The announcement must have felt like a punch in the stomach to a lubricant engineer.
Promoting a study entitled “The Outlook For Packaging In Lubricant, 2000,” a recent press release placed the potential for market growth firmly on the shoulders of packaging, not on hard chemistry or demonstrable performance advantages.
“Some segments of the lubricants market are being turned into commodities, and in these segments, it is not necessarily about what is in the package that sells lubricants; rather, it is about the size, shape, color, and what is on the label that makes the difference,” said the release.
All those hours spent formulating a performance advantage, an additive package, a tweak here and there–are they really all for naught?
Tom Glenn of Petro Trends, who is conducting the study, explains that it’s not that performance doesn’t matter, but that consumers are responding to packaging, not what’s in it.
“The market continues to move toward the commodity. That’s a function of the specifications. In order to play the game you have to meet them,” says Glenn, adding that that’s almost hidden for most consumers. Like in many other segments, the only way to show that differentiation is on the packaging.
You can, says Glenn, talk about API specifications, but most consumers don’t understand what’s behind it. The coming GF-3 specification may be tough to meet, but it certainly doesn’t provide the kind of product differentiation that marketers look for. API and ILSAC standards work to create a sameness among products.
Instead, oil companies are looking to differentiate themselves on the product shelf. Yellow bottles, black bottles, silver bottles, bottles with identifiable caps, bottles with sharp graphics on them and bottles with no color at all are all evidence of the realization by lubricant suppliers that they are in the consumer products business. It’s a realization that, says Glenn, didn’t occur all that many years ago.
“The oil companies for many years were used to selling industrial, high volume, up until the last 10 or 15 years when they realized that the passenger car side is a consumer product. And then they started to deal with these consumer packaging issues. The oil companies are going through that evolution. What is appealing is very important and that’s not necessarily the case in their other segments.”
About half of the finished lubricants business is industrial lubricants, oils, and fluids, and that segment of the business doesn’t care a whit about pretty packaging.
“Darn near half the market says (liter) containers are a non-starter. In truck oils, you’re looking at 10 gallons or 15 gallons in a truck’s sump, but all big equipment doesn’t typically use quarts.
“On the commercial side, they’re less enamored of the package. Your interest in quality is significant and packaging plays differently in the commercial and industrial markets. In industrial it’s about convenience and safety, and cost. Can I stack them? Can I move them? The volume difference in one tote that sits as high as four drums is notable, because you don’t have that dead space between,” he adds as an example.
“So on the industrial side, the beauty of a package is in its usefulness and efficiency.”
This is strikingly similar to the effect of packaging on the installed market and, in this way, even the installed market is not immune to changing packaging trends.
“Because there is a greater awareness in the trade, whether on grades or personal preferences, the trade is challenged to have the assortment and to still provide it in an efficient way,” says Kara Kravitz, consumer marketing manager in Canada for Castrol North America. “The trade has a unique challenge predicting the mix for an individual location.” The traditional 1-liter package, and even to some extent the 4-liter and larger jugs, are really consumer packages, says Kravitz.
“In the trade, it used to be just bulk tank for the conventional grades,” says Kravitz. Now with the increase in grades and the addition of semi-synthetics and synthetics, things are changing.
“We’re being asked for flexibility all the time.”
The size of the package, if one can call a bulk tank a package, is as important for the trade as it is for the consumer. Yet the most visible shift in lubricant packaging remains at the consumer level.
Mark Reed, director of brand management, lubricants, Pennzoil-Quaker State Canada Company, says that a key issue is consumer knowledge.
“The reality is that a lot of people don’t know what the donut means and what the API spec means.” He says that the tightening specifications leave little room for companies to make superior performance claims, even when they exceed the specifications.
“The top tier brands tend to go over the top and exceed the specification. What does that mean to the consumer? He probably doesn’t understand enough about it. Everybody views the difference between what they put in the bottle and the API spec as their marketing advantage.”
If the trends being reported by the ongoing packaging study are anything to go by, that’s not a particularly robust marketing advantage.
“The shift (from the one-liter to the 4-plus liter jug) is the big trend,” says Wes Cosgriff, with Kline & Company, co-authors of the study. “That package has been around for eons in the heavy duty and commercial sector.” But, says Cosgriff, it’s the new battleground for the consumer business.
“Wal-Mart has a tremendous impact on the business.” Cosgriff says that the shift has been so rapid, it’s hard to keep up. “We had seen it as a trend last year, but within the last three weeks, everybody has them now. The reality is that this is a big jump. Differentiation has already occurred with a squat bottle, some with a collapsible neck, a two-stroke oil with a removable collapsible spout. So you’re seeing those types of things.
“It’s a consumer-based business and I think we’re going to be looking at a whole slew of unique designs.”
“Packaging has always been a part of the marketing mix, obviously. So, I don’t disagree that it is becoming more important,” says Matt Dickson, national marketing and retail manager for Canada, Texaco Lubricants Company North America.
“In what is perceived as being a more level playing field, there is always the issue of who gets there first. I guess down the road what is going to have an impact on this industry might be long drain, but packaging is basically what we see is happening right now.
“There’s more emphasis on clearly differentiating product types–synthetics and semi-synthetics–from conventional oils. As the quality increases, so does the cost to the consumer, and there’s a need to portray that higher quality and not to confuse one type from another on the shelf.”
Packaging is certainly important for the company to portray the brand image, and is designed to build identity and impact on the shelf and therefore impulse sales.
“And also packaging has been developing to meet the needs of the consumer. We brought out things like the 4.4 liter package, which represents a complete change to the majority of car owners. You’ll notice that 4.7 liter is starting to show up, but that’s really a five U.S. quart jug.
“There are various things that drive packaging, and one of the things that is important is that we want to position ourselves. People are continually changing and trying to update, and I would say there are a lot more package changes going on the last ten years than there were in the last 25.”
Positioning is, of course, a marketing approach and consistent with what Glenn says about the evolution of the oil companies to a more consumer market oriented stance.
One example is Valvoline’s MaxLife brand. This has all the hallmarks of a market driven product–picking out a niche and then developing the product–as opposed to one driven purely by engineering capabilities. The product was developed as a cooperative effort between Valvoline’s technical department and the marketing people, and the chemistry is real, but the impetus is unmistakably in the marketplace, not the lab.
ion, graphics capabilities have also improved, allowing more flexibility in labeling beyond lettering and stripes to include vehicle graphics and flashy special effects.
While the fact that the major trend is toward the installed market–the accepted floor for the DIY market is at 40% of volume and the current market is already at 48% and sliding–it’s hard to build a brand in bulk.
“Packaging is a big part of it because that’s what leads it off the shelf,” says Reed. “We’re always talking about packaging options. We want to make them communicate to consumers and to make it less expensive and to make it more environmentally friendly.
“That’s what you buy. There’s a certain expectation when you see a brand in a package. Most bottles have a unique look for the brand.”
That uniqueness is not about to go away, in either one-liter or the larger size 4.4 or 4.7 liter form. In fact, says Cosgriff, we’re only seeing the beginning of the evolution.
“Envision a container that would have a funnel attached that could be drained into. Use it as a waste oil container. These are some of the things that are starting to come out.”
If you want to see what’s coming, suggests Glenn, check out your local Wal-Mart or Canadian Tire. “If you want to know what you’re going to have on your shelves, get in your car, go for a drive and visit them. They are very much harbingers. Look at the shelf today. In less than a year, they’ve replaced a great deal of their shelf space (with jugs). If you’re an auto parts store, that’s what you’re going to see coming at you.”
“I would emphasize we’re at a new beginning of consumer preferences. It becomes less about what is in the product and more about who is going to do something innovative.”
Castrol’s Zavitz cautions, however, that people shouldn’t mistake the recognized importance of packaging as a surrender by the lubricant engineers.
“Packaging is a luxury you can explore only when you have the technical proficiency down. It’s not up for just anyone and everyone to play that game.”