A vote of confidence

When spot propane prices at Mont Belvieu topped $1.16 this past July, I wondered if spiraling world oil costs would be the final blow that would push marketers out of the business once and for all.

Patrick Hyland

The feedback from retailers responding to our annual State of the Industry survey this year tells a surprisingly different story, however.

Expectations are up – way up – heading into 2007. In fact, retailers say they are the most optimistic they have been in the last four years. A full 73 percent say they expect gain customers, and 52 percent expect higher profits. These numbers are more than 10 points higher than last year’s survey responses.

Despite another abnormally warm winter that drove down weather-related demand to its lowest point in years, marketers report a modest 2 percent growth in gallons sold in 2006. And more than 41 percent chose to expand their market area during this challenging year.

That success is even more remarkable considering that $2 and higher propane prices pushed many customers to alternative energy sources such as geothermal, wood pellets, corn furnaces and electricity.

So how are propane marketers effectively making lemonade out of the lemons they were dealt in 2006? By getting smarter.

Our research shows evidence that more businesses are learning to control certain costs and improve the efficiency of their operations on several fronts:

The percentage of “keep full” accounts is higher; there is greater use of purchasing and hedging tools to stabilize wholesale prices; more billing options are being made available to retain customers; added storage capacity is helping calm price volatility; and marketers are improving the productivity and profitability of daily deliveries through technologies such as GPS, tank monitoring, fleeting routing software and in-truck terminals with billing capabilities.

Continuing the trend we have seen in the last few years of surveys, technology clearly is being incorporated into the retail management process more quickly. Our traditionally stodgy industry appears to be waking up and embracing change as a means of growth and prosperity. Finally!

There still are plenty of concerns and challenges ahead in the New Year, of course. You can read about them and much more in our State of the Industry Report.

But I’m not going to play Scrooge when those on the front line say the cup of egg nog is more than half full this year. Cheers!