Price war erupts in bottled gas market

A VICIOUS price war has erupted in the bottled gas sector, threatening to undermine Calor Group, the quoted industry leader with a market share of more than 50 per cent.

Calor's margins are likely to be eroded by Esso Gas, a wholly-owned subsidiary of the petrol company, which is is keen to carve out a bigger share of the lucrative industry. In some areas, 47-kilogram bottles of gas are being sold for pounds 17; Calor's price is around pounds 38. One gas analyst said yesterday 'Their margins are being destroyed - they derive three quarters of their revenue from bottled gas.'

Veronique Hoyaux, a gas analyst at County Nat West added: 'They (Calor Group) have lost market share, and their margins are being eroded.'

An Esso spokeswomancommented: 'Calor is quite definitely the market leader, but we are trying to make some headway. We have been operating since September 1991 in what is undoubtedly a very competitive market. We have between 3 and 6 per cent of the bottled sales in the UK.'

Asked about the pricing differential, she added, 'Our gas does sell at a different price throughout the country.'

Calor was keen to play down the threat. A company spokesman, said: 'We are the brand leader with over 50 per cent of the share, and we shall be aggressively marketing our product with lots of campaigns in the autumn.'

But Calor now sells half as much bottled gas as it did a decade ago because of increasing competition in the market for its two main products, butane and propane.

In 1992, the workforce was cut by a third in a rationalisation programme that saw more than 1,000 jobs axed.

The group has beenkeen to diversify and in February it moved into the natural gas market through a pounds 75m link with Alliance Gas, which enabled it to sell piped supplies in Britain.

As well as Esso there are other smaller companies, such as Supergas, that have entered the market, and competition looks set to stiffen.

Bottled gas is primarily used in rural areas by domestic householders and small commercial outlets, such as pubs, restaurants and agricultural concerns.

Calor made profits of more than pounds 50m last year. The shares closed at 290p on Friday, unchanged on the day.