Business model of Valvoline

Customer Segments

Valvoline serves a wide range of consumer and commercial customers. 

The company’s core clients can be organised broadly into the following categories:

• Retail and Distribution Companies, including retail auto parts stores, mass merchandisers and independent auto part stores, as well as warehouse distributors that resell to both do-it-yourself consumers and to installers for do-it-for-me consumers;
• Automotive Installation and Maintenance Companies, including car dealers, general repair shops, and third-party quick lube locations, as well as through a network of approximately 200 distributors;
• Fleet Operators, including heavy duty fleet customers, such as on-highway fleets and construction companies through an installer distributor network; and
• General Consumers, including car owners who are comfortable installing and utilising the company’s products independently.

Valvoline serves customers worldwide.  It’s core operating market, however, is North America, which accounts for around 74% of the company’s total sales. Asia Pacific is the company’s second largest market, accounting for around 17% of sales.

Value Propositions

Valvoline provides value to its customers in the following ways:

• Brand Recognition and Reputation – Valvoline is among the most well-known and well-regarded producers of automotive lubricants, having an established reputation dating back to the nineteenth century as a reliable supplier;
• High Quality Products and Services – Valvoline produces a wide range of high quality products and services for a broad spectrum of customers, including fleet operators, automotive retailers, and consumers;
• Sponsorship and Marketing – Valvoline has enhanced its reputation and the prestige of its products through sponsorship partnerships with a range of racing and sports teams;
• Accessibility and International Reach – Valvoline operates an international sales network, spanning the Americas, Asia Pacific, Europe, the Middle East, and Africa, reaching a large customer base quickly and efficiently; and
• Innovation and Technology – Valvoline is committed to developing innovative new products and services for its customers, devoting a substantial portion of its resources to research and development activities.

Channels

Valvoline serves its customer base directly primarily through its internal sales force and technical support organisation. 

The company has a centralised marketing services group as well as dedicated marketing resources in each reportable segment, and a number of distributors within the Core North America and International reportable segments that represent the Company’s products.

In its Core North America segment, Valvoline sells its products to consumers through a network of more than 30,000 retail outlets across the US and Canada, to installer customers through more than 12,000 locations, and in the Quick Lubes segment through 1,242 company-owned and franchised stores and 347 Express CareTM outlets.

Customer Relationships

Valvoline seeks to establish longstanding relationships with its clients. 

The majority of Valvoline’s large customers are supported by direct sales representatives with a number of key customers having dedicated Valvoline teams.

  The company also operates a customer support unity that operates across the company’s offices and provides general customer support over the phone and online.

Valvoline also utilises its digital infrastructure to more efficiently interact with customers and drive customer engagement. 

The company notably operates a website at www.valvoline.com, through which the company provides information on its products, services, operating locations, and partners.  

It also provides information to customers through FAQ sections and through its media portal, which includes press releases and news articles.

Valvoline additionally maintains accounts across several social networking platforms – including with Instagram, Facebook, Twitter, and YouTube – through which it is able to communicate directly with customers, manage customer complaints and queries, and public timely company updates.

Key Activities

Valvoline is engaged in the production and distribution of automotive, commercial and industrial lubricants, and automotive chemicals. 

The company organises its operations into three reportable business segments: Core North America, through which the company sells Valvoline, and other branded and private label products in the US and Canada to both consumers performing their own automotive maintenance, referred to as Do-It-Yourself consumers, as well as, to installer customers using Valvoline products to service vehicles owned by Do-It-For-Me (DIFM) consumers; Quick Lubes, through which the company serve the passenger car and light truck quick lube market primarily via its  Valvoline Instant Oil Change stores and Express Care outlets; and International, through which the company sells Valvoline and other branded products through its affiliates, joint ventures, licensees and independent distributors.

Key Partners

Valvoline works closely with a broad network of partner companies and organisations. 

These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, including suppliers of materials and equipment used in the development and production of the company’s core products, as well as providers of other third-party services that support the company’s corporate activities more broadly;
• Retail and Distribution Partners, including retailers, distributors, and wholesale merchandisers of automotive products that help to extend the company’s reach, notably in markets where the company does not have an established presence of its own;
• Franchise Partners, comprising a range of companies and business figures that operate retail and service outlets under the Valvoline brand;
• Marketing and Sponsorship Partners, including agencies that assist the company in developing and implementing marketing schemes, as well as major sports teams and organisations to which the company provides sponsorship in return for brand visibility;
• Joint Venture Partners, comprising a range of companies with which the company provides products and services together through mutually owned entities; and
• Community Partners, comprising a range of non-profit and charitable organisations, with which the company collaborates on community and social projects. Primarily in the US.

Valvoline has a number of sponsorship partnerships in place. 

The company sponsors Hendrick Motorsports, Manchester City Football Club, and the Memphis Grizzlies, as well as Indian cricket player Virat Kohli.

Key Resources

Valvoline business success is dependent on its ability to develop, produce, and distribute innovative and effective products. 

As such, the company’s key resources are its products and brand, its supply chain, its intellectual properties and technologies, its research and development facilities, its production facilities, its retail and distribution network, and its logistics infrastructure.

Valvoline has been issued 36 US and 62 international patents and has 26 US and 81 international patent applications pending or published. 

The company also holds more than 2,500 trademarks in various countries around the world,  including the Valvoline trademark and the company’s “V” brand logo trademark, which are registered in over 150 countries.

Valvoline’s key resources also include its partnerships, its office network and properties, and its personnel.

Cost Structure

Valvoline incurs cost in relation to the procurement of supplies and materials, the implementation of research and development projects, the operation of its production facilities, the management of its retail and distribution network, the management of its partnerships, the sponsorship of sports teams, the payment of salaries and benefits to its personnel, and the payment of utility and rental fees. 

In its most recent annual report, the company’s largest costs were its selling, general and administrative expenses, which totalled USD 430 million for the year.

Revenue Streams

Valvoline generates revenue through the production, distribution, and sale of automotive lubricants and chemicals, and the provision of other automotive services. 

The company derives its revenue primarily under sales and service contracts agreed with its clients – including distributors, retailers, and commercial entities – as well as through direct sales fees charged to consumers. 

Valvoline also generates revenue through the collection of franchise fees from its franchise partners, who operate outlets under the Valvoline brand. 

In its annual report for the year ended 30 September 2018, Valvoline recorded annual sales of USD 2.29 billion, up from the USD 2.08 billion recorded by the company in 2017. 

The company’s Core North America segment generated the largest portion of sales, alone recording annual sales of USD 1.06 billion. 

The bulk of the company’s revenue, around 86%, was derived from sales of lubricant products.