Auto Service World
Feature   March 1, 2003   by Dennis Mellersh

Market Feature: Underhood Chemicals and Additives

What's Moving Under There?

Underhood chemicals and additives continue to be a strong aftermarket segment in both the essential products category (such as antifreeze/coolant) and optional products such as fuel and oil additives.

However, industry experts note that while some underhood chemical product categories are steadily increasing in sales, others are not. Long-life antifreeze/coolant products, for example, are generally seen as flattening demand in the overall anti-freeze/coolant category because of their obvious effect on the replacement interval. The emissions control category of additives, on the other hand, is growing in sales, because more and more cars and light trucks in various jurisdictions are being subjected to an emissions test before the owner is allowed to renew the vehicle license.

To sell effectively in this market, jobbers and their counter staffs will need to be armed with a lot of product knowledge as well as up-selling skills. And these skills and knowledge will also have to be imparted to the installer customer base if jobbers expect to push these chemical products through to the consumer.

Just as with underhood hard parts, technology and other market drivers are resulting in a proliferation of “parts” in the underhood chemical side of the business. These chemicals and additives are becoming more and more complex in formulation and application specifics, in addition to there being such a wide variety of them. It isn’t yet at the point where you need to be a chemical engineer to be successful at selling underhood chemicals, but the days are long gone when the one-size-fits-all approach could be successful in this important aftermarket category. The view is that if you aren’t prepared to answer a lot of technical and application questions about these products from your customers, you may as well not stock them.

Demonstrating a seemingly endless capacity for product proliferation, the overall underhood chemical products market is healthy, with room for additional growth. However, for this market to reach its full potential, there will have to be more consumer education on the capability of these products to improve the operation of vehicles.

Richard Navin, national sales manager of Radiator Specialty Company, says, “The overall automotive chemical category is far from mature. Acceptance is growing, but acceptance is not established to the point where consumers fully understand that chemicals with modern chemistry can provide solutions to improve efficiency, increase component life and delay replacements.”

Similarly, Chris Osborne, director of marketing, Kleen-Flo Tumbler Industries, comments, “The majority of these categories are still in a growth stage, with a few that have clearly matured. The only category that appears to be dropping off is winter-based items such as gasoline antifreeze and starting fluid. However, with the winter we have experienced in many parts of the country, even these items have shown significant growth. This pattern will only be sustained [if we have] similar winters for the next few years, though.”

Convenience products and longer-life products are two key drivers in the underhood chemicals market today, according to Megan Currie, Prestone Marketing, Canada, Honeywell CPG. “More people are looking for heightened performance, but also ease of use for their vehicles,” says Currie. “The average person is more pressed for time and those who work on their vehicles want to trust the brand of product they are using, so brand names are also key. We are seeing a lot of niche products and segmentation within categories. The market as a whole is mature, but certain segments are seeing increased sales; for example, extended-life products to meet the needs of higher mileage, or longer change intervals in the case of antifreeze/coolant.”

The dizzying array of underhood chemical products competing for the consumer’s attention poses a challenge for growing this market effectively, says Stephen Joyce, president of Molyslip Canada. “For the consumer, there may be too much choice. There are many varieties of these types of products and a lot of companies are involved. The market may have been chopped up too much. The solution is that consumer education will be required,” says Joyce.

Because antifreeze/coolant replacement is not mechanically challenging or knowledge-intensive compared with hard parts replacement or repair, this is still a fairly strong DIY market. Research compiled by DesRosiers Automotive Consultants Inc. for the Automotive Industries Association of Canada’s 2001 Car Maintenance in Canada Report (the most recently published) shows that DIYers performed 33% of replacements, with mechanics/professionals responsible for the remaining 67%. In the mechanic-installed (MI) segment, new car dealers accounted for the largest share at 38%, followed by independent repair shops at 36%. Looking at DIY channel outlets, auto parts stores are doing reasonably well in this product category with a 17% share, exceeded only by Canadian Tire at 46%.

Technology is strong in the antifreeze/coolant product segment. And, just as extended automotive component life has affected aftermarket parts sales, so has improved quality and technology affected the antifreeze coolant market. Perhaps one of the most important developments has been the advent of the new “long-life” formulations. Generally speaking, they vastly increase the necessary change intervals. Texaco Havoline’s Dex-Cool Extended Life Anti-Freeze/Coolant, for example, is described as more than “doubling the recommended length of coolant system service intervals.” The first aftermarket offering licensed for General Motors’ Dex-Cool formulation several years ago, this “formulation provides superior heat exchange capabilities (cools better), improves water pump seal performance, and enhances coolant system component durability.”

Kurt Teblum, senior vice-president, automotive products, Recochem, says this and other long-life antifreeze/coolant products have changed the market. “This market is flat from a volume perspective and will remain flat. Currently it is at about 72 million litres annually and it has been there for some time. The long life coolants are taking market share. These products are much more sophisticated and utilize organic acids to protect water pumps.”

Although the volume in the market may be flat, Teblum says there are up-sell opportunities with the long life “hi-tech” antifreeze coolants. Negative pressures on profit because of volume decreases in regular antifreeze/coolant can be combatted on the revenue side by actively promoting these value-added products. “There is a definite upgrade opportunity here. We have 22 salespeople on the road selling coolant, and we are teaching them how to up-sell to the better technology products. For the jobber and the installer, if a consumer is having a timing belt changed, for example, it is an excellent time to suggest to the customer that he may as well upgrade to a better coolant. By spending only a few dollars more, he can get the best technology, which will be much better for the cooling system components in his vehicle.”

In addition to the market changes brought on by long-life formulations, Teblum says the pre-mix market is growing quickly and has gone from virtually zero percent of the market to 30% in about six years. He says the biggest sector in this market is not flush and fill but rather top-up, because evaporation and other sources of partial coolant loss are still the main issues.

Because of improved radiator design and shielding as well as better components such as water pumps and hoses, catastrophic coolant loss happens nowhere near as frequently as it used to, thus lowering the growth potential of both antifreeze/coolant and auxiliary cooling system products. Richard Navin says that products such as those that stop leaks are no longer a growth category, and there is now little change in demand for these products from year to year. A look at a new car’s front styling shows why. “The radiator in [newer] vehicles is often well protected compared with the expos
ed designs of the past. This results in far fewer holes from projectiles and the resulting leaks.”

Although the long-life products have eroded volume up to this point, eventually the newer car and light truck radiators with factory fills of long-life will have to be flushed and refilled. These products do not last the entire life of the average vehicle on the road. Currie says, “The General Motors five-year antifreeze/coolant factory-filled cars are now coming back onto this market to get their radiators flushed and filled. As a result of this, we are seeing an increase in our Prestone Long Life product.”

Not surprisingly, oil additive products are being used for the most part on significantly older vehicles, according to DesRosiers’ research. Looking at oil additives’ market share by vehicle age, eight-to-12 year-old vehicles account for 40% of oil additives use and vehicles more than 12 years old account for 30%.

“Oil additives are a strong category,” says Navin. These products are generally easy to use and the results are easy to determine. They are also a sales catalyst in that the use of these products gives consumers the confidence to try other chemical formulations for problem solving, Navin says. “There is a lot of consumer support from long-term users of oil additives, especially from those who own high-mileage vehicles.”

One of the leverage factors of oil supplements is that they appeal to the consumer’s need for making their dollars go further. Consumers are looking for ways to reduce the cost of operating their vehicles and oil additives can be one of the answers, says Joyce. “One of the ways people can cut costs is through fuel savings and our oil supplement helps with this. Tests involving the use of our product have shown an 8% fuel savings, which is substantial.” By using oil supplements that reduce friction and wear, consumers can also gain extended life with their engine components, which is another savings, says Joyce.

The composition of the Canadian vehicle fleet is well known and can be used as an effective sales tool with oil additives. Valvoline Canada has taken a very careful look at the nature of the fleet and is now targeting specific products to particular vehicle age segments. “We are trying to address what happens when vehicles age, with a view to maintaining the integrity of these vehicles and keeping them running,” explains Dennis Favaro, marketing manager. “As vehicles age, they have different problems. Our strategy is prevention of problems before they happen. We are trying to preserve the consumer’s vehicle through preventive maintenance products such as oil additives. Essentially, this is a vehicle strategy rather than a product strategy and we are targeting everything from new with low mileage to much older with high mileage.”

Providing value-added service experiences for the consumer with oil additives is one of the ways jobbers and their installer customers can increase profits. Chris Osborne says, “The traditional oil change has in many circles become a loss leader. The inclusion of an oil additive to this service not only provides added value to the motorist, but it can also turn a simple oil change into a profitable service procedure for the installer. Generally, once an installer sees the benefit of such an up-sell, they are more likely to recommend this type of product to their customer.”

Fuel system additives, and in particular, emissions-related products, have strong consumer appeal and should be promoted, particularly the well-branded products. One of their key appeals is ease of use. Richard Navin notes that for the consumer, “Fuel system additives are products that are simply poured into the fuel tank. They are among the most easily understood products and as a result, this category is still the fastest growing additive. Although the proliferation of companies trying to get a position in this category grows almost daily, it seems that the core and proven brands remain unaffected and continue to grow.” He also says that despite people’s vocal desire to help the environment, emissions control fuel additives would go down the drain as a market if it were not for legislation governing automotive emissions. “If the legislated mandates for emissions tests were ever cancelled, this category would fade from existence.” Megan Currie supports this assertion. “Governments are the biggest influence in this market, with programs such as the Drive Clean Program in Ontario and the Air Care Program in British Columbia.” There are, however, no signs that this is about to happen. On the contrary, the programs have been progressively toughened.

In general, there is plenty of opportunity for jobbers to increase their sales revenues with these products through aggressive promotion. Educational efforts directed to the DIY customer and to the installer base should prove effective in moving more of this product category off the shelf. In many ways, what moves in this category is up to you.

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