The seven types of outlets are:

1. Repair Specialists (including quick lubes)

2. Foreign Specialists

3. Garages and Service Stations

4. Tire Stores

5. Discount Stores and Mass Merchandisers

6. Car Dealers

7. Auto Parts Stores

Lang has some really interesting perspectives on each of these retail channels, which led me to wonder: What is the likely direction for each in the area of automotive lubricants? Ill take a shot at what that might be, but first, here are two overarching trends Lang says to keep in mind.

First, the average annual mileage for U.S. vehicles peaked in 2004. Since then, miles-driven-per-vehicle has been on a fairly flat plane. 2010 was not a great year but was higher than any year since 2006. Coupling this with the trend towards longer drain intervals suggests engine oil aftermarket sales volumes arent booming.

A second significant point is that U.S. new-car sales have not been good for the last four years. Between 2007 and 2010, unit sales dropped 25 percent overall. Foreign vehicle sales fell 15 percent while domestic brands plunged a whopping 33 percent.

The table on page 8 shows other ways in which the U.S. market has changed. Passenger cars are half the new vehicles sold, and Ford has elbowed higher among the domestic brands. Meanwhile, import labels are over half the market, and Korea and Europe are nibbling away at Japans traditional dominance.

Looking at these numbers, I see that engine oils and transmission fluids are going to become more diverse, and that there are going to be more oil specifications and requirements than ever before. The opportunities to segment and grow markets into profitable niches are good with both. Engine oils designed for each vehicle brand could become the standard (witness General Motors Dexos specification). Many foreign automakers have always preferred their own oil rather than a generic API category, and this splintering of the vehicle market will simply reinforce that desire.

Weve already seen some marketing of so-called truck oils for pick-ups and SUVs. I think that there will be more of that. The major difficulty in so many grades and types of oil is that mass merchandisers such as WalMart and BJs Club limit the number of SKUs (stock keeping units) theyre willing to handle, so there will need to be some selectivity as to which oils will be made available, and through which channels.

That leads me to Langs prediction that among the seven distribution outlets, some will grow and others will shrink. The aftermarket has been stronger than at any time in the last 25 years, thanks to the many features that the driving public wants in their particular vehicles. Accessories such as satellite radio, high-intensity headlights and so forth are now being purchased after the sale rather than as a part of the package from the dealer. For example: Why pay $1,000 or more for a built-in global positioning system when you can buy an aftermarket unit for under $250?

Older vehicles are driving the aftermarket as owners do the things necessary to keep them running well and extend their lives. Valvoline has tapped into this market twice, first with its trend-setting MaxLife engine oil, and more recently with its warranty program which guarantees an engine for up to 300,000 miles with regular oil changes using their synthetic engine oil products. If the engine fails, Valvoline picks up the cost of repair or replacement. Pennzoil, Mobil and others have followed suit with similar guarantees. Thats a great encouragement to keep the old chariot going as long as possible.

Lang believes the big winners in the aftermarket race will be so-called repair specialists, which limit the variety of repair services they perform. (Think of transmission shops, and quick lubes as well.) Specialists are growing due to the obvious concerns about keeping our vehicles running for as long as possible.

Remember, according to GM, the average age of cars and light trucks on U.S. roads today is 11 years. In the 45 years that Ive been involved with the lubricants industry, this is by far the oldest the vehicle fleet has been. It speaks well of the OEMs quality efforts and to the desire of many consumers to take good care of their possessions.

Foreign vehicle specialists are another growth area, according to Lang, and many independent shops targeting either a foreign brand or region will do well in the future. Naturally, these will be the target of engine oil marketers who can obtain the required approvals from VW, BMW, Mercedes, Honda or other foreign badge vehicle manufacturers, in hopes of fetching a premium price. Major international engine oil brands may have an advantage here, since they already maintain such approvals in their global supply system. But there are also opportunities for independent blenders who can serve these small, local outlets.

Garages and service stations also are growing, for the same reason as the foreign specialists. In fact these market outlets are enjoying their largest gains in 30 years, Lang points out. Again, the customer is trying to get as much out of his vehicle as possible and these local shops are the best for those cars and light trucks near the middle and beyond of their product life-cycle.

Tire stores merit their own category since they seem to be on every street corner (and sometimes on opposite sides of the street). In addition to tires, many of these do some mechanical work including fast oil changes. In fact, Bridgestone, Goodyear and Wal-Mart are among the tire installers that have built dedicated service bays to perform quick oil changes, and in doing so have captured a great deal of bulk oil business. Their market proposition is that drivers can get a convenient oil change, at the same time as their car is having its tires serviced.

The outlet to which we all react most strongly is the mass merchandiser. With their tremendous buying power, such big-box stores as Target or Wal-Mart are able to offer engine oil at some of the best retail prices out there. However, as mentioned before, they do limit the variety of products any oil marketer can place on their shelves. They also require the oil marketer to retain ownership of the product until the moment when the container crosses the scanner and becomes the buyers property. This means larger inventory carrying costs for the oil supplier. While the dollar amount of oils sold is large, I dont forsee much growth going on in this channel. Its pretty much status quo.

Sadly, there are always some who dont capitalize on an upswing in the aftermarket, and Lang suggests that these are car dealers. The ranks of U.S. auto dealers were decimated in the past few years, of course, and the survivors could be marshalling for a comeback. Foreign car dealers may not have suffered as much as domestic dealers, since they make a stronger push to get drivers to bring their cars and trucks in for regular service. The impact with regard to lubricant sales is that for those oil companies willing to segment by OEM specification, car dealerships – and foreign ones in particular – can represent a foothold in the marketplace.

Auto parts stores are also on the losing end of the growth in aftermarket sales. I think this reflects the continued move towards Do It For Me on the part of the North American consumer. There will always be those who enjoy the challenge of working on their own vehicles, but signals point to no growth and continued slip-page in the long run. Engine oil isnt a big seller for the auto part stores as they concentrate more on parts such as spark plugs and other items that the serious Do It Yourselfer needs to keep his vintage wheels turning smoothly.

Cross-pollination among these types of outlets is also likely. For example, some of the large national chains such as Midas Muffler or Goodyear Tires will take advantage of some the techniques used by the mass merchandisers to improve their bottom line. That would include forcing oil suppliers to hold inventory on their books until it is actually sold or used. Its the Wal-Mart model in the muffler shop. Oil marketers can expect more of that same treatment in the future.

In my view, the bottom line is that oil marketers have some exciting opportunities to supply specialized oils at better-than-average margins, but with the difficulty of having more grades and brands to produce, warehouse and distribute. Theyll wind up owning them for a longer period of time and will really be under the gun to develop lean production, inventory and distribution systems. Theyll have to tailor their selling approach to meet the particular needs of each of the market channels, too.

These are challenges that many will meet with enthusiasm, and a few will meet with disdain. I like challenges, and I hope you do too.