Businesses reconfigure as fuel prices continue to climb

With the average price of regular gasoline edging closer to $4 a gallon, Randy Winkler has taken to riding his bicycle to work at the Regent Market Co-op instead of driving his car.

But the food store can't shift gears as easily as can Winkler, its general manager, as it struggles with the impact of rising fuel prices.

Some vendors are refusing to bring orders of less than $500 to the West Side co-op while others are tacking on surcharges of as much as $75 a trip, Winkler said.

"I have to pass it on to customers. That's another 1 percent on each sale," he said. Prices on grocery items are going up anywhere from 5 cents to 30 cents each. "I'm a consumer, too. It hurts my pocketbook, too," he said.

Local businesses of all sizes are feeling the squeeze. Some are passing on the higher costs to their customers while others are waiting, hoping to ride out the spike.

Reynolds Transfer and Storage moves loads ranging from heavy industrial equipment to home furnishings. With 70 cranes and vehicles of all types, the business uses about 10,000 gallons of diesel fuel every month, said Mark Reynolds, president.

"We do a lot of cross-country hauling and fuel is a significant expense," he said.

The rising price has had "a huge impact," Reynolds said. He has added a 5 percent fuel surcharge to customers' bills, only the second time that's been done in the history of the company founded by his great-great-grandmother in 1888.

"It's not offsetting all of the increase but it's a help," Reynolds said. The company also is scrutinizing its practices, looking for ways to hold down fuel costs. "We try to be efficient with our crews and save on wasted trips -- probably similar to what people do at home," he said.

Running more efficiently

Frank Beverage Group, Middleton, also is a big user of diesel fuel as its trucks traverse eight counties, making 50 trips a day to bars, restaurants and stores in south-central Wisconsin.

"We drive the same number of miles, independent of what fuel costs," said Mark Morello, operations manager of the beer side of the business, Frank Beer Distributors. Diesel expenses are up about 10 percent, he estimated, and some breweries have added a fuel surcharge, raising prices coming and going.

But Frank Beer Distributors has no plan to charge its customers more, he said. "We're just trying to run the equipment as efficiently as possible," Morello said.

A new logistics system, installed a year and a half ago, already has trimmed expenses. "It helps us establish the most efficient routes. We were able to reduce mileage about 10 percent," Morello said.

Eating costs

Garrett Hudson, manager of Roman Candle Pizza, Middleton, said fuel surcharges imposed by suppliers are not new for pizza restaurants. "Any of our food purveyors will have a diesel fuel charge," he said.

But the price has grown quite a bit during the 10 years he's been in the business. "When I first started, it was $1. Now, it's $4.50 or $5 (per delivery)," Hudson said. With multiple shipments coming in each week, that adds up pretty quickly, he said.

But Roman Candle has not passed along the increase. "We are not, at this point, raising prices. We're just eating it for now," Hudson said.

Roman Candle pizza delivery drivers, meanwhile, pay their own gasoline costs, without extra reimbursement from the company. "They hope to make it up in tips. But when the economy is still fairly poor like it is, they just make less money," Hudson said.

Alternative fuel

Tom Melms, president and owner of Badger Cab, could justifiably feel smug as he watches fuel prices soar. Badger Cab converted its cars to run on propane in 1980.

"We have not used a drop of gasoline in our vehicles since then," he said.

Not only does propane result in less air pollution and less engine wear than gasoline, but as gasoline prices have risen, propane costs have dropped, Melms said. That's because propane is widely used in the winter for heating homes in rural areas, and with the mild winter, stockpiles of propane are huge, he said.

While the average price of regular gasoline in Madison was $3.935 on Friday, according to AAA, the cost of propane translated to $1.75 a gallon, Melms said. At least, that's the price for Badger, which fills its fleet of taxis -- comprised of used Ford Crown Victoria police cars -- from a 30,000-gallon tank.

"If it were not for the propane, I don't know how I would compete in the market," Melms said. "Propane has been that edge that we've had in order to keep our prices down."

There have been ups and downs for propane's price over the years and converting the fleet was expensive, Melms said. "It feels good because we made the commitment, we spent the money, and now it's paying off and it has paid off for 32 years."

Union Cab did not take quite as big a step, but it, too, is getting a break from rising fuel costs after switching out 34 of its vehicles for Toyota Prius hybrid cars.

"We're using a lot less gas than we had used," general manager John McNamara said. "If we can triple our miles per gallon, that's great, unless the price of gas triples."

McNamara said he also expects more people to take cabs instead of driving. "When gas shot up in 2008, we had a record business. But then people ran out of money," he said.

Union Cab does not plan to add a surcharge or raise rates, either of which would need City Council approval, he said.

"Hopefully, we'll be part of the solution for people," McNamara said.

(c)2012 The Wisconsin State Journal (Madison, Wis.)

Visit The Wisconsin State Journal (Madison, Wis.) at www.wisconsinstatejournal.com

Distributed by MCT Information Services

Tags: business, energy, wisconsin, food, transportation