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Organic growth: Our industry’s great need

August 5, 2021 By    

In the past 20 years, which organic growth opportunity has the propane industry exploited? Autogas? Lawn care? Power generation? Water heating? The answer to this question from most industry members is none. Analysis of the market share data trends confirms this perception.

Organic growth – the fulfillment of the Propane Education & Research Council’s (PERC) vision to “increase uses and users of propane” – is challenging because the customer is expected to move from the fuel that is familiar to them – such as diesel or electricity – to propane, which is unknown and requires new infrastructure.

Further, to tout the greatness of propane’s many uses also requires the small propane industry to learn vastly different technologies and markets, from advances in residential to transportation and everything in between.

Underlying problem

The industry’s organic growth problem is a combination of the following issues:

  1. Most propane marketers view “business development” as “rolling competitor tanks” or acquisitions, which merely reshuffles the industry pie. As a result, few marketers have the sales, product and technical expertise to organically grow gallons and exploit market growth opportunities.
  2. PERC’s effectiveness is limited by the lack of propane marketer engagement in organic growth. Further, the approach to “build it and they will come,” with a commercialization plan that includes only marketing materials and incentives, will do little to create significant new uses and users.
  3. The propane industry needs to ally and engage with others such as the trades, engineers, architects and homebuilders to make propane their fuel of choice when natural gas is not available.
  4. Our industry has too many examples of failed attempts to develop new markets due to faulty technology or unreliable service. This is a self-inflicted growth barrier.

Business development solution

  1. Propane marketer engagement: Consider the saying, “Opportunity is where you find it, not where it finds you.” Propane’s many benefits combined with the advent of U.S. propane production have created growth opportunities. However, we cannot expect the customer to come to us. The propane marketer must go to them. We must be ready to offer one-stop installation and service solutions, which requires propane marketers to either expand their core competencies or build partnerships with outside contractors. Organic growth requires time to build relationships to create awareness of propane as an option. None of this is easy.
  2. Patience and perseverance: Developing the relationships and trust needed to persuade the customer to switch from their familiar fuel of diesel or electricity to propane often takes years.
  3. Alliances and partnerships: More time and resources are needed to create awareness among energy decision-makers about propane’s benefits and to build the relationships to trust our products and services. The effort to add propane to technical schools and community colleges is a great example.
  4. Reliable technology and service: Commercialization plans that include steps that ensure the propane technology will work and will be supported by a dependable service network are crucial.
  5. PERC: The commercialization plan is the most important part of developing new technology.

Can the propane industry become an industry that organically grows by exploiting its growth opportunities? Our history says we will not. Without a major course correction, our future story is that top-performing, full-service propane marketers will enjoy growth by taking their competitors’ customers, and the consolidators will grow through acquisitions. This will lead to a more consolidated industry with a smaller pie, or at best minimal growth, as we will not replace our market erosion from the electrify-everything movement, natural gas expansion and energy-efficiency gains.

Randy Doyle is a 40-year industry veteran who serves on the NPGA board of directors and is active in the Virginia Propane Gas Association. He is a past PERC councilor. He consults with Holtzman Propane in Mt. Jackson, Virginia.

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1 Comment on "Organic growth: Our industry’s great need"

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  1. Craig Wollenberg says:
    August 10, 2021 at 3:18 pm

    Randy – I agree with you 100%. Over the last 37 years in the propane industry, primarily with two companies, I have seen us focus less and less on organic growth. Just recently, the company that I work for reduced our sales staff outreach, only to rely on incoming calls and office based CSR’s. One of my roles is as a CSR and I take pride in being very good at it, but we need to have people in the field. Even in our area that is predominately rural and residential, field sales people are key in my opinion to maintaining a personal touch with individual consumers and key contractors and home builders. We need to be ready at all times to promote, with a plan, solutions to consumers that will ultimately keep money in their pockets vs competing energy sources and demonstrate some contribution to the green agenda.

    As a side note, I am not a believer in the whole green movement. I believe as stewards of this planet, we are certainly capable of reducing the level of contaminants we release into the atmosphere. However, the input I have received from various well educated scientific minds that I respect, lead me to believe that our current global warming is mostly part of the cyclical nature of this planet. All of the well intentioned green plans actually have a miniscule effect on our climate.