Propel became a major E85 player by understanding its customers

Rob Elam sounds like the Billy Beane of the ethanol retail game. But instead of pioneering analytics in baseball for the “Moneyball” Oakland Athletics, he pores over data to keep giving Propel Fuels customers what they want.

And what they want is a good product to put into their flex-fuel vehicles. One that’s better for air quality and the environment than gasoline. And this is the important part: It has to be cheaper.

“We know what our discount to gasoline needs to be to move fuel at the volumes that we like to see. And we work really hard to get that,” Elam says. “I can tell you that 92 percent of our customers say that they get better value with Propel than anyone else, so clearly that’s the major driver.”

pump2Elam, the founder and CEO of Sacramento-based Propel, says the company is the largest E85 retailer in California, selling about 70 percent of that fuel blend in the state. Propel owns about 50 E85 dispensers that deliver an average of about 25,000 gallons each per month. Elam says the national average is about 4,000 gallons per dispenser per month.

Propel analyzes its customer base closely to figure out where flex-fuel vehicle drivers are; where to open new pumps; how to price the product; and what decisions to make as far as wholesale purchasing.

“We’re in possession of the data; we’re in possession of the facts. These models that people create that are trying to anticipate the business, they’re simply that: They’re just models. They don’t have actuals; they’re not based on facts. So our business is very data-driven, from our purchasing and supply to our approach to marketing to our customers, to retaining our customers and to finance. And in order to do that successfully, you’ve got to look at the truth; you have to look at the data. And much of what you’re referring to is just bad information, and people have made business decisions based on this bad information, and they’ve suffered because they have not converted their customers base as they expected.”

Propel buys much of its ethanol from Pacific Ethanol, which has plants in Stockton and Madera, keeping the supply chain local and costs down. Most often Propel will install a new underground storage tank for E85 or renewable diesel, less frequently using an existing, under-utilized tank. The signage, the equipment are all Propel’s, and so is the risk.

“We bring value to an operator’s site … no upfront money from them. So think about us as like a cash machine or a car wash or something else they’re familiar with. If you’re an independent gas-station owner, you might have a major brand’s fuel supply, but we will monetize extra space on your site and bring you a lot of new customers who are gonna visit your c-store [convenience store] and bring a lot of revenue to your c-store.”

Elam acknowledges that the climate for selling E85 nationally is difficult, with gasoline prices low. But he sees the tide turning, largely because of the movement to reduce emissions from transportation. Oh, and because of antipathy toward the oil companies.

“Propel’s brand loyalty from our customer base is 89 percent. As a whole, Big Oil’s brand loyalty is 8,” Elam said. “They use the product, they have to, but they HATE Big Oil.”

“People are motivated by their own decisions,” he added. “As I said, our survey work has given us insights into the behavioral drivers, why they’re choosing our fuels. Value is clearly one of them. The fact that it’s better for the air and the environment is one of them. And performance is one of them.”

ethanol

A gallery of Propel customers. Photos courtesy of PropelFuels.com.

To any retailers or ethanol suppliers considering offering E85 as part of their fuels program, Elam encourages them to think like a certain ubiquitous chain of coffee shops.

“If you look at Starbucks and say, ‘Wow they’re wildly successful,’ they didn’t just take these out-of-the-way, crappy locations that had cheap rent and build one of the most successful consumer brands. They went to the places where they knew their customer demographic was located and built a store that gave an experience their customers wanted to have.

“So anybody who’s coming into this business should expect it to be exactly what it is, which is the challenge of introducing a new product. And you cannot come in loaded with assumptions, you need to listen to your audience and understand what the customers want, and give them that.

“At the end of the day that’s the secret sauce: The secret sauce is people want this product.”

The entrepreneurial Starbucks comparison isn’t accidental: Elam started Propel in his Seattle garage in 2004, installing three biodiesel pumps in the city and expanding from there. Elam is a fifth-generation Californian originally from Davis, but he has a strong connection to the Pacific Northwest, spending time in Seattle and Portland. He and his family love the outdoors, and he devotes much energy to salmon and forest protection.

Selling alternative fuels isn’t just business for him.

“You might as well have passion for your work. It’s kind of boring to work, spend your life, all that time, working and not be very interested in it.”

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