I don't want to be that guy…
We both know what E85 costs at the rack …even with freight and taxes. And the retail price is right there on the sign…
I’ve never been that guy. In the past when E85 was super cheap, I've sometimes even encouraged retailers NOT to lower their E85 price just because they could – especially when the resulting E85 price was so far below E10 it might give users unrealistic expectations in the future. If widening the spread between E10 and E85 doesn’t increase E85 volume, why do it? But put the additional margin in the bank, so when the gap between wholesale E10 and E85 prices tightens, you can keep the spread at a level that maintains E85 volumes.
We’ve preached to marketers about the “delta” – the price gap between fuels - being the key to grabbing and holding higher ethanol blend customers and increasing volumes of those fuels. E15 retailers have done a good job of setting and maintaining the delta between E10 and E15, when the wholesale cost differential is rarely the same as the retail price spread. So, I guess we could take some blame if overpriced flex fuels are the result of E85 retailers sticking with the “delta” they’ve adopted and maintained at our urging…
But come on, man…
I get the “justifications” for higher E85 markup - Equipment costs more (assuming you didn’t get any of the billion free dollars USDA and others gave away the last decade), and there are fewer flex-fuel vehicles pulling up. That makes sense to a point. Premium and E0 aren’t big volume fuels either but if you tried to get four or five times E10 margin - $2 to $2.50 markup - like we’ve seen with recent E85 pricing – they’d be zero volume fuels.
Damn. Now I’m being that guy… and I’d rather light a candle (away from your fuel islands, of course) than curse your darkness.
To me, this looks like missed opportunity. Today’s additional flex fuel margin could be earning retailers higher volumes AND profits by using E85 as a traffic driver rather than a niche product. Price it aggressively. Make it obvious. There are 20 million FFVs registered on the road in the US, and probably 15 million of their drivers don’t know it. Give everyone a reason to check.
E85 doesn’t need to be a side option on the island. It can be a differentiator – It can be the reason someone chooses your station over your competitor’s. Even if they can’t use E85. Price gets everyone’s attention. And that gets cars on the lot and people in the store.
And it all starts with pricing that invites people in.