Whats the profit on a ton of pellet ?

  • Active since 1995, Hearth.com is THE place on the internet for free information and advice about wood stoves, pellet stoves and other energy saving equipment.

    We strive to provide opinions, articles, discussions and history related to Hearth Products and in a more general sense, energy issues.

    We promote the EFFICIENT, RESPONSIBLE, CLEAN and SAFE use of all fuels, whether renewable or fossil.
Status
Not open for further replies.
I am just curious (not in this business) - does anyone know how much dealers actually make on a ton of pellets ? The difference between box store and dealers are in the 40-50 USD/ton range right now, with some having the exact same pellets - just under different names. I would think the box store also makes its cut....

it is reasonable to assume the dealer makes 80+ USD/ton profit ? or more ?

Anyone willing to share some insights/thoughts ?
 
I'd say the average per ton is somewhere around $50. The exception is the boxstores, They can't be pulling that much at what they are selling them for. And some stove shops getting top dollar for what they sell. They probably have close to 50% markup on their pellets.
 
i wasnt happy with my area selection and price so i looked into it this year, the price wholesale on a small level avg to above avg quality pellet seems like 160 to 200 a ton then shipping puts you out of reach, mark up is about 50 to 70 a ton
 
$30 on the low side, $40 average, $50 and up in areas where there are no competitive situations. Need to point out though, thats grossing, not net. In talking with one of the suppliers who I know quite well, who does supply a Big Box or two, they basically say that at current levels the BB's are losing money......might be a sutuation of one hand not knowing what the other is doing? Much speculation on that.

As for $80 profit? In my area? no way. Half of that. Actually not all that much when you consider spoilage, loading/unloading, etc.
 
There is a lot of sweat making that "mark up". I would question if there is much of any profit. ( money after expenses )
I don't want to pay anymore than I have to, or can afford, but every retailer should make some profit if they intend to stick around. I'm paying what I consider to be a fair price from my pellet dealer. I can't help feeling that he losses whatever he made when he pays for the "free" delivery. I would hope we keep our local business woman and men in mind when we make our purchases and repair needs.
 
  • Like
Reactions: smoke show
I am all for supporting small. local businesses, But my dealer charges about $100.00 more per ton than the local box store! I may be the problem, but I will keep that extra hundred in my pocket everytime. Give me a fair price of twenty to thirty dollars more and I would consider backing my local business!
 
  • Like
Reactions: roadking88
The OP's original question was - whats the profit on a ton of pellets? That will vary greatly. The mark up may be $40-$100 a Ton, but the profit after overhead - payroll, lights, taxes, vehicles, etc; - will vary.

The BB's may treat pellets as a loss leader, or a way to get customer traffic. They also depend on Volume. Last year I made the mistake of taking wife to get pellets with me, we also walked out with $2,300 in a washer and dryer. Good profits on pellets that day!
 
There is a lot of sweat making that "mark up". I would question if there is much of any profit. ( money after expenses )
I don't want to pay anymore than I have to, or can afford, but every retailer should make some profit if they intend to stick around. I'm paying what I consider to be a fair price from my pellet dealer. I can't help feeling that he losses whatever he made when he pays for the "free" delivery. I would hope we keep our local business woman and men in mind when we make our purchases and repair needs.

agreed, Save$, as to the profits after expenses, thats why I said "gross", not net. I dont want to get into yet another discussion of what it costs to run a business, because it usually falls on deaf ears.....insurance, brick and mortar store, employees, infrastructure, yadayadayada, THAT argument is a lost cause because frankly, other than the businessowner, noone cares. You summed it up very well when you stated that you pay what you consider to be a fair price from your pellet dealer. Thats the essence of the transaction. The dealer charges what they think is "fair" (and that value can differ greatly), and you, in purchasing the pellet agree that his asking price is fair. if you dont agree, you go somewhere else where the price is "fairer" to you.
As for "free" delivery, we dont do it. Cant make it pay. A truck and moffet, one way to deliver, and they way we deliver, will run you $150-$200k, actually closer to $200k when you add in sales tax, registration fees, heavy highway use taxes, etc. A driver will cost between $15-$25/hr. And insurance, both vehicular and the Inland Marine policy needed for the forklift. You have to sell ALOT of pellets to offset these costs. How many tons can a driver deliver per day on average....oh, depending on the truck and delivery area, but about 28 or so, in an 8 hour day, so, about 3-1/2 tons per hour. Thats about $140 in GROSS profit. Now we need to deduct insurance, what the driver makes per hour, fuel, maintenance, maybe some damage from time to time on the pellets, tolls, and dont forget the purchase cost of the truck and lift factored in, as well as other carrying costs.....yea, agree, cant see how you cant charge for delivery. Of course, one can circumvent delivery charges if you pick up yourself!
 
I am all for supporting small. local businesses, But my dealer charges about $100.00 more per ton than the local box store! I may be the problem, but I will keep that extra hundred in my pocket everytime. Give me a fair price of twenty to thirty dollars more and I would consider backing my local business!

yea, thats alot per ton, as long as its the same pellet. Some dealers have the idea that the Big Boxes can sell the bulk of the pellets, but if the dealer is going to go thru the trouble of having them, and stocking them, then, well, they are gonna make the profit they want to make, and thats it. As Swaybar said above, some of the Big Boxes do treat pellets as a loss leader (which means they sell them quite literally below cost to pull folks into the stores), but no dealers I know of can afford to do that...the extra sales brought in to the hearth store wouldnt even take a bit out of the loss from the pellets....Big Boxes sell a volume of totally unrelated, high profit items that folks are more likely to buy, and they have advantages, such as the inventory, that most hearth dealers dont have (stock market investment, inventory on consignment from suppliers, cheap help, etc).....
 
The OP's original question was - whats the profit on a ton of pellets? That will vary greatly. The mark up may be $40-$100 a Ton, but the profit after overhead - payroll, lights, taxes, vehicles, etc; - will vary.

The BB's may treat pellets as a loss leader, or a way to get customer traffic. They also depend on Volume. Last year I made the mistake of taking wife to get pellets with me, we also walked out with $2,300 in a washer and dryer. Good profits on pellets that day!

Pellets selling at $188 at Lowes are definitely a loss leader.
 
oh, I guarantee it is.....and why it probably wont happen for much longer....
 
The OP's original question was - whats the profit on a ton of pellets? That will vary greatly. The mark up may be $40-$100 a Ton, but the profit after overhead - payroll, lights, taxes, vehicles, etc; - will vary.

The BB's may treat pellets as a loss leader, or a way to get customer traffic. They also depend on Volume. Last year I made the mistake of taking wife to get pellets with me, we also walked out with $2,300 in a washer and dryer. Good profits on pellets that day!


Rule number one when pellet hunting do not take the wife when scoping out the big boxes. Didn't anyone tell you that?
 
Went to lowes here and talked to manager about why pellets were 11 a bag. He said last year they sold them at a loss and will not be stocking much this year. Lameeeeee.
 
Went to lowes here and talked to manager about why pellets were 11 a bag. He said last year they sold them at a loss and will not be stocking much this year. Lameeeeee.
$11 a bag??? Is there gold pellets in there too?????
 
Either that or every bag has a chick that comes out and caresses your sack when you lift it YIKES
 
Went to lowes here and talked to manager about why pellets were 11 a bag. He said last year they sold them at a loss and will not be stocking much this year. Lameeeeee.
lol- and who's fault is it they sold em at a loss?! booohooo
 
Went to lowes here and talked to manager about why pellets were 11 a bag. He said last year they sold them at a loss and will not be stocking much this year. Lameeeeee.
What state or planet was this Lowes?:cool:
 
Fairbanks, Alaska. Its on the website too. Eureka is the brand.

pellet rip off.JPG
 
Pellets selling at $188 at Lowes are definitely a loss leader.
Just a newbie hear but I wouldn't be so sure any box store is losing money on a ton of pellets. My local HD had 30+ tons in stock with another 40 tons on order. I just looked up be regional map on HD website there are 100 stores within about a 200 mile radius +/- . If each store only stocked 30 tons for the whole season , thats 3000 tons. If you were to add in a radius of another 200 miles to my west there are another 100 HD stores. The pellets come from PA so it's possible all 200+ stores get stock from the same supplier since it falls into a close delivery area. I think it's possible that HD is getting pricing at 5,000-10,000 ton price.
If a local supplier can sell pellets at $275 ton and buys 1,000 tons from 1 supplier? I have no idea what a small supllier would purchase 1K tons seems like a high number from 1 manufacturer? What price do you think the box stores could sell at and still make a profit? $188 I think so.
Newbie to pellet stoves, buyer during the day so the profit margin was an interesting subject. I think for pellets as with just about anything it comes down to volume. Also do not believe they want to lure people to the store for pellets they are not typically hidden in the back of the store forcing you to walk thru and possibly buy something else. They are out front and you have to place a order at the front desk , but it could be something to get you in the store who knows. My 2cents on the subject.
 
$30 on the low side, $40 average, $50 and up in areas where there are no competitive situations. Need to point out though, thats grossing, not net. In talking with one of the suppliers who I know quite well, who does supply a Big Box or two, they basically say that at current levels the BB's are losing money......might be a sutuation of one hand not knowing what the other is doing? Much speculation on that.

Generally BB places run loss leaders (losing money on purpose) for several reasons. One is to drive competition under. They are a chain and can make up the loss on volume and sales at other locations. Once the competition goes under, their prices float to the previous (or higher) levels and they make a profit on the sales and gain market share. The other is to drive customers into their stores. Like any 'sale', you go in to buy stuff cheap, and maybe you buy something else while you are there, or you will come back and shop there again in the future. Its the way these places drive others out of busienss, and WalMart and Costco prevail. Another way for them to make money is to buy in massive volume. BB stores cut deals on large lots ahead of time, and manufactures give them a great price as they know they are assured a large volume of product over a long period of time. Places like CostCo will also buy lots of what I call "stranded merchandise," stuff that is sitting in a warehouse or truck that cannot be moved to its original destination, for whatever reason. Or it is about to expire on its date. Maybe weather is preventing it from being moved, or an order is cancelled, or a payment cannot be made by the buyer. So they buy the stuff up... on the cheap, and sell it for cheap. Product also commonly get dumped on BB stores to avoid inventory taxes. They can move that stuff pretty fast, and it does not sit in a warehouse someplace and get taxed.

I was at Costco this weekend and noticed that most of the stuff I buy is cheaper at other BB stores. So I am gonna let my membership there expire this year. WinCo and Home Depot are cheaper. Home Depot is really weird, or does not understand the internet very well. You can get a new 30-NC stove at some of their stores shipped to your door for 650. They are competing with their own local stores that way, for whatever reason. The local HD store price of a 30-NC is 900. It may be a way for them to get rid of excess merchandise at specific sites though, so maybe in the end they make out on the deal. *shrug* They may get a store volume sales compensation, and they are doing it for bonuses. Or they are trying to ramp up internet sales. Hard to say these days what drives some sale prices, but loss leaders are pretty standard in the BB stores. Buy it now for less always works to get customers into the stores and messes with competition. Its a thin margin in BB though, and they survive on huge volume. If volume drops, places that cut it too thin go under, like Circuit City. Best Buy is having the same problem and may not be around much longer either.
 
I think it's possible that HD is getting pricing at 5,000-10,000 ton price.
If a local supplier can sell pellets at $275 ton and buys 1,000 tons from 1 supplier? I have no idea what a small supllier would purchase 1K tons seems like a high number from 1 manufacturer? What price do you think the box stores could sell at and still make a profit? $188 I think so.
Newbie to pellet stoves, buyer during the day so the profit margin was an interesting subject. I think for pellets as with just about anything it comes down to volume. Also do not believe they want to lure people to the store for pellets they are not typically hidden in the back of the store forcing you to walk thru and possibly buy something else. They are out front and you have to place a order at the front desk , but it could be something to get you in the store who knows. My 2cents on the subject.

good points, Boss.....cept Ive been dealing with the Big Boxes since they opened hereabouts....and can unequivocably tell you they DO sell items below cost.....not all items, not even alot of items, but the price sensitive ones.....lets face it, everyone knows what a 2x4-8', a 1/2" 4x8' sheetrock, and a ton of pellets costs....those are price sensitive.....and the general thought is, simply, that "hey, if they are low on the price of this item that I KNOW the price on, then they must be lower on everything else....!"......not true really, but thats the general mentality.

1000 tons? small dealer...thats not even 30 truckloads....we arent small......I KNOW what the cost is on pellets, and I also know that any discounts given arent earth-shattering. IMHO, this is clearly a loss leader at this point in time for the BB's.
 
Status
Not open for further replies.