Australian convenience retailers Ampol and Viva have an opportunity to roll out quick-service restaurant (QSR) counters across their high traffic sites and lift non-fuel margins to be in-line with US peers. Foodservice penetration in the US is an aspirational target for the domestic market, but Australian fuel retailers can grow gross profit per store by tapping into the circa 70% gross margins in QSR. QSR store rollout supports Ampol and Viva’s five-year outlook for growing non-fuel earnings, whilst elevated refiner margins are also supportive in the near-term.

We initiate coverage on Ampol at a time when convenience sites are executing well with upside from a better sales mix and more foodservice offerings. In the next two years the company should also experience a substantial lift in profitability in its fuels businesses as throughput recovers and capital projects are completed.