A Rising Tide Lifts All Boats

Consumer awareness, quality and collaboration were the buzzwords at the 2019 Pellet Fuels Institute Annual Conference.
By Anna Simet | July 22, 2019

As it was last year, fostering growth of the retail pellet appliance market is a key initiative for the domestic U.S. wood pellet industry in 2019. The Pellet Fuels Institute Annual Conference offered fresh perspectives during its discussions this year, featuring panels with a near-split on representatives from the pellet production and pellet appliance manufacturing/retail segments, with much of the content centered on how producers and retailers can work together to increase consumer awareness and satisfaction, and grow the market.

Kicking off the conference with a thorough discussion of the U.S. EIA’s Monthly Densified Fuel Report, Lead Survey Statistician Connor Murphy discussed fiber prices, production and inventory levels, sales and data trends since the agency began collecting the data in 2015. While fiber costs have risen in 2019 as a result of last year’s historically wet weather and constraints driven by the China trade war, U.S. inventory levels were below 20,000 tons at the end of 2018, according to Murphy, and reported sales for 2018 were the highest they have been since 2015. In February alone, sales were up by nearly 30,000 tons compared to February 2018, and up 53,000 tons from February 2017.

Murphy said the EIA, which publishes each report about four months retroactively, is looking to improve the way it presents the data. Feedback from producers and industry is welcome, he added, and reminded producers that all manufacturers of densified biomass fuel products—operating and those planning to begin operating within a year—are required to report. Those with capacities of 10,000 tons or greater must report monthly, and those under 10,000 tons on a quarterly basis.

When asked about releasing regional feedstock pricing data, as each U.S. region experiences significant variations, Murphy said that due to a low number of large-scale producers in the Southeast region, EIA could not share at this time, due to confidentiality issues. Other attendee suggestions to improve the data included redefining the geographical regions to more accurately depict the domestic wood pellet industry.

Eyes on Appliances
For pellet appliance shipments in the U.S. and Canada, 2017 and 2018 were both strong years, according to John Shimek, vice president of marketing at Hearth & Home Technologies. Shimek said 2018 saw double digit growth, and that he expects another solid year of double digit growth in North America in 2019. He estimated that around 70,000 to 80,000 appliances were sold in the U.S. and Canada last year.

Whether the upcoming U.S. EPA New Source Performance Standard requirements would affect sales, Shimek said he is confident there will not be a sell-through provision and as a result, dealers will only be purchasing 2020 compliant appliances. “90 percent are already compliant, so this forces dealers to look at other inventory…there may be discounting of noncompliant appliances.”

Although cheaper wood appliances won’t likely sway consumers from compliant pellet appliances, Shimek said, it will make for choppy inventory levels going into 2020. On the topic of consumers, Shimek said they are changing the way they shop and becoming more involved in the process, and desire to start buying everything the way they want, such as online. “We may have to change how we do things, or figure out how to address that,” he said, adding that along with buying ease, customers want ease of use, one example being having to feed an appliance less. “People like to travel, and they can’t be there feeding the appliance on a regular basis,” he said. “We need ease of use.” He said Hearth & Home Technologies plans to launch a product this fall that can go three or four days without being fed.

The biggest challenge the industry faces is awareness, according to Shimek. “If we can team (with producers) and drive one thing, it should be awareness…it all starts with the consumer.”

One way of doing that is increasing the use of digital advertising technology, Shimek said, adding that this year, Hearth & Home invested $750,000. “It’s not going away; we’re investing heavily to get consumers into our facility,” he said. “It’s a process, a system we’re putting into our business—we’re going after it.

Continuing the theme of appliance sales, the next panel featured the perspectives of four stove retailer representatives. All agreed that while 2016-‘17 were down years, the past two years have been up by 25 percent or more.

But while appliance sales have been on the rise, pellet sales have not, said Adam Martin, owner of Martin Sales & Service. “This is the big problem—that pellet sales aren’t going up, and we’re doing nowhere near where we should be,” he said. The panelists attributed stagnant pellet sales to big box retailers selling lower-priced pellets, and suggested finding ways pellet producers and appliance retailers could work together to incentivize consumers to purchase their pellets where they buy their appliances. Ideas included using a different bag type or carrying a higher quality of pellet that can’t be bought at big box stores.

Strategy aside, some customers will always go for the lowest price, emphasized Tom Swan of Black Swan Fireside Hearth & Home. “I tell my customers that they should buy pellets from me for two reasons—I sell high quality pellets, and if you burn them in our stove, I will have less service calls,” he said. “I lay that out up front and plant those doubts, and tell them that if they don’t, it will come back to haunt us both.”

On service calls, Dean Michanczyk, owner of Dean’s Stove & Spa, said the online shopping experience has actually made things more difficult for both consumers and dealers. “Half of our service calls come from people who didn’t buy from us—the dealer gets a bad name when people can’t get service when they have made online purchases.”

The consensus of all panelists was that online sales won’t work well for appliances. “I don’t believe appliances could be sold successfully online—they need service,” said Martin. “It creates a lot of backlash.”

Rick Soccia, owner of AES Hearth & Patio, said he tells his customers if they buy from his dealerships, they will provide the best pellets and won’t run out, and that they will provide service when it’s needed.
All agreed that on top of treating existing customers well, thus bringing in new customers from word-of-mouth, cost-effective social media will be key in spreading consumer awareness.

Policy and Relationships
Representatives of the pellet manufacturing sector took the stage in the afternoon to discuss the current policy and regulatory landscape, bright spots and challenges. Innovative Natural Resource Solution’s Charlie Niebling said NSPS aside, a main focus is still on the BTU Act and getting it over the line, as well as getting funding for bioenergy programs authorized in the Farm Bill.

Neibling emphasized the significance of fostering relationships with officials on all levels. “If you aren’t on Capitol Hill, you don’t exist,” he said. “It can seem pointless sometimes, but making relationships slowly, over time, has made a difference. They need to know who you are, so call and invite them to your plant. Get to know them before you need a favor or big ask. Two or three people in a room understanding your perspective makes a huge difference.”

Stephen Faehner, president and CEO of American Wood Fibers, said the industry has been challenged since the beginning to be relevant or counted, so the EIA tracking the industry with its densified fuel report is “a massive accomplishment. A lot of effort is spent [on policy and regulatory issues], and it sometimes feels like pushing a boulder uphill. It’s why the PFI is important.”

There is opportunity in strategizing and partnering with new environmental groups that understand the value in using low-grade wood for energy to replace fossil fuels, Niebling stressed, as well as working much closer with other renewable groups toward a common goal. “A rising tide lifts all boats,” he said. “Let’s all be for renewable thermal, rather than all against something.” 

He also reminded audience members of the importance of sharing accurate data in instances such as the EIA report—particularly, installed capacity data. “Our industry needs to come to terms with the value that could be derived from reporting that accuracy,” he said.

BBQ Pellets
Growth of the barbeque pellet industry during the past two years has been “miraculous,” according to Jeff Thiessen, president of Danson’s Inc. His company’s brand Pit Boss experienced 300 percent growth, he said. “We’ve seen massive growth, and not just with Pit Boss, but other specialty pellets as well. Year to date, we’re up 40 percent, so it’s pretty exciting…the market is phenomenal.”

Thiessen said he believes that in the next decade, pellet grills will be as common as gas grills. “It’s the flavor and convenience—once you use grill pellets, you don’t go back.”

Bryan Traeger, divisional sales manager at Danson’s, said that reviewing the past 20 years, he can’t think of any person who complained to him about a bad pellet grilling experience. “It’s still a small percent of the overall market, but it’s definitely here,” he said.

Building on that momentum, Energex is soon opening at Atlanta-based grilling pellet division, said Kenny Lisle, sales and marking manager. Lisle said having a grilling pellet side helps alleviate off years for fuel pellets. “We know people will barbeque, and it isn’t dependent on the market forces that heating pellets are…it’s a national market, and not regional. We’re reaching out to retailers that we never would for heating pellets—it’s been a unique challenge, going outside of our normal market. The freight angle is the battle.”

Lisle highlighted the value of social media, particularly platforms like Instagram that uses hashtags, when it comes to grilling pellets. “It’s all about the picture, everyone wants to see what everyone else is doing, and try new things.”

Panelists also discussed fiber sourcing for grilling pellets. All agreed that while being open to smaller fiber suppliers could be advantageous, caution should be taken to avoid using any questionable fuel, though it is unlikely anyone would risk the liability. Additionally, all agreed that pellet standards, such as the PFI program in place for heating pellets, wouldn’t serve the same purpose or offer much value for grilling pellet consumers.

“There is a lot of room for innovation in this space—the fun part is trying new things,” Lisle concluded. “Ten years ago, we were barely talking about this. It’s been a thrill watching it evolve.”

Rounding out the day’s discussion, pellet plant representatives reported on their perspective years, and shined some light on what might lie ahead. “We’re looking at a strong 2019—the pipeline is clean from the manufacturer to the consumer,” said Don Wagner of Appalachian Wood Pellet. “There is no inventory sitting around.”

Everett Follett, pellet sales manager at Spearfish Pellet Co, said a colder-than-average February made a big difference, as extra orders came in. “We were down to 2,000 tons in the yard at one point,” he said. “We’re very optimistic for the upcoming year—we’re already sold out. We are asking for orders a year in advance, which can be difficult for customers—some get upset when they can’t get orders on demand.”

On issues surrounding fiber constraints, BioMaxx has gotten creative and is looking deeper, but continues to try to determine what could be done differently,” said Mike Sayers, chief financial officer.“I don’t know if we have the answer yet—we’re still trying to figure out how to better prepare for next time,” he said.


Photos by: Symmetry Co. Photography
Author: Anna Simet
Editor, Pellet Mill Magazine
asimet@bbiinternational.com
701-738-4961