biofuels marker opportunities...the association for convenience & fuel retailing what matters to...

The Association for Convenience & Fuel Retailing

Biofuels Market Opportunities

John Eichberger

NACS Vice President Government Relations

Fuels Institute Executive Director


Influencing Consumers Follow the money


Consumers Focused on $

January 2014 Consumer Survey:

• 2/3 of consumers shop by price

• 2/3 will go out of their way to save 5 cpg

To save 5 cpg, consumers would… Strongly

Agree Somewhat

Agree Potential

Defections

Pay with debit card 49% 29% 78%

Pay with cash 44% 32% 76%

Turn left across busy street 33% 34% 67%

Drive 5 minutes out of the way 26% 40% 66%

Drive 10 minutes out of the way 14% 25% 39%

Source: NACS, Penn Schoen Berland


Consumers Interests What do they tell us?

(Fuels Institute Survey April 2014)


What Matters to Car Buyers

• 48% of consumers likely to buy car in 3 years

0% 20% 40% 60% 80% 100%

Fuel Economy

Cost

Safety

Fuel/Engine Type

Handling

Performance (HP)

Passenger Capacity

Source: Fuels Institute


E15 Findings

• 78% of respondents drive 2001 or newer vehicle

• 20% somewhat/very familiar with E15

• 25% chose correct definition of E15–

– 60% “don’t know”

• 8% said E15 was allowed for their vehicle –

– 68% answered “don’t know/unsure”

• Of those with 2001+ vehicles –

– 48% would consider E15 at a price = gasoline

– Convert 28% of rest at 5 cpg discount



E85 Findings

• 6% own FFVs, 21% don’t know

• 27% somewhat/very familiar with E85

• Of those who have FFVs –

– 43% have purchased E85 • 58% buy E85 more often than gasoline

– 59% said E85 was more expensive or same price as gasoline

– 61% who purchase E85 more often are “very satisfied”

– 73% more likely to buy E85 if more available in market



How Do You Increase E85 Sales?

Availability & Price


Flex Fuel Vehicles and E85

In 2012, EIA reports 153 million gallons of E85 consumed by 11.4 million vehicles. This averages to 13.4 gallons per vehicle per year – less than one fill-up.


0%

2%

4%

6%

8%

10%

12%

0

5

10

15

20

25

30

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

FFV as %

of A

ll LDV

s

Mill

ion

Veh

icle

s

FFV Registration Forecast

EIA FI EIA FFV % FI FFV %


E85 Potential Market

At 5% refuel rate = 4x EIA reported 2014 volume

0

5000

10000

15000

20000

25000

30000

35000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Mill

ion

Gal

lon

s p

er Y

ear

Sales if FFVs Fueled with E85 X% of the Time

100% 75% 50% 25% 10% 5% 1%



E85 Stations

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2007 2008 2009 2010 2011 2012 2013 2014

E85 Station Count

AFDC Growth Energy RFA



% Stations Selling E85

0.807%

1.055%

1.221%

1.444%

1.585% 1.614% 1.710%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2007 2008 2009 2010 2011 2012 2013



E85 – FFV Density

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

MN IL MI IA IN WI OH MO TX CA National FFV

National LDV

Ve

hic

les

pe

r St

atio

n

Vehicle-Station Density



% Price Differential

0%

5%

10%

15%

20%

25%

0

1000

2000

3000

4000

5000

6000

7000

13-Jan 13-Feb 13-Mar 13-Apr 13-May 13-Jun 13-Jul 13-Aug 13-Sep 13-Oct 13-Nov 13-Dec

E85

Disco

un

t vs Regu

lar E85

Gal

lon

s p

er S

tati

on

Monthly Average % vs Volume

% Delta Average Per Station

Source: Minnesota Dept of Commerce


$ Price Differential

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

0

1000

2000

3000

4000

5000

6000

7000

13-Jan 13-Feb 13-Mar 13-Apr 13-May 13-Jun 13-Jul 13-Aug 13-Sep 13-Oct 13-Nov 13-Dec

E85

Disco

un

t vs Regu

lar E85

Gal

lon

s p

er S

tati

on

Monthly Average $ vs Volume

$ Delta Average Per Station

Source: Minnesota Dept of Commerce


E85 Profitability

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

Gro

ss M

argi

n p

er G

allo

n

E85 and Regular Retail Margins

E85 Margins - $PG Regular Margins - $PG

Source: NACS-CSX


Conclusion

• Retailers have hurdles to overcome

– Only consumer demand will prompt action

• Must overcome negative consumer education campaign on E15 – Fear is hard to remove

• E85 price differential may not need to compensate for mpg deficit

• Stations should strategically locate near FFVs

• Consumer demand for FFVs/E85 essential to keep FFV production alive after credit expires


Thank you.

John Eichberger NACS – [email protected]

Fuels Institute – [email protected]

biofuels marker opportunities...the association for convenience & fuel retailing what matters to...

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