On the eve of the PEI/NACS show, to be held in Chicago, Oct. 1-4, NPN Magazine took the opportunity to speak with Petroleum Equipment Institute executive vice president and general counsel Bob Renkes about the state of equipment sales and distributing and some of the trends he sees on the horizon.
NPN: How would you describe the current business environment for equipment manufacturers and distributors?
Renkes: I think the industry is in a good place right now. I don't think it's great, but I think our members are pleased with the way business is going. There is a lot of little stuff going on right now, nothing big as far as new stations going up, but a little bit here and there. I think we've reached kind of a plateau right now where we’re maintaining about the same number of stations building new ones as old ones are decommissioned. Service work remains strong. Our members, like many others, are waiting to see what marketers do with the ethanol E15 blends. We have established a library for compatibility documents.
NPN: What are some of the specifics of that?
Renkes: The E15 approval will probably happen towards the end of the year and then marketers will say, "Can I put this stuff in my underground systems?” And they have to know if it is compatible or not so we took this initiative to save marketers time and our manufacturers and distributors from having to answer questions from everybody who's ever bought their equipment in the past decades. We talked to EPA first and they were trying to figure out how they were going to do it. And we said, “Well, we know the manufacturers – they're all PEI members – and distributors are used to going to our site.” So they said go ahead and do it.
We are already rolling on it, and we are off to a good start. I think some manufacturers are going to want to do one letter and for others they are going to need to do more testing, especially those with multiple UST components or multiple models of the same component. We don't make any editorial comments when we list them – we just make sure they seem to be what EPA put down in its guidance.
NPN: You speak with a lot of manufacturers, what is the feeling you get from their perspective for how quickly this transition might occur?
Renkes: It's hard to get a feeling for how fast it's going to happen – it will ultimately happen in some areas of the country quicker than others.
NPN: PEI had a solid leadership role in the diesel exhaust fluid front and that now appears to be picking up some steam.
Renkes: I think that it’ll actually go further than picking up a little bit of steam, to the point where we've reached a tipping point. When it reaches the point where you lose sales inside the store because truckers are not stopping and truckers know that they can get DEF for $2.59 a gallon instead of $5 for a jug that they don't want to carry and put it all on one credit card with the fuel – I think 2012 will show the industry reaching that tipping point. There are so many new trucks that have to be out there and most everybody except Navistar requires DEF. The (engines) only last five or six years and, we've been now finishing up two years, so probably less than half the fleets will require it, but still that's a significant amount. And they're getting better gas mileage by using this, so that's a positive benefit. There is some inconvenience and cost with DEF, but with more miles per gallon at the current cost of diesel versus the cost of a few gallons of DEF every 10,000 miles and you're probably in pretty good shape.
The fleets are also going from mini-bulk to tanks and then the underground tanks. I've heard that on the retail side the movement is starting to go underground because drivers are hitting some of the aboveground tanks on the island. Just kind of bumping them, but that's something you do not need.
NPN: What's particularly exciting about the PEI/NACS Show this year?
Renkes: I anticipate a lot of action with DEF and I anticipate a lot of ethanol compatible equipment because we’re trending that way. And you may see glimmers and some talk about electric car charging. There are ten listed electric car charging unit manufacturers compared to three listed gasoline dispenser manufacturers in the United States. Some of those are quite big –Siemens, Schneider Electric, General Electric – they are all making these units. What we have to sort out is how they are going to be sold, how they're going to be installed and who's going to install them; and there will be some winners and losers in that. I think you may see a little bit more about that at the show. We do anticipate a federal proposed rule for underground storage tanks related to testing, inspection and maintenance by the end of September or the first part of October. We'll be talking a lot about that next year, if not at the convention.
I think mobile payment is going to hit the country really fast. Maybe, just as the electronics revolution took over the industry in the 1980s with card readers, we may see something similar at the island with mobile payment in the next couple of years. It remains to be seen, but I'm hearing more and more from the 20 and 30 year olds saying they want it.
NPN: What's happening on the distributor front with some of the contraction we've seen really everywhere in the last few years?
Renkes: I don't think consolidation is over for the PEI distributor. I think we will have fewer, but stronger distributors. The baby boomers are now starting to consider retirement and distributorships are mostly family-owned businesses, and if they do not have somebody to take it over I see them selling to well-financed companies with expansion plans. I think the big ones will be getting bigger and the smaller ones will stay small, but the medium-sized ones will have to do something. But when they do sell, it still involves profitability and those that are profitable and can make a dollar will be attractive targets for those people looking to expand their territories or grow stronger in the region they're already in.