Q&A: First Utility chief executive Ian McCaig on entering the German market

Entering the German market as a new supplier will be difficult, First Utility’s chief executive Ian McCaig tells Utility Week.

One week ago independent supplier First Utility surprised the market with its plans to partner with energy giant Shell to launch into the German electricity and gas domestic supply market this month, its first move into a foreign market.

McCaig believes that First Utility can navigate the “confusing” German retail market already saturated with small suppliers by using its successful UK business model and its new partnership with global energy gaint Shell. His recipe for success will be offering German customers what they don’t currently receive; simple, cheap transparent prices from a brand they know and recognise, he says. Here McCaig explains the reasoning behind the company’s bold move.

Why choose Germany for the first move abroad?

“Most people are paying more in Germany than they need to, switching numbers are proportionately less than in the UK, it’s a bigger market, and it’s the second most expensive market in Europe. Having really established ourselves in the UK, there’s the opportunity to take a very similar proposition of lower prices, transparency, no gimmicks, no funny mechanisms for getting money back, just clear transparent low prices, and backed up by a brand is very trusted in the market and a way of working that has worked very well in the UK.”

How will you distinguish yourself from other independents?

“We are in partnership with Shell which is a very established brand in the market already with very high brand recognition and consumer awareness. In Germany there is a lot of things that used to cause a lot of confusion in the UK market – loyalty schemes, cashbacks, incentives – it’s very difficult to cut through to what the prices consumers are actually paying. We want to be a lot more transparent and get a lot more people interested in just being drawn to a more straightforward lower price proposition.”

What can the UK learn from Germany?

“There’s talk about abandoning the four tariff rule in the UK. In Germany when so many providers can construct so many products in so many ways, it’s actually quite confusing for the customer and actually switching rates are adversely affected by that, and that’s one of the concerns that we have for the UK.

“I think we are on a journey where there will be a lot more independents and there will be different sorts, be they community providers, smaller independents, niches, or green and I think Germany shows where the UK might be headed.”

Is Germany doing anything to lessen the confusion?

“They are trying to pay a lot more attention to comparison sites and make sure there’s real transparency with those comparison sites.”