Auto Service World
Feature   May 1, 2015   by Steve Pawlett

Maturing DEF Market Moving To Bulk Sales

The Diesel Exhaust Fluid (DEF) North American market continues to show significant growth since the implementation of the Environmental Protection Agency’s 2010 Diesel Emissions Standards. Every month, newly manufactured trucks requiring DEF hit the road and influence growth of the market. In addition, the apparent likelihood of higher DEF dosing rates is anticipated from prominent truck manufacturers. As the North American DEF infrastructure is challenged to meet these amplified volumes, jobbers are stepping in to meet market demands.
While the small diesel retailers are still finding their way, there is a steady market for jug sales of DEF as the infrastructure for countrywide bulk sales slowly develops.
“We expect the bulk segment of this market will continue to grow and will primarily go to the cardlock segment. But because the cardlocks haven’t expanded fast enough, there are a number of direct fleet services that have already built their own infrastructure for this,” explains Ross Ayrhart, strategic accounts and market development manager for Wakefield Canada.
“The jobbers certainly have a segment of this market, but I see the percentage of jugs going down and the volume going up over time as the infrastructure continues to develop. Right now I believe there are about 85 locations reported in Canada located at high-volume diesel stops,” adds Ayrhart.
“Based on market pricing today, there is not enough margin between the manufacturer and the end user to sustain a profitable two-step or three-step distribution. When the product was launched margins were good, but within 18 months the margins just plummeted; it became a commodity very quickly. In fact we parallel it to windshield washer fluid, where direct to retail/user distribution prevails. The truth is that the distribution cost makes it an unprofitable proposition. Also there has been a pronounced move to bulk distribution of the product so that it can be filled at fuelling points for heavy-duty applications,” explains Dennis Favaro, marketing manager for Valvoline Canada, a division of Ashland Corp.
Diesel Exhaust Fluid (DEF) is a non-hazardous solution that is 32.5% urea and 67.5% de-ionized water. DEF is sprayed into the exhaust stream of diesel vehicles to break down dangerous NOx emissions into harmless nitrogen and water. This system is called Selective Catalytic Reduction (SCR) and can be found on 2010 and later model year trucks and many diesel pickups and SUVs. DEF is not a fuel additive and never comes into contact with diesel. It is stored in a separate tank, typically with a blue filler cap.
The vast majority of the DEF is consumed in heavy-duty engines, which are driving well over 99% of the volume. While passenger car diesel is growing and will continue to grow, it still will not amount to a large DEF market in the foreseeable future. “While this does not mean that jobbers cannot carry and sell the product, they just need to understand that they may need to position their offer as a retail convenience purchase to obtain the margins to sustain the product, as is done at truck stops, kind of like motor oil at gas stations, where you will pay up to twice the market price for a bottle of motor oil. The major consumers of this product will purchase their product where it is most convenient and they can get it the cheapest; hence the move to bulk. Also, Wal-Mart and Canadian Tire also sell DEF, but targeted at consumers,” adds Favaro.
It continues to be a growing market, but unit jug sales are going down, even while the total volume is going up. “We don’t sell in bulk but we do sell the 208-litre barrels to our industrial clients, and we have jugs in the store which sell well too,” explains Miles Brown, branch manager for Lordco Automotive in Victoria, B.C.
“The market kind of just materialized very quickly when the emission standards came in in 2010, and it’s held its own since then. I can’t say that it is growing for us, but it is steady,” adds Brown.
“We do sell it in the big totes, as well as the jugs here,” says Tyler Bamford at NAPA Auto Parts in Assiniboia, Saskatchewan. “Customers usually come in and grab a couple jugs to have with them in case they need it, since the infrastructure for the bulk sales is still developing. Our sales are pretty steady.”
Jobbers should ensure their customers are always buying API-approved DEF for their vehicles to ensure that no longer-term, costly damage is done to their vehicle.
The quality of all approved DEF product has to meet API standards. So from a user standpoint, customers should always be sure the jug they purchase has an API logo on the bottle; all the reputable brands have that.
“It’s a roll of the dice if you don’t buy the approved product, because over time you are predominantly going to see catalyst failure, and this could cost as much as $7500 to replace,” explains Ayrhart. “To save a penny or two a litre on an unknown brand could cost the vehicle owner a lot of money long-term.”
A special grade of urea and deionized water is used in the formulation of DEF. “If it was made from agricultural-grade urea, it may have formaldehyde and other contaminants in it, so every plant that makes urea does not necessarily make DEF-grade urea,” advises Ayrhart.
Everyone licensed through ISO is required to do all the testing to ensure that formaldehyde and any other contaminants are not present in the product.
“In particular, it’s formaldehyde that is going to clog up the catalytic system. It’s no different than using leaded gas in a modern car. It’s going to plug up the catalytic converter and cause a number of issues,” says Ayrhart.
Be sure to point out to your customers that if they pour some questionable product into their tank, it may not happen immediately, but down the road, over time it will cause a problem.

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