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Distributors Begin Year
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SOUTH On Level Keel
Southern states contain the highest number of companies (72%) forecasting a flat year…no sales increase, no sales decrease. 22% of them expect sales to increase at an average rate of 16%. The South has the third lowest aggregate percentage change in sales over last year at +1.4%, beating out the lowest region by one percentage point. Members’ biggest challenges include “company survival.”
Rene Latigo, president, Southern Tank and Pump (North Fort Myers, FL), conservatively estimates his sales to increase 30-40% because of the push to get work completed in Florida by 2009. “There are not enough Florida contractors in the state to finish the upgrades to be in compliance, even if we all work 24 hours a day.” Latigo points out that “working-out-of-their-truck-contractors are coming out of the woodwork from other states, bidding work, and getting it because their overhead and their insurance—if they have it—is probably half of what everybody around here has.” While end-users will do what they have to do to comply, Latigo predicts that a lot of businesses will either close their doors or buy extra time. He is offering leasing programs to financially challenged customers and will add products online to attract a wider market. He also plans to market lighting and surveillance systems to other, semi-related industries.
“Sales have not been great,” says Donald Culver, president, Oil Repair & Installation Co. (Salisbury, MD), and he expects no increases in 2008. To compensate, the company is doing more lift repair, compressor work and third-party inspections. Its location on the Delmarva Peninsula (Delaware, Maryland, Virginia) provides a lot of marina work. Currently, Culver’s main workload is inspections and repairs. “Regulations are the priority right now.”
To maintain level sales growth, Billy Pierce, president, Petroleum Equipment Solutions (Apex, NC), is selling environmental products to gain access into non-competitive markets. He’s transitioning from QuickBooks to MasterBuilder, investing $20,000 in the new accounting software and hopes to get better job costing, more accurate accounting and easier reporting. “Customers want someone to handle the details—compliance details, state inspections and checklists,” he says, and is considering offering this service.
Rex Beck, vice president, Petroserve (Stokesdale, NC), believes the state’s requirement for double-wall tanks that took effect at the end of 2007 will contribute to the closing of many small stations in rural areas, and he expects a lot of work to consist of tank removals. He predicts business to be down 20-30% and is hoping that commercial, industrial jobs will offset the lack of petroleum work. “The regulators fashioned everything on California’s rules. Yet many of California’s stations are owned by the big companies, and in North Carolina, almost 50% of the stations are locally owned mom-and-pops.” Beck estimates that two-thirds of these businesses will close down if they have to comply.
Melvin Motsinger, president, Mott’s Oil Equipment & Service (Charlotte, NC), has been in business for 48 years and is getting ready to retire. Looking for a buyer for his company, he is working to keep sales at an even pace. He repairs “a little bit of everything” and about 30% of his business is dedicated to gas pumps. Years ago, he diversified the company with air compressors and lifts.
Service Station Equipment Repair operates within a 75-mile radius of its headquarters in Columbus, Georgia. Karen Culpepper, president, notes that customers are not spending money in rural, agricultural regions and plans to expand into the metropolitan areas to offset level sales. “The farming communities still want just a basic retail computer pump—nothing electronic, no pay at the pump.” In addition, many businesses are being acquired by two major chains. One of them, Circle K, supplies their own equipment, leaving Culpepper to do the installations and ship-ins.
“If sales get any better than they are, I don’t know how we’re going to handle it. We’ve been booming because of Hurricanes Katrina and Rita,” says David Brumby, owner, LASSCO Inc. (Lake Charles, LA), “doing repair and new work.” Brumby has a new consulting service to help retailers meet federal guidelines for leak and cathodic protection. He wants to hire two service technicians, but acknowledges the difficulty of finding them. “In this town, there is a help wanted sign on almost every business.” He recently expanded into commercial work.
Focusing less on service stations and more on industrial clients is Petro Serv (Richmond, KY) and, according to Tom Fassas, president, “We’re taking a more value-added rather than pricing approach.” He expects sales to remain level. With the state EPA doing regular inspections, there is a need for repairs, reports, testing and retesting, and Fassas is marketing a monitoring software package with 24/7 online access. To keep his bottom line where it needs to be, Fassas is “tightening up the ropes on the ship and putting measurable controls in place.” One of these measures is Service Tech Scorecards. Technicians are graded every quarter and the one who ends up with the highest score is awarded two days off with pay. Explains Fassas, “We first gave the top tech $100, but when the prize was switched to two days off, they really took notice. Time off is a bigger motivator right now.”
“Automotive dealerships that have been built in the last three years will slow down; the Quick Lubes have already slowed,” indicates Charles Stookey, president, Reliable Hydraulics (Smyrna, GA), and he expects sales to remain level. Stookey wants to hire four to six more people to fill installation, service and clerical positions by the first half of the year. Improving cash flow is at the top of his list. “Because of our growth, we have much higher supplier costs and to keep employees satisfied, we have to have programs that catch their eye and keep their interest. Cash flow dictates our profit-sharing plan.”
While retail sales are expected to be flat for Petro Services (Maryville, TN), President Sid Lester wants more customers involved with dispenser media technology to provide a stimulus. “We are upgrading POS systems to enable customers to obtain more detailed information more quickly.” He may add warehouse space at a satellite office in Kingsport.
Mike Perry, president, Perry and Sons (Monroe, LA), expects sales to remain the same as last year and is marketing harder to out-of-state areas. He plans to sell upgrades and would like to hire two or three young people out of instrument or computer school and train them on his electronic equipment. He says, “I pair older, experienced, more knowledgeable workers with younger ones who are very comfortable with new technology and not intimidated by computers.” Perry will continue to add GPS to his vehicles, at the rate of two per month, to eventually have it on his entire fleet.
New regulations that go to the legislature in February requiring double-wall and vapor recovery are, according to Jimmy Ratcliff, president, Performance Oil Equipment (Jackson, MS), “a very big step for the state of Mississippi.” He expects that installation work will be down this year, but dispenser and POS sales will be up, making for level growth for his company. Ratcliff is looking at moving to a new location in the 3rd Quarter, which will double the size of the current facility and provide more visibility. He is adding a new department—a compliance group—to the mix of installation and service groups.
To meet the needs of newly merged companies and new owners, C. L. McBride Company (Louisville, KY) has expanded its services. “Our customers want us to help set them apart from their competition,” says President Beth Roos, who forecasts a 5-7% growth. “We assess their strong points, suggest ideas to get people into the store, do site assessments and assist their architects.” She adds, “A shrinking customer base has made us continue to improve ourselves and sell why we think we’re the better choice. So we, too, have to make ourselves stand out in some way.” One way Roos is doing this is by sitting down with the customer and just listening. “Listening to the customer is an amazing tool. They tell us the extra things we can do to increase our value to them. We try to truly understand what the customer wants to accomplish and other needs they don’t know how to get met, or they’re paying excessive cost for, or they’re having to call somebody from a state or two away because no one local does that. We help them grow their business, and they can see value in that.”
Compliance has increased service work at Petroleum Equipment Company (Nashville, TN) by 20%, and President Garry Sisco forecasts overall growth of 5-10%. He’s remodeling the facility, adding space for an environmental department and wants to hire at least two technicians, two construction workers, and one or two administrative staff. His criteria: “Someone who’s trained, wants to work 40-80 hours a week, and can pass a drug test.” He no longer places ads or looks on Web sites. “I have my best employees looking, asking, searching the market for ethical people who can be trained.”
Dale Wandrie, manager, Hooten Equipment Company (Springdale, AR), expects equipment sales to be up by 5-10% but service work down due to the lack of construction. He’ll be bringing on two technicians and purchasing three vehicles. Wandrie’s biggest challenge is operating the service department with the rising cost of fuel.
McKinney Petroleum Equipment (Mobile, AL) covers an area encompassing Alabama, Florida and Mississippi, about 150 miles around. Kevin McKinney, president, expects company sales to remain level. His biggest challenge is insurance. “Our business being what it is, as well as our location in the Katrina area, our insurance rates have been really slammed.” McKinney expects sales to be better in 2009 because of Florida’s requirement for double-wall tanks.
Petcon, Inc. (Jackson, MS) distributes lube equipment. However, President Alex Ralston says that 50% of his business is conducting seminars, doing continuing education and training to certify and license installers and removers of underground storage tanks. He has done this training in 26 states and points out that coastal areas have a real challenge, both to regulators, owners and contractors. “In these areas, the requirement for interstitial monitoring is challenged by water in the sumps. Even if the water didn’t come in through the sump, it’s coming through the conduit or some other way. The sumps have to be watertight or the manufacturers need to build them better.” He sees aboveground tank inspections increasing in preparation for the SPCC regs.
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Feast or Famine in the WEST
In some Western states, business is very good. In other states, not so. The average increase for companies expecting growth is 23%, the highest in the United States. Overall, the percentage change in sales activity from 2007 is +7%. Overwhelmingly, companies in this region are concerned about finding employees to do all the available work.
“Business is just feast or famine,” says Bruce Doughty, president of SyTex West (Las Vegas, NV), who saw a 50% increase in sales in 2007. In 2008, Doughty predicts it will be down by 20%. SyTex is a design/build engineering firm that also sells equipment and does what Doughty calls “gigantic jobs people can’t do.” He stays away from service stations because, he says, “I don’t want to be a non-profit company.” His biggest challenge is finding qualified personnel, and he’s concerned about the shrinking labor pool with so much work available in the western part of the U.S. He could hire six people today if he could find them, and is bringing people from Salt Lake City to work in Las Vegas, two cities he describes as having the hottest economies in the country right now.
“Customers want more technology,” says Jon Boyd, president, Coeur d’Alene Service Station Equipment (Coeur d’Alene, ID), who expects sales to be similar to last year’s very good numbers because of the area’s increasing population and construction. As his customer base changes, Boyd is getting contracts to protect the company, especially with receivables. He just took a 30% hit on insurance and is looking for another provider.
California’s Phase II EVR upgrades will definitely have an impact on some companies. Joseph Bagley, president, Bagley Enterprises (Lodi, CA), expects sales to increase by 50% as a result. “This is going to create quite a workload on distributors and contractors.” Bagley is worried about the dealers, especially the independents, who are holding out. “They’re going to get clobbered.” He believes that if the deadline is not pushed back, there will be havoc, with equipment running out, labor running out, and time running out. He plans to subcontract some of this work and will hire two project managers by 2nd Quarter.
Al Goe, president of GRW Equipment (Paramount, CA), also expects equipment sales to increase by 15% because of EVR. Calling himself a “traditional distributor,” GRW carries about a half-million dollars of inventory all the time. “The only way to increase our sales is to have the material on the shelf, so it is there when people want it.”
In Bakersfield, California, sales at DiMaggio Maintenance will go up anywhere from 15-20%, according to Sales Manager Terry Cannady, who is seeing hesitancy on the part of customers waiting to come into compliance. Cannady’s customers are primarily the major oils, and things started to jump in the fall. Cannady will hire 5-10 field service techs by the end of the 1st Quarter. “We can keep up.”
There are approximately 13,000 retail stations in California, according to Jerry Thomas, president of C.E. Thomas Company (Gardena, CA), and as of December 2007, only about 1,000 of them had the enhanced vapor recovery system. “That’s 12,000 without. If this stays the course, everyone is going to be busy in this industry.” Thomas expects a 25% increase in sales and is wary of people “hanging up shingles that say they are a contractor. You don’t want to make a mistake in this industry, because if you do, it will cost you an arm and a leg. You have to do it right.” Thomas points to some jobs done by other contractors that he has fixed because they didn’t do it right. “Our customers’ margins are not adequate for these kinds of mistakes.”
Susan Regier does purchasing for P.S.I. Equipment Sales (Fresno, CA), and she has a different take on the situation in California. Regier forecasts sales to be down 2-5%. P.S.I. works in the state’s agricultural region where the economy is driven by the ag dollar. Recent years saw a freeze, rain and then drought. “When farms get hurt, we see the decrease,” says Regier. In addition to the farming industry, P.S.I. does airport refueling. Regier points to one of the requirements of doing business in a rural area: “You become friends with your competition. California is far away from most manufacturing and warehouse facilities and sometimes it takes five days to get product. To meet customers’ needs, we sometimes get items from other distributors. Never burn a bridge.”
“The margins in Montana are terrible,” laments Kirk Brumfield, operations manager, Marketing Specialties (Billings, MT), who points to a swing from multiple smaller companies to three or four larger ones, which account for 30% of his business. “My mission this year is manpower,” he says, indicating that key employees are nearing retirement age. It will also be his biggest challenge as he competes with the coal methane industry that “is hot right now and sucking everybody out of the labor pool.”
Counting on another good year similar to last, Kevin Garner, president, Commercial Service Unlimited (Ogden, UT), is bringing on two estimators to get more of the available work in the state. He is building a 6,000 sq. ft. facility to move into during the 1st Quarter. “We do all the small jobs the big guys don’t want to mess with.” Recently, Garner received several calls from companies whose tanks were lined 10 years ago. “We have to break the concrete or asphalt and get in the tank to reassess the lining because they didn’t install cathodic protection 10 years ago. Of course, the companies that did this are no longer in business, and now it’s a $50,000 bill for the owner.” By the first of the year, Garner had 15 sites lined up and is expecting more.
Two years ago, Colorado formed the E85 Coalition to promote ethanol use, and the governor mandated that E85 production and distribution be more available. By the end of 2007, there were 50 E85 stations throughout the state. Kendall Johnson, president, Littlejohn’s Equipment Co. (Denver, CO), explains that the state’s energy office and fire marshall’s office urged local fire marshals to approve E85 dispensers if the dispenser manufacturer issued a letter stating the dispensers were compliant, even though UL pulled its certification. As a result, Johnson has sold some 22 dispensers to date. “This is the positive for the state, as there is not much else on the horizon.” He forecasts level sales in 2008 and is working hard to find customers focusing on E85. “One is doing four hoses per station and is able to market E85 at 50 to 70 cents cheaper. As a result, his volume is 10% of the total gallons sold, which is a higher percentage than the number of flex fuel vehicles.”
More than customer abuse or wear and tear, the rain in Washington state affects equipment electronics, which is just fine with Josh Hodges, director of service, SME Solutions (Tacoma, WA). He’d like to hire 10 more people before the end of 2008. “We look for field workers from the trades that slow down in the winter months, i.e., carpenters and electricians.” Since most of SME’s customers utilize Key Performance Indicators (KPI), so does SME. “This shows we are a premier organization.” Some customers have asked for three-man compliance entrance, some for two-person overhead work procedures. Hodges notes that as major oils divest their retail locations, his company will be working for mom-and-pop stores again. “Our needs are going to change, and we will prioritize our thinking to satisfy a much different kind of client.” However, he adds, “Money is still green on both sides of that fence.”
Fuel Tec LLC (Saint George, UT) is busy with remodels, upgrades, new stations and bulk plants. Manager Keith Dalton says this activity will drive a small growth of 5%. “Installation and service have the most activity right now, and while construction is down, there are still service stations being built.”
Gary Stensgaard, general manager, Hartsook Equipment & Pump Service (Cheyenne, WY), is aggressively marketing every product and service he can. In 4th Quarter 2007, the company moved to a new location as it consolidated with another part of the business. Stensgaard wants to hire four people for service, warehouse and administration. He expects sales to be level, but growth can come from aboveground storage tanks. “It seems they are getting around to enforcing some existing regulations.”
“It’s all about diversity,” says Bill Mascott, president, Mascott Equipment Company (Portland, OR). “The one-horse, single-gun distributor is a thing of the past.” Mascott looks for opportunities in other, nontraditional petroleum fields, i.e., the oil industry, fleet, refined oil and fuels, aviation and communications. “In this market, we have quality competitors and quality customers. The only thing really left is how well we do our jobs, how well we go to market, how well we attract a quality customer base. And it all comes back to training quality people. It’s that simple. People do business with the staff.”
NORTHEAST Meets Challenges
Cash flow, collections and keeping inventory under control are on the minds of most every PEI member in the Northeast. With the lowest overall change in sales activity (+0.4%), the Northeast also has the highest average in sales depreciation. For those forecasting their sales to decrease, it is expected to decrease at an average rate of 26% over 2007’s numbers. Not all is woe, though. 43% of companies are working for an average increase of 10%.
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“With rapid advances in electronics, training must be an ongoing process,” says John Campbell, president, Okar Equipment Company (Rochester, NY), who adds that the company’s investment in employee training will be the most important thing he does in 2008. Campbell budgets upwards of $2,000 per technician, a little less for salespeople, all adding up to around $30,000 per year. With this investment, he expects and gets high-quality staff. The company takes advantage of manufacturer training schools, but also has an internal program for new technicians to be trained by older, more experienced ones. “It’s an incubator system that brings along the young employees.” Campbell expects sales to be similar to last year’s, with perhaps a slight increase depending on the price of crude oil.
“I’m always interested in new products and always looking for new opportunities,” says Audrey Waxmonsky, president, Corey, Inc. (Plains, PA), who predicts sales to be similar to last year. Corey, Inc. does a lot of work for the state of Pennsylvania, and often is called in to repair the improper work of other contractors. A former math and science teacher, Waxmonsky is currently in the process of redoing the company’s data management system, doing much of the programming herself. “We have a lot of talented people, and we’re all hands-on.”
Jerome Mello, president, Northeastern Petroleum Service & Supply (Boston, MA), projects a flat to slight gain of less than 5%. “Most of our sales will come from existing customers with budgeted upgrades, maintenance needs, the occasional emergency, and customers who want help staying compliant.” High fuel prices are forcing customers to make sure that measurements for fuel distribution systems are calibrated properly, and this segment of Mello’s business will be brisk. He is looking for more work in municipal markets tied to budgets rather than profits, and will be adding GPS units to his trucks. “I expect to squeeze in one more service call per day to get a better margin/return on our service.”
A 10% increase coming from pent-up demand, increased bulk plant activity and the replacement of 20-year-old tanks is on tap for Portland Pump Company (Scarborough, ME), according to President Charles Wilson. He is working to increase the company’s knowledge and skill with biodiesel and corn fuel products. He’s also investing $100,000 for two service vehicles in the 1st Quarter. “With such small margins, customers need their equipment up and running; they need quick responses and well-trained technicians.” Adding two technicians to the 15 now on board will help speed up response time.
Kessler Installation Corp. (Hartford, CT) is also responding to those 20-year-old tanks now up for replacement. Manager Kevin Noel predicts a 10% increase in sales. He’s seeing a crackdown on non-compliant owners, “and people are doing something about it.” He’d like to hire a plumber and an electrician and will make some capital investment in heavier-weight utility trucks.
“We’re capturing as many new orders as we are losing orders,” says Mark Towey, president, Whitemarsh Corporation (Middlesex, NJ), who forecasts sales to be the same as last year. “Whatever our customers need, we’ll figure it out and stay with them.” About 90% of business is made up of equipment sales; the rest is service of that equipment. Towey explains, “Our customers rely on us to be the expert on equipment and the installer to be the expert on installation.”
“The convenience store is turning into the old-time, local general store,” says Richard McLaughlin, sales manager, George I. Reitz & Sons (Brookville, PA). “It’s not just the place anymore where people go to buy gas, and in a small, rural town, the c-store just might be the biggest business in town.” McLaughlin acknowledges this is changing the market, either closing small stores or forcing them to remodel or relocate. This drive toward bigger and better c-stores with 10 dispensers and a large canopy is one of the reasons McLaughlin foresees an increase of 5%. The other is that commercial customers are looking for ways to control high fuel costs. “Fuel control systems, card systems and onsite fueling offer some control.” To help customers understand regulations and technical improvements, employees are talking to customer groups such as the Pittsburgh Petroleum Club, Central PA Oil Heat Association and the Pittsburgh Auto Repair Association, among others.
Susan Scott, vice president, J.W. Scott Service Station Equipment Co. (Trenton, NJ), is taking advantage of Shell’s divestiture in the region. “There will be a lot of upgrading,” resulting in a 5-10% sales increase. Scott will put in a new computer system in the 3rd Quarter, including a new accounting package, and is considering adding credit card swipes to her trucks to help collect payment.
“Gas stations are maxing out credit lines because of the high price of oil, and this reflects back on us as to what they will invest in,” says Bob Hanley, operations manager, Biermann Services (Chicopee, MA). He predicts a 20-25% decrease in sales as a result. Service business, however, is steady, and Hanley is now pursuing the commercial fleet market and municipal work because, he says, “They are still spending money.”
Don Longo, president, Don Longo, Inc. (Chester, NJ), does no work for major oils. “Because of the mergers & acquisitions, they use people from outside the state.” Much of his business is with commercial accounts, and he acknowledges that he now has a better cash flow as a result. “Some of these businesses and organizations, i.e., public utility companies, are more appreciative of our spontaneous same or next-day service.” He is moving more toward municipal markets. “If public utilities live within their budget, they can do everything they have to do. Major oils are very unclear, and the small independents are not reliable.” Longo expects sales to be similar to last year, and points to the high cost of doing business as a challenge.
Oil Trades Supply Corporation (Brooklyn, NY) focuses on the terminal and trucking business, and Vice President Walter Adamushko indicates his sales will be up by 10-15%. “Customers do not want to purchase high-priced new equipment, so there is an increase for used, rebuilt equipment.” The company may soon move to a larger facility and will hire three people for shop work by the end of the year.
An increase in E85 equipment on the islands will help fuel a 10-15% increase in sales at Alfa-Tronics (Jobstown, NJ), according to President Ralf Hillesland. He recently added three service techs and will be investing in equipment, including two service trucks to add to his fleet of eight.
“The cost of doing business has tripled, but we can’t triple our costs,” says President Jo Anne Kennedy, John W. Kennedy Company (E. Providence, RI), who forecasts sales to be down by as much as 30% because customers are putting off spending money to compensate for rising gas and insurance prices. Kennedy maintains a tough control on inventory. “The day you borrow money for inventory is the day you are dead in this business.” She points out that in the Northeast, “it’s dog eat dog” as competitors sell product at cost. “We’ve got to be smarter than our competition.”
“Sometimes change is good,” says Louis Gioffre, president, Industrial Petroleum Supply (Hackensack, NJ), pointing to major oil divestiture, “because it brings new customers and new avenues of business.” Unfortunately, change also comes with trepidation, and Gioffre points to customer preoccupation with rising fuel prices and lower margins. Last year ended quieter than usual, and he expects retail sales to be similar in 2008. Gioffre is aggressively marketing his company’s services at trade shows, with mailings and other advertising. He also is sweeping out the warehouse. “Technology is making a lot of products obsolete, and I don’t want dead inventory. We are purchasing more wisely.”
Sunny in SOUTHWEST
The Southwest tops the domestic list of companies expecting to have a good year. 58% of businesses in this region expect an average growth of 17%. This is the only region where no company forecasts a decline. The aggregate change in sales activity over last year, +10%, is the best of any region in the U.S.
“The indications are things will be level, but this market changes pretty quickly,” says Chuck Nadeau, partner, Petro-Tech (Temple, TX). Headquartered in the middle of the state, he plans to stretch Petro-Tech’s radius south to Austin and north to Cleburne in search of new business. The warehouse will be expanded by 2,500-3,000 sq. ft., and four construction employees will be added by the end of the 2nd Quarter.
Dave Embertson, president, Erling Sales & Service (Houston, TX), expects sales to increase by at least 25%. During its first two years in business, the company has focused on sales and service and is now ready to move into construction. A couple of service techs and a construction supervisor will be added in the middle of the year. “We’ll be buying products better and more efficiently and will experiment with price increases.”
“The construction business is very good right now,” says Les Gray, vice president of Les Gray & Company (Garland, TX), who forecasts an increase of 15-20% for his company, which does primarily commercial and industrial work. Says Gray, “There are numerous facilities requiring emergency generators that are presently in both design and bidding phases. These new systems have become very sophisticated, requiring fully automated controls and redundancy in the fuel oil system operation. The company is very involved in the design and/or re-design of the systems.”
A 30+ year veteran of the industry, Ronnie Riley, president of Nor-Tex Pump Co. (Krum, TX), expects sales to be similar to last year. “There wasn’t a lot of activity in ’07, though I expect 2008 to be a little better.” Riley and his four employees do mostly sales and installations at commercial jobber sites in the Denton metro area.
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All three divisions of Rykin Pump Company (Odessa, TX) are doing as well as last year, according to President Richard Rylee. The three divisions—irrigation systems, electrical contracting, and above- and underground tanks—are busy, and Rylee is considering a move to a larger facility in 2009. Having gained 30% year over year for the last three years, he wants to “catch up with all we haven’t been able to do.” One of his challenges this year is finding people. “The oilfield’s cracking so hard right now, offering $1,000-a-month bonuses. The bottom line is you can’t compete with the oilfield, and there’s probably not a business in this town without a help wanted sign.” To deal with this, Rylee advertises on the radio, in the newspaper, and even on billboards.
A lot of companies have run the course on their forecourt equipment and will be upgrading,” says Dru Hall, president of West Texas Service Station Equipment (Abilene, TX), recognizing that c-stores are changing their forecourt marketing strategies and taking advantage of available technology, especially POS upgrades and new dispensers. These upgrades will create a 7% rise in sales, and Hall wants to hire a qualified technician. Wind energy in the Abilene region is taking a lot of technicians, and keeping up with the demand on service is Hall’s greatest challenge.
POS and tank upgrades, along with the change from single to double-wall tanks, will result in a 20% increase for B & J Equipment (Longview, TX). Stephen Scott, president, says his customer base is made up of a lot of older stores, and customers are either upgrading them or tearing them down and building new ones. B & J is doing several tank changeouts per month. Scott is working on a six-acre land deal to build a new facility that will be finished by the end of the year and is expanding service offerings by way of an acquisition. He points out that larger c-store customers have a need to stay on the cutting edge of technology in order to compete with other c-stores. “They are always looking for the newest product that someone else doesn’t have,” he says, “and we give them product updates when we get them from the manufacturer.” This makes the sale of the product much easier because the customer has been anticipating and waiting for its release.
Ken Allen, facility manager at 4 Corners Petroleum Equipment (Texarkana, TX), expects activity to remain steady, mostly because his customer base is not building any new stores. Unlike in other areas, many of these customers are not yet willing to invest in new technology. In fact, there are still many mechanical pumps in the area. Allen will purchase two new trucks this year to get lower maintenance costs and may expand his radius from 100 miles to 150, though he knows that customers will have a problem paying that mileage rate.
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Harry Milstead, president, Milstead Equipment Co. (Spring, TX), expects a slight increase of 6-8%. His accounts are commercial and industrial, and the economy and housing market in the region have slowed. Milstead plans to purchase four new trucks. His biggest challenge, like others, is health insurance.
Customers of Cochise Petroleum Equipment (Phoenix, AZ) are not shopping price, according to Cochise President Brent Erekson. “They are shopping quality, safety, and someone who will be there for them tomorrow.” An expected 20% increase in sales will be driven by new construction, and Erekson’s goal is to “get a piece of every pie. If we don’t do the fuel, we’ll do the concrete; if we don’t do the concrete, we’ll do the service.” Running “lean and mean,” Erekson recently streamlined the company’s bar-coding system to do better with inventory. The purchase of two Dodge Sprinters each quarter until the end of the year will save 37% on fuel costs.
Mid-South Petroleum and Refrigeration (Tulsa, OK) expanded in 2007 with a new facility and will add another one in 2008. Chris Haggard, president, says new construction continues to drive sales, and he forecasts a 20% increase. He also points out that independents are relying on the equipment companies to be their IT department, especially with POS operation. Says Haggard, “We’ve become the go-to IT.” Controlling growth is a challenge, and the company is now using a computer program that speeds up accounting processes and inventory tracking. Haggard also hired key people who were ready to step into management positions.
Gerald Newcomb, president of Petroleum Marketers Equipment Company (Oklahoma City, OK), does not expect to see an increase in sales this year. His business, which is predominantly c-store installation and service, is fairly level right now, but he is looking forward to double-wall tank regulations coming out this year or next. Newcomb wants to hire three or four construction installers and service techs and will invest in training these new employees to get up to speed.
Opportunities in MIDWEST
The biggest challenge for Midwest companies expecting an increase (43%) is finding qualified people. This region has the second highest number of companies (48%) forecasting sales to remain level—no increase, no decrease. 9% expect sales to decrease at an average rate of 22.5%. The overall change in sales is the second lowest in the U.S. at +1%.
“Right now, the farmers are making good money and are spending it,” says Robert J. Stanley, president, Stanley Petroleum Maintenance (Norfolk, NE). That cash filters down to c-stores, Stanley’s primary market, and he expects sales to be up by 10%. There is great interest in higher-end equipment, especially pay-at-the-pump. “We have a lot of people out here with mechanical computing pumps and they want to go electronic.” With the rising cost of health insurance and gasoline, Stanley is focusing on keeping expenses down.
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Jim O’Day, president, O’Day Equipment (Fargo, ND), expects sales to be up, but is reluctant to say how much. New technology will lower his operating costs, thus improving ROI. He will add two salespeople and five technicians. “Our strategy is to build on our existing customer base. Customers want scheduled maintenance inspections; they want to reduce their liability risks; and they are looking for fast service and resolution of their problems.”
Steve Thickstun, general manager, Advanced Fuel Systems (Columbus, OH), is investing in people in order to decrease the time it takes for custom installations and is adding one or two technicians. He expects sales to be up 5-10% as he moves into a specialty market with consulting services and inspections for SPCC compliance.
Sales at Strick Equipment (Jenison, MI) will be up 10%, according to President Brett Strick, who has started to see work come in for aboveground tank upgrades. The company has added tank cleaning and demolition services to its mix. “People are tearing out more plants than they are putting in.” Marketing will be his most important investment, as 35% of Strick’s business is done out of state. “This is a world economy,” he says, “and we don’t recognize borders. It doesn’t make any sense for us to try and beat heads against the 10 guys in our state for 300 oil jobbers.” Via the Internet, Strick is marketing to 14,000 oil companies in the United States.
“We’re a one-stop shop for petroleum equipment, whether you’re buying it, having it installed, or needing service after the sale,” says David Dean, president, Buckeye Oil Equipment Company (Vandalia, OH), who expects sales to be up 10-15%. Compliance with UST regulations will drive his commercial sales. “It seems like you don’t have any work, or you have too much,” and he would like to even out that workload so it’s not all being done at the end of the year.
Chuck Storey, president, W. C. Storey & Son (Cincinnati, OH), is optimistic that sales will be steady with last year, a very good year. Driving sales will be generator systems. “We’re doing manhole replacements and fill containments, maintaining rusted-out equipment installed 10-15 years ago.” Storey’s sales have shifted from retail to commercial with the addition of card-lock systems. Storey points out that customers miss a lot of information. “They know they have pumps, but they don’t know what kind so they depend on us. Niche markets offer that advantage.”
“I don’t see anybody going out to build a new station when they can buy one already built,” says Steve Kryl, vice president, Ampsco (Forest View, IL), who adds that many of the already-built stores left behind have only 900 sq. ft. buildings. “There is no room to make money in a store like that, so they’re adding space.” He expects sales to stay level with last year, and points out that “more and more customers are replacing their own hoses, nozzles and filters, ignoring the safety factors, the experience factors.” Kryl plans to start up another car wash company this year.
Tom Riss, president, Sparling Corporation (Romulus, MI), expects sales this year to be down by 20%. Much of his business is aviation-related, both public and privately owned airfields, and Riss believes the presidential election makes people “sit on their hands.” In business for 30 years, he notes that every 8th year is a tough year. “This is that 8th year,” he says. A pipe fitter will be hired in the 1st Quarter.
Janine Haymond, president, Enviro-Vac Services (Troy, MI), points to alternative fuels as “the only thing keeping us going.” Haymond calls the Michigan economy very unstable and is forecasting level sales growth. “Customers don’t really care about quality,” she says. “They’d rather have a $20 nozzle instead of an $80 nozzle. They’re all looking out for their bottom line.” She plans to diversify into aboveground tanks, in addition to waste hauling and supplying petroleum equipment.
Don Torreyson, president, Mid-State Petroleum Equipment (Hallsville, MO), expects sales to remain level this year, and he too is branching out into car wash sales and service. Mid-State will enlarge its warehouse and purchase a new building for its Camdenton branch in the 1st Quarter.
“Michigan is going through a tough time,” says Mid-Michigan Station Services (Chesaning, MI) Vice President Mike LaFehr. Nevertheless, LaFehr forecasts a small increase of 3%. He will make sure the current customer base is satisfied with the value they’re receiving from the company. LaFehr does what the customer needs, including changing their invoicing to accommodate a customer request. “We make sure we’re doing what they need so we’re the ones they call.”
Irv Sorge, manager at Kay Tank & Equipment (Jamesville, IA), deals predominantly in agricultural markets, particularly fertilizer and fuel tank storage. “Sales have increased substantially in the last two years, but 2008 will be steady. Sorge notes that farmers are putting in larger fuel and fertilizer tanks to control costs. “Now they can buy in volume based on price.”
In Blue Grass, Iowa, Roger Clark, president, Central Petroleum Equipment, hasn’t seen any big expansions in his market. It’s been level for the last two or three years.” He is going after the alternative fuel market and expects this business to increase by about 25%. Clark is investing 20,000 to 30,000 dollars in training his staff, many of whom have been with the company over 20 years.
A lot of major oils have pulled out of the area, changing the market for Robert Strassburg, CEO, B & D Pump (Duluth, MN). “Now there are many small, independent stations and we’re trying to branch out.” Strassburg sees customers doing more of their own maintenance. “They want to do all the small stuff to save money; buying parts from us and then fixing it themselves. They just see the bottom dollar. They think they can do their own service, but not always.” He plans to add a service tech sometime this year.
Jobbers are the major market for Midwest Pump & Equipment (Lincoln, NE), says President Dennis Walls, “and they are making major changes in their stations and canopies.” The company does a lot of commercial work and Walls forecasts sales to remain level. He will invest in training two employees brought on at the end of 2007, focusing especially on new equipment technology.
Doug Flesner, general manager, Grimm’s Pump & Industrial Supply (Rapid City, SD), expects a 5% increase. “With BP pulling out, there will be a lot of rebranding and upgrading, and customers now want smart merchandising on the display screens. He’s hiring one or two petroleum techs and will update his own equipment by adding three-quarter-ton pickups with utility boxes. He typically gets 200,000 miles on them, and some techs run 50,000 miles a year.
“In larger metropolitan areas, there is a trend toward upgrading, remodeling and rebuilding existing sites, rather than ground-up building, and if this year’s sales could be what last year’s were, it would be acceptable,” says Bill Gorton, president, Petroleum Construction Service (West Allis, WI). Gorton wants to make his terms tighter, and he plans to increase COD service, currently about one-third of the calls. “We may start taking MasterCard because it takes too much time to chase customers for a $400 service call.”
With installation work expected to be down by 50% and service work steady, Mike Sprague, president of Dicks Petroleum Company (Tripoli, IA), expects overall growth to be down by as much as 25%. He explains, “Two large companies are doing all the install work, and no one else has a chance to bid. Co-op business is down because of mergers, and regulations are pushing small mom and pops out of business.” He is relocating his truck shop to a smaller area, downsizing from three bays to one. “The machine shop business is doing very well, though, and the service department is seeing activity in the northeastern part of the state where many of the gas stations are insured by PMMC, who does an inspection. If the work isn’t done, they get cancelled.”
John Franklin, president, Allied Petroleum Equipment (Indianapolis, IN), does a lot of work with terminals, leasing companies and school systems, many of which are bringing their fueling facilities up to date with current regulations and/or building new maintenance facilities for their buses. This will add up to a 12-14% increase in sales. Franklin may add environmental monitoring equipment and automated fuel systems. Like others, finding qualified people is a challenge, and he’s relying on word of mouth and customer referrals.
A major customer has kept Midwest Liquid Systems (Eldora, IA) busy with its acquisition activity and thus, remodeling work. President Harold Meyer is looking at other services to expand the business, including doing more with compliance. He’s also thinking hard about the future and two years ago began a succession plan. “You have to do what’s best for the company. It’s time to put younger blood in and re-energize.” Meyer plans to name a new president this winter.
“As larger customers continue to acquire smaller ones,” says Jerry Tigges, president, Oil Equipment Company (Madison, WI), “our sales will be up 3-5% due to remodeling activity.” His company is expanding, and he added new software to help manage the business. The Green Bay branch recently moved into a new facility, and Milwaukee keeps growing and Tigges estimates that it will move into a larger facility within the next year or two. “We are now triple the square footage of what we were seven years ago,” says Tigges. “Our suppliers require us to stock more and more.”
INTERNATIONAL Tops Chart
There is a lot of activity at PEI’s International distributor companies. 88% expect sales to increase at an average of 17%. The overall change from 2007 numbers is +14%, much better than the United States’ +4%. South America is hot, and the Middle East is reeling from turmoil. Global contracts, new markets and new products are fueling growth around the world.
At McMurray Industrial Supply (San Juan, Puerto Rico), sales will increase by 60%, according to General Manager Oscar Navarro, who attributes this to new management. Navarro will be adding personnel during the 1st Quarter and moving into a larger facility, doubling current space. New repair services and products will be available. “Our number one challenge in 2008 is to defeat the competition and grow without being affected by the shifting financial situation of the world market. We will offer competitive pricing and 100% service to our customers.”
Reuben M. Valerio, chairman/CEO of AC Corporation (Taguig, Philippines), also expects his company’s sales to increase 50-60%. Along with an increasing number of vehicles and economic growth, Valerio points to “a dramatic growth of independents as well as a move by major oils to replace older equipment.” He will be purchasing a 30,000 sq. ft. facility in a gated industrial zone, to be occupied in September by the company’s IT group. New hires in the 1st Quarter include software and hardware engineers and two senior positions in finance and administration. The flip side to this growth is acknowledged by Valerio: “Our phenomenal growth in 2007 left our bank facilities way behind, and as we begin 2008, finance is our number one challenge. Either we accept equity, venture capital, or increase our borrowings to fund our activities.”
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In Panama, James R. Hattrick, general manager, Artimex (Panama City, Panama), also expects sales to increase by 5% due to an expanding market made up of private fueling operations. He will add one salesperson to handle the coverage and purchase a new vehicle in the 1st Quarter.
Antonio Loyola Gonzales, general manager, Importaciones & Tecnologias (Lima, Peru), indicates that sales will increase by 15% due to “economic movement and our raid into new markets, particularly mining and industrial.” New facilities will be purchased during 1st Quarter, increasing the size of his operation by 40%. The expansion will be completed in the 2nd Quarter and will provide the ability to distribute new measuring instruments.
A 12% increase will be fueled by new projects, according to Camilo Klein, general manager, Ekip De Colombia (Bogota, Colombia). In 1st Quarter, Klein will add centrifugal pumps made in Brazil to his line. “Training salespeople and advertising the new product to current and potential customers will be a primary focus.”
Due to the addition of new product lines and an increase in the export business in Central America, sales are expected to be up 15% at Benedetti Zelaya (San Salvador, El Salvador), according to President Rodrigo Benedetti. In March, he will introduce products to complement the service station equipment line. “Through a well-thought-out combination of outstanding service to our customers, we will earn market share without sacrificing profit margin.” Benedetti believes that alternative fuels will take longer to arrive to his market.
Walter Dura, president, BILPA (Montevideo, Uruguay), expects sales to be similar to last year. “We don’t have oil company investment in our distribution area.” During the 1st and 2nd Quarters, Dura will invest in vehicles and equipment for pump and dispenser service. “We must give very good service, have enough stock and warranty to oil companies.” With activity at customer sites slowing down, FranÇois Domingue, president, Dorion Equipments–Mobile Group (Laval, QC, Canada), is looking at a projected decrease in sales of 15%. By 3rd Quarter, the company will have moved into a new office, increasing facility size by 30%. “Our challenge is to keep new employees and train them for the future.”
Last year, major customers of Petroservice (Saint John, NB, Canada) delayed ordering dispensers to ensure that equipment purchased would be EMB-compliant and meet more demanding credit/debit processing security requirements. Bernie LeBlanc, general manager, expects sales to increase 5-7% this year and he plans two major investments. The first is the annual upgrade of a quarter of the service fleet. The second will take place during the first half of the year. An enterprise software system will be purchased to integrate dispatch, scheduling, inventory management, billing, database management, GPS tracking and eventually paperless work-order processing. Says LeBlanc, “Once this software is in place by mid-2008, we expect customers to benefit from more timely and accurate billing and equipment information.” Other benefits include flagging repeat calls and better identification of technician qualifications in order to dispatch the most qualified technician to resolve a specific customer issue.
Gerry McKay, president, Keller Equipment Supply (Calgary, AB, Canada), expects a slight increase of 3% due to a price increase. McKay’s number one challenge is making sure manufacturers are committed to distributor success. “I will continue to prove to manufacturers that we are the best choice for distribution of their products.”
Tiina McCombie, vice president of marketing, National Energy Equipment (Mississauga, ON, Canada), expects company sales to increase by 6% because of rising costs and a gain in market share. NEE recently completed a pilot study of the use of bar coding at one of its locations and will phase it in at all branches throughout the year in an effort to improve inventory management and reduce errors.
In South Africa, Pumptec (Sebenza, Edenvale, South Africa) Director Richard Bullock forecasts an increase of 15% due to new colliery mining developments and the replacement of aging equipment. In 1st Quarter, Bullock is adding new workshop management software. “End-users are more conscious of automation, and delivery of products is becoming more important. The challenge is meeting these requirements in the most cost-efficient way.” At the end of 2007, Pumptec introduced an electronic meter head that Bullock describes as “cheaper than our opposition’s.”
Market growth and modernization, specifically service set up by a call center, will spur an increase of 10% at Al Hamad Trading (Doha, Qatar), according to General Manager Manoj Megchiani. In the 1st Quarter, the company will expand its facility by 100 square meters (1,076 sq. ft.) and add marina fueling equipment to its product mix. Manoj expects that the call center will improve after-sale service.
Ata Altun, president, Tekser (Istanbul, Turkey), expects sales growth to range from level to as high as 10%. “Our business is affected not only by the economy, but by the elections. The year ahead does not seem very promising, considering the latest developments regarding the terrorist attacks in Turkey.” For Altun, success comes from superior quality service, and he will be offering the latest technology to customers, periodically updating service software to achieve that superior quality service. “Our challenge is the need to always keep a large inventory, and wherever possible, we get forecasts from customers as to their needs.”
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Increased investment spending by oil companies will spur a 20% growth in sales for Interpet Petrol (Istanbul, Turkey), according to Bekir Aluc, general manager. Aluc says, “We expect a safer environment for investments in 2008 now that last year’s problems are behind us. We are constantly working on our R&D and looking for ways to increase our portfolio of products without losing our concentration on our core competencies. By the addition of new manufacturing from R&D and new distributorships from other manufacturers, we’ll be expanding our playground and thus hopefully our sales figures.” Aluc is planning to build a new facility next to the current one, to be completed by the 2nd Quarter. Aluc says the biggest challenge he is facing is terrorist activity in the country and the unstable movements in the value of the dollar. “Due to the process of joining EU, we are expecting to see oil companies invest more on the equipment side of their business to be able to meet the EN norms. This includes following standards in underground piping equipment.”
SHM Industries Co. (Cairo, Egypt) will see sales growth of 25% if all goes according to plan, says Fathy Abdel Maksoud Ibraheem, engineer. The company will expand its production area in 1st Quarter, doubling in size. Additional employees will be needed. “Our number one challenge,” says Ibraheem, “is to open new markets, while maintaining quality and fulfilling customers’ requirements.”
In Australia, Nigel Howlett, CEO, Shipman King (West Heidelberg, Victoria, Australia), indicates sales will increase anywhere from 1-5%. He is diversifying from service stations into “markets wherever fuel is dispensed. End-users need more documentation, monitoring, inspection and testing of their fuel systems.”
Training has been a focus at Metric Australia (Keysborough, Victoria, Australia) that will pay off with a 12% sales increase due to the work of an improved sales team, as well as changes in legislation. Steve Crispin Brown, national business development manager, says, “Customers want better, faster service and equipment at a lower cost.” In 1st Quarter, Metric will expand its facility by 10%, increasing the size of its pipe and tank installation division. Brown hopes that these improved conditions, along with increased and improved training, will help staff retention.
