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Assessing LPG’s progress

January 28, 2020 By    

All who have invested their capital and careers in the propane industry should be interested in the big picture. Nobody operates a propane business in isolation. Therefore, it’s worthwhile to keep a pulse on the important questions that define our industry’s performance. My column from five years ago, republished here, provided a framework for assessing what is needed to realize our growth potential. My updated assessment and priorities are provided in italics below.


An industry of growth?

Published December 2015

The table has been set to reverse the propane industry’s 15-year gallon slide.

This year's survey offers busy retailers a useful tool to assess their businesses. Photo: iStock.com/kozmoat98

Photo: iStock.com/kozmoat98

Consider the following: Lower propane prices should create competitive advantages against electricity and other fuels for the foreseeable future; the climate change movement puts propane in the spotlight as a viable solution for policymakers and clean energy advocates; lifting the Propane Education & Research Council’s (PERC) consumer education restriction opens the door to promote propane’s benefits to new markets; and propane’s clean, versatile and efficient brand fits the demands of today’s energy consumer.

All of these factors remain favorable, which is good news for propane.

This is great news, but we cannot expect new customers and markets for propane to come to us. Instead, we must go to them. Is the propane industry ready to develop these new markets and counter the challenge from propane’s competitors?

Here are five questions that will determine whether we achieve our growth potential:

1. Propane marketer engagement in organic growth. Gallon growth requires new customers, burner tips or spark plugs. This may be the industry’s most significant growth barrier, and too few propane marketers are engaged in organic growth. To overcome this barrier, propane marketers must shift from being operationally focused with a cannibalizing growth strategy of taking the competition’s customers to instead making their priority selling propane’s benefits and applications. Propane marketers must become more retail-like by upgrading the appearance of their facilities and focusing on customer service. Will propane marketers become engaged in the organic growth of new customers, burner tips and spark plugs?

Propane marketers have made little, if any, progress in becoming more retail-like in their appearance, product and service offerings, and marketing. Most propane marketers still rely on a cannibalizing growth strategy.

2. MLP priorities. The three largest master limited partnerships (MLP) – AmeriGas, Ferrellgas and Suburban Propane – represent 30 percent of the industry’s gallons. They have the opportunity to be the industry’s flagship for market development because of their size, resources and national market presence. Their challenge, however, is that they must satisfy Wall Street’s short-term demands for financial profits, which often conflict with organic growth’s long-term investments. Can MLPs balance their priority for satisfying Wall Street’s demand for profit today while allocating sufficient financial resources that organically grow propane markets?

The challenges of the three largest propane marketers of high debt and Wall Street’s demand for short-term profits remain unchanged, thereby making it difficult for them to invest in marketing activities that organically grow gallons. Their combined gallon decline is 10 percent since 2015. (Editor’s note: AmeriGas is no longer an MLP. UGI purchased AmeriGas’ remaining public shares. The company’s last day of trading on the New York Stock Exchange was Aug. 21, 2019.)

3. Propane industry partnerships. The propane industry is too small to fully develop its organic growth opportunities. We must develop partnerships with energy decision-makers outside the propane industry. These include plumbers, HVAC contractors, homebuilders, fleet managers, vocational and technical schools, clean-energy advocates and lawn care dealers. Currently, this group of energy decision-makers knows little about propane’s benefits or has negative perceptions about propane. Will the propane industry’s efforts to forge new partnerships effectively create propane advocates?

The propane industry continues its insular focus and as a result has very few collaboration successes that grow propane’s awareness and favorability among energy decision-makers. The good news is there are some isolated success stories in working with trade schools that add propane to their curriculum.

4. Propane’s brand. Presently, propane’s brand is not good among non-propane users. We are seen as unsafe, marked with the “Hank Hill” caricature and used for grilling alone. The reality is propane is clean, versatile, affordable and an American-made product. Will our industry’s consumer education awareness methods and customer service practices create the positive brand propane deserves and one that attracts new customers and increases propane’s applications?

Creating propane’s national brand is a very complex and significant task. We’ve seen little progress. PERC’s “Blue the Dog” campaign was prematurely discontinued because of an ineffective message. Still too often, decision-makers do not think of propane as a viable gas option when natural gas is not available. Propane is perceived as a dirty fossil fuel by our policymakers. PERC and National Propane Gas Association (NPGA) leaders recently acknowledged the need to work together to create propane’s clean energy message.

5. Industry collaboration. The major organizations of the propane industry – the NPGA, PERC and state associations – each serve a critical role that influences the industry’s growth. Their alignment on priorities can create a powerful synergistic force for growth. Stuart Weidie, Blossman Gas CEO and incoming NPGA chairman, stated his priority of helping to strengthen the bond of these organizations. Will the other leaders of our industry follow Weidie’s example and help execute the collaborative growth plan among the organizations?

NPGA’s, PERC’s and state associations’ working relationships are probably the best they have been in the past decade. However, PERC council efforts to create a regional structure that would identify unique regional needs and foster greater collaboration between the states died due to lack of support.

Given today’s events and initiatives underway, NPGA, PERC and state associations should prioritize the following if the propane industry is to reach its potential:

  • Set a gallon-growth goal. The NPGA and PERC leadership should heed NPGA Chairman Randy Thompson’s 2-year-old call to set a gallon-growth goal with a plan for achieving it. Such an action could be a rallying cry to the industry on how we will achieve our growth potential.
  • Create the propane brand. The collaborative effort to create propane’s response to the electrify everything movement is a start in creating our brand. PERC’s Propane Can Do That campaign holds promise.
  • Regional structure. PERC and NPGA should create a structure that:
    1. Creates focus on the opportunities and challenges unique to each region of the country.
    2. Fosters much-needed resource- and idea-sharing across states.
  • Build partnerships through education. State associations should create a plan for working with community colleges, vocational and technical schools, and HVAC and plumbing schools to make propane mainstream with their curriculums and in their training centers. PERC should be prepared to support the states with implementing their plans.
  • Propane marketer training. A well-respected state association executive aptly said, “The propane marketer needs a roadmap on how to organically grow their market.” This too is a complex but very important task. PERC and state associations should work together to make this happen.

Randy Doyle is a 30-year propane industry veteran who serves on the PERC council and on the NPGA board of directors.

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