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Will Price "Postings" Commoditize the Lubricants Business?

Although there are a number of ways to define a commodity, in general, commodities are products with uniform quality across producers. In short, this means if you purchase a commodity from one supplier, the quality of that product will be virtually the same if purchased from another supplier. And since there are no differences in quality and/or performance, commodity buying decisions are driven by price.  

Whereas some will likely argue the point, gasoline and diesel are often considered commodities,  like metals, agriculture, meat & livestock and others.

Although there was a day when the motoring public and fleets were very willing to pay a premium for certain brands of gasoline and diesel , octane and cetane ratings  leveled the playing field, and in a large way, moved all gas to be gas, and diesel to be diesel.  This moved both closer to the world of a commodity.

As a result, today, we are looking at a gasoline and diesel fuel business where buyers and sellers are fixated on price. In fact, many now look first at price "postings" to make a buying decision. In the case of bulk buyers pulling gasoline or diesel from terminals, many will even reroute trucks at the drop of a dime (actually far less) to get a "better" deal based on "posted price."  Further, the big time buyers of diesel fuel often write contracts that tie/peg the price of diesel to crude. And for the motoring public, consumers will wait in long lines at Wal-Mart, Costco, Giant Eagle's GetGo, and others, and risk life and limb driving miles to save a few cents on a gallon of gas based on the price posted on the sign at the station.

But that's gasoline and diesel. What about lubricants? Are lubricants a commodity?

Whereas most agree lubricants are not a commodity, some say that's exactly how  some pricing services are now treating lubricants when they publish "posted" wholesale/jobber prices for lubricants from various suppliers, just like they have been doing for years with fuel. Many are concerned that rather than considering the quality and performance differences of lubricants, and the services and support that differentiate products and suppliers, lubricant pricing services are trying to fit a square peg into a round hole by treating lubricants as  if they are commodities. And whereas  purveyors of wholesale pricing data  on lubricants can make a small fortune by repackaging and selling data already in the hands of most marketers, and some buyers might even find short-term gains biting into this apple, at the end of the day, buyers  and sellers could easily bite into worms if they treat lubricants, like fuels,  as a commodity.

Let JobbersWorld know what you think. Is it a service, or a disservice to buyers and sellers to publish "posted" wholesale/jobber prices for lubricants like that seen with gasoline and diesel?

TAKE THIS POLL TO LET US KNOW WHAT YOU THINK 

Speaking of posted prices... What follows are prices that are clearly posted on the shelves at retail stores. Keep in mind,  these prices are highly visible to consumers and many have already made up their minds about the value of brand before a greeter says hello on entering the store.  Further, unlike lubricant jobbers who can add true value to the sale, the value retailers add typically starts and ends with the products on the shelf. 

The average price of conventional passenger car motor oil (PCMO) at a leading big box store reached $3.75 a quart in July 2011, up from $3.59 in June. This represents an increase of $0.16 a quart, or 4.5%.  The average price of synthetics also moved up over the month. Whereas the average price of a quart of synthetic PCMO was $6.15 in June 2011, it reached $6.32 in July. This represents an increase of $0.17 a quart, or 2.8%, on average.

Interestingly, the price of mid-tier (high mileage) PCMO declined over the same period, as shown below.

United Petroleum Looks to Step up with the Majors and Step Out Above the Competition  

For those that haven't heard, United Petroleum Company (UPC) is one of the few significant players to emerge in the lubricants market in years. But as the company's Executive Vice President, Claude Terry says, "Competing as the new kid on the block is nothing new." Claude should know, because he stepped onto the hardwood back in 1972 as a 6'-6" rookie for the Denver Nuggets after a record-setting college career at Stanford University. And following six successful years in the ABA-NBA and a decade of successful coaching at the collegiate level, Claude and his son Shane Terry, President of UPC, say, "We know what it takes to play on the same court as the majors and to step up by out-working the competition and delivering higher value."

In the views of Shane Terry, the first step was to determine the real and perceived costs and benefits of branding. Based on years of experience in the lubricants industry and months of focused market research by UPC, Shane says "It's clear the value many of the major brands deliver has evolved to be more about supporting the image and prestige of the brand, corporation, and the profits than it is about bringing true value to the customers served."  Shane adds, "Because of this trend, distributors continue to pursue alternatives to major brands in an effort to remain competitive and to meet the needs of their increasingly price-conscious customers." In fact, according to UPC's research, as much as 56% of the industry falls under this category, and that number is growing.  With rapid escalation in private label volume came a degree of uncertainty concerning product integrity and a general lack of customer service and marketing support.  Shane continues, "We plan to bring some uniformity to what most consider an extremely disoriented industry".

Rather than competing with the major brands as currently defined, UPC says it's setting its sights on redefining what a major is by going back to the roots of what made the majors the majors. Shane says, "That's not about high-priced NASCAR sponsorships and Super Bowl advertising.  Nor is it about Spiffs,  BDA's, VIP's, PPP's or marketer 'Classifications'.  Instead, it's simply about providing customers top-quality products, a growth-oriented marketing platform, competitive prices, technical support, proactive customer service, integrity, and, at the end of the day, the assurance they are doing business with someone they can trust.  That's how we plan to define our major oil brand."   Claude adds, "From my athletic career, I discovered what it takes to obtain long-term success: dedication, perseverance, knowledge and a willingness to sacrifice for the benefit of others.  UPC is committed to the same set of principles".

To learn more about UPC visit: www.united-petro.com/about-us

Posted June 9, 2011

Lubricating Specialties Company

• Lubricants and Fluids Sales position in the Greater Los Angeles California market

Lubricating Specialties Company a well-established, leading blender and packager of oils, greases and industrial fluids on the West Coast, is seeking highly motivated and creative sales candidate.  LSC is seeking to fill a Territory Sales Manager position in the Los Angeles area. The successful candidate will be responsible for outside oil, grease and industrial fluid sales to an existing base of independent Jobbers. Duties will also include expanding the current customer base by adding new accounts and expanding product offerings in those accounts.

LSC offers an excellent salary package including commission, health insurance, 401k, fuel and cell phone reimbursement. AA/EOE. Qualified candidates may submit resume to: acastillo@lubespecialties.com