New Background

1
Strategic Management Class Presentation
Outline October 11, 2000

• Market Background
• DIFM Strategies

2
DIY vs. DIFM

• Quarts Based
• Total United States
• By Selected Time Periods

D-I-Y
Installed
12 Months Ending June, 1996 - 2000
3
Market Continues to Shift From DIY to DIFM
Factors Causing Shift From DIY To DIFM

• Age - The aging population is more inclined to be
  DIFMs
• Convenience - Higher demand as less leisure time
  is available
• Increased Installed Outlets - Emergence of new
  outlets and competitive pricing
• Environmental Concerns - Public awareness on
  hazards of improper used oil disposal
• Female Influence - Increased number of female
  drivers, decision-makers
• Strong Economy - Increased disposable income
  decreases DIY activity

Conclusions

• More Profitable Packaged Volume Declining While
  Less Profitable Bulk Volume Increasing
• Less Brand Recognition / Influence in DIFM

4
MOTOR OIL BRAND SHARE TRENDS

• Installed Quarts
• Total United States
• 12 Months Ending June, 1996 -2000

(0.5)
(0.6)
(0.7)
(0.4)
(0.4)
(0.3)
Share point change required for statistically
significant difference between years, at the 90
confidence level.
5
PURCHASES BY KEY CHANNELS - INDUSTRY

• Installed Quarts
• Total United States
• 12 Months Ending June, 1996 - 2000

6
Brand Share within Top 3 Installed Channels
Installed Quarts Total United States 12 Months
Ending June, 2000
é
ê
é
ê
ê
é
é
ê
ê
é
é
7
Top 10 Quick Lubes by Centers (Fast Lubes Only)
Source National Oil Lube News, March 2000
8
Top 10 Oil Change Businesses

• GM Goodwrench Quick Lube Plus 4500
• Midas Auto Systems Experts 1500
• Firestone Tire Service Center 1363
• Wal-Mart Lube Express 1200
• Motorcraft Fast Lube 1000
• DaimlerChrysler Mopar Express Lube 970
• Shell Auto Care 900
• Gemini Auto Service Center (Goodyear) 806
• Penske Auto Center (Kmart) 660
• Meineke Discount Muffler 622

SOURCE National Oil Lube News / as of March
2000
9
Service Center Growth
630
584
574
519
474
455
422
407
360
10
Strategic Management Class Presentation
Outline October 11, 2000

• Market Background
• DIFM Strategies

11
Motor Oil Company

• Challenge Response
• Slow Market Growth Grow market share in
  installed segment
• and Shift to DIFM Improve bulk oil margins
• Alliances with distributors / grow together
• Outlets less Brand Loyal / Controlled Outlets
• Switching Costs Low - Company-owned oil
  changes
• - Franchised oil changes
• - Mid-tier Program Express Care
• - Tougher Supply Contracts
• Differentiate Understand the oil change
  business
• - Offer solutions
• Family of Brands

12
Valvoline Express Care
13
Reasons for Express Care Program

• Accelerate Growth for Valvolines DIFM Business
• Provides Offerings for Three Distinct Installer
  Groups VIOC, Valvoline Express Care and the We
  Feature Program
• Provides a Branded Program to a Customer
  Valvoline is not Currently Positioned to Sell
• Competitive Program to Sell Against Texaco Xpress
  Lube, Pennzoil 10 Minute Oil Change and other
  Branded Independent Programs
• Increased Family of Brands Purchases, Longer
  Term (10 Year) Contract, Consistent Marketing and
  Image Management of Independent Operators
• Pulls Several Fragments into One Program

14
Quick Lube - General
Challenges
Response Location, location, location Site
Selection Models Labor expense and
turnover People. Cars. Greatness. (Become a
Most Admired Company) Benefits New Hiring
Methods Offering new products and
Convenience services Ability to sell /
focus Trust Trade-offs between
price Constantly shop motor oil company deals and
brand Understand impact on customer base
l
l
l
l
l
l
l
l
l
l
l
l
l
15
VIOC - Specifically
Challenges
Response Controlling Expenses Real-time
Management Systems Labor Scheduling Internal
Benchmarking Investment Base Greater Percentage
of Franchisees Geographic Expansion Protect
Existing Markets - 3 Tiers Stay within Areas of
Valvoline Brand Strength Concentrate to Leverage
Advertising Differentiate MVP Program Service /
Trust
l
l
l
l
l
l
l
l
l
l
l
l
l
16
Competitive Interaction

• Protect Your Markets
• Concentrate / contiguous
• Fill out existing markets
• Stay in Areas of Strength
• Good distribution (cost advantage)
• High DIY market share
• Areas Where You Compete Head-to-Head
• Service (Employee Friendliness / Recognition)
• Trust
• Best Location / Convenience
• Promotions
• Service (Product and Service Offering)