Distributors Build Momentum

Distributors Plan For Growth

The PEI Journal set out to find distributor members curious enough to stare into the crystal balls on their desks and gutsy enough to tell everybody what they saw. In random interviews, you told us about your plans for the new year, the challenges you face, and what you need to increase business in 2007. You were forthright and straight on.

Sales activity will continue to increase but, for some companies, not a lot because service technicians and salespeople are few and far between. You are concerned about eroding profit margins, competition, lack of customer loyalty, and in some cases, manufacturer loyalty, consolidations, factory sales, and what your company will look like in a couple of years.

The good news is that the market is strong, and your strength comes from resiliency, creativity and knowledge – a powerful combination.

“We emphasize professional service and a turnkey approach.” Scott Hafer Hafer Petroleum Equipment   “Staying up-to-date with technology is a constant process.” Steve Sulland Valley Petroleum Equipment   “Paying lots of attention to receivables will cut them down considerably.” John B. LoRusso Barlo Equipment Corporation   “There are other ways to make the sale besides giving equipment away.” Jack Dunifon Gasoline Equipment Service Company   “Where we once had non-competing manufacturers, we suddenly have manufacturers who are competing through their acquisitions, and we have to make a decision.” Steve Hieber PWI, Incorporated   “Mandatory certification is driving up the value of technicians as oil companies hire service techs away from distributors.” Joseph Bagley Bagley Enterprises   “Growth will come from taking market share in new markets.” Gregg Miller Northwest Pump & Equipment Co.

Product Mix Broadens in District 1
Sixty-seven percent of District 1 distributors expect sales to increase this year, but at an average increase of 5%, the second lowest across the United States. There are pockets of growth coming from major oil divestiture and distributors setting stake in unique, niche markets.

“Many stations were redone in upstate New York when Mobil pulled out last year,” notes Michael Howell, president, S&W Services (East Syracuse, NY), whose company's offerings are equally divided among construction, distribution and service. Howell expects sales to be on an even par with last year's and is looking forward to new dispenser technology. “It will be a great advantage to C-store owners to have another source of revenue through advertising at their pumps.” S&W is adding 3,000 sq. ft. to its facility for additional warehouse and office space, and will be hiring three or four people to do sales, construction and technology work.

President John B. LoRusso describes his company, Barlo Equipment Corporation (Hicksville, NY), and his employees as “specialists” that cater to industrial markets. The company's work for the federal government will be responsible for a small increase in sales this year, about 4%. LoRusso wants to keep his family-owned company small, and has no plans to add personnel. He will, however, add products to meet “a growing need for electronics.” He acknowledges the manufacturers who rely on his company to handle the many “little detail, some may say nuisance, calls they get. We have the answers, and they don't get swamped at the factory.”

With no new regulations, equipment sales are a bit slow in Connecticut. “We're watching California, Texas and Maryland and hope those things come our way,” says Bill Ensign, president of Ensign Petroleum Equipment Co. (Norwalk, CT). To maintain last year's sales numbers, Ensign will aggressively promote the benefits of management systems for compliance issues, plant operations and gas station management. He's also adding a truck lift line.

“Customers all think they want the lowest price, until we ask them if they all drive Hyundais!” says Quality Nozzle Company (Bethel, CT) General Manager Dan Ripley. With 40 people on the road educating customers about the value they add and why there is a price difference between the least and most expensive items, Ripley notes, “Because we represent the least, more and most expensive items, we're careful to walk a fine line; we don't want to negate any of the manufacturers we represent.” Along with expanded sales efforts on the road, the addition of an inside sales rep will bring a 5% increase. Says Ripley, “Despite our narrow focus on hanging hardware, contractor customers are asking us to provide other things, moving us further back into the dispenser chain. These are welcome requests.”

2006 brought new challenges when a Tractor Supply store opened directly across the street from Miller's Petroleum Systems (Pittsfield, MA). “I'm watching our two lines of compressors go by my window all day long,” says Dennis Miller, president, “and none of them were sold by my company.” Miller turned his focus to other opportunities and has a plan to increase sales in 2007 by 15-20%. In addition to several large projects upgrading bulk plants, the company will do excavation, water and sewer line work for pre-fab housing. “We already have the heavy equipment, excavators and dump trucks.” He also found a niche with super stations. “Specialized guys get the heavy electronic work. We do the grunt work, and we like it.”

“It's hard to say no when your background is sales,” admits Ken Hayden, president of Northeast Petroleum Technologies (Schenectady, NY), who will be weighing opportunities based on credit risk, location and equipment. Along with Mobil's divestiture in the region, the unusual warm weather in the Northeast created many opportunities for the company and Hayden expects sales to increase by another 5%, after a 35% increase last year due to a new branch location in Utica. In January, the company was booked through July. “We'll enjoy it while it lasts because it will go the other way sooner or later.” The biggest challenge is finding experienced service technicians and construction workers. Says Hayden, “We have so much work to do right now that we don't even have time to train people. We need people who already know what they are doing.” The pickings are slim, since the only people available, Hayden points out, are those who have failed elsewhere. “Every business worth anything is busy.” Hayden's solution: “Find workers in related areas and apply their skills to what we do.”

New Markets Propel District 2 Growth
Two-thirds of distributors in District 2 are optimistic for a sales increase ranging from 3% to 20%. To achieve a 7% aggregate increase, distributors are promoting new construction, new services and new markets. Throw a chef into the mix, and the recipe looks good for a successful year.

“Would you rather buy a 16-ounce porterhouse steak at Ponderosa, Outback or Morton's?” asks Stephen Klesic, president of United Environmental Group (Sewickley, PA). “It's still a piece of meat, but it's the chef who cooks it that counts.” He continues, “Just like with the steak, we are that chef, and how we put things together, how we consider quality is what counts. When you can explain that to customers and they understand it, they look at things differently.” For two reasons, Klesic expects sales to increase by 8-10%. “First, regulators are starting to crack down on companies that did not upgrade; and second, a lot of marketers have made substantial amounts of money from high gas prices, and to decrease their taxes, will want to do some upgrades.”

With local governments and private sector increasing their spending, new construction will fuel a 20% increase in sales for Oil Equipment Sales & Service Co. (Chesapeake, VA). Charles Hubbard, president, has had an expansion plan in place for the last two years, but it is delayed because he can't find experienced employees to hire. This, in fact, is Hubbard's biggest challenge: “to continue growth, and the only way to do that is to find employees who know what they are doing.” Hubbard does not believe in hiring employees away from competitors, which is “of course, the best way to hire trained people.” He laments the lack of industry awareness. “One of our industry's challenges is that people don't realize there is an entire industry behind what we do, and it's no wonder that finding people well-versed in it—sales, service or construction—is difficult.”

Without enough state inspectors, the state of Maryland instituted third-party inspection of underground storage tanks, and Jeffrey Underland, president, Petroleum Services (Baltimore, MD), is taking the classes to earn certification. He hopes to start doing third-party inspections in the 2nd Quarter. “If the market prices itself fairly and we can make a profit doing inspections while serving our customer base, we'll do them.” To gain a 5% increase, Underland's main focus will be on developing construction and installation efficiencies, the most profitable sector of his business. He'll be hiring three people for service, installation and sales.

Linnie Hiter, president, Advanced Fueling Systems (Ashland, VA), is moving away from C-store work and diversifying into more specialized commercial applications. He expects a slight increase of 3% this year, and will be raising his prices. Hiter is always on the lookout for good employees, and relies on his workers in the field to keep their eyes and ears open.

The warm winter is impacting sales at Farmer Co. (South Williamsport, PA), but not in a good way. Michael Farmer, president, expects to see a 5% decrease. “No one can spend money because they're not making money selling fuel, and their equipment is not wearing out because it's being used very lightly.” Farmer will concentrate on alternative fuels, particularly biodiesel, and will add two employees—one in the shop, the other in construction. Farmer describes his biggest challenge as “keeping overhead down and controlling smaller expenses, since health care and fuel prices are not controllable.” Lately, Farmer has been thinking about narrowing down the number of manufacturers his company represents in order to do a better job for them. “Some manufacturers want only larger companies. If we sell more of their product, we become a bigger asset to them.”

Re-imaging of Mobil stations across Pennsylvania will lead to a 10% sales increase for Francis Smith & Sons (Chinchilla, PA), and Craig Smith, president, is prepared. He's adding two service technicians and remodeling his facility. A change in the business plan, along with growth, spurred the renovation to create more efficient space. Smith's biggest challenge right now is collecting payment and negotiating contracts with non-English-speaking customers. As a result, he makes sure contracts are set up to be understood by all parties, and is implementing COD service calls.

For the past 20 years, Beneficial Systems (Jetersville, VA) has specialized in fuel management facilities, primarily for the U.S. trucking industry. It wasn't until last year, though, that the company developed what President Ron Sledd calls a “strategic plan” that included benchmarks, objectives, measurable goals and written job descriptions. Not only have sales increased, but profits as well, and Sledd expects another year of growth, 20%. A business coach was hired to teach how to identify primary customers, their needs, and how to better service them. “We're screening customers before we go to them,” Sledd says. After hiring a VP of marketing, project managers and administrative staff will be added.

“The goal is to handle growth without creating a hardship for the existing base of the company.” John Conarro Mid Indiana Service Company   “It's easier to run a business and be profitable when you think forward, are prepared for change, and accept it.” Craig Smith Francis Smith & Sons   “We are improving our efficiency through technology. This will enable us to grow without growing our personnel.” Doug Kimball Eaton Sales & Service   “We continue to be a learning organization, consolidating our knowledge, and making it pay off.” Fred Snyder Willborn Bros. Co.   “Increased growth demands that we work on improving operational efficiencies.” Michael Madeson Interstate Pump and Tank   “Customers are making quick decisions and want little, if any, lead time. If we want to give good service, we have to stock more inventory.” John Faris Oilmen's Equipment Corp.   “Construction jobs come and go, but service is recurring revenue.” Maurice J. Hubbard JMP Solutions

Hafer Petroleum Equipment (Reading, PA) is a factory training center for Gilbarco Veeder-Root and Gasboy, where training involves not only the company's service technicians, but other distributors' technicians, as well as store managers and operators who are Hafer customers. President Scott Hafer forecasts sales to be even with last year, but expects to see growth from the training programs. With a market predominantly made up of jobbers and independents, Hafer is pursuing new accounts while massaging the existing customer base. “We continually call on them and offer our turnkey approach of sales, installation and service.” Hafer will be adding service techs and installation workers to an expanded car wash division.

With a consistent backlog, Roger Tartaglia Sr., president, Center Point Tank Services (Douglassville, PA), expects sales to be similar to last year, which saw quite a bit of growth. As Center Point expanded its environmental business, Tartaglia increased his facility by 30%, including additional personnel. He will be focusing this year on expanding his growing biofuel business. “We're constantly looking for the next job, turning over every rock, and following leads.”

Salespeople from PWI, Incorporated (New Oxford, PA) are on the road a lot these days. Steve Hieber, president, indicates that divestiture of major oil retail locations, consolidation of C-store chains, the building of new C-sites, and the advent of alternative fuel will bring a 12% growth, but it comes with a challenge: “Most of the divested stations are being picked up by independent business owners, and we're running into a lot of smaller, new customers. As a result, our salespeople have to get out and make many more calls.” Customers are interested in biodiesel, and Heiber is making sure their equipment is up to par, especially those handling methanol or ethanol.

“The last buggy whip manufacturer left standing made a lot of money,” remarks William Thompson, president of Callis-Thompson, Inc. (Harrington, DE), “and we're in the buggy whip business! We have to adapt to the fact that we just can't go out and beat the bushes to find new customers. Instead, we have to be really aggressive with market share.” Thompson expects sales to be level this year, but profits to increase, and will focus efforts on customer retention by “making it easy for them to call us, and unproductive to call anyone else.” Thompson cites management succession as his company's biggest challenge. “I have a lot of mature employees who are ready to retire, and we won't let them. We accommodate them in any way possible. If they want to work 20 hours a week, they do, because they are a strong resource for the company.”

Improvements Pay Off in District 3
Facility expansion is the word in District 3 as distributors open new locations and expand existing facilities. Seventy-two percent expect business to be up. Across the district, the average increase is predicted to be 11%.

Commercial construction has picked up, and Bob W. Grunow Jr., president, Peachtree Petroleum Equipment (Lilburn, GA), expects sales to increase by at least 15%. “There is a lot of business out there, and there is a lot of competition,” which Grunow indicates will be his biggest challenge. To counteract it, he'll continue to solidify his base while expanding his niche market to commercial end-users such as marinas, construction and concrete companies. “When I work with them directly, nine times out of ten, it doesn't become bid work.”

Bobby Dutcher, president of Atlanta Petroleum Equipment Co. (Tucker, GA), agrees about competition being the number one challenge. “We know we have to do it better, quicker and smarter. We cannot afford to cost overrun a project.” Dutcher expects sales to be level with last year, especially as end-users look at the price of upgrading equipment. “I don't see a whole lot of new business coming in as end-users face this reality.”

“In this time of e-mail, instant messaging and high-speed Internet connections, customers are used to getting everything quickly, and when they get ready to buy service station pumps or fuel trucks, they have the same mentality: 'Why can't I have it right now!' So we try to give it to them, right now,” says John Faris, president, Oilmen's Equipment Corp. (Spartanburg, SC). “This means stocking more inventory because we want to be prepared for customers who make quick decisions and won't wait for lead time.” Faris calls this the company's “little niche” and plans on promoting it to customers. Last year, the company experienced a very high demand in its core business, truck tanks, and pre-sold a lot of trucks. As a result, Faris expects sales to be down by 15% this year. He says, “Last year was phenomenal and tuned up. We have people here who handled that volume, and we want to make sure our sales are such that we can keep that engine running.” To grow the company, he is considering some acquisitions.

Maurice J. Hubbard, CEO, JMP Solutions (Fort Myers, FL), has an interesting business strategy that will grow his business 10-15% this year. “We're taking on everything no one has time to bid.” By the end of 2009, all of Florida's 2,000+ tanks will be changed to double wall, and Hubbard says that everyone in Florida currently has their plate full. “We're not changing out tanks, we're doing the jobs that everyone who is changing out the tanks doesn't have time to do. We go to bid openings now where we are the only bidder.” This spring, Hubbard will add a location in Orlando, as well as an installation crew. To get ready for the slowdown come 2009, new services are being added. “Our customers like one call for everything,” and the company is responding by having employees service air conditioners, ice, soda, coffee and hot dog machines. To find employees, Hubbard runs classified ads in Northern newspapers during the winter.

“We've taken a one-dimensional business model and turned it into a one-stop shop for C-store customers,” says Joey D. Batchelor, president, Guardian Fueling Technologies (Jacksonville, FL). “Not only do we service gas dispensers and tanks, we are licensed and staffed to do lighting, electrical and walk-in refrigerators. Customers love it.” The company has grown 25% since this multiple revenue stream was introduced four years ago, and this year will be no exception. Last year, the company opened two branches, and this year is looking at Atlanta and Charlotte. Batchelor explains his strategy: “The customers were controlling our business; because we were so one-dimensional, they leveraged us against our competitors.” The company is investing heavily in IT, including the creation of a customer portal. Says Batchelor, “We're separating ourselves from our competitors, giving our customers information that our competitors can't give them. It justifies us charging more, too.”

Dave Polak, president of EZ Fuel & Tank Solutions (Duluth, GA), has developed what he terms a “little niche” for his company. “We are a nationwide sales/consultant organization that designs and engineers above-ground fueling systems for commercial applications.” Polak expects growth to be at least 25% this year. The company has eight full-time, independent salespeople; two more will be added for the Texas territory.

Headquartered in Miami, Florida, all of Bolivar Trading's sales are international. The company has offices in Guatemala, El Salvador, Honduras, Costa Rica, Panama, Columbia, Nicaragua and a potential new one in China at the request of Exxon. Says President Oscar Ramirez, “Customers recognize the economic drawbacks of working with 20 different vendors, and are looking to order from one source.” Bolivar Trading buys, sells, ships and delivers the entire station, and also does design. Everything is shipped in containers from the company's new 45,000 sq. ft. warehouse in Miami. Bolivar Trading's worldwide distributors install the equipment or work with local contractors. This international, one-stop shopping niche will be responsible for a 15-20% increase in business.

Alternative Fuels Spur District 4 Growth
Only 43% of District 4 distributors expect sales to increase, as activity slows down after a few very busy years. Distributors forecast an overall increase of 3% led by environmental work and expanded interest in biofuels.

Gasoline Equipment Service Company (Fort Wayne, IN) started 2007 with an expanded location in Indianapolis. About 4,500 sq. ft. were added, doubling the size of the facility. Coming off a great 2006, Jack Dunifon, president, expects sales to remain the same as last year, which were 35% over the previous year. “We are emphasizing service and giving our customers more bang for their buck. We try not to give our equipment away,” he emphasizes. Dunifon stresses loyalty to manufacturers as paramount to his success. “We stay loyal to one brand and we sell it. That does mean something to manufacturers.”

“Things are status quo,” says Willard Able, president, Petroleum Systems Inc. (Akron, OH), and he expects activity to remain the same amongst his long-time, loyal customers. Able is noticing that more utilities are reinvesting into their facilities, and he is seeing an increase in utility work. Like so many in business, Able cites insurance costs as his number one challenge, and relies on PEI's liability insurance to help out in that area.

2007 Expansion Plans 49% of companies currently have job openings, the most in District 8 (71%). 40% have definite plans to introduce new products, the most in District 1 (83%). 19% of companies will expand facilities. District 3 plans to add the most (43%).

Customer interest in biofuels and E85, along with bulk plant work due to SPCC regulations, will drive a 5% sales increase at Collins Equipment Corp. (Cleveland, OH). The company will expand its fuel filtering service and add more wireless products to its offerings. President William Morgan explains his strategy: “We put together package systems made up of small and large ticket items so that the entire package is not a commodity and retains an element of profitability.” Looking for more efficiencies, Morgan will renovate office space and remodel his warehouse layout to allow trucks into the area for night-time storage. Two additional construction workers will be hired in the spring.

“You just can't lag. You have to stay right out on the edge if you're going to be in this marketplace today.” David Broyles Broyles Inc.   “Emphasize information that will help customers do their jobs better, especially product knowledge and inventory.” David Chrien SSECO Air & Fluid Equipment   “My best customer is my most educated customer, because the more they know about me and my industry, the better the chance they will buy something from me.” Stephen Klesic United Environmental Group   “The business is out there. Finding the right people who can help you grow is the biggest challenge.” Oscar Ramirez Bolivar Trading   “People hired from outside the industry bring a fresh focus, and often are our biggest success stories.” David Diamond DPS Companies   “The trend to accept debit cards at the pump is creating a need for upgrades.” Paul Knower METCO   “The rebuild is dragging, and the big push is to bring stores back online in the devastated areas of Orleans Parish.” Butch Shelton Rittiner Equipment Company

Oil company divestiture has created a different market for Reliable Oil Equipment (Dayton, OH), and Jeffrey Badgley, president, has had to make some adjustments. “These small-company customers are one sale at a time, which is different for us.” Badgley is finding that individual stations are underestimating the size of a project and what it takes to get it done. He notes, “It's important to make sure they have secured financing.” Despite the loss of the majors, Badgley expects sales to be level with last year, and is focusing on new items, like sign-age. He's upped his marketing with a new brochure, an upgraded Web site with products for jobbers and commercial accounts, and will be doing some regional advertising outside his normal market area.

Jeff Bauer, president, B & B Equipment (South Bend, IN), expects sales to hold their own this year, especially since upgrade work has slowed down after a few solid years. Bauer will move his focus away from installation to the sale of equipment. “Our biggest challenge is staying competitive with others who are all fighting for the same business from big box and major oil companies.” To do that, Bauer spends a lot of time working with employees on customer care, “teaching them how to keep customers happy.”

“Maintaining a steady growth, instead of rapid growth,” is Mid Indiana Service Company's (Indianapolis, IN) goal this year, according to John Conarro, president, who forecasts a 15% increase for the company. Conarro expects a lot of sales to come from environmental work as the acquisition activity weeds out weak locations, resulting in the removal of underground tanks. Conarro also expects upgrade work and new locations. Much of MISCO's business is build-to-suit as well as the leasing of locations to marketers. “The marketers who are left are much stronger,” he says, and he will focus on building loyalty programs with them.

The economy is slowly recovering after a lot of business left Ohio, according to David Chrien, president, SSECO Air & Fluid Equipment (Cleveland, OH). Chrien is optimistic and hoping for a slight increase of 4% spurred on by a combination of environmental, biodiesel and ethanol-related growth. Chrien acknowledges that customers are not always aware of new improvements available on products, and will emphasize his company's role as a resource for information that will help customers do their jobs in the best manner. “We have to provide answers and solutions.”

Diversity is the Word for District 5
Half of those interviewed in District 5 do not expect any change in sales activity; 17% expect a decrease. For the remaining 33%, an increase will range from 10% to 40% and will come from diversifying markets and products.

“We get about 30% of everything we quote, and we've been doing a lot of quoting,” says Gary Estes, president, Estes Equipment Company (Chattanooga, TN), who is “cautiously optimistic” that sales will remain the same as last year, which was a good year. Estes believes that a lot of new business will come from commercial bio applications, along with required secondary containment upgrades. He just picked up a line of car washes to offer a total package to the end-user. According to Estes, the company's biggest challenge this year is keeping expenses and overhead in line with volume and gross profit. “We'll be paying attention to installation and service tech overtime to make sure that overtime is being billed appropriately.”

Last year was a very good year for Petroleum Equipment Co. (Richland, MS), and President Forrest Rhemann does not expect to match it in 2007; he expects sales to be down 10%. “We'll adapt to whatever market conditions throw at us, be they oil or economy-related challenges.” Rhemann describes his company as “well-diversified” and will be evaluating new products to introduce into his lines. He adds, “It's important to be a team player with manufacturers to justify having their lines here.”

When Michael Shelby, CEO, and a business partner purchased 45-year-old The Southern Co. of North Little Rock, Inc. (North Little Rock, AR) two years ago, they developed a “smart growth plan” and set out on an aggressive marketing campaign. Those efforts are paying off, and Shelby expects sales to increase by 10%. The company is emphasizing general contracting and environmental services. Since buying the company, Shelby has added 15 employees, new software and accounting systems, and hired a certified OSHA instructor. Accidents have decreased by 30%. Having expanded facilities in '06, Shelby will do so again in '07 to accommodate five to ten additional people at the home office.

Butch Shelton, operations manager at Rittiner Equipment Company (Gretna, LA), is still working through the after-effects of Hurricane Katrina. “A lot of our orders are storm-related,” he says, “but the rebuild is dragging in Orleans Parish and New Orleans proper.” As a result, Shelton expects sales to be, at most, level with last year, perhaps down. He is doing upgrades at sites badly in need of them, and is seeing an interest from customers in using marketing technology at their pumps. “Efficiency is driving company-wide efforts,” says Shelton. The company is testing wireless processes with service technicians, including sending dispatch calls to laptops and PDAs, accessing customer data in the field, and creating invoices at the job site.

Oil Equipment Co.'s (Birmingham, AL) core business, building convenience stores, is focused in four southeastern states. Fifteen percent of the company's sales is petroleum equipment, which has dropped off over the last several years, and Geoff Smith, president, is working hard to keep them from dropping any further. “If I were just selling gas pumps, hoses and nozzles, I'd be out of business.” So he's focusing on diversifying his construction work. In addition to convenience stores, Oil Equipment Co. is building strip centers, Dollar General stores and Waffle Houses.

“With the change in our marketplace, we have tremendous opportunities right now,” says Eric Scott, president of The Southern Co. (Memphis, TN), referring to a competitor that recently went out of business. Availability of capital, increased margins for jobbers and a customer base that dramatically expanded will contribute to 30-50% growth in sales. Scott will expand retail service and emphasize retail fueling systems, while continuing to cultivate commercial and industrial markets. He is looking to hire construction and service techs who are “immediately able to go out into the streets with a rate of return,” and is building resources that will not only increase the volume of business, but provide quicker turnaround and response times. “In today's environment, these are what major oils, indeed all customers, require.”

Expect Success, District 6, but Exercise Caution
While 10% of District 6 distributors predict a downward trend, and 30% expect no growth, the remaining members forecast sales to increase anywhere from 5 to 20%, adding up to an overall average growth of 6% for the region. Distributors will be promoting new testing and inspection services and focusing on the growing alternative fuel market in the Midwest.

“Biodiesel blending is a babe in the woods,” says Steve Berning, president of Accurate Tank Technologies (Naperville, IL), “and it's going to pop!” Berning is excited about the precision accuracy of these units when dialing in a mix of soybean oil with petroleum diesel fuel. A combination of E85 and biodiesel equipment sales will be responsible for a 20% growth. A 10% increase in management, administrative and field/labor personnel will support the extra sales generated.

Glen Mulder, president, DRW Services (Chicago Heights, IL), would be happy if 2007 numbers were equal to 2006 sales numbers. To meet the needs of several oil company owners, Mulder is opening a Florida branch to take advantage of the state's requirements for secondary containment. “There are a lot of tanks in Florida that do not meet compliance,” he says. DRW Services is looking at adding a tank testing service. Says Mulder, “I don't think there are any testing companies that offer a tank testing service and then are available to perform the repair.”

Jerry Culbertson, president, Iowa Petroleum Equipment Company (Storm Lake, IA), indicates that UST compliance inspections will result in a growth in 2007 sales. “Due to a lack of funding, the state will outsource inspections to a third party. We will do more EPA training certification through the Iowa Department of Natural Resources, and offer compliance inspections for a fee. If needed, we can offer the client a remedy in order to come into compliance.” The challenge is to find the technicians and installers who can install spill containment manways and monitor well manholes, dispenser sumps and tank sumps.

“E85 and biodiesel fuels are hot commodities in the Midwest,” says METCO (Hillsboro, WI) President Paul Knower. Knower expects a 10% increase, supported by the popularity of alternative fuels and POS software upgrades. “Our customers are pushing to have the latest, greatest software in their pumps and in their point of sale systems. An increased number of ownership changes and subsequent re-branding will also drive sales, and an expanded service department will help to better meet increased demand.”

Loren Semler, president of Semler Industries (Franklin Park, IL), is forecasting sales to refinery and bulk terminal customers to be up by 12%, largely driven by two additional salespeople. “As long as oil prices remain high, there will be capital money to invest, so we expect business to be pretty robust.” Semler Industries' primary markets are in the industrial distribution and liquid process industries. “As manufacturing moves offshore, we are taken out of the picture. In order to compensate, we will penetrate our markets more deeply and sell more products and services to those companies that remain in the area.”

Michael Madeson, president, Interstate Pump and Tank (Waukesha, WI), expects a 10% increase in sales, supported by an increased focus on biofuels, alcohol fuel plants and state regulations. He says, “We see a need to upgrade piping and dispensers with the passing of new regulations.” To increase internal efficiencies, Madeson will refine paperwork processes and add field personnel.

Just a few hours north of Waukesha, in Green Bay, Wisconsin, Paul Berken, president, Petroleum Equipment Service of Wisconsin, indicates that sales will be down by 10%. “The whole market has been tight lately. Nobody is building, nobody is putting up new C-stores.” He will place more emphasis on service, and may look at car wash products in the 2nd Quarter. Berken's attention will be aimed at cost-cutting measures in order to enhance profit margins.

“We understand what we do, we understand what we're good at, and we understand what we have that others don't.” Ron Sledd Beneficial Systems   “We make sure to educate the customer about turnkey opportunities.” Bobby Dutcher Atlanta Petroleum Equipment Co.   “We could all use an industry-wide, Web-based safety training module.” Steve Berning Accurate Tank Technologies   “Compliance inspection, followed by deficiency correction, are presenting opportunities in the state of Iowa.” Jerry Culbertson Iowa Petroleum Equipment Company   “There is a lot of business out there, and there is a lot of competition.” Bob W. Grunow Jr. Peachtree Petroleum Equipment   “Our number one challenge is finding qualified employees.” Suzi Hill Gene Hill Equipment Company dba The Hill Co.

As margins erode, Glen Corkill, president, Source North America Corporation (Addison, IL), is examining his entire product line and pricing structure. “Margins on some product lines tend to erode the composite margin.” Corkill expects a sales increase driven by environmental regulations, as well as the consolidation and re-branding of stations. He will add several sales positions. He points out, “We need to stay close to our customers. Our job is to help them to be more efficient.”

In Milwaukee, Wisconsin, Badger Oil Equipment Co. has been emphasizing service rather than heavy construction over the last few years. That focus on service supported the company's efforts to upgrade POS counsels in an expanded territory. Edward G. Ettl, president, expects to maintain last year's growth in sales. He says, “The construction business is so competitive. We stopped fighting it.” Plans call for an expanded service department and expanded testing programs, with an additional service person hired.

David Diamond, president, DPS Companies (Rochelle, IL), expects the number of construction projects his company works on to be slightly ahead of last year, while his overall numbers stay level. “Margins at the pump are getting tighter and tighter for our clients, and they must look at additional profit centers outside of fuel. In combining services that have not always been found under one roof, we are teaming a car wash, lube center and car repair facility with a C-store.” He's also designing for non-traditional food offerings—salads, chicken wraps and Asian food—that provide higher profit margins for his customers. Newly hired project management personnel and a business development manager will identify regional market opportunities. The company's alternative fuel blending system will be marketed to national truck stop chains, as well as to independent markets.

Internal Efficiencies for District 7
Distributors in District 7 have a collectively positive outlook about sales in 2007. Of those surveyed, 75% foresee sales increases ranging from 9% to 30%. Gains will come from internal efficiencies and acquisition activity.

Accounts receivable is a major concern for David Barker, president, Dave's Pump Service (Blair, NE), who has seen a major shift beginning last summer. “Customers are paying around every big bill; they pay $100, but owe $10,000.” Barker describes this disturbing phenomenon in a five-step process: “First, they print the paper; next they put the ink on the paper for the check; then they send it to the big wheel who checks it to make sure it's right; it's re-sent back; then it's in the mail. And when it finally gets to me, it's often NOT for the total amount.” Not sure who to blame—the economy or other reasons—Barker will focus on remodeling construction work and expects sales to be level.

The biggest challenge for a small company like Valley Petroleum Equipment (Grand Forks, ND), according to President Steve Sulland, is keeping current with training. “Staying up-to-date with technology is a constant process,” and Sulland makes sure his employees attend factory schools. A concern this year is E85 compatibility. “Customers are asking about it, and we're all waiting for UL to let us know about equipment.” Sulland expects remodeling jobs in order to add fully compatible E85 equipment. The company's focus this year is on new equipment sales, which Sulland hopes will bring a 15% increase.

Compliance issues with aboveground tanks, double-wall containment and piping will increase sales anywhere from 20-40% at Rocky Mountain Pump Service (Cheyenne, WY), and Bradley Nelson, president, plans to hire at least one service tech and two construction workers. The company will do a full-service annual inspection for almost every customer, laying out a strategy for their compliance issues. While keeping up with all the work is a good challenge to have, Nelson points to a bigger challenge—pricing for equipment upgrades. “We deal with a lot of used equipment, and quality and reliability are always at issue.” Nelson is qualifying his suppliers of remanufactured equipment and will eliminate a few, “narrowing them down to two or three companies to work with on a regular basis that are reliable, have a nice product, and respond to any problem.”

The last three years brought significant growth to Eaton Sales & Service (Denver, CO), and while President Doug Kimball projects that commercial industrial work will expand by 8-10%, he prefers to focus on internal growth in 2007, while continuing to look for acquisitions. He is focusing heavily on technology to help drive revenue through current levels of employees. Kimball describes his company's number one challenge as managing generational differences among employees. “Motivations, skill levels, aptitude and willingness to learn are so different.” Eaton managers are being trained to understand the dynamics of different generations, while young employees are given opportunities to mentor with older, more experienced ones.

District 8 Adapts to Changing Customer Base
Distributors in District 8 are looking in their crystal balls and seeing good times ahead. Eighty-six percent predict sales increases in 2007. Estimates range from 5% to 50% with the median increase at 15%. Reasons for such optimism include an expanded Web presence, more commercial sales, and stronger relationships with customers.

After a customer bankruptcy in 2004 put a damper on equipment sales, customers are back to building and remodeling stores. This all will add up to a 20% increase for Mid-South Petroleum and Refrigeration Company (Tulsa, OK), and Chris Haggard, president, is busy upgrading his company. He has expanded his market to Texas and is developing a Web site for online sales to be rolled out by the 2nd Quarter. By summer, the company will move from its current 6,500 sq. ft. facility to a larger one, around 15,000 sq. ft. A new accounting system to track sales and end costs in real time will be added, along with an inventory program to show where stock is coming and going. “Our number one challenge in 2007,” says Haggard, “will be to control our growth.”

“Technology always drives equipment sales,” says David Broyles, president, Broyles Inc. (Humboldt, KS), who looks forward to a small increase of 8% driven by new products and new technology. Employees take advantage of webcasts and other training resources to keep up with advanced technology. Broyles indicates that Web training saves on travel costs and helps technicians and sales staff to stay up-to-date. “Webcasts provide not only refresher information, but keep us excited about products as they become available, as opposed to waiting every six months or so for a sales meeting.”

Fred Snyder, president, Willborn Bros. Co. (Amarillo, TX), expects the general economy to see a modest drop in 2007, and his sales to be level as a result. Snyder will focus on his car wash business, a recent addition. He expects to expand building space in 2008 or '09, and this year will do some modest upgrades to facilities and equipment. “We don't project a lot of growth this year, but we do project greater effectiveness in our operations.” To that end, Snyder will establish processes to gather accurate operational information so employees and management can learn from the information, and he will institute “a training program focusing on real needs, rather than generic ones.”

As environmental work and equipment sales slow down, Bryan Chambers, president, Chambers Pump Service (Brownwood, TX), will focus on construction. Chambers estimates a 20% increase from more construction work, specifically construction of metal buildings and canopies. He expects that regulations coming from the Energy Act will be the cause of some changes in the industry, and he acknowledges “a push by manufacturers to certify installers, which will add to training time.”

Regulatory upgrades are the reason for a 5% increase in sales at Petroleum Marketers Equipment Co. (Oklahoma City, OK) as, notes President Gerald Newcomb, “customers have waited until the last minute to meet the 2007 deadline.” Newcomb will emphasize quality workmanship. His biggest challenge is communicating with customers who don't speak English. “We haven't been able to figure this out yet, trying to sell and train non-English-speaking customers.” Concerned about the safety of his customers, Newcomb even hired a translator. “Trying to train on a piece of equipment was almost impossible.”

Continuing to emphasize marketing in 2007, Suzi Hill, president of Gene Hill Equipment Company dba The Hill Co. (Fort Worth, TX), is encouraging her line staff to take a more active role in relationship building with customers. Hill predicts at least a 50% increase in sales. “The marketplace is responding to pent-up demand caused by a lack of confidence in the economy. Requests for proposals long thought dead are suddenly coming alive.” Eighty-five percent of The Hill Co.'s business is emergency generator fuel systems for universities, hospitals, communication companies and data centers. “No matter what we do, we put in leak detection.” Hill is searching for experienced installers.

United Pump Supply (Arlington, TX) functions primarily as a distributor, installer and service company for retail fuel systems. This year, however, the company will emphasize commercial sales and service, and John Farrell, president, expects a 5% increase as a result. “The margins are higher on the commercial side,” he says, explaining the change. Farrell will add three to five sales and support employees, and will bring in new offerings, like high flow meter calibration. He also is aggressively looking for acquisitions.

District 9 Sells Solutions
Distributors in District 9 are not forecasting 2007 to be as robust as other districts. Only 40% of these members are expecting increases. However, those who do are looking toward an average growth of 14% over 2006. Half of those in District 6 predict sales to be similar to last year.

In Alaska, there is no continuous trend in any direction; it's either straight up or straight down. Ellis Smith, president, Ace Supply Inc., dba Alaska Petroleum Equipment (Anchorage, AK), says, “Here, we live with disaster. The economy was good when the pipeline was up, then it went down. We had an oil spill, it went back up.” Smith expects sales to remain the same as last year, and points to the unknown as his number one challenge.

“Minimizing exposure to injury and inadvertent product spills is always a challenge.” Steve Leonard Leonard Petroleum Equipment   “Keeping everyone vigilant about safety on the job is critical.” Bryan Chambers Chambers Pump Service   “We are consolidating our lines and the products we sell so we're not carrying a multitude of the same product from different manufacturers. This helps us manage inventory better and have stock in place when the customer needs it.” Jeffrey Badgley Reliable Oil Equipment   “Severe penalties have been placed on 28 oil companies, which could have a negative effect on the size of the investments planned for 2007.” Bekir Aluc Interpet   “I'm always willing to look at new product lines.” Roger Tartaglia Sr. Center Point Tank Services   “The trend is now toward single ownership. Almost every gas station is a new sale.” Bill Ensign Ensign Petroleum Equipment Co.

“Regulations in the state of California are cost-prohibitive,” says Bernie Lingnau, CEO, Pacific Petroleum Equipment (San Diego, CA), whose company focuses on retail applications. “Oil companies are reevaluating their retail business, and things are on hold.” Lingnau expects a 10% decrease in retail sales. To protect profits, the company is examining its expenses and watching costs closely.

John Moore, president of Banks & Co. (Fresno, CA), will be concentrating on growing his car wash division and waste management services, after adding these lines a few months ago. With upgrade work leveling out, Moore expects sales to remain the same as last year. As a result, he is diversifying his offerings while focusing on what the company can do well. “We will still push gas pumps and all the related equipment.”

“There is a ton of work out there,” says Joseph Bagley, president, Bagley Enterprises (Lodi, CA), who says his sales in 2007 would be significantly higher if he were not trying to cut back. Bagley is moving from general contracting and turnkey installs to consulting work. So while equipment sales will increase by 10%, his total sales will remain level. Mandatory certification, particularly in the state of California, is driving up the value of technicians as oil companies hire the service techs away from distributors. Bagley has another concern: End-users who purchase direct from manufacturers or distributors, thus eliminating the contractor, but expecting the contractor to do the installation with, at times, incorrectly specified product.

The opening of a new branch in Anaheim, California, and the acquisition of additional territory for product lines that are still under wraps will increase sales by 18%, according to Gregg Miller, president, Northwest Pump & Equipment Co. (Portland, OR). Miller's Sacramento, California, branch started the year off with a move into larger facilities. The company is also expanding its car wash coverage in Southern California. Miller says, “We are targeting specific accounts, customer service improvements, and delivering the best product we can for our customers.”

Car wash equipment has more momentum than petroleum equipment, according to John Bleymaier, president, Petrol Services (Boise, ID). With one or two sales and service employees joining the company, sales will stay relatively even with last year. Plans call for a slight increase in service rates as the company focuses on employee training. Says Bleymaier, “Manufacturers are asking us to pay for training, yet at the same time, we aren't able to increase our warranty labor rate.”

Aging dispensers past the point of needing repair or refurbishing, particularly in rural areas, will help to propel a sales increase of 12-15%, believes Steve Leonard, president of Leonard Petroleum Equipment (Twin Falls, ID). Leonard will also be installing safe and sanitary fuel installations at dairy farms. Newer product lines include potable water tanks and firefighting cisterns, which are a requirement in some jurisdictions. “We have developed a significant business in fiberglass underground water storage tanks.”

“Customer expectations have continued to rise during the past three to five years,” notes Bill Tegethoff, chairman, ANS Distributing (Tucson, AZ). With branches in Phoenix, Atlanta and Cleveland, and 51 employees, ANS Distributing runs lean. Tegethoff expects sales to increase by 15% this year as the company promotes “solutions rather than equipment sales.” The company hired an in-house trainer who provides weekly training sessions focused on compliance, management, regulatory issues and equipment training.

Getting permits in a reasonable amount of time is a serious problem in Arizona, according to T-PEC, Inc.'s (Tucson, AZ) President Steve Kimbriel and his son, Brent Kimbriel, general manager. They say it can take up to three years to get a development site approved and permitting for a convenience store. A growing population and booming housing market contributed to 2006's record sales. The duo are predicting another strong growth year in 2007. Brent Kimbriel says, “While we can build a full facility or just pumps, we prefer to sell and install equipment.” The company will focus on area lighting equipment this year.

After his father Robert retired last year, James Enewold took over company operations at B&T Sales & Service (Sparks, NV). A technician by trade, he hired another technician to handle the workload, and expects sales activity to be up by 10%. Enewold will emphasize inspections and certifications. With the hiring of an additional salesperson, the company will place more emphasis on tank cleaning services. The struggle is to price service work competitively. Says Enewold, “For every qualified service technician who is capable of doing the job right, there is a hack who can be hired by a competitor to do the job for $20 an hour less.”

Technology Upgrades Improve International Efficiency
Across the globe, 92% of distributors of petroleum equipment expect sales to be ahead in 2007, due mainly to the introduction of new products and services. Several companies are revamping their online presence, while a third are expanding their physical presence by remodeling facilities or adding new locations. International members expect an increase anywhere from 4% (Canada) to 30% (Australia), with an overall average increase of 14%.

“Increased sales on all fronts—pumps and dispen-sers, POS, submersible pumps, auto tank gauges, LPG filling plants—will result in growth,” says Reuben M. Valerio, chairman and CEO, AC Corporation (Taguig, Philippines). Valerio expects petroleum equipment sales to grow by 25% due to the replacement of aging equipment and new technology applications, i.e., RFID for forecourts and C-stores. A more aggressive marketing and sales campaign will result in improved product exposure. The company plans to expand personnel by a minimum of 30%.

New projects in the mining industry will contribute to a sales increase of 9%, according to Richard Bullock, managing director, Pumptec (Edenvale, South Africa). Bullock says, “Additional inside salespeople as well as the 1st Quarter introduction of a new pump line will support our ability to be more competitive. We are focusing on maintaining customer loyalty in the face of newer market entrants who are offering lower-priced, usually inferior, products. Customers must be educated to understand that first cost is only part of the picture and that higher quality products are, in fact, less costly in the medium term.”

Currently operating from a 2,000 square meter headquarters, Interpet (Istanbul, Turkey) recently purchased an adjacent plot of land of 400 square meters to build a new facility within the next two years that will house its engineering operations. The company is shopping for new products, including CNG, hydrogen and hybrid fueling products. As new oil companies, including Lukoil, prepare to invest in Turkey, Bekir Aluc, general manager, expects sales to increase by 15-25%. At the same time, Aluc says, “The ruling party recently issued severe penalties on 28 oil companies, including Shell, BP, Petrol Ofisi, Total and Opet, which I fear could have a negative effect on the size of the investments planned for 2007, thus reducing the effect of the growth coming from the investment potential of new players in the marketplace.”

“After several years of minimal spending, two major oil companies are updating equipment, which will result in a sales increase of 30%,” says Bob Butterfield, state manager, Metric Australia (Keysborough, Victoria, Australia). The company is currently discussing an expanded facility, which will add 50% to its current footprint. Butterfield says, “In late 2006, we introduced a new method of ATG installation that will further support our growth.” In response to new regulations, the company will introduce, late in the year, better tank monitoring equipment.

“A new and improved Web site will better support the sales and marketing of new and existing products,” says Nigel Howlett, general manager, Shipman King (West Heidelberg, Victoria, Australia). The company antic-ipates sales equal to 2006 sales.

The introduction of Stage II vapor recovery and an increase in market confidence will contribute to Flowco Sales & Service's (Tsuen Want, N.T., Hong Kong) 10% sales increase in 2007. Keith Jacobs, managing director, says, “In response to customer requests, we are adding a service team to perform maintenance for the marine and tank truck markets.”

An increased sales and marketing development effort at Dem G. Spyrides S.A. (Athens, Greece) will lead to a 12% growth in sales. “The greatest challenge for the company,” says President Panos Spyrides, “is instituting cost-cutting measures while still focused on growth.”

Daniel Daboin M, director, Ahiton (Caracas, Venezuela), expects sales to increase by 20%. “Our efforts to develop a successful sales structure including, by March 2007, the hire of a product manager in support of two product lines, will further our penetration of the market.” A constant emphasis on refined department budgets and improvements to the sales structure will help increase sales while still reducing costs.

“Increased construction activity is driving our projected sales increase of 5%,” says Ernie Martens, general manager, Olds, AB Westeel, Div. Vicwest Operating (Olds, AB, Canada). In an effort to enhance customer service efforts, the company will improve Web- based content, providing faster responses to customer inquiries. To attract and retain quality employees, Martens says, “The company will improve rewards.”

Francois Domingue, president, Equipements Dorion (Laval, QB, Canada), is shopping for a new location. The company is looking for space approximately 30% larger, and expects to finalize the move by July. Dominque acknowledges that “growth in new markets” is the company's biggest challenge, which he will meet by “working harder and smarter.” Investments in upgraded information systems will support growth of 10% in 2007.

“Anticipated heavier construction activity will lead to a slight increase of 5%,” says Bernie LeBlanc, general manager, Petroservice (Saint John, NB, Canada), “and we are focusing on closer cooperation between our sales, service, installation, administration and compliance personnel to provide better efficiencies.” LeBlanc adds, “We are emphasizing a lean approach, focusing on mapping processes, redefining them as appropriate, and eliminating wasteful activities that customers are not willing to pay for.” Petroservice will relocate to a new facility during the 2nd Quarter, doubling its current size.

The addition of new product lines, supported by an expanded sales staff, will drive KMD Distribution's (Montreal, PQ, Canada) sales increase of 20%. Ken Pittman, president, says, “With OPW Fueling Components' acquisition of Environ, we now have access to Environ's flexible fueling pipe as well as their other products. Additionally, we will secure other new product lines later in the year.” Expansion of a current facility by summer is under consideration.

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The PEI Journal • First Quarter 2007 • Volume 1, No. 1 • Contents are Copyright © Data Key Communications, Inc.
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