Adding Alternatives

Retailers share their experiences of offering renewable fuels

The decision to add alternative fuels such as E85 — a blend of 85 percent ethanol and 15 percent gasoline for use in flex-fuel vehicles (FFV) — is a big one for retailers. But it is a decision that more and more companies are making as consumer interest in renewable fuel options grows.

How do you decide if your location is right for renewables? And what are the challenges and benefits of retooling pumps to accommodate these fuels of the future? Here, three retailers share their stories of becoming destinations for alternative fuel-seeking drivers.

MFA OIL CO.

As a farmer cooperative, Columbia, Mo.-based MFA Oil Co. continually explores ways to bring value to its farmer members and to non-member customers alike.

“We believe that American farmers can provide food and fuel,” spokesperson Tom May said, noting that the company invested in an ethanol plant “back in the ‘70s with gasohol.” In 2000, “the spark to move to higher blends of ethanol” began with a single E85 location in its hometown. “From there, in order to make E85 work, it had to meet two criteria: it had to be affordable and available.”

To meet these requirements, MFA Oil started installing pumps and formed a partnership with Mid Missouri Ethanol that enabled the company to price E85 at 20 percent less than regular unleaded gasoline. “That allowed us to grow from a handful of locations to around 50 very quickly,” May said, noting that the company offers regular gasoline, diesel, propane, biodiesel, E85, E20 and E30 at its PetroCard 24 locations, as well as its Break Time convenience stores.

“For our unmanned PetroCard 24 and Break Time locations, we really look at possible demand and community support,” he said when asked how MFA Oil decides where to invest in alternative fuels. “We have made an effort to geographically make E85 available throughout our trade territory.”

MFA Oil offers E20 and E30 at five locations and hopes to expand that as well. “It really comes down to having the tanks and the pump space available once you get beyond your basic gas and diesel pumps,” he explained. To that end, the company has partnered with the Missouri Corn Growers on a Department of Energy grant to install several E20 and E30 blender pumps; worked with Growth Energy, an organization that represents the producers and supporters of ethanol, on grants; and utilizes infrastructure tax credits when available.

Introducing customers to the new fuel options is also a task retailers must undertake. “With E85, we made a big push as it was a new product that most people were not aware of,” May said. Marketing efforts included radio interviews and advertising, open houses, and special pricing such as offering E85 for 85 cents a gallon during awareness events. In addition, MFA Oil held a Fourth of July flex-fuel truck giveaway “to celebrate energy independence” on the nation’s birthday.

“The awareness campaign is an ongoing effort as technology advances, new drivers hit the road every year and we expand the product line of renewable options,” he said.

While sales and profits are important — E85, E20, E30 and biodiesel “are contributors in most locations” — MFA Oil’s focus on selling these fuels is for the future. “It is really more about making the long-term investment in renewables and growing that market to be a stronger part of the overall mix,” May said.

The company’s long-term plans include entering the market with E15, a blend of 15 percent ethanol and 85 percent gasoline. “We are waiting on Missouri legislation that will allow the sale of E15,” the spokesperson said. “And if the 1-pound waiver would extend to E15, we could offer it year-round with no issues. There are a few hurdles left to clear, but we are getting closer every day.”

OK PETROLEUM

“If you can, look for a station with E85…”

When his good friend, a successful gas station owner, offered that advice to Matt Schatzman a few years ago, the former Wall Street employee and current gas station manager took the comment to heart. “At that time, it was rare to see E85 on Long Island,” he recalled. “But Artie had been my personal mechanic for more than 20 years and when he says something, it is always right on point.”

Schatzman first attempted to follow that advice when he was close to buying a station that offered E85, but it didn’t work out. His luck changed in 2011, when his father bought the Patchogue, N.Y., station that he now manages. The father-son team set out to research the cost of replacing an existing kerosene pump and discovered it already had piping that could carry the flow of E85 — a fuel this station manager says he now sees “more often than not” all over Long Island.

The Schatzmans added E85 in the fall of 2012 and announced its arrival via social media and signage. “We started a Facebook page and posted messages that said, ‘E85 is coming,’ and then, ‘We now have E85,” Schatzman said. Old station signs that once listed prices for Regular, Super and Plus gasoline were replaced with “beautiful signs customized to fit information about E85.”

The response, according to Schatzman, “has been unbelievable. I now average 6,000 gallons a month, about 200 gallons a day on average.” Profits are up as a result. “The price for E85 is lower per gallon than regular gasoline and the amount of tax I have to pay on E85 is less, so there is way more profit on E85,” he noted.

Next up for West Babylon, N.Y.-based OK Petroleum is a push to add E15. “Nobody in the Northeast has seen it, so we don’t know what the reaction will be, but it is a project for our station,” Schatzman said. “It is hard to be in business — you have to have a niche. We are in a busy location, but you can turn your head and see four different gas stations. I needed something different and that is what drove me to E85. It has been a wonderful investment and I think E15 is going to be, too.”

PROPEL FUELS INC.

Redwood City, Calif.-based Propel Fuels Inc. was founded with a mission to offer consumers cleaner, more sustainable domestic fuel choices that reduce the impact on the environment. Since opening its first location in 2007, the company, which now has 40 stations on the West Coast, has been meeting that goal.

Propel Fuels has offered B20 biodiesel since 2007, added E85 in 2009 and has increased the public’s access to renewable fuels across all major California markets, said marketing director Chris LaPlante. “We see strong loyalty among E85 customers,” he reported. “About 50 percent of Propel’s E85 customers use the fuel exclusively, and 70 percent fill [up with it] three out of four times each month.”

Currently focused on E85 and B20 biodiesel, LaPlante said decisions about where to add renewables are based on FFV registrations in a potential site’s immediate trade area. “The FFV counts are a primary selection criteria, alongside high traffic corners and ease of access,” he explained.

Introducing customers to the alternative fuel is also key. “When we open a location, it is often the first time customers in that geography have had access to E85 flex fuel, so awareness building and driving trial is essential,” he stated. “We primarily leverage launch events and direct marketing to [FFV] owners. Direct fleet sales can also go a long way for sites with fleet depots nearby.”

With more and more customers embracing alternative fuels in the markets Propel Fuels serves, LaPlante said the move has been positive from a sales and profit perspective.

“Gasoline sales are pretty flat in most markets,” he said. “E85 enables Propel and our partners to grow volume again at a particular site and drive new traffic to a location.”