After years of effort, the next heavy duty engine oil category has been blessed by all technical and marketing organizations, and the American Petroleum Institute has set the first license date for Dec. 1, 2016. Now its time for oil blenders and marketers to move full speed toward introduction of these new products that will be known as API CK-4 and API FA-4.
In the race to get the new oils to market, oil producers and marketers must ensure that all of the important milestones have been met – much like the process of developing the new category itself. Their checklists typically will include a review of existing product portfolios and manufacturing capabilities, to assess where the new oils will fit in.
In the case of Phillips 66, a major player with one of the most complex product lines in the commercial engine oil arena, the category upgrade is being seized as an opportunity to consolidate and rebrand much of its lubricants stable.
The company announced on Feb. 25 that it will eliminate its Conoco and 76 Lubricants brands as of July 1, and continue marketing lubricants under the Phillips 66 and Kendall brands. (Conoco and 76 will live on as fuels brands.) The company has managed all four brands since 2002, when Phillips 66 and Conoco merged to form ConocoPhillips. ConocoPhillips then spun off its downstream refining and marketing business in 2012, as Phillips 66.
Throughout these maneuvers, Kendall – one of the oldest lubricant brands in the country – always stood alone, but the other three were unified on package labels about 10 years ago. Now, with the imminent launch of a new heavy duty category, the identities are ripe for a re-think, the company feels.
We historically included three brands – Phillips 66, Conoco and 76 – on a tri-branded packaging label for certain categories of products in the marketplace, such as industrial lubricants, greases, automatic transmission fluids and some heavy-duty engine oils, Jamie Allison, director of brand management for Phillips 66 in Houston, told LubesnGreases. Transitioning away from a tri-branded strategy provides a clearer brand promise and stronger product positioning, and the benefit will be greater overall brand recognition, which will ultimately streamline selling efforts, she said.
This is certainly a logical move for the company, and it also offers a chance to simplify what is arguably one of the more difficult processes in automotive lubricant marketing: managing an engine oil category upgrade. Had all four brands been involved in the changeover to API CK-4 and FA-4, the process may have been too complicated to accomplish.
Numerous steps are involved in implementing a category change, from new product testing, certification and licensing, to new packaging designs, to supply chain adjustments, and many other important tasks. Timelines become critical, and all of the changes must come together to allow introduction of the new products starting on Dec. 1.
Phillips 66 Director of Commercial Products Bernard Wallendorf referred to his companys process as a structured management of change. The change started with the selection of base oils and additive systems for making its heavy duty oils. Since the process of product development and testing normally requires more than a year to complete, Phillips 66 has already chosen its additive suppliers and packages, and product certification programs are well underway.
For a major marketer like Phillips 66 with eight blending locations throughout the country, it is imperative that all possible base stock combinations be covered in the certification process for each product. The company owns 50 percent of Excel Paralubes, which has 22,200 barrels a day of API Group II capacity in Westlake, Louisiana, and also taps into other sources for its base oil needs. Base oil interchange and viscosity grade read across guidelines, which are established in the API Engine Oil Licensing and Certification System (in document 1509, Annexes E and F), are essential parts of any major engine oil reformulation. These guidelines prescribe a minimum set of tests necessary to cover base stock and viscosity grade combinations other than those used in the initial testing regimen for a licensed product. Without such flexibility, the cost of reformulating would be prohibitive, as a single base oil and viscosity grade test program costs more than $1 million.
In addition to the mandated laboratory and engine test programs, field tests are also ongoing with prototype chemistries. These tests are intended to demonstrate product performance and generate information, pictures and videos for use in advertising, promotion and training. Working with its additive suppliers, Phillips 66 expects to obtain original equipment manufacturer approvals for a new additive chemistry that will cover its entire product line.
In parallel with this technical work, a number of teams within Phillips 66 are looking at various aspects of the new category introduction. Each of these groups has a specific area of the introduction to cover, some of which are major undertakings.
One of the longest-standing teams is working to develop new product labels. New labels will need to reflect the latest categories as well as any OEM recommendations and specification claims – and the new solo brand identity. Once the design is complete, according to Wallendorf, container labels will be available for applying to Phillips 66 or Kendall packages within about eight weeks.
Another team is working on advertising and promoting the new products. Tony Negri, Kendall brand director, points to the hundreds of touch-points the team must cover. Advertising for media such as radio, websites and videos all need to reflect the new products by Dec. 1. In addition to signs, banners and promotion sheets, this team will develop new literature, such as product technical data sheets that take into account the fuel economy benefits of the lower-viscosity API FA-4 products.
Negri commented that both employees and distributors will be educated on API CK-4 and FA-4 as part of the companys ongoing formal training efforts. Training will focus on the differences between the new categories and the existing API CJ-4 oils that have been in the market since 2006.
For the last two years, he also noted, members of the product development team have been in discussions with key distributors as well as other internal and external sources, searching for ways to educate customers and develop the selling tools that will grow the market for the new category products.
Dave Taber, a senior scientist who is deeply involved in the product chemistry and changeover operation, commented on the process for change within the blending plants. Beginning about two months before the product changeovers are scheduled to occur, the marketing team will receive inventory estimates of locations and quantities of both the existing products and delivery projections for the new products. This data will be used to build product inventories sufficient to carry through the plant changeovers.
About four weeks out, the plants storage tanks will be run down to empty, cleaned out and made ready for the new products and additives. Fresh raw materials will be brought into the plants and new products blended. These products will be ready to ship by the time Dec. 1 rolls around.
Phillips 66 anticipates that some of its products will be on the shelf and wearing CK-4 or FA-4 in the API donut soon after the first allowable license date. Others will move into place later. Trying to get every brand, viscosity grade and container size out the door within the first allowable days would be a stretch for both manufacturing and logistics.
Taber also raised the issue of operational documentation. Along with product specifications and additive provisions, updated safety data sheets must be prepared. To add to the complexity, if any products are shipped to foreign locations, export and import documents also need to be developed.
As all of these steps progress, Phillips 66 has expressed concern over backwards compatibility for API FA-4, the fuel economy version of the category upgrade. Shawn Ewing, product technical services coordinator, noted that FA-4 does not meet the high temperature, high shear viscosity limits of earlier categories. Field testing will help to demonstrate the performance of the category, and he said that wear data generated to date look good. However, those trials dont cover the atypical use that is bound to occur. Ewing and others hope that OEMs will be able to bring some clarity to this situation, such as what it may mean for engine warranties.
Another issue for the industry is the question of universal oils, such as API CJ-4/SN, which mixed fleets can use in both diesel and gasoline engines. Are their days numbered? Negri noted that transit fleet managers are interested in maintaining this flexibility in their oil purchases, so theyll only need to stock one engine oil for all of their vehicles. However, OEMs are concerned that the higher levels of phosphorus in heavy duty engine oils – typically 1100 parts per million – can damage catalytic converters in passenger cars; conversely, the 800 ppm maximum phosphorus allowed in the latest light duty specifications may not provide enough wear protection in heavy duty engines.
Wallendorf emphasized that Phillips 66 has taken the time to look closely at the market to determine where untapped opportunities and new customers may exist. Now its ready to use the CK-4 and FA-4 product introduction as a lever to expand and differentiate its commercial product line. By applying a strategic approach in designing its lubricant portfolio, he said the company will be able to introduce products that will offer true improvements – rather than a me-too response to another category upgrade.