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MINNEAPOLIS -- The vast majority of retailers that sell higher blends of ethanol fuel through flex-fuel pumps have been able to establish a fuel price advantage in their markets, seen an increase in fuel sales, simplified their inventory and experienced an increase in store traffic, according to a new study released this week.
Commissioned by ethanol industry trade group, Growth Energy, the research found that roughly 81 percent of the retailers surveyed -- the majority of them single-store owners -- were satisfied with their decision to install flex-fuel pumps. In addition, the findings indicate that if the retailer is able to advertise the price advantage, it experiences even high levels of success in selling ethanol blends.
The retailer study was conducted for Growth Energy by Irwin Broh Research in February, shortly after the elimination of the Volumetric Ethanol Excise Tax Credit (VEETC) incentive for ethanol. Though the majority of this government subsidy was kept by oil refineries, ethanol retail prices were under heavy pressure during the survey period.
Nevertheless, 81 percent of the retailers surveyed said they believe there is still a price advantage in selling ethanol blends. Sixty percent of the respondents in the survey said they advertise the price advantage of ethanol, and survey results indicate this group generates even more positive sales volumes, inventory turnover and in-store business.
On average, fuel sales represent 60 percent of the total business for the retailers surveyed. Nearly 60 percent of them said they believed their fuel sales increased thanks to ethanol, with the average increase pegged at about 13 percent. Of those retailers promoting ethanol pricing, 66 percent believe their fuel sales have increased, on average 14.1 percent.
Other findings of the study include:
• Just over 40 percent (42 percent) felt that their fuel margins improved by an average of 7.9 percent since they started selling higher blends of ethanol.
• Of those retailers promoting ethanol, 60 percent feel that their fuel margins have improved by an average of 7.44 percent. One of the primary reasons cited for fuel margin improvement was lower delivery costs.
• Approximately 35 percent of respondents said their fuel inventory was simplified after adding ethanol blends. Approximately 42 percent said they experienced better inventory turnover as a result of adding blended fuel. And in some cases, retailers eliminated a premium grade of gasoline due to greater demand for the higher blends of ethanol.
• Nearly nine in 10 retailers stated there was a relationship between fuel stops and in-store sales, where they make the majority of their profits. On average, two out of three fuel customers come into the store to buy additional items. Because overall store traffic has improved after installing flex pumps, about 48 percent of the retailers participating in the poll believe their in-store traffic has increased. On average, an 11-percent increase was reported.
• Retailers listed their top tactics for promoting renewable fuel as outside signage advertising the price advantage; local media advertising; literature; online promotion; and "personal touch" at the pump, i.e., educating the consumer, as well as station staff, on the benefits of ethanol.
About the Survey
The majority (81 percent) of the 300 retailers contacted for the survey were single-store operators. The survey had a response rate of 10 percent. The retailers are primarily located in rural locations and most are located near state highways. E85 was sold by all the retailers surveyed, with E10 and E30 accounting for 97 percent and 90 percent, respectively, of their fuel sales. Nearly three-fourths (74 percent) of the retailers were satisfied (very and somewhat) with their decision to install flex-fuel pumps.
The survey was conducted via telephone with flex-fuel pump retailers (10 percent of the total population) in Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, Ohio and South Dakota.