To Market, To Market

Over two decades, Pacific Northwest retailer Coastal Farm and Ranch has grown its pellet appliance and fuel business from a seasonal offering to a year-round, vital aspect of what it provides its customers.
By Tim Portz | September 26, 2017

In the weeks leading up to Labor Day, the Pacific Northwest was gripped in record heat. On the preceding Saturday, temperatures in Portland topped out at 98 degrees Fahrenheit, a full 20 degrees higher than historical averages. At the same time, in sixteen different locations throughout Oregon and Washington, regional farm and ranch supply retailer Coastal Farm and Ranch was running a final preseason sale on wood pellets, and inventory was flying out of the yard. “We had cars and pickups coming through our lot where our forklift operators were putting a ton in one vehicle, that vehicle would pull forward, and another vehicle would take its place for their pellets,” says Matt Brownell, a buyer of heating and cooling products at Coastal.

Preseason wood pellet sales are a regular part of Coastal’s heating and cooling business, a segment that Brownell tells Pellet Mill Magazine is a year-round effort for them, distinguishing the retailer from its marketplace competitors who may view wood pellets as a seasonal product. “In the hottest time of the year, we’ll often have our preseason wood pellet sale appear on the front of an advertising flyer that is distributed to 2.3 million households from the Canadian border to the California border, on both sides of the Cascades,” Brownell says. “I really have to justify what I’m doing with our marketing team and our purchasing team. Most people want to think of this as a seasonal business, and I just don’t agree with that.”

Coastal’s wood pellet and heating appliance strategy hasn’t always been like it is now. When it entered the market in the late 1990s, its approach resembled that of other retailers—fall came around, and heating appliances were rolled out along with some wood pellets. Gradually, Coastal’s approach changed, and the category began to grow into the impressive and important program it is today.

Coastal has deployed a store-within-a-store approach for its hearth products, offering a full line of heating appliances, including wood stoves and wood pellet- and natural gas-fueled models. “We’ve been growing our annual sales each year across our operation, and we may very well surpass 3,000 appliances this year,” Brownell says. Coastal is a premier partner with Hearth & Home Technologies, offering only its brands including Harmon, Heat & Glo, Quadra-Fire and more. Brownell estimates that pellet appliances now account for roughly 40 percent of Coastal’s appliance sales, and when natural gas prices were higher, they have represented as high as 60 percent of total sales. Either way, Coastal has put many thousands of pellet appliances into the market, and both Brownell and Coastal feel this success brings along with it a responsibility to be able to provide their customers with pellet fuel, no matter how difficult. “It’s something that is near and dear to our hearts,” Brownell says. “We have put thousands of appliances into the market that require wood pellets, so when and if there is a shortage of that fuel, we take it very seriously.”

Brownell recalls a scenario in 2006, when the Pacific Northwest endured what he calls an “extreme shortage” of wood pellets. This feeling of responsibility is, in part, what has propelled Coastal toward its year-round pellet fuel program, which will see 20,000 tons of wood pellets move through its locations, generating over $4 million in revenue.

Mutually Beneficial Approach
By featuring preseason wood pellet sales on advertising circulars and encouraging summertime buying, Coastal is able to move significant pellet volume while other retailers are not. “This really helps out our producer partners, because they are able to produce pellets and have that inventory leave their facility in late May and June, months that normally don’t see a lot of sales for most producers,” Brownell says.

This activity also eases a summertime cash-flow challenge, which can limit production and constrain supply in the event of a cold and wet winter like the Pacific Northwest had in the heating season of 2016-‘17. “We had some scares and some availability issues last year, in late December, January and February. I could have sold so much more fuel last year than I could get my hands on. Our customers felt that, and it resonated with them,” Brownell says. “Thank goodness we’ve got some purchasing power because of the volume that we do—we get some priority, because it could be a struggle. We take it very, very seriously when we can’t get our customers this product. This isn’t some other product on a shelf, this is heat for people’s homes.”

Still, Brownell and Coastal face the same challenge that producers do, in that they can’t tie up too much cash in inventory that won’t move if the weather is unseasonably warm.

Destination Center
To mitigate these challenges and keep inventory moving throughout the year, Coastal has worked hard to establish itself as what Brownell calls a “destination center” for both pellet appliances and pellet fuel. In addition to the store-within-a-store concept, each retail location has a hearth department manager, and one or two employees supporting the hearth department, depending upon the time of year.

Coastal’s hearth department is an inviting showroom with appliances lining the exterior walls. Polished wood floors and overstuffed leather furniture are all a part of an atmosphere geared to draw customers in, and get them thinking about making a cold winter day a little cozier, and more relaxing. “Our merchandising is not like walking into a conventional farm and fleet store,” Brownell says. “Our clothing department has dark mahogany wood in the dressing rooms, and a 30-foot fireplace just for ambience. This just carries into our hearth department. It’s pretty cool to see our concept of what we do in our stores.”

For Brownell, this approach, coupled with Coastal’s year-round strategy, is what sets the retailer apart from its competition. “A lot of other retailers aren’t selling appliances, and I think that has a lot to do with it,” he says. “There are people who play in the fuel space but don’t sell appliances, and then there are folks who sell appliances but don’t sell fuel. So that’s what sets us apart—tying those two together,” he says.

Quality, Essential Products
Brownell describes a typical Coastal customer as someone living either in a rural environment or on the outskirts of town, perhaps on a smaller hobby farm. “We pride ourselves on selling our customers things that they actually need,” he says. “They need to feed their animals. They need boots to go out and work on their farm. They need rain gear to protect them from the elements when they are doing these things, and they need quality appliances and fuel to heat their homes and barns.”

Coastal places a high premium on quality, carrying those brands that their customers have come to expect high quality from. Brownell points to Coastal’s relationship with Hearth & Home Technologies, and the handful of pellet manufacturers it works with as an indication of that commitment. “We enjoy the luxury of extremely high-quality pellets out here,” Brownell says. “With all of the Douglas fir here and great manufacturers that we’ve known for so long, we feel very confident that we’re taking the very best pellets to the marketplace.”

Brownell and Coastal rely on their suppliers not only for high-quality pellets, but also to hit their delivery marks, particularly during peak pellet demand. “Freight is our biggest challenge with these guys, and that is why we work with a number of different suppliers,” says Brownell. He points to the recent buying momentum that Coastal’s stores experienced during their final preseason sale.
“Typically, a truckload of pellets from our suppliers is a 30-ton delivery. When you are selling one or two tons, one order after another, it doesn’t take that long to go through an entire truckload.” During these periods, Brownell says that customers number into the hundreds at each location. “As a result, we’ve got trucks landing at our locations every day during our peak periods, and sometimes, it’s three or four times a day,” he says. During periods like this, Brownell says, communication with his suppliers is critical.

Coastal’s pellet and pellet appliance business is not without its challenges. Brownell notes that last year’s heating season was a welcome respite from a trend of warmer and shorter winters in its market area. “We’ve had a couple of soft years as far as fuel sales go, and it’s been due to weather,” he says. Compounding this challenge is the reality that low natural gas prices have, for now, all but eliminated the discount that heating with wood pellets has historically offered. Despite this, Brownell believes Coastal’s wood heat business is buoyed in part by a familiarity, comfort and appreciation for wood pellets. “That’s what our customers’ folks did, and it’s what they grew up with, what they know and love, and that’s the kind of thing that is working in our favor,” he says.

There are also challenges to Coastal’s business that don’t have anything to do with the price of natural gas or the temperatures in February and March. “I know I’m preaching to the choir with other retailers, but finding and keeping quality people is a definitely a big challenge,” Brownell says. Coastal’s strength in the hearth category are the people working in the department, and the company places a high value on helping them grow in their expertise and knowledge. “It’s our strength, and at the same time, it’s what is so tough about staffing. Finding quality folks, getting them trained and helping them grow,” he says.

Coastal Farms will celebrate its 54th anniversary this year. Brownell has been with them since 1999, when the company had just five stores. As a manager at the store level, Brownell really shined in the hearth department, and he developed a passion for that aspect of the business. While he has responsibilities outside of heating and cooling, about one-third of Brownell’s time is consumed by Coastal’s hearth business. It could be said that Brownell’s career and the pellet appliance and fuel business have evolved and grown together, and because of one another—despite low natural gas prices and warming winters—Coastal is committed to a heating business that has become a real market differentiator for the retailer. “Our pellet business is still strong,” Brownell adds. “For someone to be able to say that in the market and weather conditions we’ve had over the past three years, is really saying something.”

Author: Tim Portz
Executive Editor, Pellet Mill Magazine
[email protected]