Addressing the propane industry’s gallon sales decline

Beginning in 2002, our industry has suffered a slow and steady 25 percent gallon decline.

The Propane Education & Research Council’s (PERC) recent market analysts’ forecast for continued gallon loss through 2030 is not good news either.

Propane industry members who have invested their family fortunes and careers in the industry – and investors in publicly traded MLPs – rightfully ask:

• “What’s causing the industry’s decline?”
• “Can the propane industry grow again?”
• “What is industry leadership’s plan to reverse the downward spiral?”

These good questions have no clear answers, and that’s a problem. Perhaps nothing can be done to save the industry because propane, according to textbook economic product life cycle theory, meets the criteria for being in its fifth and final decline phase.

Is our future one of simply milking the business built by previous generations while the “electrify everything” movement slowly makes us an irrelevant industry in 20 years?

Causes for our decline

For the past 10 years, we should have been looking in the mirror when explaining our industry’s decline. Instead, we’ve placated ourselves by believing the story of more efficient appliances; better insulated homes; warmer winters this century; competing against the giant gas and electric utilities; and propane’s price volatility are the reasons for our decline.

While all of these factors have contributed to the industry’s gallon loss, we need to begin looking at the factors we can control that have resulted in market share losses and seriously consider why we have not been developing our growth opportunities. These factors are:

1. The disengaged propane marketer – The trend of the past 25 years is that fewer propane marketers sell and support propane applications, i.e. water heaters, space heating, autogas, etc. Who has filled the void vacated by the propane marketer to tell propane’s story to the homeowner and energy decision-maker? Nobody.

2. Lack of industry unity – For too long, PERC, the National Propane Gas Association, state associations and the propane marketer have not had a unified message. There’s been little collaboration among the industry’s key stakeholders, resulting in scapegoating and distrust. PERC is often wrongly blamed for the gallon loss. The biblical quote “A house divided against itself shall not stand” sadly fits. The good news is progress has been made in these key relationships, beginning with past NPGA Chairman Stuart Weidie’s call for industry collaboration.

3. Undeveloped partnerships and alliances – We have not done well in creating propane advocates with plumbers, the HVAC industry, homebuilders, fleet owners and their trade associations. The propane industry is too small to effectively promote propane to all of the markets we serve. We need partners and alliances to tell our story.

What will save us?

First, we must acknowledge that propane can be a growth industry. This will require a change in heart and confidence about the future. Propane’s attributes as a clean, efficient and versatile fuel will not change. Now, it is more abundant than ever, thereby assuring its affordability to remain competitive with other fuels.

Second, we need a growth goal. Industry leaders should unify around Randy Thompson, incoming NPGA chairman, who challenged us to grow by 4 billion gallons over the next five years.

Third, we need a growth plan. PERC, as the industry’s collaborator, should take the lead role in creating this plan. PERC also needs to reorient its work to become market focused to ensure the limited resources are appropriately allocated and that our industry’s best expertise in key markets we serve are called upon to develop the plan.

The plan should provide the propane marketer with the practical roadmap on how to become more effective marketers. The growth plan, if done well, will create collaboration among PERC, NPGA and the state associations, thereby unifying the industry.

Can we do it? With a thoughtful plan that engages all aspects of our industry, partnership creation and collaboration – yes, we can.

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Randy Doyle is a 30-year industry veteran who has worked with both multi-state and independent propane marketers. He currently serves on the PERC council and the NPGA board of directors.

*Featured photo: Joe McCarthy