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    Success Story - Mid-Atlantic Nursery

    VP of Finance uses revolutionary Pricelock program to control fuel costs.


    The company's primary objective is to grow and sell plants profitably to a happy client base. But when fuel prices jump, it erodes the company's margins and makes it harder to keep their pricing low. "The company is prey to fuel prices and that carries risk," said the VP of Finance, "given we take orders six months to a year before the plants actually leave our facility."

    He knew it was time to change how the company managed its delivery costs and found Pricelock. He was intrigued by Pricelock's offering because he thought fuel price protection was only for companies with massive fuel budgets and therefore could participate in the futures market.

    The VP of Finance decided to protect the company's margins during spring season from any drastic jumps in diesel fuel prices. As the company's highest revenue period, spring season is also when deliveries consume 85% of its fuel exposure for the year. Working closely with a Pricelock fuel expert, he executed a plan to protect 10,000 gallons of diesel for February and 15,000 gallons of diesel for both March and April at a protection price of $4 per gallon. This means that the company can budget for $4 national average diesel price because Pricelock will pay them if prices go above this level; if prices drop, there are no hidden costs and the company still benefits from lower fuel costs.

    It was an easy sell to the owner and president of the company who wanted to "take the fuel price risk out of their business" and protect profits while keeping prices low for clients. For the VP of Finance, "I want to have good profits because we made smart improvements in how we run our business. I like knowing how we do year-over-year is due to how we run our business versus just being lucky that fuel prices did not go up."

    Some of the other options he initially explored included purchasing a 15,000 gallon fuel tank and having drivers fuel onsite. While this approach works for some, he said that "the infrastructure costs were significant enough that it would take ten years for the investment to pay off." Plus, onsite fueling was not a practical option for its long distance deliveries. He liked the simplicity of the Pricelock offering in which the company would get paid when the national average diesel price rose above its protection price.

    "Overall, I'm very impressed with Pricelock," he said. "I liked having access to a fuel expert and found Pricelock's online educational content, tools and data helpful to empower customers like me to make well informed decisions." He intends to make fuel price protection part of the company's annual budget and protect the company again next spring.

    The company name is not being used as the company wishes to remain confidential for competitive reasons.

    Nursery
    This nursery grows and distributes container plants to independent garden centers and chain store retailers including Costco. Based in the Mid Atlantic region, the company employs up to 100 people in their peak season and distributes the majority of their plants using tractor trailers and box trucks from North Carolina to Massachussets.
    "What Pricelock is offering—fuel hedges to smaller businesses like ours—is revolutionary and will help us offset any increases in our delivery costs due to fuel price jumps."

    VP of Finance


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