Propane industry growth prospects

November 13, 2017 By LP Gas

On the final day of the 2017 LP Gas Growth Summit, propane retailers and vendor partners gathered for a panel discussion. The four participants helped further the dialogue and information exchange on propane gallon-growing opportunities and challenges that pose threats to that growth.

The panelists were Dave Bertelsen, national propane product manager at Matheson, which is headquartered in Basking Ridge, New Jersey; Joe Silva Sr., president and general manager at EnviroPro Energy Co. LLC in Williams, California; Chad Kroening, facilities and projects administrator at Boehlke Bottled Gas in Cedarburg, Wisconsin; and Christopher Caywood, president and co-owner of Caywood Propane Gas in Hudson, Michigan.

Their comments have been edited for organizational purposes, as well as for clarity and conciseness.

Retailers participate in a panel discussion. Panelists were, from left, Christopher Caywood, Chad Kroening, Joe Silva Sr. and Dave Bertelsen. Editor-in-Chief Brian Richesson (far right) facilitated the conversation.

LP Gas: One of the biggest issues we hear from propane retailers is in regards to the challenges associated with finding and hiring qualified employees. Are you experiencing some of these same challenges, and what are you doing to overcome them?

Bertelsen: It is a challenge to find qualified employees, drivers in particular. It’s almost a 60-day process before an employee can go solo on a bobtail because we have a pretty rigorous training process. We get through the initial phase of training and sometimes they fall out because they are not able to complete all of the tasks. That has been a difficult thing for us, but at this point we are ready for the winter season.

Silva: We are working with the local high schools and talking to them about career opportunities that exist outside of a college environment. The Western Association is working to develop a propane college. I’m at the point where I want to take a high school graduate, get them through that four-year college and then hire them right after that. The dynamic has changed, but we are going to get a respectful, educated blue-collar employee.

Kroening: We have had some hiring issues in the past. We’ve even been going through office staff a lot in the last couple of years. Our business is a bunch of 55-plus-year-old guys, and now we are looking for younger people. We don’t interview people based on just skill. We give a buy-in to the family values and the family service culture. During an interview, we don’t ask a lot of questions about the job because it’s a pretty simple job when it comes down to it. We’re making sure we hire the person who fits into the culture of the company. Those are the things that work for us.

Caywood: We’ve been going outside of the industry in the last three or four years of hiring. When we looked inside of the industry, we didn’t have any luck, so we just started looking for people with experience or CDLs, and we hired those people. We hire drivers to also be service technicians. So, they’re out setting tanks, but they are also expected to deliver gas. We hire nice people. You can hire a nice, smart person and make them a good driver. You can’t hire a nasty person and make them nice, no matter how much experience they have.

LP Gas: Propane supply continues to be a hot topic in the industry, which can’t grow without a reliable supply and distribution network. Can you tell us how your company takes the necessary steps to keep your customers supplied, even under the most challenging of circumstances?

Bertelsen: Two things to consider: First, look at your suppliers as partners. That has been important to us in our dealings with our suppliers. The other point is that you need to have a complete supply plan, meaning multiple contingencies. We do business on the East Coast, and it just takes a minor hiccup to throw that into chaos in a heartbeat. So you need to have option one, option two and option three to combat that.

Kroening: Contracting gas is a big deal. Paper contracts are okay for price protection, but they don’t protect your load. Having different suppliers from different parts of the country is a great idea. What happened in ’13 and ’14 basically came down to: We were short, everyone was in a panic, and then we had a transportation problem. Suppliers in the East were going to the Midwest; suppliers in the Midwest were going to the West; the Northwest was going to the South, and so on.

Silva: In California, there is a different dynamic. It doesn’t get as cold. But I know about natural gas and fracking and what’s going on, and the problem is going to get bigger. We are exporting billions of gallons of propane, which means that propane is now being internationally priced, not domestically priced. We have conflicting agendas, but ultimately propane wholesalers are going to sell to the person who will pay the most.

Caywood: All of us lived through the great shortage of January ’14. We are very concerned about supply. We have taken a very careful approach to try to figure out how propane gets within delivery distance of us and then we diversify that. We have wholesalers that are supplying propane from three ultimate sources, so if one of them goes out we still have the hope of two other sources.

More on growing gallons from the LP Gas Growth Summit

LP Gas: Can you tell us about some of the technologies that your businesses have implemented that have really made a difference in operational efficiency or made processes easier on the customer end?

Bertelsen: We have multiple programs going on with tank monitoring. We have implemented it across the board, but also with our customer base and with certain vendors. The other thing we are going to be testing is tablets, where guys can come up to a tank and get all of the history and the usage and everything.

Kroening: Truck automation has been a big thing for us, and right now we are incentivizing people to go paperless. In the future, when we are getting people to be on board, we are going to be in the situation where we say, “This is the way we do it; there is no other way.” Whether or not that’s worth it to lose a customer or upset a customer, sometimes you have to look at the big picture and think, “How many systems do I want to run?” Technology is going to be important moving forward, so it’s going to be if you want to run your business or if you want your customers to run your business.

Silva: We do monitoring. We are paperless. Our employees have Android smartphones. We are cloud-based and we use all the cloud-based functions. I can bring up every single customer and show you everything on my smartphone in minutes. I think it’s great. I don’t have any legacy customers I would have to migrate. I do get some flack from my wife about being sticky about the email invoice thing. We work with customers who don’t want invoices via email. We do not keep paper in our office except for a few truck files.

Caywood: Is there anyone here who hasn’t bought stuff on the web? Our customers are in the same spot. How many of our competitors give their customers the ability to sign up, check their bill, pay their bill online? When I got active, we launched a website. We actually do something that is unique: We publish our prices. What industry has retailers that hide the ball under the cup? We post our prices. We have electronic contracts and we are 90 percent digital. Most of our customers like that. They want to sit down in their pajamas with a cup of coffee and not talk to us.

LP Gas: Can you tell us about what markets today are ripe with growth opportunities?

Caywood: Right now it is autogas. It’s actually cleaner than natural gas. It’s easier to use than natural gas. We have a great green story to tell about autogas, and I think it’s a terrific opportunity for the industry.

Kroening: Autogas is probably the best opportunity that the industry has had in a long time, but I would answer more broadly and say commercial propane. Fleets are where autogas is going to have to start. Being clean, saving green and being able to provide a reliable product at a low cost is what’s important to these guys. These fleets who are going to use autogas, they don’t care how they get it; they just care that it’s there and they are saving money. Going out to commercial, the lawn mowing industry. I’ve got a couple of accounts that have a lawn mower. They’re municipal accounts running three, four times a week, 800 gallons a year. The forklift market is there, too.

Silva: I’m excited to talk about autogas, but it’s just not going to happen in California. I do not do government work or work for the county. I sell to farmers, so I am able to exist in California. A school district in California cannot buy an incentivized propane school bus because it is not considered a clean fuel. I run a complete autogas fleet because I sell millions of gallons of irrigation fuel. People are getting incentivized to run electric irrigation systems. All new houses in California have to be carbon neutral.

Bertelsen: Autogas and forklifts is our opportunity. Electric is our competition. We are seeing more conversions to electric, and I know PERC is putting together programs to combat and educate going forward. We joined a group that puts us in touch with autogas professionals. As a customer, we’ve got all the professionals lined up so we can talk equipment, conversions and supply. I would urge you to consider joining one of these autogas groups.