Sizzling returns

Barbecue fuel profit potential offers C&I operators food for thought

It's barbecue season again and, for the profit-hungry convenience and impulse outlet operator, that means only one thing ... it's time to get the bottom line sizzling!

The last few years have seen a steady growth in the number of people who are choosing to entertain and cook at home and, when the weather is fine, that more often than not means firing up the barbie. But, when the snags, burgers and steaks are ready to go on, and the gas bottle suddenly runs out or the briquette bag is found to be empty, would-be chefs want a quick and convenient solution to their barbecue fuel conundrum.

And that's where the convenience channel should come into its own. The simple fact of the matter is that the public now expects to be able to find barbecue fuel at their local petrol and convenience outlet ... and it certainly doesn't pay to disappoint them.

In simple terms, barbecue fuel can be said to come in two forms ... gas or solid. And C&I operators would be well advised to stock plenty of both, particularly in summer, during holidays, on long weekends, or on days when a big sporting occasion is being televised.

Solid barbecue fuel gives a natural, charcoal flavour which is enjoyed by many barbecue aficionados, particularly since the arrival of incredibly popular cooking shows like Masterchef on our TV screens.

The 'swap' system grows

Bottled gas is perhaps the more common fuel to most Australian families ... and it has become an even more quick and convenient – and thus more profitable – business since the introduction and spread of bottle exchange schemes.

Whereas previously, all operators filled up an empty bottle on site, which was often quite a time consuming process, suddenly customers could just bring in an old bottle and exchange it for a full one supplied by an outside company.

The swap system grew at a rapid rate between 2004 and 2008 as all of the major petrol companies stopped refilling on site. The primary motivations for switching to swap were, of course, safety concerns and the labour costs associated with refilling.

Two companies dominate in the bottle exchange trade ... Elgas SWAP'n'GO and Kleenheat Kwik-Gas.

SWAP'n'GO offers 8.5kg and 3.7kg LPG cylinders for swap or sale, delivering a fast, safe and convenient solution to gas needs. The company accepts out-of-date cylinders at no additional charge and says its system is very operator friendly. Its delivery trucks visit on a schedule based on a site's sales history.

"The operator just pays for the product as it is consumed from the cage and SWAP'n'GO accepts all competitors' bottles as well as out-of-date bottles ... only heavily damaged or incorrectly valved bottles are declined but this constitutes less than 1%," said the General Manager of Marketing, Eric Hahn.

"Consumers have come to expect a swap cage at every petrol outlet and operators who choose to not have a swap cage are foregoing a major profit opportunity."

The good news gets better

And what an opportunity it is. Mr Hahn says that, based on SWAP'n'GO's recommended retail price, operators can expect a minimum mark-up of 40%. And, he says, some operators charge more than the recommended retail price and make greater margins.

And the good news just keeps getting better.

"The trip to get a SWAP'n'GO bottle is often unplanned and can result in additional fuel and convenience sales during the visit," Mr Hahn said. "C&I outlets only need the appropriate space to be a suitable swap outlet, and SWAP'n'GO even has half width cages to facilitate installation between bollards, as this can frequently be a problem."

SWAP'n'GO also offers a range of barbecue maintenance products that make a profitable addition to fuel sales.

Kwik-Gas offers a similarly easy LPG cylinder swap service that has no start-up costs and delivers a profitable product for the outdoor area at convenience retailers.

The National Business Development Manager for Kleenheat Gas, Adrian Jennings, says many C&I operators offer both decant and swap services, but swap is by far the most popular and it is continuing to grow year on year.

"We envisage this will continue because of the simple nature of the swap product ... no filling is required and all servicing and replenishment is provided by Kwik-Gas," said Mr Jennings. "The Kwik-Gas cylinder swap service is popular because it is a hassle-free solution to offering outdoor entertaining fuel."

He says Kwik-Gas LPG is considered a convenience consumer product and therefore consumers expect to find a swap service at their local C&I retailer.

"Consumers often swap their cylinder once they run out and they don't want to travel far when this occurs," said Mr Jennnings. "The swap cylinder service is easy for the consumer and only takes a few minutes compared to cylinder refilling."

He says other benefits for C&I outlets include attractive profit margins, increased store traffic, improved customer convenience, and reduced staff time.

"Kwik-Gas offers a swap service whereby the customer brings an acceptable cylinder to their Kwik-Gas outlet, pays the swap fee, and collects a new or newly refurbished filled Kwik-Gas cylinder," said Mr Jennings. "In addition, if the customer has no cylinder to swap, they can purchase a filled Kwik-Gas cylinder for a slightly higher price."

Like SWAP'n'GO, Kwik-Gas retailers are able to accept all competitors' bottles providing they are suitable to swap; that is they must have a foot ring, a neck ring, have a POL valve, have a 3.7 or 8.5kg capacity, meet Australian Standards, and be in a good condition.

"There is definitely a growing popularity for entertaining outdoors and Kwik-Gas has benefited directly," said Mr Jennings. "As well as barbecues, Kwik-Gas offers a solution for outdoor heating, so much so that the trend is for households to have more than one gas bottle in their backyard."

And, he says, the trend for portable gas over other solid fuels is likely to continue due to the fact that portable gas is convenient, quick and controllable.

Indeed, for its part, SWAP'n'GO says that independent research has shown that LPG is the predominant fuel for barbecuing, and that the choice of fuels has been very consistent for many years.

"Inasmuch as most petrol outlets already have barbecue fuel, the growth mostly matches the organic market growth, which is around 3% per year," said SWAP'n'GO's Eric Hahn. "However, as with almost every other sector, consumers are increasingly environmentally conscious, and this led us to introduce SWAP'n'GO GREEN, a barbecue fuel that is 100% carbon offset and features a new high tech bottle, as well."

Men are by far the largest purchasers of bottled gas and while barbecue fuel is commonly the spur for the visit to a convenience and impulse outlet, accompanying purchases such as ice or barbecue snacks such as crisps and soft drinks, are also common.

It pays to advertise

While most consumers now expect to find bottled gas available at convenience outlets it certainly pays to advertise and placing a cage in the back corner of the forecourt or around the side of the building should obviously be avoided.

"Cage visibility is very important and having the cage near the store entrance or visible from the road will help optimise your consumer exposure," said Mr Hahn. "SWAP'n'GO focuses on providing excellent cage signage to act as point of sale advertising and offers other point of sale materials including bollard signs, fridge wobblers, roadside signs and more to help the operator maximise sales."

While winter has become more popular for gas bottle sales due to the increasing popularity of gas patio heaters, summer is still barbecue fuel boom time and C&I outlets need to be prepared.

"If an outlet chooses SWAP'n'GO as their swap supplier, they can relax in the knowledge that we have a summer stockpile and added staff to manage the increase in sales and deliveries," said Mr Hahn. "The operators need to do nothing special."

Similarly, Kwik-Gas says C&I outlets can sell with the assurance of extra production and stockpiling during peak months. It says supply peaks are managed by its parent company, Kleenheat Gas.

"The nature of C&I outlets makes them the perfect candidate for Kwik-Gas retailing and setting up Kwik-Gas at a C&I retailer is easy," said Adrian Jennings from Kleenheat Gas. "A Kwik-Gas business representative will evaluate the site, assist in acquiring a dangerous goods licence, and provide a business with a Kwik-Gas supply agreement."

While gas for barbecuing is big, it is not the only fuel in town ... or in the convenience channel.

Companies such as Swedish Match and Australian Char offer barbecue food lovers a different experience and a different taste.

Barbecue fuel sales are increasing year on year and many homes now have both gas and kettle barbecues in their backyards, according to Swedish Match Brand Manager, Donna Wilson.

"Slow barbecuing over hot coals offers a different cooking and eating experience to gas barbecuing," she said. "Grilling over an open flame is very popular with 'foodies', because it is healthier and the food tastes better."

She says that Redheads barbecue fuel is a natural wood charcoal, made from 100% compressed sawdust and contains no chemical binders. She says the fuel is clean burning and leaves no dust or charcoal fines on food.

"As people become more and more time poor, convenience outlets have the opportunity to gain barbecue fuel share from grocery," she said. "Stocking barbecue fuel can provide retailers with extra sales from time poor consumers who shop C&I for other entertaining items such as ice, drinks, bread and gas."

As well as barbecue fuel, the Redheads range consists of fire needs products including matches, firelighters, wood logs and gas lighters.

Capitalise on impulse sales

"Impulse or unplanned purchases are usually high in C&I outlets, so it is important for them to have products such as barbecue fuel in high traffic areas to capitalise on this behaviour," said Ms Wilson.

"They should be positioned in high traffic areas such as forecourts and adjacent to motor oil and ice freezers."

And, she says, operators should ensure visibility of product on display and make sure they are never out of stock.

"Adults with families are typical buyers and users of Redheads barbecue fuel and peak times are summer – from September to April, including Christmas/New Years – and Easter," she said. "Redheads offers a premium range of market leading products at industry competitive prices."

Australian Char also offers a range of premium products that includes Heat Beads Barbecue Briquettes and Heat Beads Natural Firelighters.

"C&I outlets typically stock our Heat Beads Barbecue Briquettes 4kg bag," said Australian Char's Group Sales and Marketing Manager, Damien Cunliffe. "It is a convenience bag size and is our number one selling product across the market."

He says consumers most certainly do expect to find solid barbecue fuel available at C&I outlets.

"Due to weather considerations a lot of barbecue events can be organised at the last moment and consumers need to know that C&I outlets have the product available at such times," Mr Cunliffe said.

"Outlets without suitable forecourts can stock Hot Beads Barbecue Briquettes inside as this is how the product is sold through other channels."

Solid barbecue fuel then does have strong appeal to many people and Australian Char has been very active in promoting its appeal at events such as the 2010 Melbourne Food and Wine Festival.

"Increased interest in shows such as Masterchef and personality chefs such as Jamie Oliver and Gordon Ramsay mean that consumers are making a lot more effort when preparing meals, especially when entertaining," Mr Cunliffe said. "The taste of food cooked over solid fuels can propel a backyard barbecue to a Masterchef-like status with their friends."

Visibility is important

Naturally enough, visibility is as important with solid barbecue fuel as it is with bottled gas fuel.

"Consumers will purchase if they know the product is available," said Mr Cunliffe. "And this is especially important during peak summer months and during seasonal holidays such as Christmas and Easter... stock outs at these times can impact negatively on potential sales."

So, as the summer season gets into full swing, it is certainly crucial that C&I outlets fully consider their fuel offer. In the same way as bottled gas can attract customers who then spend on other items while in store, so too can solid barbecue fuel.

"As purchases are commonly due to last minute entertaining requirements consumers are likely to purchase other products for their event," said Mr Cunliffe. "This can be ice or drinks but could be associated products such as firelighters or matches if they are available."

The potential rewards from catering to the needs of the barbecue boom then are huge indeed and the consequences of not doing so potentially very costly. It is a category that, to some extent sells itself, but the basics still have to be looked after. Barbecue fuels boast huge margins and doubtlessly can attract new customers in store. Neither barbecue fuel suppliers nor convenience and impulse operator outlets would like to see all that profit potential go up in smoke.