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DEF Sales on the Rise; Operators Respond in Numerous Ways

28 Sep Press Release

Alexandria, VA – September 1st, 2012

The demand for diesel exhaust fluid is on the rise and truckstop and travel plaza operators are responding by stocking jugs and offering bulk DEF at the pumps.

“The acceptance from the public has come. People are willing to use it and buy it, “ said Matt Middleburger with Mitten Travel Plaza, Oakley, Kan.

Monica Baker, a research manager with Integer Research, said North American DEF consumption will increase to 140 million gallons in 2012—double 2011’s consumption rates. Class 8 truck sales have been steadily increasing, so the growing demand for DEF is expected. All new trucks other than those produced by Navistar Inc. utilize selective catalytic reduction technology to meet 2010 federal engine emission standards and require DEF.

“Demand continues to grow as a direct result of fleets replacing their older trucks with the newer engines,” said Jon Archard of Love’s Travel Stops & Country Stores. Love’s is offering bulk DEF at 150 locations in 790 lanes. “From our customers’ perspective, we must have DEF available at the pump and at every lane,” Archard said.

How truckstops offer DEF varies widely across the industry. Chain locations, such as Love’s, have committed to having bulk product available at nearly all of their sites while some independent operators are in the process of building a successful jug program. No matter how a location offers DEF, there are several key factors that can make it a success.

The Choctaw Nation has 13 c-stores, five of which are truckstops, and offers DEF in a variety of formats. All the locations offer one gallon jugs, the truckstops also have 2.5-gallon containers and one of the truckstops also has an above-ground bulk DEF dispenser that holds 2,000 gallons at one diesel lane.

Chuck Tillman, environmental specialist with Choctaw Nation, said, “It is cheaper than utilizing an underground tank and setup only took one week.”

Because DEF is temperature sensitive, the dispenser is enclosed in fiberglass housing that has a fan for summer use and a heater for winter use. The dispenser came with a magnetic misfueling nozzle that is designed to only work when it is inserted into a tank with a magnetic release nozzle. However, Tillman has replaced the nozzle with one without the magnetic option so customers needing DEF for 2012-model pickup trucks or heavy equipment can take advantage of the bulk pricing on DEF.

“The tank and housing are on skids and can easily be moved to another store location if we decided to upgrade the tank size and place an underground tank,” Tillman said.

Broadway Truck Stops, which operates eight locations, offers jugs at its locations and has rolled out bulk distribution as well. “We’ve been able to get into the mix and we sell a fair amount of DEF. We’re selling more every day,” said Dan Alsaker, chief executive officer of Broadway Truck Stops. Alsaker added that there have been times when he has run out of bulk DEF.

Broadway currently offers bulk DEF from 500-gallon totes that are stored in heated sheds near the fuel islands at five locations. “We have a reel so our employees can stretch it out and reach the first two fuel lanes,” Alsaker said.

Broadway built the heated sheds that store the DEF and has a federaland state-approved pumping meter system connected to it. Broadway’s employees do the filling and are trained on how to dispense the DEF and clean the nozzle before and after each filling.

Alsaker continues to see his DEF distribution figures rise. Given the growth, he is continuing to research additional bulk options. “We know that this—the totes—is a Band-aid approach,” he said.

Fortunately, Alsaker said he anticipates the price of DEF dispensing equipment to decrease as more technology is released. “We’re probably waiting until the third generation comes out and we’ve found some competitive pricing on 6,000-gallon tanks.”

Mitten Truck Stop, a TravelCenters of America franchisee, is in the process of burying a 10,000-gallon tank and plumbing it into the location’s fuel islands.

Selecting A Def Partner
Finding a DEF supplier isn’t just about price. Operators want to partner with a supplier that can provide consistent supply and can provide important customer service.

Stop Watch spoke to DEF manufacturers and truckstop and travel plaza operators who suggested operators seek out suppliers that have scalable production and can continue to produce enough DEF to meet demand as it increases. Large-scale production will help guarantee they get the product from their partner day in and day out. Operators should also look for suppliers that have API certification, which gives operators confidence that the DEF is going to be on spec and good quality.

Chuck Tillman of Choctaw Nation checked with several vendors and wholesalers before selecting a partner. “I made sure [the DEF] met ISO/ASTM standards then we discussed price,” he explained.

Tillman also suggests operators examine the total cost of the product. “We actually found situations where the unit price was lower but the freight cost would overrun the savings,” he said.

“I think that the opportunity from a competitive standpoint is to see if we can offer it at an easier fashion than the competitor,” Middleburger said.

There are several things operators need to keep in mind when researching DEF equipment. “From what I’ve learned, I know it is a terribly sensitive product. All of the fittings have to be plastic, fiberglass or stainless steel,” Middleburger said.

Because DEF can be easily contaminated, Middleburger said he will closely monitor loads as they come into the location. “Contamination is one of the trials. If you contaminate it, you have 5,000 gallons in the ground and there aren’t a whole lot of people who know what to do with it if it is contaminated. The industry has a learning curve and that is probably upon us,” he said.

There are significant pricing differences between jugs and bulk gallons, which can be nearly double the price.

One of the benefits of bulk distribution will be cutting down on the empty jugs left at the location. “The jugs add up,” Middleburger said. “We have about 15 dumpsters here and we have once-a-day pick up. On the weekends we don’t get pickup so there are times that I have to start filling our dump truck with trash.

Jug sales at locations can fluctuate once bulk distribution is installed. Tillman said jug sales at the location that also has bulk DEF dropped off slightly but have been remaining steady, which he attributes to growing demand from four-wheel and construction customers.

“A year ago I was putting in an order of 40 cases of the 2.5 jugs a month. I could stock all of our operations with those 40 cases. Then I went to 40 cases a week. Now we have gone from zero bulk gallons gales to 1,000 a month. We still sell 2.5 gallon jugs, but we don’t sell nearly the same number,” Alsaker said.

Alsaker is trying to be careful when ordering jugs because of the price differential between bulk that can reach nearly $3 a gallon. “Technically I could take any extra jug inventory and literally go dump it in the bulk and sell it, but I would be losing a lot of money,” he said.

Operators said jugs continue to appeal to drivers who want to ensure they won’t run out of DEF. “The last thing people want going through the vast area of Montana or the Dakotas is to run out,” Alsaker said.

Tillman orders a pallet, which is 72 units, of the 2.5-gallon containers every four weeks. Tillman has found that 2.5-gallon containers outsell the one-gallon containers because they provide better value to the customers and come with a spout to pour the fluid.

Three Bulk Storage Considerations
1. Volume: The typical dosing rate for DEF is 3 percent, so operators can look at their diesel sales to help determine how much DEF they should stock. Since the market for DEF isn’t fully developed yet, operators may want to consider demand over the next 3-5 years to determine their approach and the level of investment they plan to make. A mini-bulk tank that holds a few thousand gallons may help them meet their short-term goals while creating plans to eventually grow to a 10,000-gallon tank.

2. Tank Size: Buying full tankers is the most economical way to buy DEF. Those tankers hold between 4,800 and 5,200 gallons, so operators may want to purchase tanks in the 6,000 to 8,000 range.

3. Tank Specifications and Locations: Operators will want to consider space requirements for both the height and width of the tank. Above-ground and belowground tanks are available. When deciding where to place the storage tank, operators will want to consider how the DEF tanker will unload the fluid, electrical accessibility and protection from heat, which can damage the shelf life. Operators will also need to purchase weights and measurement certified dispensers and equipment.

To promote their gallon containers, many locations create displays by stacking them in high-traffic areas, such as fuel desks or doorways. “The major truckstops are trying to build displays of 15-20 cases,” he said. “This allows the display to be large enough to be seen but not too big to disrupt traffic flow.”

Because DEF has a shelf life, Tillman closely monitors his supply. “I have a close relationship with our current vendor and they have taken great strides to make sure that the product they are delivering is new and not closing in on a shelf life problem,” he said. “DEF kept at 60-80 degrees has a shelf life of approximately two to two-and-a-half years. However, if it is stored in a hot building/shed where the temperature may get 120-plus degrees during the Oklahoma and Texas summers, the shelf life dramatically drops to four to six months.”

Operators are taking several approaches when it comes to promoting their DEF offerings. Tillman relies on banners to promote DEF and said the above-ground storage makes it highly visible.

Alsaker has relied on point-of-sale signage. The locations are also listed on Pilot Flying J’s website as having DEF, which Alsaker said is helpful. “Drivers are pre-planning their stops and seeing where they can get DEF in bulk.”

Archard said of Love’s, “We promote the growth of our DEF offering through our website and with direct discussions with our customers. Those that we don’t reach are quite active in seeking out their over the road options.”

Middleburger is designing a new billboard and promoting bulk DEF on it, and all the operators Stop Watch talked to suggested locations list their DEF offerings on “I personally think the discover DEF website or similar websites are extremely important marketing tool for stores,” Tillman said.

They may also want to update information with fuel optimization software providers.

“Some of the bigger companies use optimizers and they can set a protocol in the optimizer that says, ‘If this fueling location doesn’t have DEF, take it out of the system or move it to the bottom of the list.’ Somebody might have a better fuel price, but it won’t come up in the optimizer,” Middleburger said.

Find DEF
Operators interested in adding DEF to their offerings can purchase the fluid and dispensing equipment from these NATSO allied members. *Members as of July 11, 2012. Visit NATSO’s Buyer’s Guide here for an up-to-date list.

Phone: 714-990-3940

Sept-Oct-2012Cover.jpg This article originally ran in Stop Watch magazineStop Watch provides in-depth content to assist NATSO members in improving their travel plaza business operations and provides context on trends and news affecting the industry.

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