Thursday, December 09, 2010

'Pioneering in pellets' at $199 a ton | The Portland Press Herald / Maine Sunday Telegram

'Pioneering in pellets' at $199 a ton | The Portland Press Herald / Maine Sunday Telegram

A Jay businessman shakes up the market with below-cost prices as he tries to build a customer base across Maine.

By Tux Turkeltturkel@mainetoday.com
Staff Writer

PORTLAND - Elizabeth Miller was waiting as a truck backed into her driveway Wednesday afternoon. On the truck's trailer were five tons of Maine-made wood pellets, produced in Athens this week and driven 65 miles from Jay.

Miller had been buying pellets from hardware stores, but these were selling for the cheapest price she'd ever seen.

"In this economy, I just couldn't turn it down," she said. "And the free delivery made a big difference to me."

Miller is among the latest customers of the Wood Pellet Warehouse in Jay. The company's owner, Steve Barker, is shaking up the state's wood pellet business this year by undercutting competitors and advertising aggressively. He's selling a ton of pellets for $199, cash or credit, and he'll even stack the 40-pound bags for the customer.

That price doesn't cover his costs, Barker acknowledges. His goal is to build a loyal customer base this year with discount prices and an extra measure of service. And he's willing to drive across much of Maine to do it, making the trip to Portland at least once a week. his count, he'll deliver 3,000 tons of wood pellets in 2010.

Barker said he started a price war in the spring. He saw pellets advertised in Greater Portland at $250 a ton, without delivery, and figured he could beat that.

"I started at $199 a ton last April," he said. "I look at it as pioneering in pellets."

Some of Barker's competitors in the Portland area question whether his business plan makes sense. They can't offer pellets for the price Barker is charging, they say, and don't intend to try.

Sales of pellet stoves -- and wood pellets -- exploded two years ago, when oil prices hit record highs. Activity stalled just as quickly after that, when the recession and an oil glut took hold.

But oil prices are climbing again, and so is interest in alternative heat. That may help Barker find a niche in a market that has had too many pellets and too few customers.

For now, at least, pellet burners such as Elizabeth Miller are happy to find bargains just as the weather turns cold. She took two tons from Barker on Wednesday.

"I'll be ordering more from him later in the winter, I imagine," she said.

Barker was a facilities manager for the G.H. Bass shoe company until it moved out of state in 2004. He wound up buying a warehouse in Jay and opening a recycling and redemption center. Recently, he made a connection between recycling and Maine's forest economy.

"My concept is, joining forces in Maine to get cheaper fuel," he said. "We have plenty of wood to heat with in Maine."

Barker's supplier is Maine Woods Pellet Co. in Athens, the largest of four pellet mills in the state. Retailers also sell pellets from Canada and other parts of the United States.

Wood pellets have subtle differences that invite debate and marketing. Heat output and ash content are variables that influence customer loyalty and dictate price. Among the most costly are Okanagan, made in British Columbia from 100 percent softwood sawdust. Barker sells some, at the request of a stove shop. They retail for $282 a ton.

Maine Woods pellets are a blend of sustainably harvested hardwood and softwood. Earlier this fall, Barker was buying a trailer load -- 26 tons -- nearly every day. Demand spiked after he began running newspaper ads in southern and central Maine.

"If you're reading this ad, we will deliver!!," the ad says.

That promise has put Barker and another driver on the road daily from Kittery to the Bangor area. After Barker finished at Miller's house, he was off to two other homes in Portland.

Around the block from Miller's house, Paris Farmers Union sells Maine Woods pellets for $199 a ton -- to customers who pick them up. With delivery, the cost is $219, although the crew will stack the bags.

Maine Woods is the store's best-selling brand. It sells two other Maine brands and one from Canada. Prices range from $229 to $289 a ton, delivered.

Pellets are only part of the store's business; it's not looking to expand sales with discount pellet prices. "We have our hands full with deliveries as it is," said Joel Fellows, the assistant manager.

Pellets also are a sideline for Bob Maurais at Southern Maine Renewable Fuels in Windham. He doesn't carry Maine Woods pellets, but sells the comparable Maine's Choice, produced in Strong.

He charges $229 per ton for cash and $235 for credit cards. He tacks on a $30 delivery fee, plus $1 per mile from his warehouse.

"I know what I need to get for a (ton) to make it profitable for us," he said.

Barker's ads have prompted many of Maurais' customers to call and ask about the $199 deal. He tells them he can't match that price.

"We stopped playing that game a long time ago," he said. "But I never begrudge anyone for starting a business. I wish him every success."

Barker's ability to influence the wood pellet market with a truck and a strong back helps illustrate that the industry in the U.S. -- unlike in Europe -- is very young. The time will come, suggested Bill Bell, executive director of the Maine Pellet Fuels Association, when bigger companies will begin delivering with greater efficiency.

That's starting to happen. Maine Energy Systems in Bethel, which sells automated wood pellet boilers, announced this week that it's building a bulk pellet delivery truck to service businesses, institutions and homes. The European design can unload a ton of pellets in four minutes.

But with most customers buying the fuel in bags to feed stoves and fireplace inserts, there's still room for entrepreneurs. Barker is benefiting, Bell said, by buying from a mill with its own wood supply and a lower cost of production. With Maine pellet mills running below capacity, it's a buyer's market.

"I think 'price war' is probably too strong a term, but there are some good deals for consumers," Bell said.

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

tturkel@pressherald.com

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