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Hearth & Home January 2015

Burning Bridges

By Richard Wright

With one brief letter to a number of its dealers, New England Wood Pellet sent many of its customers on a frantic search for more pellets.

At the end of September, NEWP (New England Wood Pellet) sent a letter to many of its customers (primarily hearth dealers) informing them that their “requests” for deliveries in the fourth quarter would not be honored. The reason cited was “significantly stronger sales during the summer months” as the cause of “dramatically lower inventories.”

Just a bit later a dramatically different reason emerged. It seems that NEWP had sold its entire production to Home Depot, Lowe’s and Tractor Supply. Their other dealers were left out in the cold, and forced to scurry at the last minute to find other sources of pellets for their customers.

One of those was Jim Fallon, owner of Home & Hearth in Hampton Falls, New Hampshire, and one of the largest pellet dealers in the Northeast.

Hearth & Home had a conversation with Fallon toward the end of November.


Jim Fallon of Home & Hearth in New Hampshire.

Hearth & Home: Can you tell us when you placed your order with New England Wood Pellet and when you were cut off?

Jim Fallon: “With New England Wood Pellet, you have to predict what you’re going to use, or give them a purchase order for every quarter; they had a purchase order from me for everything I ordered. On September 24, they sent me a letter that said, basically, ‘Your purchase order is no longer going to be honored.’ That was it. There was no real explanation.

“I’ve never before had a purchase order refused by New England Wood Pellet; I gave them the order and expected to get pellets.

“I talked to Woody (Norwood Keeney III, NEWP Operations manager) who has been there quite a while, and he told me they had commitments from the Box stores and they were going to take it all from the dealers.

“Now, I’ve been with New England Wood Pellet (NEWP) from its inception; that’s 23 years. I was their number-one dealer for many years, along with Larry Miller, and I have paid them millions of dollars over those years and just to get blindsided like that – it’s horrendous.

“I’m a pretty good dealer. We have close to 12,000 stoves in the field now, and a lot of those customers depend on me for fuel. I’ve been scrambling to get fuel to take care of them. I’m bringing it in from Idaho and British Columbia just to try to make up for what they haven’t given me.”

Are you getting decent pricing when you bring the stuff in?

Fallon: “Oh, absolutely not. We’re looking at a very, very high premium when it’s coming in by rail. They (NEWP) pretty much put the boot to a lot of us dealers, especially the dealers that put them on the map. It’s phenomenal what they have done to us.”

How many tons a year do you go through, and do you buy exclusively through NEWP?

Fallon: “I go through on the average between 12,000 to 14,000 tons. We do a lot. There was a time when I was getting 10 loads a week from NEWP – nonstop. Over the years, and because they went to the Box stores and started putting pellets any place they wanted to – which of course is their prerogative – we dropped back to about four loads a week. For the last quarter of 2014, I was down to two loads a week. I currently bring it in from six different manufacturers.”

How many tons do you think you were on track to buy from New England Wood Pellet?

Fallon: “ It was two loads a week straight through the fourth quarter so that would be 12 weeks and 24 loads, which consists of 26 tons per load so that’s 624 tons. I had already purchased 1,560 tons from them in the first three quarters.”

So they basically just cut you off and didn’t give you any reason why?

Fallon: “The only reason I got was from Woody and he said, ‘We have commitments to the Box stores and that’s all there is to it.’ That was it. There was no other explanation.”

­­­Now, NEWP was bought by Rentech, a much larger concern out of California, in May 2014. In your opinion, is that the problem, that a much larger company just doesn’t give a damn about the small dealers?

Fallon: “I’m just guessing, but that’s probably one of the big issues. They just don’t care about the little guys anymore, including the little guys who put them on the map. I was a real good personal friend of Steve Walker when he first started the plant, and I’ve been with them right along until he sold out and things started to change drastically.”

I never found out why he sold out; I thought he loved the business.

Fallon: “I did too, but when they built the other two plants in New York, I think that’s when the corporation started and he had a Board of Directors he had to answer to. I think he just got fed up with all the bureaucracy.”

Well, that’s a shame.

Fallon: “It sure is. New England Wood Pellet basically had all of the New England area. It was because of them and a lot of the dealers out there that pellets became so popular here in New England. To just cut off, at the last minute, the people who put them on the map is just a crying shame.”

They’re not only hurting you, they’re hurting a multitude of consumers who depend on hearth dealers to keep them warm through the winter.

Fallon: “Oh, absolutely. Plus they’re hurting the new buyers and the potential buyers of pellet stoves once they get a whiff that the fuel is not as available as it has been. There’s been a struggle all fall, and we’ve been selling out every day for the past two months. I’m getting six to eight tractor trailers a week coming in all the time and we constantly sell out.”

Did you end up getting a letter from them, like a lot of other dealers did?

Fallon: “Yes I did, and it wasn’t signed by anyone.”

That letter didn’t say anything about selling to the Box stores. It simply said there was a large demand in the summer because of the cold winter last year. That was it.

Did you get to see an article in the Vermont Rutland Herald that had to do with LaValley’s Building Supply? That company had 90 truckloads scheduled for the 4th Quarter and they cut him off pretty much at the last minute. They also said that all of their product was going to the Box stores.

Fallon: “Yes, I saw that article.”

It seems as if NEWP is putting all of its pellets in the Big Box basket, which is a dangerous thing to do.

Fallon: “Oh, absolutely. We will never deal with them again. I’ve got 10 Box stores within a 15-mile radius. They’ll bring fuel in and then sell it for less than they paid just to get the customer into their store to buy something else. They’re selling New England Wood Pellets for $199 to $210.

“I’ve been one of their biggest dealers for many, many years and it costs me $235 a ton. So I know the Box stores are selling it under their cost just to bring the customer into the store.

“The big thing with the Box Stores, of course, is that come February they don’t want fuel in their store anymore. That’s what happened this past spring. We had such a long winter that I had lines in front of my shop that stretched down Route 1 for over a mile every day for six weeks. We were rationing fuel, five bags per customer.

Customers lined up to buy pellets from Home & Hearth in late winter 2014.

“I was very fortunate. I’ve been in the industry a long, long time so I’ve got some connections when it comes to pellets. Thank God for Vermont Pellet. They really stepped up for me.”

I don’t have a clue how many stores and how many consumers have been affected by what NEWP just did, but it must be hundreds and hundreds of stores and thousands and thousands of consumers.

Fallon: “Absolutely. I think what they’ve done is going to be very devastating to this industry – to pull out just at the time of winter when that fuel is really needed. They have created some real problems for a lot of the dealers.”

Your point is well taken. Are you thinking in particular about homeowners? If they end up not being able to get enough pellets to see them through the winter, there’s a good chance they’ll just say, “Screw it. I can’t depend on this industry.”

Fallon: “Absolutely. I think it could devastate the industry, especially given the price of oil right now. It’s at an all-time low. We’ve been down to a one-ton limit and we tell the customer to come back in a couple of weeks and we’ll give you another. We’re just trying to make sure that we have fuel for all of our customers.

“Some of them have come in and told me the way the price of oil is down right now, it’s about the same buying oil or pellets. It’s almost a wash. Plus, it’s a lot easier to turn that thermostat up than it is to dump a bag of pellets in the stove. It’s going to have a devastating effect on this industry with what they’ve done.”

New England Wood Pellet has plants in Jaffrey, New Hampshire, as well as in Schuyler and Deposit, New York.

Rentech is a publicly-traded (NASDAQ: RTK) Los Angeles-based company that owns and operates wood fibre processing, wood pellet production and nitrogen fertilizer manufacturing businesses.

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