Boonsboro, MD — When Randy Thompson joined the family business a little more than 15 years ago, ThompsonGas had just one store, three delivery trucks, and eight employees serving three states. Today, the firm has more than 51 branch locations and 350 employees serving 10 states. In this Middle-Market Executive interview, Thompson tells us where the firm’s next chapter of growth will likely be written.
Thompson: What you’ll find is that there are some really top players that control about 35 percent of the market, and the rest is taken care of by regional companies like ours and small family-owned companies much like we were before I took over the business from my father. There are about 4,000 of these businesses across the country, so the industry is certainly primed to see continuous consolidation. We typically report our volume annually, and we’re going to be somewhere around 30 million gallons of propane, which makes us around the 18th largest propane company in the United States. What you’ll find is that there is an abundance of propane, which is really a by-product of natural gas, and with all of the natural gas that this country has now found, propane prices are being kept low compared to those of other liquefied fuels.
MME: Why have these smaller propane businesses remained so competitive?
Thompson: Well, I think that there are a number of answers to that question. First, these businesses are local. The fact is that propane is a volatile fuel that can have catastrophic consequences if not handled correctly, and we find that customers in rural communities frequently know and trust these family-owned businesses to take care of them in a safe manner. Number two, this is an industry where you can still get a decent return on your capital investment. The third thing is that you’ll find that a lot of these smaller companies have very low overhead, which allows them to be very competitive with their margins, and some of the larger players are publicly held, so they tend to be hungry for additional margin in order to please their shareholders.
MME: When it comes to serving customers, what matters most?
Thompson: The propane business is one where if you take care of your customers – and by that I mean that if you make certain that they don’t run out of propane when they need it and the price that they pay is a fair one — you tend to hold on to them. In other words, you’re not likely to lose them over a few cents per gallon. Meanwhile, the last thing someone wants is to have to take a day off from work to have their system switched out to another provider. So when it comes to propane, if you take care of customers, you’ll hold on to them.
MME: Who are your customers today?
Thompson: About 75 percent of our customers are residential, but you’ll find that propane is widely used inside the agricultural area, where you might be using it to dry crops or to keep your chickens warm. Another area where it’s been receiving a lot of press lately is motor fuels. Propane is the third largest motor fuel in the world and it’s clean-burning, so you’ll find that the propane industry has been trying to raise its profile within the fleet industry and other areas.
MME: Where within the propane landscape will we see the next chapter of growth be written for ThompsonGas?
Thompson: Over the next 5 years, we are looking to grow the retail propane business and, at the same time, we are also looking at midstream assets. We refer to them as midstream assets, but this just means that they’re complementary to the retail propane business. These are assets like propane rail terminals, propane storage facilities, trucking companies, things that move our product around and for which we could charge other propane companies a fee to utilize. This is just a wonderful fuel that can be delivered in a liquefied state like gasoline and diesel. It can operate and fuel vehicles and lawn mowers, but does so with 95 percent fewer greenhouse gas emissions — and meanwhile costs about $2 less per gallon than gasoline.
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