Going green

Petrol, and now vegetables

Joseph Stalin once attributed the Allies’ victory in the Second World War to the industrial might of the US. Supplying two-thirds of the military equipment used by the alliance, the Americans churned out more than double what the Axis could manufacture in the final year of the war. That feat would not have been possible without the extensive retooling of many American factories. Iowa’s Maytag, for instance, switched from making washing machines to aircraft components.

Chinese President Xi Jinping has elevated the battle against Covid-19 to something of a war footing (see WiC481), and assembly lines across China are also being adapted to plug the shortfall in critical supplies. GEM, a Shenzhen-based supplier of cobalt chemicals for batteries, will make disinfectants, while iPhone assembler Foxconn and electric vehicle maker BYD both announced their plans to produce surgical masks.

Sinopec has joined the mask producers as well by setting up 11 new production lines for that task. And to top up its virus-fighting effort, the state-owned refiner has even begun selling fresh vegetables.

Given the outbreak has disrupted logistics (and triggered panic buying), fresh vegetables are in tight supply in major cities. The National Development and Reform Commission was forced to release some of the country’s winter and spring vegetable reserve in major northern cities to ease supply shortages, Xinhua reported last month.

In early February Sinopec began selling fresh vegetables at 340 of its filling stations in Beijing. The healthy greens are available through a newly launched service called daoche under its convenience store brand EasyJoy.

On the EasyJoy mobile app, drivers can pre-order a 7kg pack (which comes with a dozen types of vegetable and 10 eggs – enough to feed a family of three for three days) for Rmb99 ($14) and have it loaded into their car boot while an another Sinopec attendant fills up their tank with fuel.

“With the daoche service, there will be no need for shoppers to get out of their car, enter a store, or touch surfaces unnecessarily,” explained Jiemian, a local news outlet, noting that the service is meant to reduce human interactions, so as the chances of catching the infectious disease. Roughly 600 packs of vegetables are being sold by EasyJoy to Beijingers every day.

Impressive though the service is, the new offering is not going to offset the far greater plunge Sinopec has experienced in fuel demand owing to substantially lower industrial activity (estimated at less than 60% of normal levels because of the virus). This has led Sinopec to slash its refinery throughput – cutting around 600,000 barrels of oil per day of capacity. That represents 12% of last year’s average daily volume and is Sinopec most drastic reduction in over a decade.

That said, selling vegetables won’t be a temporary side-business for Sinopec, Beijing News reported, as the energy heavyweight is prepared to expand the operation even after the fight against Covid-19 recedes.

The new division is illustrative of Sinopec’s broader strategy to make a bigger push into non-fuel retail sales. Last year it launched its own takeaway coffee brand (see WiC467) and cemented its partnership with Yum China by opening a KFC restaurant at one of its petrol stations in Dalian using a franchise model. The collaboration, however, is not exclusive given the fast food chain has struck a similar deal with Sinopec’s rival CNPC.

Sinopec is hoping to fund its retail ambitions by floating its filling station assets. These include 30,668 gas stations and 27,362 convenience stores (the country’s largest convenient store network).

Reportedly it will be listed on the Hong Kong stock exchange under the name Sinopec Marketing. The share-sale, green-lighted by the State Council last year, is expected to raise up to $6 billion, Bloomberg reports.

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