There Is an E15 Consumer Disconnect

by Susanna Retka-Schill (Ethanol Producer Magazine) Sheetz, Thortons executives give careful thought to strategically offering the new fuel. -- Almost weekly, another announcement is made about a retail location offering E15. The rollouts, large and small, are indicators E15 is gaining steam and, in late July, HWRT Oil Co. announced it will offer pre-blended E15 at four of its terminals in mid-September, with plans to add 17 more terminals in seven states. Getting E15 available at the terminal level is a big step. While these are signs E15 momentum is building, the story told by executives at two major convenience chains illustrates the challenge ahead still is significant. For one, E15 has a brand problem, one that’s shared by E10—consumers don’t know what it is.

A recent poll of 1,500 drivers conducted by Reuters and Ipsos confirms the retailers’ observations. More than half of respondents said they were unfamiliar with ethanol and a similar number said they pay little or no attention to whether the gasoline they bought contains ethanol. Both the survey results and interviews with motorists show cost and convenience trump everything, with 93 percent of those surveyed saying price influenced their decisions and 80 percent said location of a gas station was a priority.

The approach to overcoming the disconnect varies. Thortons, which is rolling out E15 in its Chicago market, has trademarked its chosen name. “We call it Unleaded 15, instead of E15, because it seems easier for the consumer to understand,” Gallic (Jeff Gallic, vice president of fuels for Thortons) says.

Lorenz (Mike Lorenz, executive vice president of petroleum supply for Sheetz) points to Minnesota retailers who call it Regular 88 or Regular Plus. Sheetz decided to stick with E15 when it started its rollout in North Carolina. “If you call it Regular 88, it really doesn’t tell you what it is. It really doesn’t tell you it’s got 5 percent more ethanol,” Lorenz says. “There was a concern that we want to be upfront and honest with people, and not be deceptive. That’s why we went with E15.” Having a consistent brand nationwide would be helpful in gaining consumer acceptance in the future, he adds, as the fuel offering spreads.

Thortons got into E85 early, first offering it in 2005 and building up to 90 retail stations, along with E30 at nine locations in Indiana. It operates 181 C-stores in six states: Illinois, Kentucky, Indiana, Ohio, Tennessee and Florida.

Due to air quality issues, the U.S. EPA requires low-volatility RFG be sold in the Chicago area, making it possible to offer E15 year-round to all vehicles 2001 and newer.

By late July, Thortons had nine stations selling Unleaded 15, with the expectation that all 44 will be done by early 2017. “We’re really pleased with the results so far,” Gallic says. “The volume we’re selling is higher than we expected. It varies, but we’re satisfied with the amount of unleaded 15 we’re selling. We’re discounting it 3 cents a gallon, compared to unleaded.”

There are three categories of stores. Newer stores already have E85 tanks in the ground and many have the piping in place, so changing out the dispensers takes about a week, Gallic reports. Some locations have the tanks, but need additional piping along with new dispensers, taking about two weeks. The big disruption comes when a new tank needs to be buried, often requiring the property to be closed. “You lose revenue every day you’re closed, which adds to the cost of project. The grant money is available for the equipment and installation, but the grant does not include reimbursement for revenue lost while your location is shut down,” Gallic says. “Our expense is fairly substantial for this project.” Once all stores are complete, the company will be rolling out a promotional campaign.

With the price sensitivity of consumers, Sheetz sees the 7 to 10 cent discount it offers for E15 a great way to attract customers.

“E15 is a great product. It’s a good value proposition for the customer, we can offer it more cheaply than 87, it’s higher octane,” Lorenz says. “And then you have the story behind ethanol: it’s cleaner burning, so it’s good for the environment; it’s U.S. made, so it’s American jobs; and you’ve got energy independence, reducing our dependency on foreign oil.” With such a great story, Lorenz is pondering the best way to promote it. “There are people buying it. But if you look at the value, there should be more people buying it. That’s our goal, but how do we get there? It’s not as simple as it seems.”

Consumer education is important, but he points out you can’t force someone to get educated. It’s well-known that the consumer is sensitive to gas pricing, he adds. “They should be all over this. It’s one of those deals where it should sell itself, but it doesn’t.” He has given a lot of thought to crafting the right message. “It’s not that people are anticorn or ag or ethanol, necessarily. Our research has shown 90 percent of the people are oblivious, while 5 percent are pro-ethanol and 5 percent are anti-ethanol,” he says. “The majority of the people don’t have a reason to want to know. What’s going to convince them?” READ MORE