Tapping Into the 1-lb Refillable Cylinder Market

Propane marketers don’t deal much with 1-lb disposable propane cylinders. “Coming in contact with them is more of a nuisance than a benefit to them,” Sam Newman said. Newman, CEO of propane cylinder company Flame King (Pico Rivera, Calif.), says individuals bring their 1-lb cylinders to propane marketers to dispose of them. The propane company will then evacuate the propane and recycle them. Some propane marketers work with local recycling facilities to dispose of the cylinders. In other instances, a propane company will contract with the local park to dispose of cylinders that campers leave behind. “That’s about the only time marketers will see a 1-lb disposable,” Newman stated.But he sees 1-lb cylinders as an untapped source of revenue for marketers. He notes that more than 40 million 1-lb cylinders are produced every year in the United States. That comes out to more than 10 million gallons of propane that propane marketers are not involved with, he estimates. Marketers should be competing for a portion of that business.

To help marketers tap into that industry, Flame King is introducing 1-lb refillable cylinders at the National Propane Gas Association’s Southeastern Convention in Atlanta. The Flame King 1-lb refillable propane cylinder will help propane marketers get into industries such as welding and plumbing. Service trucks for plumbing companies such as Roto Rooter all have 1-lb propane cylinders that the plumbers use for soldering, cutting, heating, and bending copper pipe.

“Plumbing is a multi-billion-dollar industry,” Newman stated. Most air conditioning and heating technicians carry 1-lb propane cylinders in their service vehicles, he added. But disposables are the only choice they have at this point, he stated. Newman believes refillable cylinders offer great potential for propane marketers. “For the independent propane marketer, this potential represents a significant opportunity, helping them meaningfully increase their profits.”

Flame King has been selling propane cylinders and products to retailers, propane companies, and original equipment manufacturers (OEMs) throughout North America since 1998. Ironically, the company got its start in the propane market selling Coleman the valves for that company’s 1-lb disposable propane cylinders. “One day in 2000, Coleman asked us to find a facility that could produce 20-lb propane cylinders for them,” he said. “At the time they were unhappy with the pricing rigidity from [their suppliers] and wanted another option. How can the pricing we are being quoted as an OEM be higher than the wholesale clubs like Sam’s, Costco, and BJ’s price to consumers, they wondered. We decided to embrace the challenge and the rest is history.” Flame King has expanded its line to include 20-lb, 30-lb, 40-lb and 100-lb cylinders, as well as forklift cylinders.

With Flame King’s new 1-lb refillable cylinders, the consumer could put a deposit down or give a credit card authorization so the marketer can make sure the customer brings the cylinder back to the business.

The consumer just pays for the gas and not the cylinder. “If you think about it, you have a cylinder of gas on the 1-lb disposable side that carries 1 lb of propane — where the costs to produce the cylinder are four times as much as the propane is worth wholesale that’s in it — and throwing it out after using it once,” Newman stated. “The concept is to condition people: Why are you throwing it out if you can use it for 10 to 12 years? We have to take care of our environment. We can do it economically and in a way that’s environmentally friendly.”

Marketers will also be able to use the 1-lb cylinder business as a way to gain additional business from customers. “Mass retailers use the 1-lb disposable cylinders as a throwaway, a giveaway so they can get the consumers in the store. We’re introducing a refillable product that looks and feels exactly like the disposable.”

The 1-lb refillable cylinder business could bring in a high per-gallon profit for propane marketers, Newman noted. Stores such as Wal-Mart charge about $3 for a disposable cylinder, Newman noted. One gallon of propane yields more than 4 lbs.

“So you’re getting over four cylinders from each gallon of propane,” Newman stated. “At $2 a cylinder that would be the equivalent of $8 a gallon. Propane marketers like to look at how many gallons they are moving. Their whole business is built around the volume. It’s groundbreaking for the propane industry to get into all these different markets. What I’m talking about is getting into another side of the business that could open up new opportunities and significantly increase what they’re doing around their propane business.” —Daryl Lubinsky