July 16, 2014
By Holly Jessen
When Charlie Good, mechanic and owner of Good & Quick in Nevada, Iowa, started preparing to add E15 to his product offerings at his independent gas retail store, he noticed his contract with ConocoPhillips said he couldn’t sell anything with an ethanol content higher than E10. He called his supplier and was told he’d have to either wait several months, until his contract was up, or pay $30,000 to get out of it. In the end, Good negotiated an agreement that he would put his own canopy up and just fly the ConocoPhillips flag for the remainder of the contract.
Good sees absolutely no downside in letting his ConocoPhillips contract run out and going with an unbranded fuel supplier. Still, he admits it was a difficult decision. “I’m not going to lie to you and tell you I wasn’t afraid of doing this,” he said. “… I know how the big boys can eat you up if they want to.”
Nationwide, there are 135,000 retail gas stations, with 84,000, or 63 percent, under single ownership, says Mike O’Brien, vice president of market development for Growth Energy. And, unbranded or independent retailers, some of which are under single ownership and some that are not, are starting to offer E15. Over time, this will give those companies a competitive advantage and, eventually, force major oil brands to start selling it, he adds.
Good agrees, saying that offering alternative fuel blends is a way for independent retailers to survive and excel against oil majors by finding a niche. “I don’t believe you will see Casey’s or Kum & Go or any of these majors adapt to these fuels, until the public demands it,” he says, naming his two competitors in Nevada.
Since his central Iowa gas station switched to an unbranded fuel, there have been no problems with fuel quality and Good is so confident there won’t be, he 100 percent guarantees the fuel. So far, the only complaint Good has received is that that store no longer takes ConcoPhillips credit cards. Other than that, his customers couldn’t seem to care less that the canopy no longer displays the name of an oil major. “Brand loyalty means nothing now,” he says. “It’s all about what it’s going to cost me.”
In fact, the end of May, Good had sold nearly 7,000 more gallons of fuel as compared to the same time last year. “The big mistake that I made was, I only put one blender pump in,” he says, adding that although he spent half a million dollars updating his station he wishes he had found the extra money to make all three of his pumps blender pumps. In all, 15 to 20 percent of his fuel sales is ethanol.
There are other benefits. He’s spending 2 to 7.5 cents less a gallon on unbranded fuel stock and saving significantly on credit card fees. His new supplier charges him a 1.7 percent fee on credit card payments from customers, down from 3 percent, his previous rate, saving him about $3,000 in one recent month.
Good isn’t the only retailer encountering pushback from big-name petroleum distributors attempting to limit retailers’ options when it comes to selling ethanol blends, says Robert White, director of market development for the Renewable Fuels Association. That’s been true for E85 but it’s particularly been an issue with E15. “The majors, at least until they feel a pinch from competitors, are pretty much either requiring that they put in all new equipment, label it to the nines, which would basically scare off any reasonable person, or they can’t put it under their canopy at all.”
Darin Schlapia, the branch manager of Creston Farmer’s Co-op in Iowa, encountered difficulty when he attempted to negotiate a brand agreement with Cenex for a new Farmer’s Co-op location, which will be built in Mount Ayr, Iowa, this fall. Even though Cenex markets ethanol and distillers grains and recently acquired a 133 MMgy ethanol plant in Rochelle, Ill., its contract requires gas retailers offer at least two different grades of gas, E10 and straight gas with no ethanol content. In order to sell E15 and other higher blends, as the co-op planned, the gas station would have had to add additional equipment. Schlapia knew from sales numbers at the Farmer’s Co-op station in Afton, Iowa, that the cooperative would sell more gallons of fuel if it offered E15 and other ethanol blends instead of ethanol-free gas. “Afton sells regular 87 gasoline and we might sell 50 gallons a day at the most,” he says, adding, for comparison, that the store could sell about 600 gallons of E10 in the same day. “People are definitely choosing the higher ethanol blends. To spend that much money on equipment, just to have another grade of gasoline, was not economical.”
The Mount Ayr station will still purchase its fuel from Cenex but, because it’s not a Cenex branded station, it isn’t allowed to display that logo anywhere. Schlapia is disappointed in the Cenex stance on E15 and thinks it needs to be re-evaluated. And yet, he understands that the company is trying to make sure all Cenex branded stations have a consistent offering of the same fuels, he says.
In Kansas, Scott Zaremba says Phillips 66 created new rules designed to keep him from selling E15 after he’d already moved forward with becoming a registered E15 retailer. The oil company told him he had to sell E15 on a yellow E85 hose, which actually goes against U.S. EPA requirements for selling E15 to heritage vehicles. So he paid $380,000 to get out of his contract and changed the name of his seven gas stations from Zarco 66 to Zarco USA. “They told me if I used anything with 66 in my name they’d hang me out to dry,” he says.
The move was well worth it, in his opinion. “We have to be able to sell whatever products we want out of our retail facilities that we own and we operate,” he says. “… They were just trying to dictate what was going to happen at the facility and we weren’t going to let them.”
In Minnesota, the Minnesota Service Station & Convenience Store Association is working with independent retail stations to band together under one logo and the name Minnoco. So far, four retailers in the Minneapolis, St. Paul area have joined, says Lance Klatt, executive director of MSSA. Although selling alternative fuels isn’t a requirement for Minnoco retailers, most are doing just that. With the help of various funding sources, including Growth Energy, the Minnesota Corn Growers, Minnesota Department of Agriculture and Minnesota Lung Association, Minnoco retailers have received financial support to install equipment to sell E15 and other higher ethanol blends. That’s a big draw for retailers who might not be willing to take a chance on E15 otherwise, Klatt says.
Retailers have responded enthus-iastically, appreciating the opportunity to bring new fueling options to their customers and make their own decisions on how to run their business. Klatt expects there will be 25 Minnoco stations offering E15 and higher ethanol blends by November. “Right now we feel like it’s the most sought after image in the Minneapolis marketplace,” he says, adding that retailers like the look of the logo as well as the opportunity to manage their own brand.
Of those stations already signed up, 15 or 20 percent of their sales are E15, E30 and E85. That’s driving increased fuel sales to current and new customers. There’s also work being done in cooperation with the Minnesota Pollution Control Agency and the Minnesota Agriculture Department to possibly launch E15 statewide, labeling it as the new midgrade fuel, he says.
Read the original story here : E15 Retailers Get Creative