Marketing Biodiesel on Fuel Attributes, Not Feedstocks

By Nile Ramsbottom | January 15, 2009
Diesel fuel is marketed on its fuel attributes. No. 1, No. 2, ASTM D 975: These terms, not the source of the fuel's crude oil, determine pricing and handling of distillate fuel.

Taking the lead from our petroleum partners, Renewable Energy Group is marketing biodiesel on finished fuel attributes, not feedstock sources.

In the late 1990s, when REG began biodiesel production, American soybean producers strongly supported soy biodiesel. Their vision for value-added agriculture flourished. With exponential biodiesel industry growth, the economics of soybean oil shifted. REG acted on the need to diversify our feedstock portfolio to economically provide large volumes of high quality biodiesel in order to meet blending demands within the 60-plus billion gallon diesel fuel market. Our production technology shifted in accordance and REG began building high free fatty acid-capable production plants. In 2006, REG's first multi-feedstock biodiesel production facility, Western Iowa Energy LLC, produced biodiesel made from corn oil and animal fats that exceeded ASTM D 6751 specifications.

This cutting-edge production success provided an immediate opportunity for REG to begin marketing different biodiesel products. This created a marketing challenge: How do you move from a strong soy-only brand to an even stronger multi-feedstock marketing approach? In April 2008, we launched our answer: the trademarked REG-9000 product line.

This fuel attribute-based marketing approach mirrors the way diesel fuel is sold in the U.S. Much like No. 1 or No. 2 diesel, REG-9000 products are marketed on finished fuel attributes: cloud point, oxidative stability and cetane number.

REG-9000-1 has a cloud point ranging from 0-2 degrees Celsius and a cetane level from 47-50. REG-9000-5 has a cloud point ranging from 3-7 degrees Celsius and a cetane level from 50-53. REG-9000-10 has a cloud point ranging from 8-12 degrees Celsius and a cetane level from 53-59. All three products offer improved oxidative stability.

As part of the product launch, REG announced a guarantee that all REG-9000 biodiesel exceeds ASTM specifications, regardless of feedstock. Production technology and experience, not the feedstock, determines biodiesel quality. Consumer confidence in that biodiesel quality is the key to marketing on fuel attributes.

From a producer and marketer's standpoint, the greatest advantage of marketing biodiesel based on fuel attributes versus feedstock is flexibility. As new feedstocks come on line, the B100 can be placed in the marketing matrix based on its fuel attributes without creating confusion over the feedstock itself.

This marketing matrix allows customers to purchase the REG-9000 (10 degrees Celsius) product at a discount from the REG-9000-1 (1 degree Celsius), just as No. 2 diesel is discounted from No. 1 diesel. This is important, as the Federal Blenders Tax Credit now allows yellow grease to earn the $1 per gallon credit along with soybean, canola and other oils and fats. With the right production technology, this opens the marketplace for yet another feedstock that can add value for petroleum customers who are purchasing on price point.

With almost one year of fuel attribute-based marketing under our belt, REG has met several marketing challenges head on. First, petroleum customers appreciate pricing options which fit within their current options. Long- and short-term contracts, and index and spot pricing for the product lineup have been well received. Second, making biodiesel available year-round and offering the expertise to manage multiple cloud points with proper handling guidance have allowed REG to merge our customer service world with our product lineup.

Finally, quality is king. If you can provide your customer with a certificate of analysis for every lot of biodiesel from every feedstock, you can win their business and loyalty.

That's not to say that finished fuel attribute-based biodiesel marketing has overcome every challenge. The education process continues with some of our petroleum partners who are entering the biodiesel market for the first time. We must work with new feedstock providers in the yellow grease, algae oil and other emerging feedstock oil markets to better understand what the attributes of their B100 can offer to the petroleum industry. We must continue to improve quality on every single gallon of biodiesel from every single feedstock. Biodiesel must perform to the petroleum industry's value and operational expectations or their confidence will be lost.

Nile Ramsbottom is the president of Renewable Energy Group. Reach him at or (515) 239-8000.
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