Chemical prices

[soapy]

At Sam's club yesterday and took picture of current gas prices. I remember over the last 6 years all the price raises for our chemicals and the explanation was usually because of the rise of petroleum prices. Now that it has dropped by more than 1/2 I doubt that we will see any kind of rollback of prices.

 

[Randy]

We are at $1.97 here, some Stations are $2.06. Our gas tax is higher than in Idaho. I don’t think you’re going to see any drop in the price of chemicals.

 

[rph9168]

There is more to manufacturing car wash chemicals than the cost of raw materials. There are costs for labor, production materials, packaging, building rent or lease, utilities, insurance, equipment maintenance, and other costs when operating any business. While the raw materials are a good percentage of their costs consider what percentage of your car wash is the cost of the chemicals.

Pricing set by the companies that supply these chemicals to the manufacturers is not that volatile. Most of the time they set prices only once a year unless there is a drastic increase in their cost. I can remember only once where it happened three times in one year. Like most businesses chemical companies are reluctant to lower prices unless the competition does. While we have seen gas prices reduced by as much as 40% recently there is no way manufacturers will see the same reduction that quickly if ever. If the decrease in petroleum products stays low you will see prices come down due to the highly competitive car wash chemical market but I would not expect to see any reductions before the Fall or even later when manufacturers see a significant reductions in their costs.

 

[MEP001]

There is more to manufacturing car wash chemicals than the cost of raw materials. There are costs for labor, production materials, packaging, building rent or lease, utilities, insurance, equipment maintenance, and other costs when operating any business. While the raw materials are a good percentage of their costs consider what percentage of your car wash is the cost of the chemicals.

The thing is, they blamed the raising of prices almost solely on the cost of fuel.

 

[robert roman]

Carwash chemical prices are a function of manufacturing cost and supply and demand.

What happens when the demand for something decreases as the cost to produce it increases? Like when price of oil spiked and sustained high gasoline prices 2006/2007 and then recession occurred 2009/2010.

Moreover, carwash chemical represents only a small share of total U.S. chemical spending most of which (85% or more) is supplied by regional brands and bathtub blenders.

The carwash chemical market is fragmented like carwash and barriers are low. So, increases in raw materials and “freight” put a great deal of pressure on suppliers, in a highly competitive market.

What’s changed is operators are increasingly relying on chemicals for up-selling.

For example, top package marketing is a popular form of menu merchandising for conveyor operations.

Typically, this includes a basic wash plus good, better and best and then up-sell products.

Here, each wash uses more ounces of chemical and increasing cost of goods. For example, here is my analogue of stores.

Basic uses a total of one oz of chemical at cost of $0.85; good 1.5 oz at $1.05; better 4.0 oz at $1.90; best 7.5 oz at $2.45 and up-sell 13.5 oz at $3.95.

Interestingly, cost per oz drops from $0.85 to $0.29 moving up from basic to top package with up-sell.

Because carwash operators have no control over cost of raw materials, it makes more sense to focus on extracting the highest price from the market rather cost reduction.

 

[rph9168]

The thing is, they blamed the raising of prices almost solely on the cost of fuel.

While I am sure freight figured into it manufacturers mostly attributed the increase mostly to the cost of raws. Most of the cost of shipping are borne by the distributors in the form of either a charge based on their order size or "free" freight with larger orders. Perhaps your distributor made that statement.

 

[madscientist]

The thing is, they blamed the raising of prices almost solely on the cost of fuel.

Yes, it's also hard for them to argue when there is a line item on your bill that says "Fuel Surcharge", which hasn't gone away.

 

[hkim310]

I agree with some of the other operators as it clearly states on the bill that the extra charge is a FUEL SURCHARGE.

 

[rph9168]

On whose bill does the surcharge appear? Manufacturer to distributor or distributor to customer? Normally the fuel surcharge is assessed by the freight company or shipper, not the manufacturer.

 

[madscientist]

Distributor to customer.

 

[hkim310]

We purchase from the manufacturer, Simoniz, and it is on our bill. We also received a letter at the beginning of the year stating we would receive an additional Fuel Surcharge based on rising fuel costs.

 

[2Biz]

Gas went up 16.6% over night here. $.30 a gallon increase....Go figure. Now what was you guys saying about "Surcharge"?!?!?

 

[soapy]

I guess we should listen to RR and forget about the cost side of running a wash. Just raise your prices every time you see a increase in your costs and people will come.

 

[rph9168]

Fuel surcharges have been around for a long time. I guess what it will have to take is for one of the major freight companies to stop the practice.

 

[I.B. Washincars]

I lump fuel surcharges right in there with resort fees at hotels and document fees at car dealerships. They are total BS charges with a made-up name to make it look like they didn't really raise the price.

 

[robert roman]

“I guess we should listen to RR and forget about the cost side of running a wash.”

Of course not but what is left to save?

What I mean is good operators have cost under control. Everything excess has been squeezed out.

So, sales rep comes along and says company’s “new and improved” can save a nickel on soap, big deal.

Is this going to help if water and sewer rates double or a loss of 20 or 30 percent of business?

Profit maximization is the process by which a firm determines the price and output level that returns the greatest profit.

In other words, you want to maximize the difference between revenue and cost.

With chemistry available today, it’s easier to maximize revenue than it is to minimize cost.

 

[tdlconceptsllc]

You know what I like about Distributors on my area they all have the same mantality in this business could only name 1 or 2 straight up ones they charge a Fuel charge of $95 dollars and also a Trip charge of $75 dollars on the Same Invoice,and then they sell you the soap or service, You got to love it and I do Scientific Refrigeration and we don't even do such thing. Then the Soap companies go up every year a percentage supposedly on the soap first of the year. If I the Carwash Operator went up all the time like they do it would be $20 dollars in the SS Bays and $35 dollars for the Top package on the automatic and have about 2 customers a day.

 

[Waxman]

I try to mitigate the extra costs of shipping by waiting to order from kleen rite until i have a pallet load of goods i need then shipping is free.

i try to control chemical costs by blending my own powdered soaps on both automatic and self serve wash. with the help of S.G. here I have developed what i think is a really good blend for in bay presoak, hp soap in ss and foamy brush.

i also raise prices and don't look back, because i want a profitable business and not one that has to struggle.

 

[soapy]

On a similar note from the Wall Street Journal, American airlines said it will keep rates as if the price of oil was still $100 per barrel. This will result in no air fare drops and an additional 5 billion dollar profit per year for the airline.