Strength And Power

At the end of 2008, PEI distributor members bravely looked at the year ahead and, without wincing, talked about their sales expectations for 2009. Overall, 36% of U.S. distributors expect their company's sales to increase; while 39% say sales will be flat. The remaining 27% expect sales will be down. In the rest of the world, 100% of respondents expect their sales to be up this year. The economy brings its challenges, and PEI members are ready to respond.

Secondary Containment Driving SOUTHWEST Growth
Half of the companies in the Southwestern region of the United States expect sales to be down, at an average rate of 11.7%. For the 17% expecting an increase, that average increase of 15% is the highest in the United States and is being driven by secondary containment regulations in Texas and region-wide remodeling for the major players.

For Mid-South Petroleum and Refrigeration Co. (Tulsa, OK), 2009 promises to be a big year. “We have more new installs scheduled for the first part of the year than we've ever had,” says President Chris Haggard, who predicts a 10-20% increase in sales. “A lot of construction is taking place for the major players in the industry. We're not seeing much out of the smaller independents, but the big guys have the financial strength to build and remodel.” PCI compliance will also drum up substantial business. “With equipment retrofits, dispenser sales and installations, PCI compliance will increase sales, no question.” Haggard may add three to five technicians and is investing in technical training during the 1st Quarter.

Susan Rollins, vice president of Excell Fueling Systems (Austin, TX), predicts a flat year as retail construction has slowed. “Without credit and adequate funding, many customers can't afford to do new construction.” To help customers obtain funding, Excell has teamed with several companies that specialize in financing for the retail and commercial petroleum equipment markets.

According to Mike Grohall, vice president of Grohall Inc. (Tucson, AZ), a sharp decline in the mining and construction industries will decrease sales by 5%. “Our business is mainly in mining and construction, and several mines in southern Arizona have shut down.” Grohall will explore diversifying his markets and will update his information systems. “People want instant gratification, and I want to expand my database to the point where I can send information directly to a customer while we're both on the phone talking about it.”

Susan Bush, president, Jay Ball Equipment (Dallas, TX), expects sales to be down by 15-20%, a drop she attributes to the current economy. “People are leery about buying and are putting off equipment repairs.” Bush hopes to counter this decline in service work by stocking more inventory. “We can't sell products we don't have, and hopefully, more inventory will translate into more sales.”

“New construction and large-volume equipment purchases will decline significantly,” says President Mark Barron of Petroleum Solutions (McAllen, TX), who forecasts a 10-15% decrease in sales. “If there's one bright spot, it's service. Since customers won't be making big purchases, they'll require more service work to maintain their current equipment.” Barron will continue to invest in employee education. “Training is not something I want to cut back on. It's important to keep techs up to speed on new equipment and help the sales staff find new opportunities.” Barron is looking for opportunities on the industrial side, particularly with fluid movement and industrial lube equipment.

“We are working hard to get down payments on large purchases. Some customers still don't want to do it, and we have to get better at collections.” Ann Thomas, Petroleum Marketing Equipment “We devote much effort to customer service, and we want people to know that we care about their business, because their success is directly tied to our success.” Tom Dion, Wildco Petroleum Equipment “There is no need to be a hero in a troubled economy. Our intention is to coast along with very few exposed extremities to avoid being bitten or suffer from frostbite.” Reuben M. Valerio AC Corporation

“Maintaining profit margin and volume in a troubled market will be a challenge,” says Jerry Schmitz, vice president of Petroleum Marketers Equipment Co. (Oklahoma City, OK). Schmitz foresees a level year, and expects the lack of credit availability to be a problem for customers. The implementation of new software will help control costs. “Strong internal controls and new software will help to streamline operations, contain costs and make our employees' jobs more efficient, thereby limiting new hires.”

SOUTH Forecasts Highest Rate of Growth
Regulations requiring secondary containment will drive growth in the Southern region, and 63% of companies expect sales to increase. This area has the highest overall projected average rate of growth in the United States, 3.3%. Distributors are exploring new markets and adding new product lines.

Upgrades, installation and testing work will create a 5% sales increase for Arkansas Testing Services (Austin, AR), predicts President Jim Cheevers. “Most of our work right now is replacing old systems and installing new equipment.” However, collections may prove to be a significant hurdle, offset in part by requesting some customers pay in advance. In the 2^nd Quarter, Cheevers plans to invest $100,000 in two new service trucks to more efficiently meet customers' needs.

At Slater Corporation (Port Everglades, FL), a 10-12% increase in sales will come courtesy of Florida's compliance deadline. However, according to President Randy Slater, with the surge in business comes increased competition. “Whenever there's a new state guideline or code change, companies from northern states come into Florida and try to take that work.” To better support its loyal customer base, the company is adding two or three service techs and pipe fitters in the 1^st Quarter and will invest $15,000 in marketing efforts.

Michael Clark, president of Petroleum Technicians (Deland, FL), attributes an expected 15-20% increase to Florida's secondary containment regulations. He points out, though, that as his company does tank upgrades at an average of three locations a month, it's getting more difficult to get the equipment to do the job. “Tanks, sumps and piping are getting harder to come by. Right now, it takes 12-14 weeks to get a tank built.”

The 1^st Quarter investment of an additional $200,000 in inventory and three additional outside salespeople will deliver a 10% jump in business for his sales-only company, says Mike Marquez, president of Service Equipment Co. (New Orleans, LA). Like others, Marquez expects collections to be an area that will require extra attention. “We have to pay attention to the companies we do business with, make sure the invoices are sent out correctly, and then collect money with our terms. If those things don't happen, red flags go up.”

Expansion into new markets, including chemical and petrochemical, is the goal for Ralph Byars, president of B & E Equipment (Columbus, MS). Though Byars expects a 20% drop in sales, the company's focus on relationships remains a priority. “We work hard to maintain good relationships, and hopefully we can build new relationships with new companies in 2009.” By doing more specialty work on aviation projects, the company is able to offset decreased demand in a region hard hit by job losses. With more competitors bidding on the same projects, Byars says, “we will turn over every rock and then hunker down and hold on.”

While construction has slowed, inside sales and service are up at Brown Equipment Co. (Macon, GA), and Vice President Chris Brown anticipates a 5-10% increase in sales. Finding qualified service technicians continues to be a challenge, and Brown wants to hire two. He will invest $55,000 in new service trucks, reaping the benefits of better gas mileage and fewer repairs. To address the challenge presented by single-truck operators charging lower per-hour rates, Brown offers a well-stocked inventory to provide his customers with immediate fixes when they need them.

Summit Service and Sales (Birmingham, AL) President Wayne Wade forecasts a flat year as his company focuses on three segments: tank truck equipment and c-store and commercial fueling. The company will introduce new products for blended fuels, and may begin to offer tank cleaning services, starting in the 1^st Quarter. Wade adds, “We also will pay close attention to the needs of the New American single-store operator.”

NORTHEAST Companies Aim to Please with Service
Most companies in the Northeast show neither growth nor decline. For 87% of distributors, sales will remain flat. A big reason for this is the lack of upgrades at independently owned stations. An average growth of 10% across the region will come from diverse offerings and entrance into new markets. Many companies are using this downturn to train their employees to be the best at what they do.

“I will improve efficiencies, lessen paperwork and eliminate anything that's dragging us down.” Mark Barron Petroleum Solutions

“It's important that our employees are not one-dimensional,” says Scott Diltz, president of Diltz Equipment Sales (Bloomsburg, PA). “They should be able to move from one area of the business to another and help in both service and construction.” To achieve this goal, Diltz will devote $30,000 to employee training, particularly on dispenser units. With construction work slowing down, dispenser sales and service will maintain sales at a level pace. Diltz acknowledges, “We are preaching technology and talking to customers about upgrades.”

“A number of factors go into a customer's purchasing decision: product availability, product knowledge and price,” says Tom Dion, president of Wildco Petroleum Equipment (Bloomfield, CT), who expects that a company-wide focus on customer service will help maintain sales similar to last year. “We want to service our customers better than our competition, so when they do have a choice and there's an opportunity, we want to be the ones front and center. We follow up after each sale and let customers know we care about their business.” LED lighting will be an opportunity for the company, as energy efficiency becomes an increasingly important issue for customers. In the 2^nd Quarter, Dion will invest $70,000 in a 24-foot stake body delivery truck to speed up delivery time.

Diversifying products and services and moving into new markets is a possibility for General Oil Equipment Co. (Amherst, NY). “Selling petroleum equipment is only going to go so far,” says President Joseph Huber, who cites the industrial market as a potential opportunity for growth. Based on customer demand, Huber forecasts a flat year. “There is not much new construction or installation work going on. For our customers, everything is set in place.”

In New Jersey, changes in the service station landscape have had an effect on Service Station Service (Mickleton, NJ). “A wave of major oils have been selling off to jobbers,” says President Charlie Gillen, “and the jobbers are not buying new equipment. If we depended solely on the service station margin, we'd be hurting.” Contracts in the municipal, commercial and industrial markets will drive an increase of 10%, and Gillen expects a rise in service work to contribute to the growth. “There's so much rebuilt equipment being sold right now. That equipment breaks down quickly and will require repairs.” Gillen is no longer billing many of his service accounts. Payment is up front with credit cards or on the job. He explains, “We've always resisted that, but no more.”

A customer base in the propane market gives Trask Petroleum Equipment (Providence, RI) a boost in tough economic times. According to President Paul Trask, overall sales are expected to remain level. Collections are the big challenge, and Trask will tell customers to use their credit cards.

Kevin McNeil, president, Fairfield Truck & Tank Center (Baltimore, MD), has a strategy for 2009: “We will continue to offer the best service and keep our customers happy.” McNeil forecasts level sales, and plans to invest $600,000 in new trucks and trailers during the second half of the year in order to improve efficiency. With a lot of work in the Baltimore ports, Fairfield employees are required by the Department of Homeland Security to carry a Transportation Worker Identification Credential. Getting this TWIC card is a long and arduous process, a hassle that McNeil calls “a barrier to employment.”

Expanding sales into Canada in the 1^st Quarter will help Lancaster Tanks & Steel Products (Buffalo, NY) achieve the goal of increased market share. President Jerry Sheldon expresses concern over the rising price of steel. “The sale of small storage tanks is being hurt by the incremental steel price increases, and customers are holding off until they see some decline in pricing.” Larger tank sales have not been affected, says Sheldon, as the purchase of large-volume tanks is driven by companies that have to replace due to problems with their existing tank farm or expansions. Sales will remain level.

The high price of gas spurred an increase in commercial business at Pet-Chem Equipment (Erdenheim, PA). President Chris Smith explains, “A lot of companies and municipalities put in their own fuel supplies in order to purchase in bulk to save money.” This commercial increase will offset the decrease in retail sales, adding up to a level year. Smith is enlisting the help of several equipment leasing companies to help his customers with credit to fund their projects.

“We're trying to do things right and take care of people. We're also looking at expanding into other submarkets.” Mike Grohall, Grohall Inc. “Because of PCI compliance regulations, stocking the right amount of inventory will be crucial this year.” Chris Smith Pet-Chem Equipment “It's a numbers game, so I will quote as many projects as I can, with a focus this year on public projects.” Don Iffrig Graham Equipment

Aboveground Tank Regulations Fuel Growth in MIDWEST
While 55% of distributors in the Midwest expect an average increase of 11.2%, this region will also see the biggest downturn across the United States. Those forecasting sales to decrease predict an average decrease of 30%. PCI compliance, equipment upgrades and aboveground tank regulations will drive sales.

“We made some important changes last year, and we're exactly where we want to be right now,” says Dave Korgel, manager, Petroleum Equipment Co. (Grand Island, NE), commenting on his company's large-scale equipment upgrade and facility change in 2008. Increased upgrading and remodeling work will drive sales up 6-10%, and Korgel wants to add at least two service technicians. In Nebraska, the implementation of the Energy Act continues to spur installation of double-wall piping and tanks.

Slow but steady growth is the projection for Northland Petroleum Service (Big Lake, MN). President Scott Olson foresees environmental regulations and compliance issues driving a 10-15% increase. Olson plans to invest $10,000-$15,000 per employee into training programs, an expenditure he believes will result in better performance, efficiency and customer satisfaction. “We're going to try really hard to keep our rates low, our prices competitive and offer more specials,” he adds. “We want customers to perceive our company as having a better value than our competitors.”

After a record year in 2008 that consisted of large railway and university projects, Don Iffrig, president, Graham Equipment (St. Louis, MO), expects 2009's sales to drop by as much as 30%. He is looking at offering wireless tank monitoring equipment and, to increase dispenser sales, will purchase display equipment to demonstrate his products' capabilities. Iffrig plans to put a dispenser on a trailer and take it on the road. “My style of sales involves physically showing customers how the equipment works.” Iffrig has no employees by choice, so the purchase of new computer software will help him be more efficient.

PCI compliance will boost dispenser sales, and EPA regulations that went into effect on February 1 mandating double-wall tanks, tank sumps and dispensers will increase installation work for Walt's Petroleum Service (Schofield, WI). According to President Brian Beggs, sales will be consistent with last year. In the 2^nd Quarter, he will invest up to $200,000 in equipment upgrades, including fleet equipment.

“High-tech technicians are hard to find,” says Ron Arent, president of Yant Equipment (Grand Island, NE), who notes that finding and retaining qualified personnel is an ongoing challenge. Arent expects PCI compliance upgrades to create a sales increase of 10% and plans to stock more inventory in 2009. “When we are prepared with more product, we can offer faster, better service.”

Diversification into markets outside of petroleum will help to maintain sales at PIC Supply Company (Jefferson City, MO). “Over the years,” says President Steve Markway, “we've diversified into industrial and waterwell markets.” Concentrating on service and maintenance, according to Markway, is crucial in a slowing economy. “When customers can't afford new equipment, they rely on repairs. That's where we will focus our efforts.”

H. Domine Enterprises' (Brownstown, MI) diverse markets include municipal, government and commercial accounts, and President Herman Domine forecasts a 20% rise in sales. “Regulations mandating overfill, spill and corrosion protection on tanks will create a jump in business,” he says. Domine will invest $50,000 in the replacement of company trucks during the 1^st Quarter.

“Last year, dispenser sales were up and we did a lot of remodeling,” says Steven Bryant, president, HCS Petroleum Equipment (Wichita, KS), “and I see that continuing in '09.” In the spring, Bryant plans to expand his warehouse. “If we stock certain items and buy better, we can make better margins.”

“There are new opportunities out there, and we're trying to capture them,” says Steve Murray, president, Murray Equipment (Fort Wayne, IN). Hesitant to disclose more information, Murray acknowledges that he will introduce new products and services to capture a 5.5% sales increase. “People will be our biggest investment,” Murray says, and he wants to add three or four employees in sales and production. “We will work harder.”

“Efficiency” and “Service” are the Words in the WEST
Customers of Western PEI members are spending little on construction. Remodeling also has taken a back seat. Service work, however, is increasing as the need to repair old equipment is more important than ever. Only 20% of distributors expect sales to be up, at an average rate of 7.5%. New markets are being explored and ways to increase operational efficiencies are being aggressively developed.

Controlling costs is a priority for Kirby Boutelle, president of Eaton Service & Sales (Denver, CO), who will limit the replacement of construction trucks and service vans in order to maintain margins. “We will replace some vehicles in the 1st Quarter but will hold off on a complete overhaul.” While the retail market reacts quickly to changes in the economy, Eaton's commercial side remains steady. To counteract a predicted 10% decrease in sales, Boutelle will seek opportunities to acquire new companies. He says, “We're always looking for an opportunity to purchase smaller companies.”

“We have to stay in front of the customer,” says Fred Seymour, president of J-8 Equipment Company (Denver, CO), “as we don't want to be forgotten when the economy turns around.” Seymour points out that some customers are trying to cut expenses by fixing their own equipment. “They end up doing more damage, and the cost of having that equipment down outweighs the cost of the repair.” Seymour forecasts an 8-10% drop, attributable to slowing equipment and car wash sales, both of which require large cash outlays and difficult-to-acquire credit. For Seymour, avoiding layoffs is the ultimate goal. “Whether it's through a round of pay cuts or cutting fringe benefits, I want to keep our people employed.”

“Installations are down, service is down, it's all down,” laments Carrie Crumley, owner, Keneco Petroleum Equipment (Great Falls, MT), who forecasts a 50% decrease over last year's numbers. “Customers are scared.” Crumley will introduce several new products, but is hesitant to reveal the details. A salesperson has been hired “to knock on more doors.”

The state of California's requirements for Enhanced Vapor Recovery will stimulate sales as stations upgrade equipment. Commercial Petroleum Equipment (Sun Valley, CA) President Gary Carson expects sales to remain similar to last year, and he plans to invest $300,000 in new software, which he hopes will make his operations more efficient. “The software will enable us to take care of additional business without adding inside personnel. Our salespeople will sell, instead of sitting in the office working on quotations.” He will increase the sales staff by two.

Expansion is the name of the game at Hartsook Equipment & Pump Service (Cheyenne, WY). According to General Manager Gary Stensgaard, the company will move to a larger facility in Cheyenne before the 2nd Quarter and will hire one or two service technicians. To offset an expected 25% decrease in sales, Hartsook will seek new customers and a larger footprint. “We'll tighten our belts, get out any excess and fight a little bit harder.”

Fuel Tec (Saint George, UT) Manager Keith Dalton notes that construction work has slowed, but the company has plenty of remodels and upgrade work scheduled for 2009 to keep sales level and steady. “Customers who can't fund new construction are making the best of what they have by remodeling and upgrading current equipment.”

“We're bursting at the seams!” says President Ann Thomas about Petroleum Marketing Equipment's (Placentia, CA) current inventory. “Because of California's EVR Phase II regulations, we've stocked our warehouses with EVR equipment. I expect that we will sell all of it by July.” Thomas is expanding the division that repairs computers in gas stations and is hiring additional service techs. A new software program will provide better control of inventory and accounts receivable. In addition, California's Mechanics Lien Law may help prevent bad debts, and Thomas will make sure the appropriate paperwork is filed. “As a company, we have to take advantage of laws that can protect us.” Overall, sales will remain level.

“We are turning over every rock and spreading farther out from home base to find new growth.” Ralph Byars B & E Equipment “People are afraid to spend money right now, forcing us to downsize.” Carrie Tew, Don's Service Station Equipment “When customers aren't seeing us because they aren't making purchases, it's important to let them know we're still here offering a service, and we'll continue to be here. We want to be here to help them when things are good, but we also have available to help them when things are bad.” Fred Seymour J-8 Equipment Company

Carrie Tew, president of Don's Service Station Equipment (Idaho Falls, ID), will cut back employees' hours in hopes of offsetting a predicted 20% drop in sales. “Downsizing will benefit the company in the long term, and everyone is aware of that.” Like others, Tew has seen a decrease in new construction, though security updates have increased due to FTC regulations. “The dispensers and POS systems are not at a high enough standard, so customers will have to upgrade their software and keypads.”

Updating equipment to meet compliance requirements will drive growth at R.J. Myers & Co. (Newbury Park, CA), according to Owner Sheila Karn. Environmental regulations in California call for large-scale tank upgrades, and Karn predicts a 5% rise in service and construction work. Karn will invest in new testing equipment.

Specializing in tank cleaning and ethanol and biodiesel conversion, OPTIC Fuel Clean of CA (Paradise, CA) will increase marketing efforts through advertising, brochures and tradeshow attendance to aim for a 10% sales increase. Says President Mark Behrens, “Once a tank is cleaned, it's good for a couple of years so we're always looking for new customers.” Ethanol conversions will taper, according to Behrens, but biodiesel conversions are on the rise.

INTERNATIONAL Members Look Forward to Increase
Across the globe, sales aren't as impacted by the tough economy in the states. In fact, 100% of the International members interviewed project a sales increase ranging from 9% to 25%, the highest increase in the 2009 forecast. AC Corporation's Reuben Valerio describes the situation like this: “When the developed nations get sick, we only catch a cold and not pneumonia.” To increase market share, distributors are developing new solutions for new customers.

Mark Louw, president of Meter Systems (Edenglen, Johannesburg, South Africa), predicts a 20% increase in sales as a result of growth in new markets. In late 2008, the company moved into a larger facility and is reaping the benefits of a larger store and warehouse, as well as a metrological laboratory for gases and liquids. Louw explains, “By the 2^nd Quarter, we will be able to provide calibration of flow meters and aftermarket repair service to customers that require compliance with traceable standards.” The company's biggest challenge is procuring enough equipment to keep service levels as high as possible.

“It is impossible to protect your position in the market without investing in new services and products,” says Tüten Aluc, business development manager at Interpet (Istanbul, Turkey), who points to his company's continuous effort to offer a more diverse range of products that offer solutions to new customers in energy-related industries. Aluc expects sales to increase 8-10%, crediting not only the introduction of new products and services, but increased investments by oil companies projected to take place after March. A 1,000-square-meter addition to Interpet's current facility will be complete in the 2^nd Quarter. Says Aluc, “We hope the new facility will lead us to be more courageous and to take on new business opportunities and challenges.”

Upgrading facilities and expanding on-site service capabilities will deliver an expected 15% increase for Pumptec (Sebenza, Edenvale, South Africa). Finding skilled fitters is difficult, so Director Richard Bullock instituted a training program for employees. “Getting the job done correctly the first time around is of growing importance.” Bullock will invest in additional workshop equipment during 1st Quarter.

Reuben Valerio, chair & CEO of AC Corporation (Taguig City, Philippines), projects a 20-25% increase in equipment sales. “Triggered by Shell's global strategy, the majors are moving away from direct investments in retail infrastructure, and dealer-owned and operated stations are becoming popular.” LPG and CNG engine conversion kits will be introduced in the 1st Quarter, and construction of a new 13,500 square meter facility in an industrial zone is set to begin in June or July, with completion in 2010.

Fuel System Technology (Singapore, Singapore) was awarded a two-year contract for supplying underground tanks to a local company, which will add up to a 10% sales increase. COO Sie Cheong Low says his company's focus will be on energy-saving products and equipment. “There is a demand for these 'green' products.” A continual challenge is retaining qualified staff.

Chris Davis, managing director, Petroleum Equipment Services (Auckland, New Zealand), anticipates an increase in sales but hesitates to say how much. “Older sites are being reworked in a short period of time, which accounts for our business improving.” By introducing new products, Davis hopes that customers will continue to view his company as a “one-stop shop.” He cites debt collection as a challenge for 2009, and will become more vigilant on keeping overdues to a minimum.

“Competition has become more aggressive,” says Thomas Hartono, president, PT Wijaya Pura (Jakarta Timur, Indonesia). “Therefore, we must be able to give the best service.” Hartono predicts a 25% sales increase and will add several engineers. “Our business is based on service, and additional engineers will enable us to provide better service after the sale.” Hartono plans to upgrade workshop equipment and testing facilities in the 2nd Quarter. He also will increase visits to customers for consultation and product presentations.

Ehab Ahmed Hamed, sales & marketing manager, tools and equipment division at Aldrees Industrial & Trading Co. (Riyadh, Saudi Arabia), entered the new year with this goal: “to have customers associate their product needs with our company's name.” Hamed wants to increase market share by presenting a variety of goods to the customer. He also wants to expand outside Saudi Arabia and will add salespeople, hoping for a 15% increase. Training will be important. He explains, “Salespeople will get more power so they can be more qualified and able to face the market variation.”

So it comes down to power - more power. The power that comes from being the best at what we do. Power that comes from exclusive networking to share best practices with colleagues from around the world; from training opportunities offered by the Institute, its manufacturer/supplier members and other sources. Power that comes from the courage it takes to look this economy straight in the eye and stare back, ready and unfazed. Here's to a powerful 2009.

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The PEI Journal • First Quarter 2009 • Volume 3, No. 1 • Contents are Copyright © Data Key Communications, Inc.
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