Shelf space for high-mileage motor oils became more crowded this month with the launch of four more entrants into the category.
With the arrival of the newest brands, nearly every major U.S. motor oil supplier now has a product marketed for vehicles with more than 75,000 miles. The category has solidified its position as part of the motor oil market – not only because of the growth it has achieved in just four years, but also because of enormous potential perceived by suppliers. Of course, the fact that it offers healthier-than-average margins only enhances supplier enthusiasm.
The newest high-mileage oils were all unveiled at the Automotive Aftermarket Products Expo held in Las Vegas at the start of this month. They are: Kendall GT-1 High Mileage Synthetic Blend from ConocoPhillips; Exxon Superflo High Mileage from ExxonMobil; and Havoline High Mileage Protection and Chevron Supreme High Mileage, both from ChevronTexaco.
They join several existing brands in the high-mileage segment, including Valvoline, Quaker State, Castrol, Mobil and Pennzoil, along with private label entrants.
Although some marketers are trying to differentiate their product – ConocoPhillips, for example, pitches its GT-1 as a premium high-mileage oil – all make similar claims: that their oils maintain viscosity and help protect old seals, thereby fighting leaks and reducing build up of deposits.
The various suppliers dont seem to mind standing side-by-side with competitors, probably because the segments growth makes it seem as though there is room enough for everyone. According to Valvoline, which launched the oldest of the existing products in 1999, high-mileage oils now account for between 5 percent and 7 percent of the sales value of the U.S. passenger car motor oil market. Companies say it has already surpassed the combined demand for synthetic and synthetic blend motor oils.
Marketers also contend that todays demand just scratches the surface of the segments potential. All cite the fact that at least two thirds of passenger cars in the United States have 75,000 or more miles on their odometers. Some believe the potential demand for high-mileage oils is on the order of that vehicle population.
At this point, approximately 14 percent of vehicles with more than 75,000 miles are using high-mileage motor oils, so the potential upside is terrific, said Ray Sparling, director of programs for Kendall Motor Oil. Moreover, we think the timing for entering the segment is very good because a significant portion of consumers have already gone through the learning curve on this type of product.
Suppliers say there is now enough demand for high-mileage oils that they feel a sense of obligation, as well as opportunity.
Our customers have asked for this type of product, said Peter Fuentes-Afflick, consumer automotive business unit manager for ChevronTexaco Global Lubricants. We feel a responsibility to offer what they want.
The attraction of the high-mileage segment is about more than just volume. With quarts of high-mileage oils typically priced a dollar or more higher than conventional oils, it also offers suppliers a chance to improve margins.
High-mileage oils give people a mid-tier option between your basic motor oil and synthetics, said Thomas F. Glenn, president of market research and consulting firm Petroleum Trends International Inc. That appeals to a large group of customers who say, I may not understand the ILSAC starburst, and I dont understand API-SL, but I understand price; I dont want to buy the product that is the very cheapest because I think there is usually some relationship between cost and quality, but I dont want to spend the money for the most expensive.
Bridging that gap between conventional oils and synthetics has been very important for the market because it gives companies a chance to bump up the price without having to make that huge leap that you have for synthetics.
That kind of opportunity is especially important to motor oil marketers given the difficulty of growing profits through volume.
It was a tough year last year – overall sales actually declined, said Blair Boggs, director of branding for Valvoline. The company has posted steadily increasing earnings the past couple years and repeatedly cited its high-mileageoil – MaxLife – as a major contributor. We’re all wrestling with that [lack of growth in overall demand] and saying that our ticket out of this is that we need to innovate.
In at least one sense, one high-mileage oil has separated itself from others in the field. Exxon Superflo appears to be the lone entrant in the category to display the ILSAC starburst, signifying compliance with GF-3, the latest passenger car motor oil specification.