Gas Station Billionaires Focus on Food Over Fuel

EG Group founders are growing their retail operation in the U.S.

December 08, 2020

BLACKBURN, U.K.—Focusing on food more than fuel helped two entrepreneurial brothers grow their first gas station into a billion-dollar business, and now they’re rapidly expanding in the U.S., reports the Wall Street Journal.

As teens, Mohsin and Zuber Issa worked at their parents’ filling station in northern England. From that experience, they purchased a single derelict site nearby and grew it into one of the world’s largest independent gas-station operations, with more than 6,000 sites across Europe, and more recently in Australia and the U.S.

The Issa brothers were there when big oil companies sold off underperforming gas stations in the U.K. and later in Europe. They sold higher-margin food and fresh and packaged groceries and franchised some of the world’s most recognizable fast-food brands.

The pair is looking to repeat that success with the U.S. EG Group, the business they own along with private-equity firm TDR Capital. Currently, they’re wrapping up the biggest deal of their careers—the $9 billion purchase of Walmart’s majority stake in British grocery chain Asda Group Ltd. (Look for a story about the brothers and their plans for Asda in the January issue of NACS Magazine.)

The brothers have kept a low profile despite amassing a personal fortune estimated at $4.7 billion, but the Walmart deal announced in October catapulted them to prominence in the U.K.

The Issas bought their first gas station in 2001 near Manchester in northern England and opened a cafe and shop on its spare land. While working at their parents’ site, they determined that motorists often wanted refreshments, and that coffee could be more lucrative than fuel. They decided to attract drivers with higher-quality food.

They borrowed money to purchase more gas stations. Then, they funded refurbishments with profits, adding c-stores that sell products ranging from milk to artisan bread, and franchised fast-food chains, such as Burger King and Subway. They opened England’s first drive-through Starbucks in 2010 and grew it into the U.K.’s largest Starbucks franchise. Today, convenience-store and fast-food offerings make up about two-thirds of the company’s revenue.

Mohsin, 49 years old, manages the day-to-day business. Zuber, 48, works on development and acquisitions. In 2011, Mohsin told a local paper that they looked for sites with lots of nearby homes or “good traffic flow and ‘chimney pot’ surroundings.”

This strategy appears to be paying off in the pandemic. EG Group recently reported a 54% rise in third-quarter earnings, stripping out the impact of acquisitions, as higher grocery and merchandise sales offset a fall in fuel volumes.

In 2018, EG Group bought Kroger’s chain of nearly 800-strong convenience stores and gas stations, which included brands like Turkey Hill and Kwik Shop. Last year, it acquired Cumberland Farms’ 567 stores in the Northeast and Florida. The company hopes to become a one-stop shop for breakfast, tobacco, newspapers and fuel for morning commuters and for groceries in the evening.

The speed of EG Group’s expansion and its debt load are attracting scrutiny. S&P Global Ratings estimates EG Group’s debt will hit $11 billion this year, with a debt-to-earnings ratio of 10 times. By contrast, the ratio for Alimentation Couche-Tard of Canada is 1.9 times. An EG Group spokesman said S&P’s calculation didn’t reflect synergies from its recent deals.