Propane retailers share top trends in State of the Industry report

December 29, 2017 By    

We asked propane retailers about their favorites – from equipment to trade show cities – but also about the issues affecting their operations. Photo by Kevin Yanik

Growing and changing.

These two words were cited most when LP Gas magazine asked readers earlier this year to describe how they view the propane industry today.

From how propane is produced, to where it’s sold, to how consumers are using it, a lot has changed in an industry that turned 105 this year.

This year’s State of the Industry report is inspired by local, community publications across the country – including daily newspapers – that give their readers a choice. These “best of” surveys are popular because they’re fun, they give community members a way to voice their opinion in a number of categories and, above all, they’re educational to the reader.

So, we’ve taken that format and applied it here. We’ve asked propane retailers for their top choices in a number of categories, including “favorite piece of equipment,” “top safety issue” and “favorite city for a propane industry event.” We also explore trends, concerns and growth opportunities.

This report was assembled from online survey results of nearly 70 propane retailers, editor conversations with retailers and other industry leaders, as well as information gleaned at industry events, including the annual LP Gas Growth Summit. LP Gas Managing Editor Clara Richter, Associate Editor Joe McCarthy and safety columnist Jay Johnston contributed to the report.

ICF and Propane Resources also provide their industry perspectives, and don’t miss our State of the Economy report, which ties so closely to the strength of our industry, on the pages that follow.


Biggest industry trend: Autogas

Autogas is one of the biggest trends in the industry. As more organizations adopt propane-powered vehicles, retailers have a new opportunity to expand their businesses and grow gallons. The other side of the coin, however, as noted by one retailer, is that as exciting as autogas is, “the proper infrastructure must be there.” Though autogas is a hot topic right now, until it becomes more widely adopted, its growth in popularity could be slowed by a lack of widespread refueling access to the product. Answers to this survey question also show that the industry is trending toward technology. Many respondents noted a move toward paperless billing, an increased use of electronics and social media, and the growing popularity of online ordering. According to one retailer, technologies like truck automation and tank monitors “can save time and money for companies in the long run.” Another retailer states that technology drives efficiency in all areas of the business. Several retailers cited U.S. propane exports as a current trend. According to the U.S. Energy Information Administration, 2017 saw the highest rate of propane exports ever, and it doesn’t appear that the trend is going to ebb. The trends all point to change. The industry is moving into new markets, adopting new technology and experiencing a new supply environment.


Photo courtesy of Blossman Gas

Favorite piece of equipment: Bobtail

Delivery systems are an essential piece to any operation, so it’s no surprise that the bobtail, the propane industry’s staple vehicle, was the most popular answer in our survey. Over a third of recorded responses were related to the bobtail. Paula Moore of Blackburn Propane Service in Calera, Oklahoma, highlighted her company’s 2018 Freightliner bobtail, which is powered by propane, in her response. “My firm belief is if we want to sell our fuel as motor fuel, then certainly our fleets should use it as motor fuel,” she says. Service trucks and crane/boom trucks were among other popular answers provided by retailers. One survey respondent noted his company’s new Ford F-750 crane truck, while another shared “our new crane trucks that allow us to place 60,000-gallon propane tanks.” Outside the top answers were computer software that aids in deliveries and communication and a digital dispatch system for delivery drivers, keeping with the general theme of improved delivery systems.


Photo courtesy of Superior Fireplaces

Most popular appliance in your showroom: Gas fireplaces

A variety of answers highlighted a wide range of products that are featured in showrooms across the country. Leading the pack were gas fireplaces and tankless water heaters, with fireplaces having a slight advantage. As a group, appliances used for heating represented about one-third of responses. Jorge Castillejo of Snow’s Fuel Co. in Orleans, Massachusetts, says the popularity of tankless water heaters is no recent development in his showroom. “Customers know it will take less gas and cost less money,” Castillejo says about the water heaters. “Customers like that.” Based on Castillejo’s experience in his showroom, he says customers also like how tankless water heaters have a modern look and a small physical footprint that allows them to fit into tight spaces. While we’ve focused here on popular appliances, it’s also important to note that many respondents to this survey question said the showroom didn’t apply to them. There’s a line of thinking in the industry that retailers should do more to stimulate growth – for their own businesses and the industry as a whole. One way is to promote, sell and service propane-burning appliances. Based on responses to this topic, that movement hasn’t taken hold yet.


Greatest employee-related challenge or issue: Finding qualified workers to replace an aging workforce

The evolving nature of the propane industry brings on challenges that all retailers will have to face in due time. Through the many responses, a common theme developed surrounding concerns about finding qualified and willing younger help to replace an aging workforce. Many respondents are worried that their reliable workforce will soon retire, presenting the challenge of finding replacements. To go along with these concerns, finding and implementing training programs and qualifying truck drivers were among other popular responses. Joe Buschur of McMahan’s Bottle Gas in Dayton, Ohio, notes that his company is split between two locations, and finding reliable long-term help is a major challenge. “It is difficult to replace a guy who has been around for over 30 years,” Buschur says. Some employees go through training and work at the operation for two years before bouncing to a new career just as the company is beginning to build trust in them, he explains. Overall, a worry for many retailers is finding reliable employees for the long term that can replace the industry veterans. The National Propane Gas Association and its workforce development task force are also following the issue.


Greatest customer challenge: Pricing and payment

Customers can be your greatest advocates, but they can also be your biggest headaches. There are many challenges surrounding customers, but most retailers have issues when it comes down to the dollars, saying they struggle with pricing issues, as well as receiving payments from customers. Retailers cite customers’ displeasure with the high price of propane, motivating them to price shop and avoiding any sense of loyalty to the company. This issue is further compounded by propane’s volatile pricing nature, which has become a greater issue in recent years due to the U.S. market’s strengthening ties to the global market. Retailers also say they face challenges from competitors that offer extremely low prices – or “low ball” reputable companies. Moreover, the pricing issues underscore the need for retailers to explain, and get customers to understand, their company’s full-service value proposition. Accounts receivable also gained a lot of attention in our survey. “Although we have weeded out most of our ‘problem customers’ the last few years, we still deal with a few that have a tough time paying,” a retailer says. “We try and help them as much as we can by giving them info on assistance programs and other things available, but you can only help someone that wants to help themselves.”


Most pressing business concerns

It is a wonder propane retailers are getting any sleep these days, with all of the concerns that seem to be weighing on their minds. From government regulations to the weather, there is a wide range of worries keeping them up at night. According to Judy Taranovich, owner of Proctor Gas in Proctor, Vermont, a lot of the worries are based on the segment of the business that directly impacts the retailer. This could account for the wide range of answers in our survey. Some of the worries feed into one another, such as growth of business and pricing, which had the majority of votes. According to Taranovich, “The pricing ties into customer retention and it’s a domino effect. I can’t beat another company because they’ve priced low to build gallons, so I lose them in pricing. Then comes in the customer retention and I can’t build my gallons.” Taranovich says that though issues like supply and safety are always concerns – with one supply hang-up or safety misstep by one company reflecting poorly on the whole industry – the industry is doing a good job of communicating its messages. Ultimately, worries like growing the business and pricing factors might be alleviated by marketing and promoting the clean advantages of propane.


Biggest regulatory and legislative issues: Winter preparations and supply

Take a trip to the National Propane Gas Association’s (NPGA) Propane Days lobbying event or even delve into any of the states’ affairs, and you’ll soon discover myriad governmental issues impacting the industry. Our survey, which launched before the heart of the winter heating season, netted winter issues (e.g. ensuring retailers and their customers are supplied reliably with propane) as the top concern. But the vote was close. Natural gas expansion and state engagement efforts to combat a growing “electrify everything” push followed closely. “We can’t predict the weather, but what we can do is plan,” says Mollie O’Dell, vice president of communications at NPGA. O’Dell cites the association’s monthly inventory trends report as a key industry planning tool, as well as the importance of increased industry communication with state and federal policymakers. Additionally, the association is trying to capitalize on the presidential administration’s regulatory rollback agenda, says Sarah Reboli, director of regulatory affairs at NPGA. This includes the industry’s push to expand the air-mile radius component of the short-haul exemption – from 100 to 300 air-miles – in which drivers who operate under specific conditions are not required to maintain record-of-duty status reports. NPGA is also pushing for a more proactive approach by policymakers on hours-of-service waivers.


Photo: iStock.com/JacobH

Favorite city for a propane event: Nashville, Tennessee

The Music City was an overwhelming selection as the top destination for a propane industry event, including a meeting or show. That really comes as no surprise, considering the National Propane Gas Association’s Propane Expo, the industry’s largest event, was held in Nashville for the last two years. What’s not to like about a newer convention center – the Music City Center opened in 2013 – and one of the best entertainment scenes in the country? The famous Broadway Avenue and Nashville’s entertainment district sits only a couple of blocks from the trade show floor. The show set an attendance record in 2016 with more than 4,100 total attendees, including exhibitor personnel. It nearly matched that mark this year at just over 4,000 total attendees. “Of course Nashville,” a Midwestern propane retailer says in the LP Gas survey. “Anyone who hasn’t been there to the Southeast Convention does not know what they are missing.” The Propane Expo shifts to Atlanta in 2018 and 2019 before returning to Nashville in 2020. Atlanta, Indianapolis, Las Vegas and Orlando also drew attention in our survey.


Most important piece of technology in use at your company: Propane management software

Retailers cited software platforms that provide increased efficiencies in their daily operations as their No. 1 choice. The software allows propane retailers and their dispatchers to schedule deliveries and route drivers to customer locations. In-truck computers and tablets help drivers navigate their daily routes, record steps taken with the customer and execute invoicing and payment. Some platforms link to back-office accounting and customer relationship management systems to help streamline the process. From accounting to accounts receivable to routing, the LP Gas survey showed retailers’ affinity for software that makes their jobs easier. One retailer in our survey said his software “allows us to track deliveries, efficiencies, safety work, leases, tank ownership, pictures, etc.” Todd Miller, manager of finance and administration at White Mountain Oil & Propane in North Conway, New Hampshire, says fuel software can give companies a clearer picture of what’s happening in their businesses. “There are a lot of things people can do through basic analysis to look at pieces of the business to understand where you can squeeze extra juice out of the lemon,” Miller says. “It’s not just delivery efficiency, but things like in your service department. There’s a metric for anything. People have trouble figuring out how to measure those things.”


Top safety issue: Leak tests and inspections

The television game show “Family Feud” has always been a study in surveys. When it comes to the LP Gas State of the Industry, the survey says: leak tests and inspections and, to a lesser degree, training. This question resulted in marketers sharing concerns about leak tests and inspections. Leak tests and inspections are an honest safety concern. As a technical answer, it gets to the heart of preventing accidents due to leaks in the system. Failing to perform a leak check on an out-of-gas or failing to have a gas system check inspection on file can only cast doubt on the system’s integrity after an accident. Most marketers taking over new propane customers occasionally find leaks in systems or some other code-related exposures undiscovered by prior suppliers. Size does not seem to matter, as prior suppliers include mom-and-pops, as well as majors. No matter how big the companies, they are only as strong as their weakest links. Holding open discussions about these situations during safety meetings will underscore the importance of leak tests and inspections.


Click to enlarge.

Biggest energy competitor: Natural gas

The topic of subsidized natural gas expansion has been top-of-mind in the propane industry in recent years, and it doesn’t appear ready to dissipate anytime soon. Still, leaders at state and national propane gas associations are working diligently behind the scenes to stem the tide. “A lot of great state executives have stepped up to the plate and not only responded in defense of the propane industry, but now they are taking an offensive approach,” says Sarah Reboli, director of regulatory affairs at the National Propane Gas Association. Reboli points to the Illinois Propane Gas Association’s approach as an example of success in this area. The state association has successfully lobbied for legislation that would prevent natural gas utilities from forcing a subsidy structure on current customers to expand gas lines. “Over the last two years, the propane industry has stood up and defended itself against natural gas and shown ourselves to be willing competitors and willing fighters,” Reboli adds. “Now we’re at the point of not just defending our line but moving it forward.” While natural gas was the clear overall favorite over electricity in our survey, electricity remains a formidable competitor to propane in the South and West.


Best ambassador for the propane industry: Employees and customers

Survey respondents provided a wide variety of diligent and respected men and women who represent the propane industry and serve as ambassadors across the country. These leaders have lifelong established careers in the industry through their own operations; some work with state and national councils; and others have contributed to the industry. However, there were two nominations that received the majority of votes, and for good reason: employees and customers. Without employees and customers, none of the industry’s work would happen, nor would it be required. Customers are the lifeblood of the industry and they depend on employees to provide reliable service. One retailer in our survey says that employees are the best ambassadors to represent the industry. “They interact with our current customers and potential customers, and they help to retain our current customers and bring in new ones,” he says. Another retailer notes, “The retailers can and should be the best ambassador for the industry. Who else has the knowledge and experience to promote and tell the story of propane other than someone that lives that life every day?”


Photo: iStock.com/JuanMonino

Best safety program or process: Training/CETP and safety meetings

All successful safety efforts begin with training. But the process of training can sometimes be challenging due to individual learning styles and attitudes. Industry trainers have shared concerns about attendee comprehension, learning retention and supervisor measurement or monitoring of skills after a trainee leaves the classroom. E-learning can be cost-efficient and convenient. However, it is the hands-on equipment practice and on-the-job skill assessments that credibly certify ability to comply with training. Practice and repetition are the keys to retained learning. Safety meetings and in-house training on topics of concern or needed focus are key factors in repetitive training. “We meet every morning to keep a finger on the pulse of both yesterday’s work and today’s work,” one retailer says in our survey. No matter how big the company, the challenge is always how to keep safety from being boring, scary or an adventure in apathy. Creative communication will successfully underscore common safety values. Shake it up and take on tough topics. Reward attendee engagement and make it fun. Discuss the importance of caring about compliance and the role it plays in best-practice accident prevention.


Most exciting emerging market or growth opportunity: Autogas

The majority of retailers surveyed feel that propane autogas for on-road fleets is the industry’s most exciting emerging market or growth opportunity. Autogas has a promising future as a clean fuel for fleet vehicles such as buses, squad cars and delivery trucks. According to Brandon Ihm, district manager at Landmark Services Cooperative in Cottage Grove, Wisconsin, “Autogas is becoming more important year to year as appliances become more efficient and natural gas lines are installed.” Several states have begun incentivizing the purchase of propane-powered vehicles. Many retailers who attended the LP Gas Growth Summit cited autogas as one of their primary ways to grow gallons. Chad Kroening of Boehlke Bottled Gas Corp. in Cedarburg, Wisconsin, says that autogas allows his company to build gallons, rather than simply swapping them with competitors. According to Ihm, “Not only has autogas helped us grow in a shrinking market, but we have also been able to pass the benefits of this new technology to school districts and other types of fleets.” Overall, autogas is the most exciting growth opportunity, but retailers in New England and the Central Atlantic regions are excited about tankless water heaters and generators, respectively.

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