When a couple of the HHT executives came to our shop a couple of months ago they asked us if we were going to be attending Harman's annual dealer meeting. We said, "No. Because the PFI had sent out their notice of annual meeting months before, and by the way why would Harman book their meeting when the PFI has theirs?" The response stopped me in my tracks. "PFI- What is it that they do, again?" Unfortunately, in many ways I agree with his assessment that the PFI is disjointed, unorganized, and in many cases ineffectual, but I would have liked to see a more proactive response of having industry reps get more involved to help get it on the right path than having them mock it and walk away. He is a good guy, don't get me wrong, it just wasn't what I hoped to hear.
So, off to muggy South Carolina for the meeting. There were probably approximately 250 people in attendance. This has grown impressively. According to one long time member they started back in Missouri in the early 1990's with six people meeting in a hotel room. In attendance were mostly fuel manufacturer's, pellet mill equipment manufacturer's, two maybe three stove manufacturer's reps- including Dan Henry from HHT, a couple of commercial boiler manufacturer's, and three maybe four dealers.
The board meeting took place the day before we arrived. There was a little "professional" scuffle that changed their intended path for leadership. Scott Jacobs from Ozark Pellets in Missouri emerged as the new PFI President, replacing long time President Bruce Lisle of Energex.
After opening comments John Swaan from the Wood Pellet Association of Canada was first to speak. He talked of the success in exporting fuel to Europe. How we exported more pellet fuel to Europe last year than we used domestically, and future growth potential. He was followed by Christian Rakos from an Austrian company who affirmed the success of wood pellet for use as fuel and energy, and said that they would be willing to share their experiences to help us grow.
Dave Atkins did a presentation on a program called Fuels for Schools in which chip fired and/or pellet fired boiler systems were being installed in schools through a grant program. The savings experienced by these schools was impressive.
A representative from ACORE (American Council on Renewable Energy) did a presentation on the potential of biomass energy, and how the pellet industry could benefit from partnering with ACORE.
Then the conversation really steared toward commercial/industrial uses and introduced the catch phrase of the weekend- Biomass Thermal Energy. Their presentation conveyed to the fuel manufacturers that the real growth in the industry was in commercial and industrial applications. Large boiler systems are beginning to emerge, and larger players are developing ground level partnerships for energy production, and industrial applications. There were a couple of larger boiler manufacturer's present who presented their system, and partnership proposals to install these larger systems which would be delivered by bulk from the manufacturers directly.
They also spoke of new legislation that would subsidize biomass use for power production. There was concern among the group about raw material difficulties, and how this would magnefy the issues if they were competing against groups that could use the subsidy. Talk shifted to government affairs with the usual plea for funds for lobbying efforts. This is where the PFI seems to get stuck. The talk of raw material shortages arises. Then it is clarified that the easy and inexpensive raw material is getting difficult to get. You have to pay where ten years ago you may not have... Then talk turns to growing both individually and as an industry. A great number of pellet mills are not interested in growth. I can see their point. Growth is risky- Remember what happened the last time the industry took a big leap in 2005 pulling in all sorts of fuel from Canada's West coast and put big bucks into processing plants? We certainly do. To put a number on it, dealer's who grew capacity to meet the last demand bubble lost five figures, pellet mills lost six to seven figures, and stove manufacturer's lost seven or eight figures. That is a lot of zeroes!! Thus the PFI divides. Small stable growth to support local residential markets on one end, and the extreme company that wants to go all commercial industrial and spend every penny on government lobbying on the other.
The conference had it's light moments, like when Dan Henry's friend sang a song he had written in the seventies about a Plain Ol' Brown Recyclable Paper Sack (I think I got it right??), and it was good to see familiar faces, and try to get a feel for their take on the current situation.
There was a good conversation about standards. They have come up with a label and testing system that will classify wood pellets more consistently, and slightly more accurately. The big definer will still be ash content, although it will also include btu's sodium content, etc. This will help the end user have a better idea about what is in the bag as 99% of pellets on the market claim premium status by the current definition.
I do have to say that as a dealer I would have been very disappointed if I attended the PFI conference hoping for answers about pellet fuel availability and solutions for the current situation in the Northeast. There really, that I noticed, was no talk of residential use, dealers, or supply issues in the Northeast.
The focus of this conference was commercial and industrial applications, using wood pellets for thermal energy, and obtaining government support.
I walked away from the conference with two main thoughts- We are now exporting more inexpensive wood pellet fuel to Europe than we use domestically, while importing even more expensive oil. The growth of this industry, at least by the the main Northeast pellet manufacturer's desire, is in commercial and industrial applications.
Thursday, July 31, 2008
Friday, July 25, 2008
Letter from Harman Representative
Posted with permission from Charlie Page:
Dear Harman Customer,
The demand for Harman pellet and wood stoves over the last three months in the Northeast has been overwhelming. The reality is that this demand is greater than plant capacity.
The company has allocated stoves to the dealers in the Northeast. In some cases lead times for stoves which were ordered have been pushed into “pool” dates in the first and second quarters of 09. The company’s plan is to provide a limited but balanced flow of stoves into the Northeast and move these back ordered stoves into production as capacity becomes available.
As the Northeast Harman Factory Representative I can assure you that the company is doing everything possible to help speed up support for the Harman dealer network and Harman customers without compromising on product quality. The production ramp up is significant and will involve purchasing new lasers and bending equipment, hiring many more employees and working very closely with company suppliers throughout the remainder of this year and into the first half of 2009.
The fact is, even with the aggressive ramp-up in production which is underway, it will take a while to fill back orders and meet future demand. While it is easier said than done, I am asking all homeowners that have either purchased or placed deposits on Harman stoves to be patient. Every stove will be built.
The company has committed to communicate realistic delivery dates months in advance in order to help my Northeast dealers manage expectations. Right now the stoves that have been pushed into 2009 have not been assigned to specific manufacturing runs, but will be within a reasonable period of time. We will let your dealer know when your stove is scheduled to be built as soon as those dates are established and you can then plan accordingly.
I know that many homeowners are upset about these long lead times – frankly I would be too – but there is one thing I would like to say – Harman stoves are worth waiting for! Unlike some people who are in sales – I am a Harman stove user and I have over 30 years experience heating with wood and pellet stoves. I use my Harman stoves in the spring and fall and in the dead of winter at -30° F. Harman stoves work, they are easy to maintain and they are reliable. You will be living with your new stove for a long time so my advice is to please be patient. Harman stoves are the best made and best designed stoves on the market today----that’s why the demand has exceeded production.
Sincerely,
Charlie Page
Northeast Harman Stove Representative
Dear Harman Customer,
The demand for Harman pellet and wood stoves over the last three months in the Northeast has been overwhelming. The reality is that this demand is greater than plant capacity.
The company has allocated stoves to the dealers in the Northeast. In some cases lead times for stoves which were ordered have been pushed into “pool” dates in the first and second quarters of 09. The company’s plan is to provide a limited but balanced flow of stoves into the Northeast and move these back ordered stoves into production as capacity becomes available.
As the Northeast Harman Factory Representative I can assure you that the company is doing everything possible to help speed up support for the Harman dealer network and Harman customers without compromising on product quality. The production ramp up is significant and will involve purchasing new lasers and bending equipment, hiring many more employees and working very closely with company suppliers throughout the remainder of this year and into the first half of 2009.
The fact is, even with the aggressive ramp-up in production which is underway, it will take a while to fill back orders and meet future demand. While it is easier said than done, I am asking all homeowners that have either purchased or placed deposits on Harman stoves to be patient. Every stove will be built.
The company has committed to communicate realistic delivery dates months in advance in order to help my Northeast dealers manage expectations. Right now the stoves that have been pushed into 2009 have not been assigned to specific manufacturing runs, but will be within a reasonable period of time. We will let your dealer know when your stove is scheduled to be built as soon as those dates are established and you can then plan accordingly.
I know that many homeowners are upset about these long lead times – frankly I would be too – but there is one thing I would like to say – Harman stoves are worth waiting for! Unlike some people who are in sales – I am a Harman stove user and I have over 30 years experience heating with wood and pellet stoves. I use my Harman stoves in the spring and fall and in the dead of winter at -30° F. Harman stoves work, they are easy to maintain and they are reliable. You will be living with your new stove for a long time so my advice is to please be patient. Harman stoves are the best made and best designed stoves on the market today----that’s why the demand has exceeded production.
Sincerely,
Charlie Page
Northeast Harman Stove Representative
Thursday, July 24, 2008
Harman
Harman's annual dealer meeting was held this last weekend. This is an event we dealers look forward to each year to see new products, discuss the upcoming season, and see Harman's facility which is always growing and changing. This year was even more anticipated as Harman has new owners, and demand is back to surge levels resulting in supply and distribution challenges. Not necessarily new challenges but with new faces, procedures, and at a higher volume than we have seen previously.
Many people have been spreading rumors and/or beating down Harman online. Unfortunately, I have not seen credible information or sources to this end. I would like to throw my two cents in to the ring for consideration. I am biased. We are one of Harman's larger dealers, and are big proponents of the wood pellet industry.
Our orders started increasing in volume in May. At this point we were still operating off of our early buy inventory. This is an order done by dealers in the spring that equals approximately 1/3 to one half of anticipated sales for the year. By June those stoves had all been spoken for and we started putting in little orders as we our sales occurred. We were cautious because many MANY of us were burnt hard the last time (2006) we really ramped up to meet an overwhelming demand. We did not want to put ourselves in that dangerous put you out of business situation we had just barely recovered from. Home and Hearth Technologies was in the process of introducing a distribution program to the larger dealers that would accomodate our desire to not stock large amounts of stoves. While this was going on Harman was making a needed software change to HHT's system as this is usually the quiet time of year. As the orders began to pile up we heard through the grapevine that an old tactic of dealers placing large orders in anticipation of high demand had begun. We placed a large order ourselves even though the new distribution program was still on the roster. The new computer system started spitting out paper. It automatically processed and placed the orders in their system and faxed confirmation. Around this time the dealer's on the new program had to put their orders in for the coming months. We put that order in, too. At this point Harman was already sending warning shots for orders ship accuracy. We kept taking orders but informed our customers it may be a wait extending in to first quarter. This did the opposite of slow things down. People were in full panic mode at this point. We would sell record numbers of stoves, have ten people waiting on a 90 degree day, and the phone would ring non-stop all day.
I would like to point out that our other pellet stove lines are also backordered and giving out inaccurate dates at this point due to the overwhelming order volume. Not just Harman. We have had dates pushed back on multiple lines, and backorders are in place for all but a handful of dealers/stoves.
Harman visited key dealers to determine if the orders they were receiving were real or just anticipation ordering as has happened in the past (like the last time we all ramped up for demand that disappeared overnight= last year). As soon as they determined it was a real demand they began to act. They made a decision not to flood the market with stoves fearing that it would trigger a pellet shortage. I do think that the PFI and stove manufacturer's could greatly benefit from communicating real sales numbers to each other to make sure there are enough of both to meet demand but that is a topic for a different time and group... Harman also decided to take control of the situation and allocate stoves to all dealers instead of sending huge numbers of stoves to people as the orders had been submitted. (10 here, 10 there... instead of 1000 to one). This does not make the one guy who ordered 1000 very happy but keeps a hundred dealers who ordered ten able to cover at least some of their demand. They spent a great deal of effort to best determine how to accomodate the maximum number of consumers throughout the Northeast (peak of demand) and the rest of the country. I did not get all of the stoves I ordered but I fully understand why Harman did it and agree with their long term prognosis. We heeded their warnings and have minimal schedule conflict other than a stove ship date being a couple of months off. This is frustrating to some but this is a long term solution and a stove will last fifteen to twenty years with proper care and maintenance so a couple of months is relatively small in comparison. Harman is continuing to hone their existing production lines and working to add additional capacity which may improve the status even more.
I have confidence in Harman, and Hearth and Home technologies. I would like to think that we have turned the corner on acknowledging wood pellet heat as a viable and needed alternative. I don't think we will have many more chances if the public once again turns their back on pellets like they did last year. We need to stop exporting inexpensive, local, renewable wood pellet fuel to decrease our dependence on expensive imported oil and gas. If you want things to grow and change faster write your congressman and senator. Send a donation to the Pellet Fuels Institute to support lobbying efforts to push through rebates and/or tax write offs for wood pellet appliances and or fuel. Be part of the solution.
Many people have been spreading rumors and/or beating down Harman online. Unfortunately, I have not seen credible information or sources to this end. I would like to throw my two cents in to the ring for consideration. I am biased. We are one of Harman's larger dealers, and are big proponents of the wood pellet industry.
Our orders started increasing in volume in May. At this point we were still operating off of our early buy inventory. This is an order done by dealers in the spring that equals approximately 1/3 to one half of anticipated sales for the year. By June those stoves had all been spoken for and we started putting in little orders as we our sales occurred. We were cautious because many MANY of us were burnt hard the last time (2006) we really ramped up to meet an overwhelming demand. We did not want to put ourselves in that dangerous put you out of business situation we had just barely recovered from. Home and Hearth Technologies was in the process of introducing a distribution program to the larger dealers that would accomodate our desire to not stock large amounts of stoves. While this was going on Harman was making a needed software change to HHT's system as this is usually the quiet time of year. As the orders began to pile up we heard through the grapevine that an old tactic of dealers placing large orders in anticipation of high demand had begun. We placed a large order ourselves even though the new distribution program was still on the roster. The new computer system started spitting out paper. It automatically processed and placed the orders in their system and faxed confirmation. Around this time the dealer's on the new program had to put their orders in for the coming months. We put that order in, too. At this point Harman was already sending warning shots for orders ship accuracy. We kept taking orders but informed our customers it may be a wait extending in to first quarter. This did the opposite of slow things down. People were in full panic mode at this point. We would sell record numbers of stoves, have ten people waiting on a 90 degree day, and the phone would ring non-stop all day.
I would like to point out that our other pellet stove lines are also backordered and giving out inaccurate dates at this point due to the overwhelming order volume. Not just Harman. We have had dates pushed back on multiple lines, and backorders are in place for all but a handful of dealers/stoves.
Harman visited key dealers to determine if the orders they were receiving were real or just anticipation ordering as has happened in the past (like the last time we all ramped up for demand that disappeared overnight= last year). As soon as they determined it was a real demand they began to act. They made a decision not to flood the market with stoves fearing that it would trigger a pellet shortage. I do think that the PFI and stove manufacturer's could greatly benefit from communicating real sales numbers to each other to make sure there are enough of both to meet demand but that is a topic for a different time and group... Harman also decided to take control of the situation and allocate stoves to all dealers instead of sending huge numbers of stoves to people as the orders had been submitted. (10 here, 10 there... instead of 1000 to one). This does not make the one guy who ordered 1000 very happy but keeps a hundred dealers who ordered ten able to cover at least some of their demand. They spent a great deal of effort to best determine how to accomodate the maximum number of consumers throughout the Northeast (peak of demand) and the rest of the country. I did not get all of the stoves I ordered but I fully understand why Harman did it and agree with their long term prognosis. We heeded their warnings and have minimal schedule conflict other than a stove ship date being a couple of months off. This is frustrating to some but this is a long term solution and a stove will last fifteen to twenty years with proper care and maintenance so a couple of months is relatively small in comparison. Harman is continuing to hone their existing production lines and working to add additional capacity which may improve the status even more.
I have confidence in Harman, and Hearth and Home technologies. I would like to think that we have turned the corner on acknowledging wood pellet heat as a viable and needed alternative. I don't think we will have many more chances if the public once again turns their back on pellets like they did last year. We need to stop exporting inexpensive, local, renewable wood pellet fuel to decrease our dependence on expensive imported oil and gas. If you want things to grow and change faster write your congressman and senator. Send a donation to the Pellet Fuels Institute to support lobbying efforts to push through rebates and/or tax write offs for wood pellet appliances and or fuel. Be part of the solution.
Wednesday, July 9, 2008
Allocation
Here we go again... The demand for pellet stoves and fuel has again reached record breaking levels- at least in the NorthEast. On the one hand I get very excited when pellet receives the support and enthusiasm I feel it should get every year but, I do worry about the long term effects of such out of the ordinary demand.
The hearth industry, and the pellet sector are coming off one or two of the worst years on record. Dealers, distributors, and manufacturer's were sitting on warehouses full of goods and banging their heads on the wall trying to figure out what happened? and how to get things moving again. Then during this spring there were hints. Sales promotions yielded much better than average results, calls started coming in early for pre-buy stove orders. By the time the pellet early buy order letters went out there was no stopping it. Orders poured in via the phone, fax, and e-mail. Just when you thought it would slow down a bit it would double.
The first month or two were o.k. Mills were just ramping up for the year and were able to keep up. Then we started losing ground- FAST! Mills could not keep up. Some of it due to the sheer volume requested, some due to trucking logistics.
The old saying is that the mills have the most product in the spring, but actually the opposite is true. During the winter their sawdust supplies actually decrease because suppliers generally use a good portion of it to heat their own buildings. Put that on top of late winter demand for pellets and you end up with the leanest supply of fuel in the spring. Larger mills are able to produce about the same amount of product throughout the year due to larger numbers of raw material contracts, and mill capacity but they certainly don't come out of the heating season with a larger than normal supply.
The word got out early this year somehow and everyone was ordering their fuel early, and in amounts often exceeding what they usually use in a heating season. This alone has created an unprecedented bottleneck! Then the hoarding. This is about as close to an attempted death blow our industry can face at this point. People hoard one year and we can't keep up causing rumors and speculation about the viability, then the next year no one is buying fuel, leaving dealers, and manufacturer's sitting on excess inventory barely surviving... Vicious cycle!
By the end of June most manufacturer's have a pile of massive speculation orders on their desk, and dealers are sold out as far as they dared to sell. Then the inevitable price increases come. The demand is so high the mills are running seven days a week, and up to 24 hours a day. Overtime costs. If a machine goes down it needs to be fixed NOW! Overnight costs on parts, and higher maintenance costs. We need more raw material. Highest bidder, and higher costs for product NOW! Add to that increasing trucking costs, and the weakening US dollar...
Now the dealers, who generally work on a tight margin anyway are taking it on the chin. We absorbed the first price increase, then a second. By the time the third increase comes around you have to send out a letter or make a dreaded phone call to soon angry consumers who don't want to pay a higher price... Allocations kick in. You can have 110% of what you purchased in year's past, or I can only get you X amount of fuel this month. Then loads don't show up because of production glitches, or trucking issues. In many years this inability to get more fuel has slowed sales. Not this year... I really suspect that this may be the last year pellet manufacturer's offer early buy programs at least as we have seen them in the past. The need to distribute fuel year round (as it is made) will need to happen. The mad rush we are getting in the spring is no longer managable.
The back side of this is stoves. You can't get a Harman stove in New England until next year. Most other manufacturer's are back ordered until October, November, or December at this point. In the past the manufacturer's have ramped up their facilities, added shifts and production lines to try to meet the demand. This year Hearth and Home Technologies, owner of the largest pellet stove manufacturer Harman, as well as Quadrafire decided to change the game. In an attempt to control the beast they made the decision to NOT double, triple... production to meet the demand. They are setting allocation levels so as not to flood the market with stoves that may not be able to get fuel. While this may be frustrating in the short term I am hopeful that it will help control the wild swings this industry has been going through. To a consumer I say that these stoves last fifteen to twenty years if you take care of them, and Europe has already proven that it is a viable alternative fuel source, so even if you have to wait until next spring it is worth it!
The hearth industry, and the pellet sector are coming off one or two of the worst years on record. Dealers, distributors, and manufacturer's were sitting on warehouses full of goods and banging their heads on the wall trying to figure out what happened? and how to get things moving again. Then during this spring there were hints. Sales promotions yielded much better than average results, calls started coming in early for pre-buy stove orders. By the time the pellet early buy order letters went out there was no stopping it. Orders poured in via the phone, fax, and e-mail. Just when you thought it would slow down a bit it would double.
The first month or two were o.k. Mills were just ramping up for the year and were able to keep up. Then we started losing ground- FAST! Mills could not keep up. Some of it due to the sheer volume requested, some due to trucking logistics.
The old saying is that the mills have the most product in the spring, but actually the opposite is true. During the winter their sawdust supplies actually decrease because suppliers generally use a good portion of it to heat their own buildings. Put that on top of late winter demand for pellets and you end up with the leanest supply of fuel in the spring. Larger mills are able to produce about the same amount of product throughout the year due to larger numbers of raw material contracts, and mill capacity but they certainly don't come out of the heating season with a larger than normal supply.
The word got out early this year somehow and everyone was ordering their fuel early, and in amounts often exceeding what they usually use in a heating season. This alone has created an unprecedented bottleneck! Then the hoarding. This is about as close to an attempted death blow our industry can face at this point. People hoard one year and we can't keep up causing rumors and speculation about the viability, then the next year no one is buying fuel, leaving dealers, and manufacturer's sitting on excess inventory barely surviving... Vicious cycle!
By the end of June most manufacturer's have a pile of massive speculation orders on their desk, and dealers are sold out as far as they dared to sell. Then the inevitable price increases come. The demand is so high the mills are running seven days a week, and up to 24 hours a day. Overtime costs. If a machine goes down it needs to be fixed NOW! Overnight costs on parts, and higher maintenance costs. We need more raw material. Highest bidder, and higher costs for product NOW! Add to that increasing trucking costs, and the weakening US dollar...
Now the dealers, who generally work on a tight margin anyway are taking it on the chin. We absorbed the first price increase, then a second. By the time the third increase comes around you have to send out a letter or make a dreaded phone call to soon angry consumers who don't want to pay a higher price... Allocations kick in. You can have 110% of what you purchased in year's past, or I can only get you X amount of fuel this month. Then loads don't show up because of production glitches, or trucking issues. In many years this inability to get more fuel has slowed sales. Not this year... I really suspect that this may be the last year pellet manufacturer's offer early buy programs at least as we have seen them in the past. The need to distribute fuel year round (as it is made) will need to happen. The mad rush we are getting in the spring is no longer managable.
The back side of this is stoves. You can't get a Harman stove in New England until next year. Most other manufacturer's are back ordered until October, November, or December at this point. In the past the manufacturer's have ramped up their facilities, added shifts and production lines to try to meet the demand. This year Hearth and Home Technologies, owner of the largest pellet stove manufacturer Harman, as well as Quadrafire decided to change the game. In an attempt to control the beast they made the decision to NOT double, triple... production to meet the demand. They are setting allocation levels so as not to flood the market with stoves that may not be able to get fuel. While this may be frustrating in the short term I am hopeful that it will help control the wild swings this industry has been going through. To a consumer I say that these stoves last fifteen to twenty years if you take care of them, and Europe has already proven that it is a viable alternative fuel source, so even if you have to wait until next spring it is worth it!
Sunday, June 8, 2008
Whip Saw
There is a disturbing trend in the stove industry. I would like to say it is a new cycle but we seem to be repeating ourselves every few years (some would argue the cycle has been shortening) and this trend can be noted as far back as the 1970's with the "wood crisis." The sudden overwhelming desire of the masses to seek an alternative due to the "recent" high cost of oil.
While we certainly appreciate this desire to get away from oil, and of course our guys like having a full schedule and job certainty, you can't look at the feast without also looking at the famine.
Famine? You ask. What do you mean famine? I can't get even book a pellet delivery in the Northeast right now!
I mean the fact that historically the year after there is a mad rush on pellet stoves and fuel (and wood, coal, corn...) the bottom seems to fall out. Orders disappear, angry people blame the industry for not being able to keep up, and when oil prices go down a bit many go back to using oil. Others have bought so much additional fuel in the hectic times it keeps them through the next heating season. What this creates is a vicious product cycle. We ramp up as fast as we can to meet demand. In the high demand times we have to buy raw materials at higher prices, we use expedited shipping methods, manufacturer's dump large amounts of money to overtime, additional staffing, extra manufacturing equipment, and warehousing to stock up for next year... But each time the bottom falls out manufacturer's and dealer's are left with mass amounts of stock, big bills, high new overhead, and regretably a lost market. Which leads to decreased production, staffing, and supply.
The last turn of this cycle was very recent. Katrina. August 2005. The moment Katrina hit pellet stoves (and wood and coal) flew off the shelves faster than we could even realize. The first few weeks we were all ecstatic about the increased flurry of sales. People came in happy to give you their money to support an alternative to oil and propane. Stove shop owners and workers felt a warm sense of accomplishment that all the hard work they had done to promote the industry was finally paying off. Then the next stove order did not come in on time. Stoves are behind. Can't get pipe. Then the backorders begin. Then the pellets fall behind due instant off the charts demand...
Then we have our first frost of the season. Overnight the mood has changed. Stove shop owners and employees are not only working at warp nine to try to keep up with the overbooked installation, and delivery schedule they are now fielding service requests and calls from those waiting for their stove who wanted their stove by now and want you to do something about it. Stove shop owners are swamped with trying to track and secure orders. The manufacturers are in the same boat. Their guys are working overtime manufacturing, shipping, and trying to secure new raw materials as quickly as possible.
But now customers are getting angry. They are mad that they can't get product NOW! They are mad that the price has gone up and start saying that they are being gouged. They scream at the guys at the stove shops. They call and yell at the manufacturers...
Still, industry folks start to talk and plan 'how to avoid this in the future.' Often followed with massive outlays of cash to move and store product in advance.
It is a long hard season but at the end each and every person I know in this industry did everything they could to install and service as many units as they could. We all worked very diligently to make sure that people had pellets to heat their home. We discouraged hoarding and by the end of the season we were only able to get people enough fuel to get through the week.
But we made it.
Now the planning was in full swing. Pellet manufacturers made deals to rail in product from plants around the country that had excess fuel. Stove manufacturers planned additional stove lines, and warehouses started to rise. Stove shop owners beefed up their staff, added equipment, invested money for new or additional warehousing and committed large amounts of money to pre-buy and store the fuel coming in from the other coast of Canada. Everyone filled their stores, warehouses, and any vacant field they could with all the product they could squeeze in. We were ready!
Then the election came.
Then the next winter (winter one year ago- 2006-2007) was a warm one.
Then the price of oil dropped.
The rumor mill was in full swing about how the industry is not viable. Customers say it wasn't worth it. The are going back to oil. The savings aren't that great anyway... Too much bother. Oh yeah, and remember the hoarding?
The bottom fell out. The saw whipped back.
After all of the time and money we invested to keep up with demand the customers disappeared. Literally. Now we had all of this product but sales fell 50%, 60%, 80% from the year before. Staff were laid off. Bills fell behind. Pellets we expected to store short term were now stranded in not ideal locations for the winter. Thousands of tons were damaged, ruined, or sold at a loss. Stove manufacturers fell into receivership (Not just pellet stove makers mind you...). Stove shops and distributors started falling like flies. Warehouses full of stoves, fields full of hundreds of thousands of dollars of fuel. Million dollar manufacturing, processing, and warehousing facilities stood full but quiet...
This last winter was a stable one. Sales were not down anymore. We had scaled back as much as we could. Those left standing were able to work through what they had left on hand. The lucky ones were able to pay off the short term loans they had to take out the previous year. Some stove manufacturers were purchased by other companies, some went into bankruptcy. Many simply shut their doors and walked away.
This year the talk of oil in the news started early. Suddenly, as though someone turned on the light switch in the middle of the night, we are back at Katrina levels of demand (if not more). Already in June we are pulling up to throngs of people waiting to buy a stove/get their fuel...
The saw is in motion.
What is my point? I guess this is just a reminder/request to all of those out there who have decided to try to get off of oil. Be patient. We are all in the same boat. Yelling will hurt not help. We appreciate that you are ready to make a change and will do everything we can to accomodate your needs as soon as we can. Know that the dealers and everyone behind them are doing all they can to service as many as we can. These units can last twenty years if you take care of them. A few months wait is a small portion of the time you will own your stove, furnace, boiler system. STICK WITH YOUR LOCAL DEALER. They will be your best resource in high demand times as well as all others.
To those who have stoves and buy fuel each year; First, thank you. Second, please do not hoard. Buy your pellets in the quantities and at the time you normally do. If you buy double what you need right now it contributes to a dangerous cycle, and may keep this low(er) cost, local, renewable fuel out of that many more homes.
To all those stove owners (old and new) be consistent. Hot and cold running support hurts us all in the end. The whip saw action/reaction cycle we have is a dangerous game. Oil is up over 400% in the last ten years. Pellets right now are still less than two years ago, and not even up 40% from ten years ago. It is viable, but it needs consistent support to be able to maintain and grow.
To borrow a saying from Fire Fighters and Rescue Workers. "We didn't cause the problem. We're just trying to help."
While we certainly appreciate this desire to get away from oil, and of course our guys like having a full schedule and job certainty, you can't look at the feast without also looking at the famine.
Famine? You ask. What do you mean famine? I can't get even book a pellet delivery in the Northeast right now!
I mean the fact that historically the year after there is a mad rush on pellet stoves and fuel (and wood, coal, corn...) the bottom seems to fall out. Orders disappear, angry people blame the industry for not being able to keep up, and when oil prices go down a bit many go back to using oil. Others have bought so much additional fuel in the hectic times it keeps them through the next heating season. What this creates is a vicious product cycle. We ramp up as fast as we can to meet demand. In the high demand times we have to buy raw materials at higher prices, we use expedited shipping methods, manufacturer's dump large amounts of money to overtime, additional staffing, extra manufacturing equipment, and warehousing to stock up for next year... But each time the bottom falls out manufacturer's and dealer's are left with mass amounts of stock, big bills, high new overhead, and regretably a lost market. Which leads to decreased production, staffing, and supply.
The last turn of this cycle was very recent. Katrina. August 2005. The moment Katrina hit pellet stoves (and wood and coal) flew off the shelves faster than we could even realize. The first few weeks we were all ecstatic about the increased flurry of sales. People came in happy to give you their money to support an alternative to oil and propane. Stove shop owners and workers felt a warm sense of accomplishment that all the hard work they had done to promote the industry was finally paying off. Then the next stove order did not come in on time. Stoves are behind. Can't get pipe. Then the backorders begin. Then the pellets fall behind due instant off the charts demand...
Then we have our first frost of the season. Overnight the mood has changed. Stove shop owners and employees are not only working at warp nine to try to keep up with the overbooked installation, and delivery schedule they are now fielding service requests and calls from those waiting for their stove who wanted their stove by now and want you to do something about it. Stove shop owners are swamped with trying to track and secure orders. The manufacturers are in the same boat. Their guys are working overtime manufacturing, shipping, and trying to secure new raw materials as quickly as possible.
But now customers are getting angry. They are mad that they can't get product NOW! They are mad that the price has gone up and start saying that they are being gouged. They scream at the guys at the stove shops. They call and yell at the manufacturers...
Still, industry folks start to talk and plan 'how to avoid this in the future.' Often followed with massive outlays of cash to move and store product in advance.
It is a long hard season but at the end each and every person I know in this industry did everything they could to install and service as many units as they could. We all worked very diligently to make sure that people had pellets to heat their home. We discouraged hoarding and by the end of the season we were only able to get people enough fuel to get through the week.
But we made it.
Now the planning was in full swing. Pellet manufacturers made deals to rail in product from plants around the country that had excess fuel. Stove manufacturers planned additional stove lines, and warehouses started to rise. Stove shop owners beefed up their staff, added equipment, invested money for new or additional warehousing and committed large amounts of money to pre-buy and store the fuel coming in from the other coast of Canada. Everyone filled their stores, warehouses, and any vacant field they could with all the product they could squeeze in. We were ready!
Then the election came.
Then the next winter (winter one year ago- 2006-2007) was a warm one.
Then the price of oil dropped.
The rumor mill was in full swing about how the industry is not viable. Customers say it wasn't worth it. The are going back to oil. The savings aren't that great anyway... Too much bother. Oh yeah, and remember the hoarding?
The bottom fell out. The saw whipped back.
After all of the time and money we invested to keep up with demand the customers disappeared. Literally. Now we had all of this product but sales fell 50%, 60%, 80% from the year before. Staff were laid off. Bills fell behind. Pellets we expected to store short term were now stranded in not ideal locations for the winter. Thousands of tons were damaged, ruined, or sold at a loss. Stove manufacturers fell into receivership (Not just pellet stove makers mind you...). Stove shops and distributors started falling like flies. Warehouses full of stoves, fields full of hundreds of thousands of dollars of fuel. Million dollar manufacturing, processing, and warehousing facilities stood full but quiet...
This last winter was a stable one. Sales were not down anymore. We had scaled back as much as we could. Those left standing were able to work through what they had left on hand. The lucky ones were able to pay off the short term loans they had to take out the previous year. Some stove manufacturers were purchased by other companies, some went into bankruptcy. Many simply shut their doors and walked away.
This year the talk of oil in the news started early. Suddenly, as though someone turned on the light switch in the middle of the night, we are back at Katrina levels of demand (if not more). Already in June we are pulling up to throngs of people waiting to buy a stove/get their fuel...
The saw is in motion.
What is my point? I guess this is just a reminder/request to all of those out there who have decided to try to get off of oil. Be patient. We are all in the same boat. Yelling will hurt not help. We appreciate that you are ready to make a change and will do everything we can to accomodate your needs as soon as we can. Know that the dealers and everyone behind them are doing all they can to service as many as we can. These units can last twenty years if you take care of them. A few months wait is a small portion of the time you will own your stove, furnace, boiler system. STICK WITH YOUR LOCAL DEALER. They will be your best resource in high demand times as well as all others.
To those who have stoves and buy fuel each year; First, thank you. Second, please do not hoard. Buy your pellets in the quantities and at the time you normally do. If you buy double what you need right now it contributes to a dangerous cycle, and may keep this low(er) cost, local, renewable fuel out of that many more homes.
To all those stove owners (old and new) be consistent. Hot and cold running support hurts us all in the end. The whip saw action/reaction cycle we have is a dangerous game. Oil is up over 400% in the last ten years. Pellets right now are still less than two years ago, and not even up 40% from ten years ago. It is viable, but it needs consistent support to be able to maintain and grow.
To borrow a saying from Fire Fighters and Rescue Workers. "We didn't cause the problem. We're just trying to help."
Wednesday, June 4, 2008
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