Finally, an answer to E85’s chicken-and-egg problem

The more people I talk to about fuel choice, the clearer the picture becomes as to why we still lack widely available alternatives. Despite the fact that there are more than 17 million flex-fuel vehicles capable of running on any mixture of gasoline and ethanol, only 2 percent of gas stations carry high ethanol blends like E85. This is partially because half of gas stations are franchises of Big Oil, which has a vested, financial interest in ethanol doing poorly. But another significant problem is that gas stations often don’t have the marketing resources available to educate their consumers about ethanol’s economic and environmental benefits, so it doesn’t make monetary sense for them to carry it at their locations. And if people don’t know about ethanol or don’t have any gas stations near them that carry it, they’re not going to use it — even if they have a flex-fuel vehicle. It’s a classic chicken-and-egg argument.

However, in Michigan, the Yellow Hose program, established by ethanol producer Carbon Green Bioenergy, is using a novel approach to bridge this gap and bring fuel choice to Michiganders — 20 of whom drive flex-fuel vehicles. The program, headed by the CEO of Carbon Green, Mitch Miller, takes a two-pronged approach.

First, the company ensures that E85 is priced competitively with gasoline at Yellow Hose stations.

“Retailers are able to purchase E85 from us 80 cents under rack gasoline, and in return they guarantee taking 70 cents to the retail price. So whatever they price their gasoline at, they then price E85 70 cents less per gallon,” said Miller, “It’s a nice consistent spread that the consumer can count on.”

Then, by using a combination of targeted digital ads, directional billboards, and upgraded price signs at gas stations, the Yellow Hose program ensures that consumers know what E85 is, where to get it, and that it will save them money on fuel costs.

So far the Yellow Hose program has seen great success: enrolling 35 retailers, stabilizing the price of E85 in Michigan, and creating a consistent dollars per gallon as well as a dollars per mile advantage over gasoline.

“We’re moving 500,000 gallons a month through our [retailer] E85 network,” Miller said. “That includes Yellow Hose stations and other E85 locations that just purchase spot from us. So 6 million gallons annually is where were at right now, and increasing.”

But Yellow Hose isn’t just benefitting Carbon Green and Michigan drivers, it’s been lucrative for retailers as well.

Take J&H Family Stores, for example. A local gas station chain in West Michigan, J&H has supplied fuel to Michiganders since 1969. A few years back, they began selling E85 at some of their stations, but saw limited success.

Then Yellow Hose came along.

“We put E85 and ethanol products in initially, I think, because of our pro-agricultural stance, and y’know what, to be honest with you, we had somewhat limited success,” President of J&H, Craig Hoppen explained, “Yellow Hose promotions is really what drove our ethanol business to a point where we could say, ‘Hey, y’know there’s a return on our investment in E85 and ethanol products, using the Yellow Hose formula.’ In other words, we could increase volume enough that it made it really more worthwhile.”

And J&H is just one of the constantly growing list of retailers across Michigan that have discovered providing fuel choice to consumers by investing in ethanol infrastructure and enrolling in Yellow Hose is not just a moral choice, it’s a financial one.

Moving forward, it’ll be interesting to see if ethanol producers in other states adopt Yellow Hose’s strategy of working with retailers to move more of their product and provide fuel choice to Americans. Judging by Yellow Hose’s success, it’s clear they’ll be missing out on a massive opportunity if they don’t.
Related posts:

• Trailblazing Kansas company fights for fuel choice

• Pearson’s California growth proves there’s demand for E85

• Petro Serve USA’s secret to success: giving customers choice

• Gas stations are adding ethanol, because it’s good for business