pellet prognostications

well, Gross Profit would be nice......but you dont make 25% on pellets, not even approaching that......not 20% either......forget Gross Profit....think NET profit......thats the real eyeopening number.....the highest cost we all have is our employees....workmens comp, benefits, taxes.....dont forget those taxes to keep our bloated government working....gotta pay for those pensions.....

HarryBack said:

well, Gross Profit would be nice......but you dont make 25% on pellets, not even approaching that......not 20% either......forget Gross Profit....think NET profit......thats the real eyeopening number.....the highest cost we all have is our employees....workmens comp, benefits, taxes.....dont forget those taxes to keep our bloated government working....gotta pay for those pensions.....

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Back to the conclusions we came to earlier in a similar thread....

Bottom line - if biomass fuels are actually going to be more than a little fad, the fuels will have to be sold by outlets that are NOT hearth dealers. As a hearth dealer for 20+ years, I can assure the public that it is rare for the dealer to make ANY money on the sales of Pellet Fuel AFTER overhead is figured in!

And, speaking for myself as a retailer, I WAS NOT happy to see all the pellet customers return to my store on a frequent basis. Sure, it might sound good, but here is a typical experience.....

Most hearth shops are understaffed during the busy season....it's a fact of life. So we'd be working hard selling stoves, and typically 10 minutes before closing time in comes an old Pellet Stove customer who wants 8 bags of fuel. We have to stop what we are doing, go outside or to the warehouse and load this fella up with the 8 bags. Our gross profit: about $4.00.

The return pellet customers rarely, if ever, bought more stuff at the store cause all they needed were pellets and sometimes fire starter. I often would have two or three customers deep at the counter purchasing stoves....and then the pellet buyer would walk in and pulled some one's out of his pocket and say "I'd like 6 bags please".

Not to be rude to the customer, but it just does not work. It's like running a jewelry store and then having customers come in to buy penny candy!

The truth, in my opinion, is that bulk goods like coal, firewood and pellets are better sold by other types of operations that are used to handling bulk materials and have lower cost employees. Sure, there are exceptions to this rule, but I think the majority of hearth dealers would LOVE to see CHEAP pellets available at multiple outlets for their customers. Only this type of supply will assure a continuing market in the appliances and fuels. Otherwise, all we are doing is going from a fuel with unlimited supply to a fuel with a more limited supply....fruitless!

Friend's parents put in a pellet stove this year. They got 3 tons for 400. They are fortunate because another friend of theirs is a trucker. once a year he takes a trip and picks up a full trailer of pellets. He has friends of his thru whatever manner he as ammased (church, business contacts, etc).....he has enough people who go in on it with him that he can go up and buy a full trailer of pellets and bring it back. Everyone who goes in on it with him gets a decent price on pelets and he probably makes a little cash as well. or at least supliments his own pellets. Innitiative always pays.

DavidV said:

Friend's parents put in a pellet stove this year. They got 3 tons for 400. They are fortunate because another friend of theirs is a trucker. once a year he takes a trip and picks up a full trailer of pellets. He has friends of his thru whatever manner he as ammased (church, business contacts, etc).....he has enough people who go in on it with him that he can go up and buy a full trailer of pellets and bring it back. Everyone who goes in on it with him gets a decent price on pelets and he probably makes a little cash as well. or at least supliments his own pellets. Innitiative always pays.

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Initiative usually does and should pay off. Thats a good idea for a trucker to go up and get a load for friends and neighbors. In my talks with the pellet companies tho, Ive been told that they arent taking new customers, and also that they may stop selling to "non-professionals" (folks not in "the business"), due to lack of supply. Im also told that some pellet companies will no longer give Spring Pricing, and try to lower the fall/winter costs by charging more for spring pellets. I guess time will tell.
Bulk pellets are also a good idea, if the infrastructure is there to make it anything other than a logistics nightmare. Im my case, I would have to erect a silo, have a railcar unload into trucks, since we have no rail siding, deliver it to our place, and unload it. Given the folks we have for customers, I just dont see enough of them with the ability or the ambition to pick up the pellets......it may come to be, but someone would certainly have to prove the viability of actually making a profit for me to build a Silo to do this....also, in our area, zoning tends to be a HUGE issue.......cant have a building over 2 stories high in our town.....well, a NEW building over two stories high.

From a stove buyers standpoint it seems to be a hard business to make money in. Once you buy the stove what else do you need? Pellets... and as you guys say, and I see, it is futile to deal with the storage, shipping, waste..I see pallets split open all ove the place in dale I mentioned, and making 4 bucks on moving hundreds of lbs of anything!! Shoot, what do ya make on a stove 7-8 hundred bucks? Then you have every tom dick and harry selling junk cheap stoves(I saw a stove at Menards and the hinges were bent the metal was so thin, the US Stoves at Fleet that people complain about all day long but payed under 1500 for) and people get bad tastes in their mouth and burn gas, oil, whatever is easy.

I have talked to guys that sell corn stoves. It is oiled for dust, and cleaned and they deliver on a auger truck. Check out iburncorn.com on accessories and you can see you can get a 2 ton bin for less than a grand. Pay 65 a ton for corn charge 120 or whatever a ton deliverd, and fill up at the feed mill when ya need to. Sell good stoves that are clean and low maintanence. the only fly in the ointment is corn price fluctuates. Think about 93 when the mississippi flooded. Anyway now days there are few simple ways to make a buck. Anyway

HarryBack said:

well, Gross Profit would be nice......but you dont make 25% on pellets, not even approaching that......not 20% either......forget Gross Profit....think NET profit......thats the real eyeopening number.....the highest cost we all have is our employees....workmens comp, benefits, taxes.....dont forget those taxes to keep our bloated government working....gotta pay for those pensions.....

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You keep changing stances depending on your point you are trying to put forth; are you sure you ain't in government?
If you are big enough to sell 4000 + tons then you should be big enough to deal with suppliers, storage, home deliveries, and still put those lumps in the old matteress.

homefire said:

HarryBack said:

well, Gross Profit would be nice......but you dont make 25% on pellets, not even approaching that......not 20% either......forget Gross Profit....think NET profit......thats the real eyeopening number.....the highest cost we all have is our employees....workmens comp, benefits, taxes.....dont forget those taxes to keep our bloated government working....gotta pay for those pensions.....

Click to expand...

You keep changing stances depending on your point you are trying to put forth; are you sure you ain't in government?
If you are big enough to sell 4000 + tons then you should be big enough to deal with suppliers, storage, home deliveries, and still put those lumps in the old matteress.

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how am I changing stances, praytell? I said 3-4000 tons...thats correct and accurate.....suppliers: can get enough pellets, folks that dont plan get upset...I cant control that....storage....how much is warehousing space where YOU live? thats sure to eat into the lumps in my mattress.....home deliveries....wow...where do I BEGIN to enumerate the issues there?.....gotta deliver between 12 and 1 pm, cuz thats when i get lunch, but only on odd thursdays, and not in the rain......WHAT!? you wont stack them in my shed!? Im elderly/sick/weak/lazy...cant do it myself! Besides, your recent estimate of making 25% is inaccurate....if I made 25%....niiiice. No, sadly, Im not in government, wasnt smart enough to jump on that golden train when i was young.....

read the webmasters post above.....he does a good job of explaining it like it is...the unvarnished truth......

Harry, some people think we need buy something for a $1.00 and sell it for $1.05 after you spend $3 to get it ready to sell.

The Yellow page ad they used to find you was free in comes with your phone service.

The warehouse is part of your $500 a month rent you pay.

The suppliers supply the forklift.

The man that is operating the forklift just does it because he has nothing better to do and it is fun holding a freezing cold 10 deg steering wheel and does not need to get paid just buy him lunch.

Insurance you are covered by your homeowners insurance.

Lights in the store you have a Water powered generator in the back 40.

Taxes who need to pay taxes.

hearthtools said:

Harry, some people think we need buy something for a $1.00 and sell it for $1.05 after you spend $3 to get it ready to sell.

The Yellow page ad they used to find you was free in comes with your phone service.

The warehouse is part of your $500 a month rent you pay.

The suppliers supply the forklift.

The man that is operating the forklift just does it because he has nothing better to do and it is fun holding a freezing cold 10 deg steering wheel and does not need to get paid just buy him lunch.

Insurance you are covered by your homeowners insurance.

Lights in the store you have a Water powered generator in the back 40.

Taxes who need to pay taxes.

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Thankyou, Rod, for clearing that up for me......tho I think you might have forgotten one or two points:

I only make 5 cents per bag because rather than wanting to actually feed my family, Id rather just sell pellets to be a "good guy".....hey, wait a minute, how about being a Philanthropist!? Maybe I sould sell BELOW cost?

The 220,000 dollars that I supposedly make selling pellets at 25%.....oh wait.....my daughter is going to college.....thats 34,000 dollars per year......wait a sec....my other daughter goes to the orthodontist.....4,000 dollars.......

I dont really need lights in my store, can figure everything longhand, kinda a Luddite existence, but wait a sec, without power, I cant run my pellet stove.

When the freezing yard guy slips on the ice with his forklift that he brings in to work each day, spears 5 bags of pellets, lets see...gotta figure out how many more bags I gotta sell to break even....harder to do longhand tho.....hold on folks! I know theres a long line at the sales counter, but Im counting on my fingers and toes as fast as I can!

The tech who installs and fixes the units goes everywhere on his own bicycle, and is SO good that he fixes the stoves with only his own Swiss Army knife! Its great, because its a commonly known fact that warrantee work is a profit goldmine!

I guess I failed to see that all of you eggs are in the pellet basket as I thought you guys are in the hearth business. It appears from your whining if not for taking advantage of this years pellet price spike boom you guys were belly up.
I was not really pointing fingers at any one dealer nor was I even saying either of you are guilty of the gouge until your last few replies.
I am a businessman and I made my mattress lumpy over the years. Yes I have had the occasional year when I really was in deep trouble but I had those lumps to fall back on. I have also had years when I made more money than Davey Crockett. I never had to gouge anyone to do that either ,just worked harder and employed more people to share the wealth when it was the right thing to do.
I guess that is the difference in our business models.

can you say passive-aggressive?

sorry about that last post....not constructive...my apologies.

Unless someone was selling pellets at $450 a ton a don’t see gouging.

Shipping is reason pellet prices are high.
Pellets average cost $90 -$130 before shipping depending on where and what kind of fuel.

Pellet cost me $225 to my door.
Selling them at $245 now if you thing that is ripping people off then you are missing something because at that price I am Steeling from myself But I have to do it to compete with the big box stores that are selling at $5 over cost.

To make our normal profit we need to be selling them at around $300

You see the sales at other types of stores Sears, Jewry stores and such
$40% off sales.
Crap we don’t make %40 off anything and you call us gougers

I like Rod more and more. Well, Rod, Im a price gouger.....Im selling for 249/ton.

HarryBack said:

I like Rod more and more. Well, Rod, Im a price gouger.....Im selling for 249/ton.

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Harry,

Are you worried that at the price you have to charge for pellets it becomes just as expensive or more expensive to heat a house with pellets as it does natural gas? Using the fuel cost comparisons from this website (hearth.com) and then using numbers that Craig has given(1.80) and what I know my cost per therm(1.07) that for Craig it would be pretty much even cost between Natural gas and pellet heat. For me it would cost 800$ more to heat with pellets. Are you worried that the price of pellets is going to kill your pellet stove sales? People are dumb and listen to the media for awhile but eventually they will catch on that they aren't saving any money. The cost of the stove, the hassle of finding/purchasing pellets, sales tax, hassle of daily reload/clean and soon the true cost of heating a home with pellets is apparent. Why would anyone in their right mind do it??? Just wondering...

roac said:

HarryBack said:

I like Rod more and more. Well, Rod, Im a price gouger.....Im selling for 249/ton.

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Harry,

Are you worried that at the price you have to charge for pellets it becomes just as expensive or more expensive to heat a house with pellets as it does natural gas? Using the fuel cost comparisons from this website (hearth.com) and then using numbers that Craig has given(1.80) and what I know my cost per therm(1.07) that for Craig it would be pretty much even cost between Natural gas and pellet heat. For me it would cost 800$ more to heat with pellets. Are you worried that the price of pellets is going to kill your pellet stove sales? People are dumb and listen to the media for awhile but eventually they will catch on that they aren't saving any money. The cost of the stove, the hassle of finding/purchasing pellets, sales tax, hassle of daily reload/clean and soon the true cost of heating a home with pellets is apparent. Why would anyone in their right mind do it??? Just wondering...

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This is true in my mind pellets have to stay far enough under gas to make it worth the extra work. Especially in areas where pellets are hard to find. The gap is rapidly closing in our area the per hour difference between running a 45,000 btu gas stove and a 45,000 but pellet stove is only around .11 cents. If pellets go above 4.00 per bag then it becomes more expensive. Then the only folks left saving money are the ones with electric heat.

You guys are just getting a taste of what everyone has been saying aboutthe Oil industry. You take all the risk and people think you are gouging if the price goes up. Oil people take the risk and if the price goes up, it's gouging. We had a guy here who sent one of his employees up to get a truck load of Generators from Pennsylvania just before the Hurricane hit us a few years ago. He had to pay his employee overtime, pay for the rental truck. pay for the hotel and food for the employee, gas....all the expenses. So it cost him more than normal to get the Generators.....and he sold them at a fair profit. And he was innundated with complaints to the state on price gouging. go figure.

I get crazy stuff from people all the time with my houses. "WHAT? I have to pay the first month's rent AND a month deposit?? That's like a down payment on a house" uhhh....yeah. folks think I should be able to lower the price just for them.....since I can keep charging other people the regular price. I'm sure I'm guilty of it myself. everyone wants something for nothing.

I have no problem paying more for pellets, and want my pellet dealer to make money on the sale so they will be there next year. 300 of my coworkers continue to proudly serve our company on floors 86-101 of the North tower. Pellet heat to me is patriotism, not economics. Corn is cheaper and more available, and I am forced to look at that because people who rushed to pellet heat to save money post-Katrina have made pellets impossible to find in Northern NJ.

NG/LP VS Pellets

Lets see we can grow more trees but we CAN NOT grow more Dinasors.

Burning Pellets have less GREEN HOUSE EFFECT than most other heating type

I dont have NG in my area the only energy source is Power at 0.14 KWH Base rate 0.18 after your base rate
and LPG at $2.30 - $2.60 per gal.

I have no idea what the cost of NG is for the nearest NG line to me is 60 miles away

hard Wood is $200 - $230 Cord.
Cost of heating my area

Wood Cost per million BTU=$14.33

Pellets Cost per million BTU=$17.17

LPG Cost per million BTU=$33.53

Electric Cost per million BTU=$49.82

useing the calucator here http://www.pelletheat.org/3/residential/compareFuel.cfm

richg said:

Pellet heat to me is patriotism, not economics.

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Rich,

Natural gas does not come from the middle east. Folks in Texas, Louisiana, and Oklahoma produce most (80%) of our natural gas. Roughly 12% of our NG is imported from terrorist nations like Canada and Mexico. Pellets are made in Canada too.

hearthtools said:

NG/LP VS Pellets

Lets see we can grow more trees but we CAN NOT grow more Dinasors.

Burning Pellets have less GREEN HOUSE EFFECT than most other heating type

I dont have NG in my area the only energy source is Power at 0.14 KWH Base rate 0.18 after your base rate
and LPG at $2.30 - $2.60 per gal.

I have no idea what the cost of NG is for the nearest NG line to me is 60 miles away

hard Wood is $200 - $230 Cord.
Cost of heating my area

Wood Cost per million BTU=$14.33

Pellets Cost per million BTU=$17.17

LPG Cost per million BTU=$33.53

Electric Cost per million BTU=$49.82

useing the calucator here http://www.pelletheat.org/3/residential/compareFuel.cfm

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Rod,

Not all NG comes from dinos. A small % of NG is actually renewable, so yes we can "grow" more.

It would be stupid to argue that pellet heat doesn't make sense in all areas of the US . I know in your rural area a NG pipeline is not present. My argument goes to the enormous growth in pellet stove sales this heating season where NG is present. Not all of this sales growth occured in rural areas like yours. There are a lot of people out there that got on the pellet heat is cheaper bandwagon to save money over their rising NG. I'm also not arguing the "better for the environment" I agree. But , most people look to their pocketbook first and maybe the environment second.

roac said:

richg said:

Pellet heat to me is patriotism, not economics.

Click to expand...

Rich,

Natural gas does not come from the middle east. Folks in Texas, Louisiana, and Oklahoma produce most (80%) of our natural gas. Roughly 12% of our NG is imported from terrorist nations like Canada and Mexico. Pellets are made in Canada too.

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terrorist nations like Canada and Mexico ??????
WTF ?

I buy all my pellets from Canada

The folks that produce NG ?
They can not grow more once it is gone.

Rod how could I be more clear with the sarcasm??? Who in their right mind would think I was serious??

Take a chill pill dude.

Yes they can "grow" more. A small percentage of our NG is mined from landfills. This is renewable because we create more and more trash