Winning by Embracing the Competition

Many businesses spend time figuring out how to beat competing products, and propane marketers work to sell their product against natural gas and fueloil. But sometimes it pays for propane marketers to embrace those competing products and sell them as well.

NOCO Energy Corp. (Tonawanda, N.Y.) started out in 1933, when Reginald B. Newman began delivering coal to homes in Western New York state for his company, R.B. Newman Fuel. Today the company provides homes and businesses with propane, natural gas, electricity, and fueloil.

In the 1940s, following the lead of many other energy companies, R.B. Newman Fuel Co. moved away from coal into No. 2 fueloil. The company later added commercial fueloil and transportation fuels, diesel, and gasoline, but did not begin selling propane until 1998. R.B. Newman changed the company’s name in the mid-1970s to NOCO, which is an acronym for Newman Oil Co.

Newman’s sons Reginald II and Donald also worked in the business. In the early 1960s, they oversaw a substantial growth period as the company moved into Mobil gasoline service stations and also became a home heat distributor for that company. By the time Donald Newman’s sons Jim and Mike Newman began full time with the company in the early 1990s, NOCO operated a thriving home heat and fueloil business. But the company also witnessed many customers converting to natural gas.

“Probably in the last five years of the 1980s and early 1990s, we saw propane making an increasing dent in what I call our rural home heating oil business,” said Jim Newman, who is now president of NOCO. His brother Mike serves as executive vice president. “People were converting to propane, and we were losing customers because we didn’t sell propane at that point.”

The decision to sell propane was not easy, however. It was a topic of serious debate at the company. Jim Newman’s father and uncle, who still ran the business at that time, considered the company an oil company. Jim and Mike Newman saw it more as a full energy company.

“Or you could say it differently —‘If you can’t beat ’em, join ’em,’” Jim Newman explained. “We were one of the many oil companies that decided to become a dual-fuel supplier, supplying both propane and 2-oil,” he added, using the term “2-oil” for No. 2 fueloil. But many fuel companies agreed with Reginald II and Donald Newman and saw propane as a competitor and not a complementary product.

Jim Newman saw propane delivery using the same model his company used for delivery of fueloil. His side eventually won the argument, and he and his brother began the work to make NOCO one of the larger propane and fueloil providers in Western New York. They began acquiring propane companies in the Buffalo area and now run eight locations that sell propane. NOCO also built a software package to improve its delivery drivers’ efficiency for propane and HVAC services. The software, called Navision, performs routing and scheduling duties as well as billing and receivables.

NOCO’s propane business is now about one and a half times larger than its delivered fueloil business.

Jim Newman believes companies that deliver only home heating fuels might see tough times over the next 10 years if they don’t diversify. NOCO continues looking to acquire companies that sell No. 2 fueloil and propane.

“There will still be a significant 2-oil business in certain markets like New England, but in markets like Buffalo or say, mid-continent, where there is both cheap natural gas and a ready supply of propane, we’re seeing a really willing market to convert away from 2-oil.”

The company also looks to hire people with experience in propane, and Dave Williams is a good example. Williams began working in the propane industry in 1975. He became operations manager for NOCO in 2009, and this July was promoted to propane asset manager, overseeing maintenance and all propane assets including tanks, trucks, and pumping equipment of the company’s eight propane locations.

“If you looked at our company 20 years ago, we wouldn’t have had a propane expert,” Newman stated. “But now we have people who are very product- and industry-specific. There are certain unique things about handling propane. For us, that’s an important skill to have here at the company.”

As further evidence of the company’s commitment to safety, NOCO Propane employee Dick DeVita is a certified trainer for the propane industry’s Certified Employee Training Program (CETP), training NOCO employees as well as employees of competing propane marketers in the area.

Supply is also important, and NOCO’s location allows it to get propane from Sarnia in Canada as well as Selkirk and Watkins Glen in New York. Newman thinks the independent pricing of the two markets is interesting.

“Some of the propane players complain that supply can be restricted sometimes, just by capacity for storage and ability to move, but the fact that we have two different racks and two different supply points has helped us grow.”

He sees a strong future for propane in the Buffalo area because of its uses in various areas such as home heating, cooking, water heating, and clothes drying. He has heard that oil customers in his area have expressed a need for a more versatile and less-expensive product.

NOCO’s propane customers in the United States are about 75% residential, with the commercial accounts mostly for temporary heating for construction sites. The crop drying business is also busy for about four weeks in October, and Newman noted crop drying for his business is “a big part of the pre-winter seasonal surge.” The company was in the middle of its crop drying season as of press time, and Newman added that the fall has been wet this year and he expected a decent crop drying season.

The company plans to continue expanding and is looking for locations in the United States and Canada. Newman’s belief that fueloil companies should get into propane extends to Canada as well. NOCO also has its hand in various additional businesses, operating 35 NOCO Express gasoline and retail convenience stores along with a lubricant division and a real estate division.

The Akron, N.Y. location, in addition to selling propane, is a full-service facility, repairing oil burners, propane equipment, propane boilers, propane water heaters, natural gas water heaters, and also houses an HVAC installation department.

NOCO began selling propane in 1998, but the overall business is celebrating its 80th anniversary this year. The company has seen good times and bad. Newman remembers a 1979 fueloil embargo as a particularly tough time for his business and 2008 as a rocky time when crude oil prices fell and spiked.

“You have to keep your nose on your mission and not be distracted,” Newman stated. “Companies that are committed to doing the right things make it in the end.” The decision to sell propane was one of those right things.
“While propane could have been seen as the enemy, our ability to embrace it as a product that we can not only sell but successfully sell is a key to success,” Newman noted. “And I think that is the same with all of our businesses. Just try to bring on new margin sources and new ideas. Propane is a steadily growing market. We recognize that, so it’s been a great place to invest money. It’s part of our success story. Our business would be much different if we didn’t make the decision to get into propane 20 years ago.”     —Daryl Lubinsky