Here's the situation: You're an important motor oil company. You're not the biggest one, but people respect you enough that you can use "The V" as well-known shorthand for your brand. Also, you've kind of got a chip on your shoulder when it comes to competing with the big players, always wanting to make sure you innovate ahead of the competition.
In 2005, you start thinking about making a "green" motor oil. Your marketing team tells you that customers are ready for it. Your engineers say that the technology has finally evolved enough to actually make a high-quality, reliable product from recycled used motor oil. So you decide to go ahead with this project, spend a lot of money on developing it and then figure out a way to get people to buy it. First, though, you need a code name for the whole thing. What do you call it? If you're Valvoline, the answer is "Project Shamrock," and we've got all the details for you after the jump.
Since 1876, when it became the first trademarked lubricant ever, Valvoline has been first and foremost a motor oil company. That was the clear message that company president Sam Mitchell gave to a group of reporters visiting the Lexington, KY headquarters yesterday. For the "independent" Valvoline, motor oil is not an afterthought, something to do alongside drilling for crude. Okay, if you want to be picky, then, yes, Valvoline is a division of Ashland Inc., but why let the truth get in the way of a good story, especially since Valvoline is not vertically integrated and really, really cares about making good motor oil? Motor oil is the company's main reason for being, and it hasn't introduced a new, big product since MaxLife, an oil designed for high-mileage vehicles, in 2000.
Now, though, the company is announcing a new motor oil called NextGen, which is made up of 50 percent recycled motor oil. Even though everyone told us – and every bottle of the stuff proudly proclaims – that NextGen is also "100 percent Valvoline" and will offer up the same performance that people expect from any other Valvoline motor oil, the company knows that this product is not guaranteed to be a instant hit. After all, would you put used motor oil in your engine?
Well, you might if you got the same detailed explanation about NextGen that we did yesterday. Here's the short version:
When you buy a new bottle of motor oil, what you're actually getting is a liquid that contains 85 percent motor oil and 15 percent additives. When that motor oil runs through your engine for a few thousand miles and gets "used," all that really happens is that additives get contaminated and useless, while the 85 percent motor oil is still there, still okay. This 85 percent is called base oil, and it can be reclaimed and turned into new motor oil.
All those nice hydrocarbons have got to be worth something to someone, right? Of course they are. Currently, almost all of the used motor oil in the U.S. is properly collected, both from DIY and DIFM (Do It For Me) sources. The DIFM collection strategy is firmly in place, and we assume most readers are familiar with the fact that you can bring your used oil to an oil shop and they'll help you put it in the big drum in back. Every few weeks, a truck comes by to collect it. The problem – from Valvoline's perspective – is that most of the collected used oil gets burned for heat, is turned into something like bunker fuel or is used to make asphalt. Some, of course, just gets dumped into the environment, but you can't educate everyone to not be an idiot.
Thus, technically, most used motor oil is already getting recycled, right? Well, yes, but Valvoline's wiry and energetic vice president of global marketing, Blair Boggs, isn't happy with this sort of one-shot deal. After all, the loop could be closed, with the good 85 percent in each bottle constantly going from engine to re-refinery to bottle and around and around again. It's not a small amount, either: U.S. cars and trucks use 3 billion quarts (almost 800 million gallons) of motor oil every year.
"If we can put a dent in that, we can do something great here," Boggs said, estimating that if everyone switched to NextGen – or another recycled motor oil (once one hits the market) – that 3 billion quarts number would be cut in half. Even better, it takes less energy to re-refine motor oil in this way than it does to drill for new sources, and the overall environmental footprint is noticeably smaller in all six of the categories that European researches recently investigated (see chart below).
So, what's the problem? There are two big ones: supply and demand.
First, right now, with so much of the collected used motor oil getting burned, only around 11 percent of the ends up getting recycled, and that's a hard limit because the infrastructure to re-refine used motor oil is pretty full at the moment. Thus, Valvoline couldn't make more NextGen right now even if it wanted to. So, the company will start with the modest goal to get NextGen products to make up about 10 percent of its total motor oil offerings; that's on par with Valvoline's high mileage and full synthetic products.
As part of the NextGen introduction, Valvoline is working with retailers to incentivize people bringing their own used oil to the shop; for example, by giving them a coupon for cheaper NextGen oil. Quid pro quo, and all that. If Valvoline can increase demand for the used motor oil, there's a good chance the supply will increase, since there is interest out there in building more smaller, re-refineries. It may cost around $40 million to build a 20-million-gallon re-refinery, but that's significantly less than a virgin oil refinery that can cost hundreds of millions of dollars. As for the used oil collectors, they have higher margins when they sell their product to a recycler than when they turn it into heating oil. The supply pieces could all fall into place.
Of course, this will only happen if – and here's where the journalists' visit to Lexington comes into focus – people know about and demand to use NextGen.
Valvoline's message here is pretty simple: buying NextGen will not cost you any more, its performance is the same and the product is better for the environment. Who could say 'No' to that? Well, how many people still use 10W40 even though manufacturers now regularly recommend lower-viscosity blends? How many people out there remember other, failed "recycled" motor oil attempts? How many old timers don't want to risk putting anything green in their cherished vehicles? Valvoline has been testing NextGen in 20 stores in Columbus, OH and 12 in the Boston area and has been dealing with all of these issues. So, while the company expects there is a market for a green motor oil, it knows it has to do a lot of consumer education to really sell it to the masses. TV advertising starts in April, and if you go into a Valvoline-branded shop in the near future, expect to get an eco/sales pitch from your mechanic. This is how Valvoline hopes that it can work to increase the demand and the supply. This is no easy task, but the stakes are high and, Valvoline thinks, the time is right.
"Our challenge is to drive consumer acceptance," Boggs said, "NextGen will reduce our dependence on crude oil. It's not going to change the world, but it is going to make a dent."
Sam Mitchell, the president of Valvoline, agreed, saying that, "The market is definitely ready for Valvoline NextGen. This could be a major stepping stone for us. We are making a statement about who we are as a company. We don't do anything subtly."
Part of that message is that NextGen is also backed by the Valvoline Engine Guarantee offer. NextGen is just now starting to hit store shelves in conventional, high-mileage, and synthetic blends. There are a total of ten viscosity weights, and all cost the same as the standard Valvoline oils. NextGen will be available in all Valvoline Instant Oil Change shops in early April. So, we ask again: Would you put used motor oil into your engine?
Our travel and lodging for this media event were provided by Valvoline. This post has been slightly edited since it was originally published.
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