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Dear PEI Member: I had lunch with the retired president of a major
manufacturer of petroleum marketing equipment last week. Our conversation
centered around the trend of accelerated consolidation among our industry's
distributors and their end-user customers. He observed that he can't remember a time
when so many companies were trying to increase market share through
acquisition. I asked him if industry consolidation helped or hurt
manufacturers in our industry. In other words, would he have preferred five
to ten large distributor customers instead of the hundreds that he had when
he ran his company. This is what he said:
"While it was tempting to want to have all the big boys sell your
product, we would purposely limit how much and at what price we sold them
to make sure we didn't have too many eggs in too few baskets. We didn't
want them to get so big that they dictated how we ran our business. We
wanted to be in charge. To do that, we wanted a lot of distribution
partners. I'm not saying we wanted 500 petroleum equipment distributors
worldwide―that's too many in our industry. But we
also didn't want a dozen or so accounting for 80 percent of our business.
Our sweet spot was in the 150- to 200-distributor range. We considered that
to be a healthy portfolio of diverse distribution partners back when I was
calling the shots, and I notice that my former company continues to follow that
strategy. "Look what Procter & Gamble, a mammoth in the consumer
products sector, recently did to their suppliers. According to what I
read, P&G currently pays its bills on average within 45 days, faster than
the 60 to 100 days that other consumer products makers and large companies
in other industries generally take. Now P&G is looking to move its payment
terms to 75 days. The companies that count on P&G to purchase a lot of
materials and services from them will have to tie up more of their own
cash in receivables or eat the interest costs charged by banks to bridge
the gap until P&G pays its bills. We were unwilling to allow any customer
to become so large and important to our company that we would be forced to
accept their terms. "To us, negotiating with a small group of larger
distributors was not a reliable path to profitability. Negotiating
leverage is better when you have more options."
This is one man's perspective as it specifically relates to the
policies of one manufacturer to its distributor customers. But the same
tenets can be applied to the sale of goods and services from a distributor
to any one major customer or a small group of large customers. |
Selling to Large Customers
Renewable Fuel Standard
Illinois E-Stop Compliance Deadline
Electric vs. Gasoline Car Costs
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RENEWABLE FUEL STANDARD
The U.S. Supreme Court on Monday refused to consider legal challenges by
several industry trade groups to an Environmental Protection Agency (EPA)
move to expand ethanol use in the United States. Trade groups for food
producers, the oil and gas sector, and the auto industry all
sued to contest a pair of EPA decisions that allowed the sale of gasoline
blends containing 15 percent ethanol. Last August, the U.S. Court of
Appeals for the District of Columbia Circuit threw out all of the
legal challenges without passing judgment on the EPA's ethanol actions. The
appeals court said none of the challengers had a legal right to sue (i.e.,
lacked standing) because the harms they might suffer were too far removed
from EPA's decision to allow E15. Legal scholars had predicted that
the Supreme Court was unlikely to take the case because the conservative
justices on the Court were interested in finding cases to narrow standing,
and a reversal here would have seemed to expand the doctrine.
A bipartisan group of U.S. senators June 19 introduced a bill to repeal
the Renewable Fuel Standard (RFS) in its entirety, saying the program is expensive
and broken. The bill was introduced by Senators John Barrasso (R-Wyo.), Mark
Pryor (D-Ark.), and Pat Toomey (R-Pa.). The bill has five co-sponsors, all
Republicans.
The House Energy and Commerce Committee has
issued its
fourth white paper
(see
March 28, 2013 TL) as part of its review
of the RFS. These papers identify a number of
emerging issues with the RFS. The fourth white paper, issued June 7,
addresses several energy policy considerations related to the RFS. In our
opinion, it provides an excellent and well-balanced summary of the energy
policy backdrop of the RFS, and how the energy landscape has changed since
2007 when the RFS was expanded.
ILLINOIS E-STOP COMPLIANCE DEADLINE: SEPTEMBER 1, 2013
Under a policy (10-PCS-005) passed in 2010 by the Office of the State Fire
Marshal (OSFM) for the State of Illinois, September 1, 2013, is the deadline for
compliance to meet the requirements in the state's regulations affecting
emergency shutoff switches (E-Stops) at all classifications of motor fuel
dispensing facilities. A notice to all underground storage tank
owners/operators and UST contractors was posted
June 21 on the OSFM website
www.sfm.illinois.gov in the Commercial News and UST Operator Training
sections. All UST regulations are available by link at the UST Operator Training
page, and the entire text of Rule Policy Interpretation 10-PCS-005 can be
found under "Policies & Interpretations" in the Underground Storage Tank
section of the Commercial page.
COMPARING COSTS
OF ELECTRIC AND GASOLINE CARS
The U.S. Energy Department has unveiled a
web-based tool (www.energy.gov/eGallon)
that allows consumers to compare the price of a gallon of gasoline against
the equivalent cost of fueling an electric vehicle. The eGallon tool
features a drop-down menu allowing users to view gasoline/electricity price
differentials in all 50 U.S. states and the District of Columbia, as well as
the national average. The eGallon price is based on monthly regional
electricity prices published by the U.S. Energy Information Administration (EIA)
and fuel economy data for five electric vehicles. The gasoline prices are
based on weekly retail prices published by the EIA.
THIS AND THAT
"Don't build a site without running CAT5/6 cable to your fueling
positions. EMV requires lots of bandwidth and legacy cabling may not provide
optimal performance (although several vendors have solutions).―NACS
Magazine June 2013, article by Phil Schwartz, Manager I/S, Valero
Payment Services Company.
Three CNG stations are open to the public in Kansas. They are
located in Overland Park, Topeka and Wichita.―U. S. Department of Energy.
PETROLEUM MARKETING NOTES
Tesoro Corp. has signed an agreement with a
wholly owned subsidiary of Par Petroleum Corp. to sell all of its
interest in Tesoro Hawaii, LLC, which operates a refinery, 32 retail
stations and other assets in the state.
Atlas Oil Co., Taylor, Michigan, has purchased 20 retail sites and up
to 50 retail fuel supply contracts in the metro Detroit area from the
Hadi Group Distributors Inc. via a sale under the U.S. Bankruptcy Code.
APPOINTMENTS AND AWARDS
Bennett Pump Company, Spring Lake, Michigan,
has hired Bo Sasnett as vice president of business development. Most
recently, Sasnett served as president and CEO of Additech.
Scott B. Fisher, vice president of policy and public affairs for the
Texas Food & Fuel Association, received the E.K. Bennett Award for his
contributions to the petroleum marketing industry. The award is presented by
the Texas Food & Fuel Association.
CANADIAN RETAIL MARKET
As of December 31, 2012, 12,285 retail gasoline outlets were
operating in Canada. Fourteen percent of all gas stations come under the
price control of one of the three major oil companies (Suncor, Esso or
Shell). Twenty-three percent of all gas stations come under the price
control of one of the nine refiner-marketers in Canada. The remaining 77
percent of all gas stations in Canada are price-controlled by individual
outlet proprietors or non-refiner marketers, such as regional distributors
and big box marketers.―2012 National Retail Petroleum Site Census,
researched and published by MJ Ervin & Associates.
Empire Company Ltd., which owns the Canadian grocery chain Sobeys,
has agreed to purchase the Canadian operations of Safeway Inc. for $5.8
billion CDN. The deal will involve Empire acquiring all of Canada Safeway
Inc.'s assets, including 213 full-service grocery stores and more than 60
gasoline stations, among other things.
MEMBERSHIP APPLICATIONS
Honduras distributor. Tecnica Electromecanica Aplicada S.A., Blv. del
Norte, Col. Fesitranh, Zona 2, Pasaje 4, #558, San Pedro Sula, Cortes,
Honduras, has applied for distributor division membership. Ramon Jose
Padilla is president of the firm, which was established in 1999. The company
represents EBW, Hosemaster, LSI, Nupi, OPW, Wayne and Zeppini. The firm also
installs piping, tanks and dispensers. Sponsored for PEI membership by
Blanca Hernandez, Nupi, Houston, TX.
Thermoplastic parts and seals provider. RT Dygert, 2700 South River
Road, Suite 116, Des Plaines, Illinois 60018, has applied for affiliate
division membership. Adam Stowers is quality control/technical director for
the firm, which was established in 1958. The company provides hydraulic and
pneumatic seals, custom molded and machined elastomeric and thermoplastic
parts, related products and support services. Sponsored for PEI membership
by Betty West, EmcoWheatn, Wilson, NC.
www.rtdygert.com
ADMITTED TO PEI
- Bobby Barrett, Kent Oil Inc., Midland, TX (O&E)
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