Introduction
	It is common to associate the gasoline industry whether the upstream or 
downstream market with the Philippines’ three main players: Petron, Caltex and Shell.  A 
common move would be just to analyze one of these three firms and be done with the 
project.  However, this is not what this paper has done.  In this research, the group has 
taken a bolder initiative and instead of focusing on the so-called ‘Big Three’, it picked an 
up and coming company, which is on the rise when compared to the three major 
corporations.
	As we said in our previous report, their is little room for the upstream oil market 
dealing in the surveying and drilling of cruel oil in the Philippines.  This is primarily due to 
the fact that this requires more than a budget of 100 million US dollars, an already 
optimistic figure to start participating in the upstream market.  Due to this huge amount of 
capital needed, this sector of the petroleum industry is rather closed to competition and 
mainly becomes a market share between those with huge budgets such as the 
aforementioned Big Three.
	In this case, the only place viable to enter the petroleum industry is through the 
downstream market, which deals mainly with the refining and redistribution of oil to 
consumers.  This requires considerably less capital, but is more labor intensive.  At the 
same time, this area of the market has received the largest number of criticism especially 
after the downstream oil market was deregulated by the government in February of 1998.  
Despite all the critics of President Ramos’ move firms started pouring into the 
downstream market.  There are now 53 new players in the market with a combined 
number of service outlets of 120.
	Although this figure may seem too small when compared to the 1000+ service 
stations erected by Shell alone, the smaller players have been experiencing more growth 
when compared to their bigger counterparts.  The Big Three have been more or less 
playing a game of market share rather than expansion and diversification.  These industries 
have become rather stagnant in the previous years despite the fact that deregulation is 
supposed to promote competition levels.
	While these once fiercely competitive firms have died down, there is a great battle 
going on for the rest of the portion of the downstream oil market.  Though it may seem 
like these companies are just eating the table scraps of the Big Three, their growth in the 
previous years say otherwise about their situation.  In fact, compared to their market share 
of 6.2 percent in 1998, it grew to 9.3 in 1999.  This alone signifies that the smaller market 
players have found deregulation to make their battlefield more equal, hence making these 
smaller companies the one to look at in this industry.
	Among the newest players, is UniOil Corporation.  What makes this company 
stand out from the rest is that UniOil corporation is one of the few fully Filipino-owned oil 
companies operating in the country, this is despite the fact that the oil deregulation law 
was meant to protect the multi-national corporations rather than the locally owned ones.  
Aside from this, UniOil looks to be one of the promising companies to invest in, especially 
in its service station franchising businesses, which offer better perks when compared to 
other gasoline companies.  In the light of these facts, the company this paper has chosen is 
UniOil Corporation.
The History of Something Truly Filipino
 	UniOil Corporation is not quite new to the petroleum market.  In fact, as early as 
1966, it was already established as the Union Refinery Corporation.  However, at this 
point, their company was more of the ‘middle men’ when it comes to the process of 
distributing petroleum to the consumers.  During this time, URC was mainly focused on 
the refinery of crude oil to its lighter constituents, one of which, is pump gasoline.  URC 
was being supplied with crude oil from the major multinational oil companies operating 
here: Caltex, Shell Mobil, Esso and Getty as well as the PNOC’s marketing arm, Petron.  
During this time, URC’s big customers were these downstream petroleum specialists and 
probably nothing much else.
	In 1977, URC formed it’s marketing arm, and now known as UniOil Petroleum 
Philippines Incorporated or UPPI.  With the presence of a marketing arm, one would 
theorize that the company would readily expand such as the case of Petron Corporation.  
However, UniOil did not want to enter the fiercely competitive market just yet.  The cause 
of this is two-fold; both of which would be explained in better detail.
	The first cause for UniOil not to enter the market immediately was that during this 
time, UniOil did not have the huge resources to undergo such an extensive expansion 
program.  Petron was able to do this because it was government-backed.  Shell and the 
other multinational firms were able to do so because of huge financial support from their 
respective mother companies.  UniOil decided that the best way to go through the 
business of surviving the downstream market was not to go headfirst into the lion’s den, 
but rather to start out slowly.  Much like what Seaoil did, UniOil had big industrial 
companies as their number one customers.  They would sell their refined diesel and 
gasoline at cheaper prices directly to these corporations, who in turn, saved money from 
having to get from the over inflated price issued by the multinationals.
	The second reason was that during this time, the government decided to regulate 
the downstream oil industry because of the fact that the world crude oil prices started to 
climb up to rates more than 1,700 percent in world price standards.  With multinational 
companies beginning to feel the pinch, UniOil decided not to enter the market just yet.  If 
they would, they will start getting huge loses, which eventually led to the close of all the 
other petroleum corporations with the exception of Caltex, Shell and Petron.  Mobil, Esso 
and the rest of the players cannot earn to reduce their expenditures from maintaining too 
much service centers in the country.  In 1996, UniOil established a trading company in the 
name of Oilink International Corporation or OIC.
	By keeping a low profile, UniOil was able to survive the oil regulation law and 
remained to do so until the Ramos Administration decided to lift the deregulation law in 
1998.
The Expansion Begins
With facilities already in place even before Ramos declared oil deregulation in 
1998, UniOil found this as the best time to enter the market.  In fact, using their single 
storage facility in Lukanin, Bataan, UniOil quickly decided to invest money to make these 
state-of-the art and at the same time expanded to construct more holding and storage 
terminal facilities.  Aside from their Lukanin, Bataan oil berth shipment facility, UniOil 
currently has a storage facility in Sta. Ana, Manila and just recently, UniOil has opened 
their newest lubricant manufacturing plant in Valenzuela.  
As of the moment, the customer-base of UniOil Corporation is mainly for the 
Luzon market, primarily Metro Manila and its surrounding provinces.  The main purpose 
of this, according to UniOil counsel Lawrence Luang is make sure that UniOil remain 
competitive in the most important petroleum market in the Philippines.  Moreover, Luang 
said that the other areas of the country remain secondary, however, if the company is able 
to secure a good foundation in the Luzon area, they will begin their expansion to the 
Visayas and Mindanao regions.
Currently, the main thrust of UniOil is to expand more on the consumer-based 
market, mainly the service stations.  Their first service station was completed and first 
operated in Sucat, Parañaque in 1998.  It enjoyed moderate success and this prompted the 
company to continue expanding, by using a franchise method of handing out service 
stations rather than making the main company operate all of them.
TOTAL Philippines Incorporated, probably the biggest amongst the new players 
and considered to be UniOil’s biggest competitor, they have kept their expansion program 
under its wing.  In fact, TOTAL Philippines Inc. has been trying to increase their budget 
from their home company in France to accommodate their Philippine expansion program, 
which got delayed when the government threatened to regulate or at least semi-regulate 
the oil industry in late 1999 and early 2000.  
On the other hand, instead of keeping all of these service stations under its wing, 
UniOil has decided to offer them as a franchise to willing entrepreneurs who are willing to 
operate a service station as a means of livelihood.  According to UniOil, franchising has 
grown and continues to grow because this kind of business provides distinct advantages 
when compared to traditional means of business ownership.
What makes the UniOil franchising concept different from all the other franchising 
concepts is that it is not just focused on the service stations and pumping areas per se.  
Their franchising concept also includes such unique features such as Convenience Plus, a 
sort of convenience store and dining area, which can be operated by the franchisee at this 
own money without UniOil getting a cut into it.
This is especially a sigh of relief especially when compared to their competitors to 
franchising programs such as Shell.  Shell franchisees have been complaining that Shell 
Corporation has been giving little emphasis on the well being of their franchise owners and 
have rather cared more about profits.  In fact, as said earlier in the previous paper, and 
now reiterated, the promotional materials are actually bought by the franchise owners 
instead of being given by Shell as a part of the franchise package.  All the colorful banners, 
and merchandise such as the match to win and Ferrari promotions all have to come from 
the pockets of the franchisees, while at the same time a huge chunk of profit still goes to 
Shell Pilipinas.  Besides this fact, Shell also cares little about proper location for a service 
station.  Quite recently, it is very easy to spot two Shell service stations less than five 
kilometers apart.  Though this may provide more profit opportunities for the mother 
company, this will surely cause the franchisee to pull out all of his hair in disgust.
On the other hand, UniOil has already put their vision to make sure their 
franchising program to be more than just a franchising program.  In fact, besides providing 
better ‘cuts’ in profits, a UniOil franchise program also includes a complete package such 
as professional help in site selection, personnel training, supply sources and advertising 
and marketing materials, which are all part of the package.
Analysis Versus The Five Forces
	Much like all other gasoline firms, UniOil has little chance of actually being any 
different from the eyes of the consumer on a more general term.  Although they may offer 
better pricing of pump gasoline, to the eye of the consumer, they are still relatively the 
same.  This is probably because of the fact that the Philippines has been too attached to 
the idea of same prices of gasoline prices during the regulation era.
	Not being exactly an industry leader, UniOil has fairly a low defense against its 
fellow rivals.  With competitive pricing from the smaller companies such as TOTAL and 
Flying V (their prices are actually the same, but lower by P0.50 compared to the Big 
Three), it is very hard to earn a good profit.  Also, with rather undifferentiated products, 
people would find each of these gasoline companies to offer virtually the same kind of 
product.  In fact, there are only a handful of people who are actually after the brand name 
of gasoline they purchase for the reason of better value, performance factors, quality or so 
forth.
However, consumer defense may start becoming a great asset to the struggling 
small companies.  When the Big Three announced a whopping increase of P0.80 per liter 
increase in fuel prices, Manila Bulletin has started to notice a change in the consumer 
behavior, which can very well spell the difference to UniOil and other such small industry 
players.  The increase of prices by the Big Three has been followed only by an average 
modest gain by the other players, UniOil included.  Despite their increase in price, they 
continue to enjoy an advantage price of more than P0.50 per liter compared to their bigger 
competitors.  Due to this big difference in price, people have begun to notice the huge 
price differences and are starting to flock to these cheaper stations realizing the same 
product as they have been accustomed to, but at a much lower price.
Due to their position in the market, UniOil has a medium defense against new 
entrants.  This is because of the fact that it takes experience, good name and image to 
succeed in this business.  As said earlier, due to the indifference in product, the only way 
to be recognized is to either differentiate the product (unlikely) or make a new gimmick 
(more likely).  If the new entrant were to be a multi-national company such as Exxon or 
Mobil and would enter here in full force, using huge amount of capital, then the likes of 
UniOil will have little choice but to bow down almost immediately to them.  However, if 
the new entrant were to be another small local player, say Marikina Gas, then chances are, 
UniOil’s market share will remain highly unaffected by this new entrant.
As said in the previous paper, there is no close substitute yet for gasoline as a 
means of providing fuel.  In fact, even with the rising prices, the Department of Energy 
predicts that consumer petroleum usage (not including industrial) will continue to grow or 
at least remain steady in the next few years.  Although there are new technologies along 
the lines of solar-powered or fuel-cell cars, in the immediate future (maybe as late even as 
2010), fossil fuels will still remain as the number one source of fuel not just in the 
Philippines, but worldwide as well.  With this in mind, we can say that the defense from 
substitutes is rather strong.
The biggest weakness on the position of UniOil among the five forces is the force 
produced by UniOil’s suppliers.  This is mainly because UniOil has a relatively small oil 
storage facility, and because of this the supply of oil for distribution is quite short-term.  
Thus, if there were fluctuations in the world price of crude oil, UniOil will be the one of 
the first to be affected compared to the ones with a bigger holding facility, which bought 
the imported crude oil at a much lower price and can store this oil for a much longer 
period of time.
Strengths and Weakness
UniOil’s strength and weakness actually lie on almost the same lines: its size.  
Though it may be true that size is a weakness in the petroleum industry, in the case of 
UniOil, it has been one of its biggest assets.  Its smallness makes it not to susceptible to 
the changing or better yet, fluctuating oil prices because it has less overhead costs to pay.  
At the same time, by franchising all of their service station facilities, their losses are 
minimized, and are passed on to the franchisee as the last resort.  At the same time, the 
planned expansion of UniOil makes it possible not to dramatically increase spending, 
which could be a factor in causing too much debt to accumulate.  In fact, as of the 
moment, UniOil has kept their franchised service station count to around eight, including 
their newly opened one in Balintawak, Quezon City.  These service stations are optimized 
as not to make each franchisee to compete for profits (which can hurt both the company 
expansion program as well as the franchise holder).  Their brand name image is starting to 
get general recognition, an indication that this scheme of minimizing the number of service 
stations, but not sacrificing recognition is working.
Being late entrants into the distribution market, UniOil has gained a serious 
advantage over the other gasoline companies by facing out premium or leaded gasoline in 
the light of the government phase out of this type of fuel this year.  This means that the oil 
refineries will have lesser products to produce, thus maximizing the ability of the company 
to concentrate more on the viable markets such as diesel and unleaded.  At the same time, 
this can help the UniOil service centers to appear in smaller sizes compared to the others 
because of the less need for a third kind of fuel pump system.  
On the other hand, their relatively small size can affect their position in the market 
more.  Luang, in an interview with the Manila Bulletin said, “We do have to sacrifice our 
margins.  Ganyan talaga sa umpisa, we are losing but we have to keep on fighting.”
The Big Three companies still hold the majority of the petroleum market at close 
to 91 percent.  Due to this fact, the smaller firms are still loosing money because of the 
smaller chunk of market they have.  In fact, UniOil along with TOTAL has decided not to 
increase the price of their gasoline, while the big three has done so.  This is because of the 
fact that this is probably one of the things that keep UniOil alive in the fiercely competitive 
market.  With their cheaper price, they have begun to find themselves with a set of loyal 
customers, who are willing to take the risk of trying a new brand of gasoline, probably 
knowing before hand that what they are getting is in the same quality they have been 
accustomed with and at the same time getting it for much less price.
In terms of franchising, UniOil seems to be one of the better opportunities to invest 
money.  In an interview with Roderick Co, the manager and operator of the newest UniOil 
service station in Balintawak, Quezon City, the only reason he chose UniOil above the 
others is the greater flexibility that UniOil offers.  Aside from the attractive franchising 
package, he added that UniOil is less strict than the less oil firms in profit cuts and so 
forth, as well as operating procedures.  He adds that UniOil allows the franchise to be a bit 
different from the rest, and this differentiation is certainly helping shape a unique image of 
the corporation.  However, he says, that best of all, UniOil offers franchising at a much 
lower rate when compared to the competitors.  
The Future
	As of the moment, profitability is not an issue that is a strong point for UniOil.  
With a stranglehold grip of the market by the Big Three, the smaller players still find a 
hard time in expansion and profit opportunities in the industry.  However, if the current 
trade continues (with respect to the recent market share growth), then these companies 
might experience a turnaround in the future.  If they keep their expansion from becoming 
too fast or too stagnant, this may help in producing a well-balanced company capable of 
holding on its own despite not getting a huge chunk of the market share.  
	Though the company is focusing on the consumer-driven market, the biggest 
chunk of operations in the petroleum industry, the one area that UniOil could enter would 
be to increase their large-scale consumers and industrial users.  In the case of Shell and 
Petron, they have been able to ink a deal with the National Power Corporation to be the 
exclusive suppliers of fuel to their power plants; this can be seen as a big boost to profits, 
if not to brand imaging and recognition.  The same is true for Caltex who is the exclusive 
supplier to Cebu Pacific airlines for aviation fuel.  If UniOil were to expand to include 
these big time users, then they will be recognized as the first of the small players to do so.  
If not through this kind of specialized fuel, then another area that UniOil could do more is 
to increase advertising through print, television and sport-related events.  Shell has been 
very successful by using it’s ‘Fueled by Passion’ campaign with Ferrari on both television 
and sports car racing, UniOil has to find a partner who is equally hungry and in need of 
promotion.  Maybe car companies such as Nissan could make a good tie-up for UniOil.  
	The key word in the petroleum industry is consumer awareness.  Since petroleum 
products are still relatively the same and the people are still more inclined to choose better 
brand names rather than better prices, then UniOil should take this opportunity to build up 
their brand name.  Probably a huge investment in this area would pay off with large profits 
in the future.

Sources
UniOil (http://www.unioil.com)

Manila Bulletin Online (http://www.mb.com.ph)

Motioncars.com Magazine (http://motioncars.com)

Interview with Roderick Co, manager and operator of UniOil Balintawak Service Station, 
Quezon City.

UniOil Brochures provided by Roderick Co (see appendix).


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