demand for premium products during warranty period is controlled by the OEMs. Car owners, especially first time owners, are shielded from mainstream engine oil brands and may choose to use the OEM service centers beyond the warranty period. This is a threat to independents as well as majors. At the moment majors have a strong position with factory fill and have excellent branding, awareness, loyalty, and channel coverage in the market that drives demand.
However, the expansion of DIFM and erosion of lube brand recognition aids private labels and house brands at the commodity end of the market.
Can lubricant basestocks support new market niches?
Can lubricant marketers use the basestock market situation to address the challenge posed by the growing competition in the lubricants market? The growing variety of basestocks makes it possible for lubricant blenders to promote their brand on non-traditional values. Traditionally engine oils have been promoted on the basis of engine cleanliness, engine life, and fuel economy. New brand positions could include “renewability”, “low carbon footprint”, and “re-refined/ recycled”. Such companies as Novvi, Valvoline and Shell are trying this approach. The crucial question is this: Are consumers aware of what goes in their vehicle and do they care? Many consumers are passionate about coffee. Among these there are some who care enough to buy ethically sourced coffee. This makes “ethical coffee” a good brand position to promote. Are there such consumers of engine oil? While this question needs to be researched more, the answer appears to be “no” at this moment. Car ownership and usage doesn’t generate the kind
of passion it used to in the past. Car ownership is no longer the life milestone it was in the past. This is a problem for the entire industry - majors, mid-tiers, and independents – and one that no one seems to want to address.
Summary
The changing basestock supply situation has reduced the bargaining power of basestock refiners and improved the position of independent blenders. This market situation has also reduced the entry barriers and is increasing competition. Lubricant marketers with other strengths in terms of access to retail and installer channels and access to OEM business will be in strong position. It is probably premature to think of basestocks as a means of brand positioning given the lack of knowledge among consumers. However that can change if consumers are educated on basestock technology and pros and cons.
LINK
www.klinegroup.com/market-research/ research-petroleum.asp
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