Market and Customers

Jump to section

• Overview & contents
• i. Important Notice and Basis of Preparation
• 1. Executive Summary
• 2. The Business and the Regulated Price
• 3. Licensing, Safety and Compliance
• 4. Market and Customers
• 5. SWOT and Competitive Position
• 6. Operations
• 7. Financial Plan
• 8. Break-Even and Debt Service
• 9. Investment Analysis
• 10. Sensitivity and Scenario Analysis
• 11. The Margin Squeeze
• 12. Risk Analysis
• 13. Implementation Roadmap
• 14. Key Performance Indicators
• 15. Key Assumptions
• 16. Conclusion and Recommendation
• A. Appendix A: Consolidated Financial Summary
• B. Appendix B: Volume, Price and Cost Schedules
• C. Appendix C: Funding, Debt and Working Capital Schedules
• D. Appendix D: Risk Register
• E. Appendix E: Glossary

4.1 Why demand exists

▪ Electricity reliability and cost. Households adopted gas for cooking and heating during the load-shedding years and many have not gone back. Even with a more stable grid, electricity tariffs have risen faster than inflation, and gas cooking remains cheaper per unit of useful heat for many uses.

▪ Winter heating on the Highveld. Gas heaters are the dominant supplementary heat source in Gauteng homes without underfloor or central heating. This is the single largest demand driver and it is intensely seasonal.

▪ Small business and informal trade. Spaza shops, takeaways, street food traders, salons and small restaurants use 19 kilogram and 48 kilogram cylinders continuously and buy on a predictable cycle.

▪ Convenience and proximity. A customer whose cylinder runs out mid-meal will drive to the nearest open gas shop. Location and trading hours matter more than brand.

4.2 Seasonality is the defining operational feature

The peak month sells about 3.9 times the volume of the trough month. Because the bulk vessel holds only about 4 165 kilograms of usable gas, the shop cannot stockpile ahead of winter. Peak demand is met by taking more frequent deliveries — roughly 4.9 bulk deliveries in July against 1.2 in January. Three consequences follow, and each belongs in the operating plan rather than the marketing section.

▪ The wholesale supply agreement must include a winter delivery commitment. A supplier who can deliver twice a month in summer but not five times in July will cost the shop its best trading weeks.

▪ Staffing must flex. Peak months need the full complement on the filling bay; summer months do not.

▪ Cash planning must anticipate a long, thin summer. The trough in trading falls in the low season, not the high one, and the working capital provision is sized against it.

4.3 Customers and competition

The 48 kilogram cylinder is only 13 per cent of transactions but 37 per cent of kilograms, which is why the commercial customer base matters more than the transaction count suggests. A single restaurant account moving four 48 kilogram cylinders a month is worth roughly the same volume as twenty-one household 9 kilogram fills.

Supplier power and rivalry both score 4.5, and they are the two forces that define this business. Supplier power is high because the bulk wholesale price is the only variable on the gas line and it is negotiated against a counterparty with far greater scale. Rivalry is high because every legal competitor faces the same ceiling and the only ways to compete are convenience, service, or discounting below the cap.

Note what is absent from the competitive table: any suggestion that the shop can win by charging more. Competition in regulated LPG retail is on convenience, trust and service — and, for those willing to give up margin, on discounting below the cap.