The Other Parts of the Equation

A specialty hearth retailer and appliance manufacturer weigh in on what might help facilitate further growth in the thriving U.S. wood pellet market.
By Anna Simet | January 23, 2020

After two strong years with the future looking bright, U.S. domestic pellet manufacturers are capitalizing—spending money where it’s needed, mapping out production plans and devising near- and long-term growth strategies.

For many, future visions of the industry involve collaboration with other industry stakeholders—not just pellet manufacturers, but those who design and build the appliances their products are used in, and those who sell both their products and appliances.

A major initiative of the Pellet Fuels Institute is to bring more retailer and manufacturer perspective to the table, and thus, it has elected a number of representatives from these sectors to its board of directors. From the PFI’s viewpoint, this collaboration is the best way for cohesive growth across all parts of the equation—from initial pellet production to the consumer removing ash from the burn pot.

Retailer Realizations
Adam Martin, owner of Martin Sales and Service in Butler, Pennsylvania, serves on the PFI board. His family-owned company has been in business for 40 years and sells many different makes and models of fireplaces and stoves, including gas- and pellet-fired, electric and more.  “We also sell the fuel, and we have a walk-in retail showroom where customers can come in and see product demos and different designs and styles,” he says.

Martin’s store is full-service, meaning besides selling the appliances and fuel, it employs technicians who install, service and repair products. “I feel this is the only way you can do this and be in business as long as we have,” he says.

After a couple of down years, 2018 was strong, Martin says, and this heating season is on track to be as successful as last year. Pellet appliances constitute about 40 percent of the store’s overall sales. “For pellets, we’re in a unique situation where they are always very strong for us,” he says. “We never really have a down year, but we’re known for it in our area because we offer the installation and service—our guys are sent to school for training, and that helps. Right now, compared to last year, we’re about even.”

As for what initially catches the attention of consumers, Martin says it’s the ease of use and convenience at first, but other factors play in as well. “Many of my customers come in after burning wood for years, looking for something less labor-intensive,” he says.  “Pellets come in 40-pound bags, and they’re on the thermostat so they’ll kick themselves off and on automatically. They can be vented directly through a wall to outside, so there isn’t a required investment in a big chimney on the outside of their house. In general, the investment, the comfort and convenience are huge.”

On critical objectives for growing the industry, Martin says keeping pellet fuel prices low is at the top of his list. “Everyone has their idea of what’s important,” he emphasizes. “But we have natural gas available to us in the Pittsburg area. People love their pellet heat, but when the cost of pellets and natural gas levels out—whether gas is lower or pellets are increasing—some consumers will contemplate just turning their gas on, as it’s easier than buying and carrying in pellets, and cleaning the appliance. It’s really important that we’re able to make wood pellets at an affordable price so it’s a cost savings for consumers.”

That said, there is another component to price points, and Martin gives the example of big box and feed stores selling pellets at prices that specialty hearth retailers can’t compete with. As a result, pellet sales at the store are far from being parallel with appliance sales. “It’s frustrating,” he says. “It’s kind of a pressure point. If the big idea is trying to get appliance manufacturers, fuel manufacturers and retailers like myself on the same page to grow the sector—we all want that—the specialty hearth retailer needs some kind of support as well.”

Martin emphasizes he is not recommending producers stop selling to large feed and box stores—rather, perhaps they could provide a unique benefit to stores like his. “Everyone has to make money, but the people selling the stoves need support,” he says. “The big stores don’t know much about burning pellets, they don’t offer service or installation, and if you go in and ask about a pellet stove, they might point you to four of them sitting in a corner and that’s it. They’re using pellets as a loss leader, selling the same brands in the same bags, below the price of what I’m actually paying for them.”

One possibility Martin believes could work is a private label for specialty hearth stores. “Sell to the box stores, but give us a bag with a different picture or label, so my customers don’t come in and say they saw the same pellets down the road for $50 less, thinking I’m hosing them. One of the best ways to grow the market is through stores like ours because we install to code, provide service, carry quality fuel and stay loyal—we just ask for the same thing in return.”

Another concept Martin believes could work is providing shared incentives to consumers—with fuel producers, appliance manufacturers and retailers splitting the cost. “Often, we provide our own incentives—discounts or free pellets with a stove purchases. There is a $300 biomass tax credit, and that’s a great sweetener. I can tell a customer about that, and that we’re doing zero percent interest for 12 months, and we throw in a free ton of pellets.”

Some stove manufacturers already work with Martin on incentives—for example, a $200 discount on a Harman stove that is shared between the appliance maker and seller. “We split that, each eating half of it,” Martin explains. “So one idea is that maybe a pellet producer could say that for each receipt of an appliance sold during certain months, they will sell pellets to us at a discount of $20 per ton. So together, we’re getting the customer over the hump to buy a pellet stove, and it gives us a little advantage over the big box.”

As for ensuring consumers stay happy with their purchase, Martin says that after his customers’ appliances are installed and operating, about 70 percent of the service calls his store receives are related to a cleaning issue. “One thing I recommend to manufacturers—and many that we sell already do a very good job of this—is to provide good directions of what needs to be cleaned and how often,” he says. “For example, YouTube videos of how to clean them, which are linked to their website. It’s so helpful when we get a service call, to be able to direct them to a five-minute video to make sure they hit the right spots while cleaning, before we come out. You would be surprised how many times I have saved customers from a service charge by recommending they do this.”

As for online sales in the age of Amazon and convenient, on-demand purchases, Martin says he doesn’t see that model working for pellet appliances. “We find that the people who complain about pellet stoves or inferior fuel online—or maybe they can’t find someone to service the brand they bought—are usually the ones who bought them online, or at a big box store,” he says. “These are the ones you read about on blogs where people say they hate them and that they break down. Well, that’s usually because of how or where they were purchased. You really do have to be trained to understand how the stove operates and works. I don’t see it ever working out well for a pellet stove.”
John Shimek, senior vice president of dealer sales for Hearth & Home Technologies and PFI board member, has views similar to Martin’s, but acknowledges it’s a sign of the times—one that is not going away.

Manufacturer Mindset
Hearth & Home Technologies is headquartered in Lakeville, Minnesota, and has manufacturing facilities and locations in seven states, producing and selling many popular brands including Heat & Glo, Harman and Quadra-Fire.

For internet sales, Shimek believes they are mostly comprised of the do-it-yourself market—people willing and wanting to, who have a way to install. “But here’s the challenge,” he says. “For pellet appliances, no matter how they are used, they need maintenance, and regularly. This is not like a gas fireplace that turn it off like a furnace, and you don’t think about it. A pellet appliance requires the consumer to interact almost daily, and weekly at most to clean and maintain it, and ensure it’s operating properly.”

Like Martin, Shimek says customers who buy online don’t get the knowledge they would otherwise receive from a specialty hearth dealer. “When you match an appliance to a consumer, it’s important they understand exactly what it is they’re going to have to do from an installation, service and maintenance perspective,” he emphasizes. “If the retailer provides that experience, then I feel okay—not great—about [online sales]. It’s going to happen, and there is no way we can dictate how consumers buy or purchase, because they will do what they want. In a perfect world, this purchase would be made through a local dealer who would educate the consumer on the requirements of the appliance, but that’s not how it’s always going to play.”

As to how to grow the industry, Shimek says he thinks pellet heating suffers from lack of awareness. “I just don’t think consumers understand pellet heating is a viable, easy, safe and clean heating option for them, or that it even exists,” he says. “For example, my brother owns three retail stores in Minnesota and has been in the hearth industry for 30 to 40 years like I have, but he never had a pellet appliance in his stores or would have thought about it.”

After his brother expressed an interest in heating his Wisconsin cabin’s garage, Shimek recommended a pellet stove rather than liquid propane gas, and, after some reluctance, convinced him it wasn’t difficult and the price was reasonable.  “Three years later, and he hasn’t looked back,” he says. “He thinks it is great—he just completely misunderstood how easy it would be to install and operate.

Manufacturers of appliances and pellets and retailers need to band together and get that awareness message out, and clear up all the misunderstandings of how hard they are to operate and maintain.”
Another potential obstacle for industry growth is pellet availability, from Shimek’s perspective. “Every three or four years, we have run into shortages, leaving some consumers with a bad taste in their mouth,” he says. “They’re counting on it as a source of heat, and when they can’t get it, they get angry. I think the industry has done much better in recent years—manufacturers of appliances and pellets—by staying in sync as to what true demand is, so we haven’t had any major shortages recently.”

Stakeholders must continue working together to better gauge true demand, Shimek says, as pellet manufacturers can’t do that alone, as they don’t know how many new appliances are being sold into the market each year. “They have a baseline, but it’s difficult for them to tell if it’s going to be a good year or bad year until it’s too late, and they can only build so much inventory in the spring. I think that’s another area where the appliance and fuel manufacturers and retailers can work together to better understand what’s moving through the system to consumers, taking their base load and figuring out a growth rate to better plan production to meet needs.”

Like any technology, to stay competitive, innovation is needed on the manufacturing side, and Shimek says Hearth & Home has some improved features coming soon.

Innovation and the Future
Consumers like to travel or go away for long weekends, but being gone for days poses challenges when an average pellet stove only holds a couple of days’ worth of fuel. Recognizing this, Shimek says this year, his company will release a product that will hold about twice as many pellets. “Typically, when you try to design an appliance to hold more fuel, it’s awkward-looking—the hopper is bigger than the stove, and it’s challenging to figure out how to make it look good and balanced,” he says. “We have a unit that has dual hoppers on both sides and can run four or five days with normal usage, on a full load. So people can go away for the weekend and not worry about running out of pellets.”

Another improvement is control simplification—making it easier and more obvious to alter or maintain a stove’s settings. “Our older appliances had dials and control knobs, and it was intimidating to understand auger speeds and feed rates,” Shimek says. “Now, we’re much more modern with touch controls on the top of the appliances—more intuitive, and just easier to run. You really only have to change the temperature, and after you dump in pellets, change the setting to reflect how full it is so that you know when to empty your ash pan. These two things are coming soon—more fuel capacity, and easier controls.”

Like last year, the current heating season has been strong, Shimek says. “2018 and 2019 were good years. We’re up a little over last year, and we put slightly more pellet appliances in the market in 2019 than 2018.”

Both Shimek and Martin are optimistic about the future of the domestic wood pellet industry and carrying forward the all-hands-on-deck mindset of many pellet producers, appliance manufacturers and specialty retailers. “I have been on the PFI board for a long time, and it’s very encouraging to see fuel manufacturers gather around standards, and manufacturers of appliances become engaged with that group,” Shimek says. “I think it will make the consumer experience of a pellet appliance much better as we move forward.”

All industry segments supporting each other will be key in delivering the best possible experience for users of pellet heat, Martin adds. “Then everyone wins—we all make money, and at the end of the day, customers are taken care of and they write positive things on the internet because they had and get great service from their store, they have great fuel, and they have a great stove.”

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Pellet Stoves 101

• Pellet stoves have heating capacities that range between 8,000 and 90,000 Btu per hour.

• Most pellet stoves cost between $1,700 and $3,000, often cheaper to install than a conventional wood-burning heater. Many can be vented horizontally directly through the wall to the outdoors, and do not need a chimney or flue. As a result, the installed cost of the entire system may be less than that of a conventional wood stove.

• Pellet stoves require electricity to run fans, controls and pellet feeders. Under normal usage, they consume about 100 kilowatt-hours, or about $9 worth of electricity per month. However, U.S. Stove’s GW1949 Wiseway eliminates the need for electricity by utilizing a gravity feed system that eliminates the typical electrical and mechanical parts found in traditional pellet heaters.

• Pellet stoves require weekly cleaning by the consumer, and annual cleaning by a professional.

• Most pellet stove hoppers hold between 35 and 130 pounds of fuel, which will last a day or more under normal operating conditions.

Author: Anna Simet
Editor, Pellet Mill Magazine