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2021 LP Gas Growth Summit panel tackles competitive strategy

October 20, 2021 By    

On the second morning of the 2021 LP Gas Growth Summit, retail propane decision-makers participated in a panel discussion about the most urgent challenges and greatest opportunities involved in running a propane operation today.

From left are Brian Richesson of LP Gas, Tony Buck of Lakes Gas, Clay Borden of O'Nealgas, Armistead Mauck of Cherry Energy and Trevor Wendt of Wendt's Propane and Oil. Photo by LP Gas staff _ 2021 LP Gas Growth Summit

From left are Brian Richesson of LP Gas, Tony Buck of Lakes Gas, Clay Borden of O’Nealgas, Armistead Mauck of Cherry Energy and Trevor Wendt of Wendt’s Propane and Oil. Photo by LP Gas staff

LP Gas’ Brian Richesson moderated the panel, composed of Tony Buck, vice president of safety, training and procurement at Lakes Gas in Minnesota; Clay Borden, general manager of O’Nealgas in Louisiana; Armistead Mauck, vice president of Cherry Energy in North Carolina; and Trevor Wendt, vice president of Wendt’s Propane and Oil in New York.

Coronavirus challenges

When asked how their business operations have changed over the past year and a half since the pandemic began, panelists detail the challenges of keeping employees and customers safe while complying with regulations and adjusting to market shifts.

Many of the “snowbirds” in Wendt’s service area who usually travel South to avoid the cold weather stayed in New York during the pandemic, meaning more gas load to heat homes and power appliances.

“We did have quite a few runouts because of that,” says Wendt. “Luckily, they understood what was going on, for the most part.”

Outdoor living became an area of focus in Louisiana during this time, says Borden.

In North Carolina, Mauck observed greater sensitivity to crises as concerns about severe weather events grew alongside pandemic-related concerns. As a result, the customers in his service area have shown greater interest in propane-powered generators.

Panelists also experienced positive transformations in operations. For instance, Borden and Mauck note greater adoption of automation tools such as electronic tickets, paperless statements and credit card payments.

Workforce retention

Panelists report that the pandemic exacerbated long-running labor issues, particularly in the trucking space.

Wendt emphasizes the entire trucking industry has been struggling to hire and retain drivers for the past 10 to 15 years, so the issue is larger than the propane industry.

“COVID did not help that whatsoever,” he notes.

Lakes Gas increased compensation to fend off higher turnover during the past two years and retain experienced employees, says Buck.

“We’ve been forced to look at what we’re paying our guys because every trucking company in Minnesota is having the same issue,” he says. “Salaries have gone up. We’ve actually implemented a hiring bonus now for the first time.”

For Borden, staffing challenges boil down to a limited pool of qualified employees in rural north Louisiana, where the population is dwindling.

Mauck, in turn, discusses ways propane companies can groom underqualified employees to become committed propane professionals. Cherry Energy uses its relationship with Rinnai and Generac to train employees to service water heaters and generators. As a result, the company can pay employees more, and employees get to wear the designations on their uniforms. Cherry Energy’s focus on technology also reinforces that job roles are modern and relevant.

“When you put someone to work and they can drive a nice truck, have technology in their hand, and wear a uniform and be trained up, it takes us to another level,” says Mauck.

Technological advancements

In Wendt’s view, propane companies must embrace technology to offset the rising cost of fuel, insurance, labor and other operational expenses.

“We’re going to have to find more ways to start trimming the fat essentially,” he says. “What I mean by that is we need to become more and more efficient to maintain what we’re making.”

Mauck views the propane business as, at base, a logistics business alongside delivery giants like Amazon, UPS and FedEx. He says Cherry Energy started using tank monitors and truck automation about 10 to 15 years ago to become that technologically driven logistics company.

Technological “connectivity” also extends relationships with customers so they can rest assured that their propane provider “has their back,” says Mauck. The team at Cherry Energy envisions customers will “forget about price” when they have that sense of security, he adds.

For propane marketers who fear resistance from employees or customers when implementing new technologies, Buck relays a reassuring message:

“When we first transitioned to the tablet in trucks, we had a 72-year-old driver that said ‘I can’t use this. I’m not going to use it.’ He had it for about a week and said: ‘You’re never taking this away from me again,’” Buck says, emphasizing it wasn’t difficult to sell the technology even to employees who weren’t tech-oriented.

Even though Lakes Gas passes some of the cost of tank monitors on to customers, those customers are requesting the monitors and the associated mobile app so they can track their tank levels with greater ease, he says.

Buck considers the monitors and app customer retention tools. Customers “think twice about jumping ship to another company because they’ll have to give up their app,” he notes.

Residential market trends

When it comes to protecting and expanding the “bread-and-butter” residential market, most of the panelists report difficulties competing with natural gas expansion and electrification in their areas.

Borden’s company operates in what he calls a “gas state,” meaning electrification hasn’t posed a significant threat to date, but he also says Louisiana is a “natural gas state” where natural gas is available to most areas unless they are very rural.

“The challenge we have is a lot of younger people want to move into cities where natural gas is available,” he says. “So from a propane standpoint, when grandmother and grandfather pass away, no one moves into that house. It’s a customer that goes and does not come back. We have to work with builders – we do that on a regular basis – so as they build new neighborhoods, they don’t work with natural gas companies – they work with us.”

Wendt says Wendt’s Propane and Oil – located north of Buffalo, New York – has lost 40 to 60 residential customers per year for the past five or six years to natural gas expansion, forcing the company to diversify beyond residential gallons. Electrification poses a challenge, too.

“There’s just so much money and lobbying power behind not only electrification but natural gas. It’s extremely hard to compete,” he says.

Lakes Gas faces similar competition on both fronts in Minnesota. Buck says natural gas is expanding in areas “that don’t make sense at all” because the industry has lobbied to expand with funding from its current customer base. Like O’Nealgas, Lakes Gas works with builders to provide incentives for propane installs.

Mauck offers a different perspective on natural gas. He considers propane “portable natural gas,” meaning propane is the next best option where natural gas is not available. Cherry Energy has a service department that does natural gas work, so that if a community runs a natural gas line, the company can retain those customers.

Mauck insists the real competition is electrification – not natural gas. In North Carolina, the high-efficiency heat pump poses a substantial threat. Cherry Energy is combating it with hydronic heating, where a tankless water heater can produce domestic hot water and home heat.

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