Technically, what this means is that Valvoline will no longer authorize the use of its trade name and trademarks for the purpose of repackaging lubricants by distributors. Repackaging typically involves (but is not limited to) filling 55-gal drums from bulk. In addition to the technical meaning, however, some of its distributors say there will be a very significant practical impact to their business from Valvoline's termination of repackaging agreements. Not the least of which will be a high probability it will drive up the distributor's costs by increasing the cost of Valvoline in drums (since they can now only sell factory-filled drums). In addition, it will likely drive up the distributor's cost by reducing inventory turns, requiring more warehouse floor space, and leaving some dedicated marketers with unused capacity in tanks purchased and/or isolated specifically for Valvoline products in bulk.

Interestingly, marketers say they remain unsure why Valvoline made this decision. In fact, some say they were blindsided by it. At the same time, others suspect the reasoning behind the move is about product integrity and an effort by Valvoline to reduce the probability that something other than its product is in the drum when it says Valvoline on it.

To get answers, JobbbersWorld turned to its parent company; Petroleum Trends International (PTI), the leading market research and consulting company in the lubricants space. According to PTI, there are two reasons why independents lubricant manufactures recently increased prices.

The first, PTI says, is not particularly mysterious or hard to get your arms around. In fact, it's simply about costs. Thomas Glenn, President of PTI notes, "Base oil prices have increased from $0.50 to $0.75 a gallon in just the past 30 days." And when you consider base oil accounts for roughly "90% of the volume in a PCEO and HDEO (including carrier/diluent oil used in additives), it's not hard to understand why independent lubricant manufactures had to either increase prices, or significantly compress their margins. Interestingly, Glenn notes, "it appears although they increased prices, they also took a hit on margins this time around." Because Glenn says, "Whereas the price of base oils increased $0.50 to $0.75 a gallon, the price increases pushed through on finished lubricants were almost all in the area of $0.40 a gallon." And if you think this suggests independents had fat in their margins that could easily be trimmed, Glenn says, "Think Again, because many independent lubricant manufactures work on paper thin margins and can ill afford to give away a few cents on a gallon, let alone,10 to 15 cents."

But the second reason Glenn says prices increased is because, "although overall demand is down, demand for private label (products produced primarily by independents), is up." In fact, private label continues to be one of the fastest (if not, arguably the only) growing segments in the business. And when asked why, Glenn says, "it's once again all about cost, but this time, not the producer's cost, but the consumers cost." When the price differential between private label and major brands is as high as "2.50 to $3.00 a gallon" (as it is today), it's not hard to understand why private label is getting so much attention in these tough economic times, Glenn says. It's also not hard to understand why some independent lubricant manufactures feel they must, and can increase prices

• News
• Mergers and acquisitions
• Promotions
• New products
• Classified

We reach out to nearly 10,000 participants in the lubricant distribution supply chain once or twice a week (depending on what's NEWS) and we tell it like it is.

Please contact us via e-mail at tom_glenn@jobbersworld.com, or direct at 732-494-0405.