Fuel For Thought: Can Consumers Save Ethanol? – Aug 2012
Around the bend, through the buzz of stock car engines, here come the Fergusons—and they’re late for a soccer game. The nuclear family’s plain beige minivan blows past sponsor-decaled race cars, leaving professional drivers hot on their tail. Cut away, and we see the everyman Mr. Ferguson in the pit refueling with “American ethanol.”
Growth Energy, an ethanol industry trade group, debuted this commercial during nationally televised Nascar races in June. The ad is part of the largest and most ambitious consumer ad campaign in the industry’s 30-year history. And a lot is riding on it.
Once a sacred cow in Washington, the corn ethanol industry lost a $6 billion-a-year federal subsidy this year, leaving many companies operating at a loss through the first half of the year. Minnesota’s 21 ethanol plants produce more than a billion gallons per year, most of it exported. Many plants are among the largest and best-paying employers in their towns. Altogether, the industry is responsible for $3 billion in economic impact in Minnesota, but growth has been stalled for a few years. Americans are using less fuel, and almost all gasoline is already blended with 10 percent ethanol.
In June, the U.S. Environmental Protection Agency authorized the sale of a 15 percent ethanol-gasoline blend known as E15, but the decision didn’t come with a mandate for gas stations to sell it. Growth Energy is counting on consumers to help sway station owners to make room for E15 at their pumps. Which is where the Nascar campaign comes in.
The strategy is a pivot for ethanol producers, who have traditionally spent more time and money targeting messages to farmers, politicians, and fuel-station owners rather than going straight to consumers. Rural communities still support corn ethanol, but the subsidy loss shows ethanol’s support from politicians is waning. Gas station owners, meanwhile, are skeptical about investing in new infrastructure to sell E15 until they’re convinced customers want it.
Ethanol producers aren’t getting any help from automakers, either. While the EPA says it’s safe to use E15 in cars built since 2000, major automakers are not embracing the notion. A few have even made public statements against it: Chrysler has said use of fuel above E10 in any of its vehicles may void engine warranties, while Toyota put a warning on the gas caps of its new cars telling drivers not to use E15.
So ethanol producers are counting on families like the Fergusons to be curious enough to ask about the fuel at their local gas station and to support stations that become early adopters.
Growth Energy has run television ads once before, in April 2010, during Sunday-morning talk shows. Those spots promoted ethanol from a policy perspective and were aimed a narrower audience. This summer’s campaign is the trade group’s biggest attempt to sell ethanol’s benefits directly to consumers. It’s a multimillion-dollar campaign that includes TV and online ads, a sweepstakes, and promotions at racing events.
The commercials make use of a six-year partnership Growth Energy entered with Nascar last year. Growth Energy agreed to promote the racing organization, whose drivers will burn E15 ethanol. Nascar gets to green its image by touting a renewable fuel, and ethanol gets access to some of the most brand-loyal spectators in all of sports, says Growth Energy CEO Tom Buis. “They buy the products their drivers promote,” Buis says.
Will the ethanol industry’s marketing campaign with Nascar pan out in the long run? Twin Cities consultant Larry Johnson, known for years in the ethanol industry as “Ethanol Answer Man” for his public education efforts, doesn’t think average consumers are going to make the kind of difference Growth Energy hopes they will. “The retailers have more impact than consumers,” most of whom make fuel decisions based on price alone, he said.
The TV spot didn’t address one of gas station owners’ main concerns about E15: customer confusion. In fact, it may even make things worse, says Dustin Haaland, director of renewable fuels and additives supply for CHS Inc., which supports about 1,400 gas stations in the Midwest under the Cenex brand.
The voiceover in the Ferguson ad points out that Nascar uses 15 percent ethanol fuel, and that “E15 is made for your car, too.” But you have to read the fine print in the ad’s final frame to see E15 is for 2001 and newer vehicles only.
The fuel also isn’t proven safe for boats or small engines like lawn mowers. CHS doesn’t have immediate plans to introduce E15 at its stations in part because questions remain about how to prevent owners of older vehicles from accidentally using it, and about who’s liable for engine damage if they do.
The ethanol industry’s efforts to prevent drivers of non-approved vehicles from using its product include mandatory warning labels on all pumps and regular testing to make sure producers and stations are selling E15.
The EPA’s decision earlier this summer to allow E15 sales boosts corn ethanol’s potential market by 50 percent, but only if it can win over drivers outside of Nascar. Which is why ethanol producers are staying hot on the Fergusons’ tail.