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Need to Know


Ever wonder who is the largest supplier of lubricants in the United States? Some know. They spend big bucks on market research reports, scanner data from retail outlets, and other sources of market and competitive intelligence. But what about the average bear – does he know who the lubricant market leaders and laggards are?

When asked, many say that ExxonMobil is the largest lubricant supplier in North America. In their view,ExMo must be the largest since the company is often said to have more money than some OPEC countries and its record-breaking sales are frequently in the news. Its also common to hear others say Pennzoil, Valvoline or Castrol are probably the largest suppliers. This makes sense to some because the logos for these brands can be seen on cars screaming across the tracks at NASCAR, hot-rod and Indy car races. In addition, these products enjoy high brand awareness due to millions of dollars spent each year on advertising.

If you happen to ask someone on the West Coast the same question, you could very well hear that Chevron is the leading supplier of lubricants. This is because Chevron has a very strong market position at gasoline stations west of the Rockies.

So who really is the leading supplier of lubricants in North America? According to Petroleum Trends market research, the largest big Kahuna in the U.S. lubricants business is Shell. Shells sales in the United States reached an estimated 380 million gallons in 2005, or roughly 14 percent of the total.

In addition to enjoying a leadership position in combined products volume, Shell is also the leading U.S. supplier of heavy-duty engine oil. Petroleum Trends estimates Shells U.S. sales of heavy-duty engine oil at about 100 million gallons in 2005, or close to 20 percent of the total. And if thats not enough to make the folks at 700 Milam crack open the champagne bottles and break out the party hats, consider that when you add up the sales for the Shell, Pennzoil and Quaker State brands, Shell also enjoys the leadership position in passenger car engine oil. So take a bow Shell, for a job well done.

But that was last year. And if you look at who was in second place and at how many gallons separate first from second, its clear that Shell could not spend much time celebrating if it planned to retain its front-of-the-pack position in 2006. This is because2005 came down to the wire between Shell and ExMo. In fact, Petroleum Trends estimates say it was nearly a photo finish. Shell won the volume race by less than 10 million gallons. And if you look at whats been happening over the past few years, it becomes clear than ExMo is positioning itself to take the checkered flag this year.

ExMo has what is commonly referred to as abalanced portfolio, well-fortified with sales in each of the three market segments (commercial automotive, consumer automotive and industrial lubricants). In fact, beyond having a presence in industrial lubricants, ExMo is the market leader in this segment. Although Shell leads in the commercial and consumer automotive segments, ExMo enjoys nearly four times greater sales volume than Shell in the industrial segment.

This is a particularly enviable and advantageous position for ExMo; whereas demand in the consumer automotive segment is relatively flat to declining,the industrial lubricant market segment continues to offer growth opportunities. So while Shell and others are running up the down escalators to try to grow volume in the consumer automotive segment, ExMo can continue to leverage its brand equity to capture market share in the industrial arena. And beyond leveraging brand equity,ExMo is also leveraging progressive and innovative technology to grow its industrial market sales.

Even in the consumer automotive market segment, ExMo is positioned to be avery formidable competitor moving forward. To start, its Mobil 1 passenger car engine oil enjoys high brand recognition as the leading synthetic engine oil. And demand for synthetic engine oil is rapidly gaining traction with consumers. In addition, ExMos willingness to bite the bullet and trade volume for value with the introduction of engine oils designed for extended drains (Mobil Clean 7500 and Mobil 1Extended Performance, for 15,000 miles) is paying off. The companys sales of this new line is reportedly capturing noticeable market share and returning attractive margins.

More important than what ExMo is doing in the public eye is what its doing behind the scenes, to grow sales not only in the consumer automotive market segment but also in the commercial automotive and industrial segments.

While its competitors are working hard to push their products into these markets, ExMo is surgically and successfully working to get the market to pull its products through. Foradeeper look, see next months Need to Know column.

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