the two groups of chemicals to which the ingredients belonged; Benzene was an "aromatic" chemical and gasoline was "aliphatic."
The highly-compressed B.V.-Aral gasoline was declared the world's first "super fuel" and soon developed into a brand product. Two years after the invention of Aral, B.V. established a research department to optimize and standardize the new gasoline and to assure a high product quality. In 1927, when Germany introduced new black-and-yellow traffic signs, B.V. switched its brand colors from black and yellow to blue and white, the colors of the city of Bochum. To distinguish B.V.-Aral from competing products, the company gave its branded gasoline a blue color. B.V. also formulated a special benzene-based high-energy fuel used in aviation. The product made headlines when used in the first motorized flight to cross the Atlantic from Europe to Canada in 1928.
After the creation of Aral fuel, B.V. focused on expanding its distribution network and product line. In the second half of the 1920s the company began to establish gas stations. At first attached to drugstores, restaurants or hotels, the facilities later became independent service stations. Within ten years the number of B.V. gas stations had risen sharply. There were about 200 gas stations in Germany in 1926; by 1937 the number of B.V. gas stations had reached 9,000. During this time, the company added motor oil and diesel fuel to its product line. Beginning in 1935, B.V. customers were also able to buy petroleum.
From Coal-Based to Oil-Based Gasoline: 1936-1967
In the late 1930s, after Adolf Hitler's National Socialist Party had achieved political power in Germany, the country began striving for economic self-sufficiency. One of the government's goals was to replace imported oil with an alternative fuel derived from domestic coal. In 1937, several B.V. members founded another association under the company's organizational umbrella, this one aimed at developing and selling coal-based gasoline.
During World War II Germany's fuel market was centrally administered by the government. Brand name fuels were abolished and replaced by a coal-based "standard" fuel. The prices were the same everywhere and the number of gas stations shrunk by two-thirds. In 1942 B.V. was integrated in a state-administered corporation of coal-based fuel producers--the Aktiengesellschaft der Kohlenwertstoffverbände.
After World War II B.V.'s future was uncertain. The company that owned Germany's largest distribution network for gasoline at a time of rapid mass motorization became the target of international oil giants, mainly American companies such as Mobil Oil. However, the authorities of the Allied Forces did not allow Mobil Oil or any other large oil company to acquire a majority share in B.V. The years of the centrally administered fuel market in Germany ended in 1951. Once again B.V. was able to sell its Aral-B.V. fuel. The following year, as a result of breaking up the former state-monopoly Kohlenwertstoff AG, B.V.-Aral AG was founded. At the same time, some large German mining companies in the Ruhr that were B.V.-members began refining imported raw oil and thereby supplied B.V. with the main ingredient of conventional gasoline, which had superceded coal-based fuel in postwar Germany. One of these B.V. members, the Gelsenberg mining operation, started refining raw oil supplied by Mobil Oil.
In 1955 B.V.-Aral began to expand beyond Germany's borders, founding its first subsidiary abroad, in neighboring Austria. Following German travelers to one of their favorite vacation destinations, the first B.V.-Aral gas station opened in Italy in 1959. Other target markets were Belgium and Luxembourg, where the company would become a market leader in the 1980s. At the same time Aral worked on expanding its domestic network of gas stations, improving their design, and expanding the range of services offered. In the 1960s the number of the company's gas stations surpassed prewar levels, reaching 11,000 by 1968.
As the importance of coal-based fuel in the gasoline market declined, B.V.-Aral outgrew its old organizational structure. The amounts of gasoline supplied to the company by its oil-refining members exceeded the volume of benzene provided by the other members by far, a fact not reflected in the voting rights. In addition, new anti-trust laws introduced in Germany in 1958 called for a fundamental reorganization. Many options--including the breaking up of the company--were considered but abandoned. In 1962 the company withdrew from the B.V. and was renamed Aral AG. It took another five years for a new shareholder structure and accompanying agreement to be approved by the German cartel authorities.
Under the new agreement, ratified on March 1, 1967, all Aral shareholders signed individual long-term supply contracts with the company. The supplied amount of raw materials was reflected in the stakes each major Aral shareholder received in the company. The German oil refineries Hibernia Bergwerks AG--which later became part of Veba Oel AG--and Gelsenberg, as well as the American raw oil supplier Mobil Oil, held a 28-percent stake in Aral AG. Another 15-percent stake was held by Wintershall AG, another German mineral oil refiner. The benzene-manufacturers' combined share in Aral AG was just 1 percent. However, every major shareholder received the same voting power--regardless of his stake in the company's capital. The new shareholder agreement included a general clause that Aral was to remain a German enterprise. If any new developments in the market challenged this agreement, shareholders were obliged to consult each other.
New Directions After the Oil Crisis: 1973-1997
The 1970s opened a new chapter in Aral's history. The steady growth of the German market for gasoline came to a halt. Due to increased competition, gasoline prices came under pressure. Some smaller gas stations were not able to realize profits and were closed down. In 1970 for the first time since World War II, the number of Aral gas stations decreased. Three years later the so-called oil crisis hit Europe. In response to political crisis in the Middle East, the Organization of Petroleum Exporting Countries (OPEC) decided to sharply curtail their raw oil output. Consequently, oil prices jumped up by some 450 percent. To preserve oil reserves, Germans were not allowed to drive on Sundays. However, while that ban was ultimately lifted, the event triggered two new long-term trends that greatly affected Aral's business. First, consumers started cutting back on their gasoline use by driving less, and second, automakers instructed their research and development departments to focus on more fuel-efficient motors. Aral counteracted the new market trends by increasingly focusing on the expansion of its business beyond gasoline.
As a result of the oil crisis, a fundamental transformation in the company's gas stations, begun in the late 1960s, was accelerated. To lower costs for the company and for consumers, Aral introduced self-service to all of its gas stations. The company's first self-service gas station opened in 1969. By 1980, 77 percent of Aral's total fuel sales were generated by self-service stations. In 1968 the company began to extend the range of goods offered at its gas stations beyond the immediate needs of motorists. Besides gasoline and other fuels, motor oil, small replacement parts such as mirrors, light parts, windshield wipers, spark plugs and travel maps, the company started selling cigarettes, newspapers, candy bars and bottled beverages. Aral's new retail branch grew continuously throughout the 1970s and 1980s. The ever-expanding line of goods soon outgrew the limited dimensions of the company's mini-markets. Over the years, shop areas were enlarged and modernized. Shelf space for auto-related articles was decreased, making room for convenience store items. By 1994, Aral shops contributed one-third to the total sales of the company's gas stations. Moreover, roughly 38 percent of sales was generated by such services as car washes, and oil and tire changes. Revenues generated by fuel and motor oil sales had shrunk from 41 percent of the total in 1984 to 29 percent ten years later.
Another hallmark of the period that followed the oil crisis was the increasing public concern over environmental pollution, as through auto emissions for example. Aral launched its own research program for environmentally friendly fuels in 1973. In 1984, when automobiles with catalytic converters entered the market in Germany, the company introduced unleaded regular gasoline, as leaded gasoline could not be used in cars equipped with catalytic converters. In the same year Aral launched a research program with German auto maker BMW exploring hydrogen as an alternative fuel. Between 1984 and 1988, ten models of BMW passenger vehicles filled their tanks with hydrogen gas at Aral's pilot hydrogen gas station in Berlin. For the world's first robot-controlled liquid hydrogen filling station at Munich Airport, which was opened in 1999, Aral developed the gas station infrastructure and contributed to the development of the robot that automatically filled up the tank.
In 1975, Veba Oel acquired a majority stake in Gelsenberg AG, taking over Gelsenberg's 28 percent stake in Aral and thereby becoming Aral's biggest shareholder. However, Veba Oel remained bound to the contract negotiated in 1967, which gave every major Aral shareholder a single vote, regardless of the size of their share in the company.
New Markets and Reorganizations: 1990 and Beyond
The reunification of the two German states in 1990 opened a rare window of opportunity for Aral to expand its market. In that year the first Aral gas station opened in the eastern German city of Leipzig. In the four years that followed the company established a network of gas stations in all of the new eastern German states. By 1995 Aral's market share in the German gas station business was about 20 percent, making it the country's market leader. However, despite the growing traffic volume, the German market for gasoline was shrinking. In 1994 fuel consumption decreased for the first time in 13 years. Besides new motors that used less gasoline, a significant raise in mineral oil taxes caused German consumers to cut back on driving. Aral decided to focus on the new markets in eastern Europe created by the fall of the Iron Curtain. The company established new networks of gas stations in Poland, the Czech Republic, Hungary and Slovakia. At the same time, Aral sold its network of gas stations in the Netherlands, Switzerland, and Belgium.
By 1998, the year of Aral's 100th anniversary, the company was firmly established as Germany's market leader in the gas station business. Aral's sales passed the DM 20 billion mark for the first time in that year, with almost 12 percent of sales generated outside of Germany. While the company was working hard to defend its leading position in a shrinking market, Aral's ownership structure changed fundamentally when a wave of mergers in the global mineral oil industry reached Germany.
In 1998 the American oil giant Exxon announced plans to merge with major Aral-shareholder Mobil Oil. The following year, Veba Oel's parent company merged with the Viag group, a major German electric power supplier, to form E.ON AG. A precondition of the Exxon-Mobil Oil merger was that the latter agree to sell its stake in Aral to Veba Oel, as did the other remaining major shareholder--Wintershall AG, which had meanwhile become a subsidiary of the German chemicals conglomerate BASF.
For an estimated DM 3.6 billion Aral became a wholly owned subsidiary of Veba Oel AG in 2000. That year was Aral's worst financially in some 15 years. A tough price war at Germany's gas stations resulted in losses from gasoline sales in the hundreds of millions for the market leader, which could not be fully made up for by the company's other branches. During his time, Veba became Aral's sole supplier of refined mineral oil products. The company was renamed Aral Aktiengesellschaft & Co. KG, and its subsidiaries were reorganized under a management holding.
In 2001 E.ON AG sold Veba Oel, including Aral, to the British mineral oil group BP plc, and Aral then came under the parentage of BP's German subsidiary, Deutsche BP AG. Two years later Aral's new parent company decided to re-brand its own gas stations in Germany under the Aral name, which was known by 98 percent of the German population. Expecting an increasingly fierce competition in the German gas station market, Aral was planning to defend its leading position through customer loyalty programs; through establishing large gas stations at busy locations that offered a variety of technical assistance services to motorists and with large, modern convenience shops on their premises; and through the introduction of innovative, environmentally friendly fuels such as natural gas and hydrogen.
Principal Competitors: Royal Dutch/Shell Group; Exxon Mobil Corporation; ConocoPhillips; Total S.A.
- Key Dates:
- 1898: Thirteen German benzene producers found Westdeutsche Benzol-Verkaufsvereinigung.
- 1918: The benzene marketing association is transformed into Benzol-Verband (B.V.) and has 75 members.
- 1924: Chemist Walter Oswald invents "Aral" super fuel.
- 1937: The number of B.V. gas stations reaches 9,000.
- 1952: B.V.-Aral AG is founded.
- 1955: The company's first foreign subsidiary is established in Austria.
- 1962: The company withdraws from B.V. and is renamed Aral AG.
- 1968: The Aral network reaches its peak with 11,000 gas stations; the company introduces convenience products to its on-site stores.
- 1969: Aral's first self-service gas station opens.
- 1975: Veba Oel becomes Aral's majority shareholder.
- 1990: Aral begins to expand its network of gas stations to Eastern Europe.
- 2000: Aral becomes a wholly owned subsidiary of Veba Oel AG.
- 2002: After the acquisition of Veba Oel AG by BP plc, Aral becomes a subsidiary of BP's German unit, Deutsche BP AG.
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