What’s Fueling the Growth of E15?

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What’s Fueling the Growth of E15?

By Debby Garbato, Stagnito Business Information - 07/12/2017

NATIONAL REPORT — With its 2012 introduction, E15 became the highest concentration ethanol blend available for use in most traditional gasoline-powered vehicles. But it raised a lot of eyebrows. Consumers, it was theorized, might confuse E15 with other ethanol blends, put it in the wrong vehicle or not understand its purpose at all.

As E15 has become more widely distributed, most myths have been dispelled. The higher-margin, higher-octane fuel is now sold by retailers large and small at nearly 900 locations across 29 states. While some drivers understand E15’s environmental and performance benefits, many are lured by E15’s lower price. Others like that it generates American jobs and alleviates foreign oil dependence. Regardless of the reason, once people try E15, they tend to become hooked.

“Nine hundred locations sell E15, which is a 200-percent increase over 2015,” said Mike O’Brien, vice president of marketing development for Washington, D.C.-based Growth Energy, which represents the ethanol industry. “This spectacular growth is fueled by demand for quality, cost-effective and environmentally friendly solutions.”

E15 can cost up to 10 cents per gallon less than other fuels. It can generate margins about 4 cents per gallon higher than those garnered by standard E10 fuel, according to Steve Walk, chief operating officer of Boca Raton, Fla.-based fuel wholesaler Protec Fuel. Typically, retailers experience a 15-percent increase in their overall fuel business within 12 months, he noted.

E15 carries an 88 octane rating and is said to substantially improve a vehicle’s performance. E15 contains 15 percent ethanol, making it more environmentally friendly than E10. Unlike E85 and other ethanol blends introduced in recent years, E15 use is not limited to flex-fuel vehicles. E15 works in conventional vehicles manufactured in 2001 and beyond (it is not recommended for motorcycle, chain saw and other small gas engines).

While there is no “typical” E15 customer, it is popular among taxi and Uber drivers and other high-volume users, said Lance Klatt, executive director of both Minnoco and the Minnesota Service Station and Convenience Store Association.

Minnoco was the first chain in its market to offer E15. After launching in October 2013, Minnoco now sells E15 at 34 out of 36 locations. Overall fuel volume has increased 7 percent to 8 percent, with E15 representing 33 percent of all fuel sold, Klatt reports.

For Minnoco’s independent dealers, E15 has been an important means of differentiation. Steven Anderson, owner of Marshall Cretin Minnoco, offers E15 along with E30, E85, E Zero, and the standard E10. He said E15 now represents 60 percent of his fuel sales. “Statistically, it’s beating E10 and we’ve had no performance issues. There’s a learning curve — ‘Is this going to damage my car?’ — but once people are brought up to speed, they’re more apt to use it.”

Many larger retailers have adopted E15 over the past two years. But Klatt said getting into the game early “gave us a short-term competitive advantage. We were ahead of the rest of the country, but they’ve caught up.”

THE BIG BOYS

Des Moines, Iowa-based Kum & Go LC first tested E15 at 10 locations in 2015. Today, 112 out of its 400 stores sell it in Iowa, Minnesota, Nebraska, South Dakota, Missouri, Arkansas, Oklahoma, Colorado and Wyoming.

The retailer wanted to provide more choices, be more eco-friendly, and offset declining sales of “mid-grade” fuels. While it had featured E30 and E50 at some locations, they have been replaced by E15. Kum & Go continues to offer E10, E85 and ethanol-free premium.

“E15 aligns with corporate sustainability initiatives and our goal to offer great choices to customers,” said Jim Pirolli, vice president of fuels. “Mid-grade fuels were declining. This was an opportunity to replace that with something that offered a better value. Most consumers don’t want to spend time learning the difference between gasoline grades. But when they find a product that’s a better value, they’re hooked. It seems the anti-ethanol rhetoric has died down as consumers understand they’ve been buying 10-percent ethanol blends [E10] for years.”

Louisville, Ky.-based Thorntons Inc. introduced E15 (which it calls Unleaded15) in March 2016. To date, it has processed more than one million E15 transactions across 34 Chicagoland stores. Thorntons also sells E85 at 120 of its 180 locations; E30 is available at a handful of sites.

“Unleaded15 has been well received, with adoption surpassing initial expectations,” Matt Nichols, Thorntons’ project manager, biofuels/business planning and analysis, told Convenience Store News. “We haven’t received a single complaint.”

La Crosse, Wis.-based Kwik Trip Inc. rolled out E15 in February 2017. Based on early results, Kwik Trip has slowly expanded E15, said Joel Hirschboeck, general manager of fuel procurement and marketing. Today, it is sold at 150 out of its 550 locations in Wisconsin, Minnesota and Iowa. The company has also offered E85 for several years. “It’s been kind of an evolution as we evaluate different markets and demand for E15,” explained Hirschboeck.

He said E15 is doing particularly well in Iowa, where consumers seem to understand it. “It’s a large corn state. This gives us a leg up on competition there,” he said.

FUELING EDUCATION

Consumers’ knowledge of ethanol fuels varies, making education important.

Protec offers retailers everything from signage and brochures to full-fledged events with food and balloons. However, it’s found pump interactions are most impactful. “We have a whole fuel island marketing program,” said Walk. “Many people automatically hit ‘85 regular.’ But when the screen says you can buy something for less, it gets [their] attention.”

Valparaiso, Ind.-based Family Express uses pumptoppers, digital media and brochures. The retailer has also worked with the Indiana Corn Marketing Council and South Shore Clean Cities on promotions and educational outreach initiatives touting air quality and overall benefits of E15, said Thomas Navarre, vice president of petroleum marketing and logistics. E15’s nuances are also explained on its website. Since July 2016, Family Express has offered E15 (which it calls Unleaded e15) at 19 of its 70 Indiana locations.

One-on-one interactions also drive sales. In addition to online and in-store brochures, Thorntons makes sure its employees are well-versed regarding the various fuels.

“Guests’ knowledge regarding fuels varies widely,” said Nichols. “We put strong emphasis on ensuring our team is well-educated.”

Kum & Go is researching what information customers want and how to best provide it. To date, it has found pump interactions fostered by on-site brand ambassadors to be particularly successful. “If a customer drives a 2001 or newer vehicle, there’s a 50-percent chance we can convert them to E15 with a one-on-one engagement,” said Pirolli.

Despite initial speculation, E15 continues to grow. Other major retailers selling E15 today include Casey’s General Stores Inc., QuikTrip Corp., RaceTrac Petroleum Inc., Murphy USA Inc., MAPCO and Sheetz Inc., according to Growth Energy’s O’Brien.

By 2018, O’Brien expects the number of locations offering E15 to double.

“Nine out of 10 cars today can use E15. Increasingly, consumers are finding out about benefits and demanding more choices. They’re always on the lookout for products that power their routines while making the world a bit better,” he concluded.