How has the Valvoline business performed over the past five years?
Valvoline has been in business for 150 years. It is the United States longest surviving and successful automotive oil brand. Their heritage was proven on race tracts all over the world. High-performance oil and lubricant products define their culture.
Valvoline Inc. (NYSE:VVV) is a leading worldwide producer and distributor of premium branded automotive, commercial and industrial lubricants, and automotive chemicals. Valvoline ranks as the #2 quick-lube chain by the number of stores and #3 passenger car motor oil brand in the do-it-yourself (DIY) market by volume in the United States.
The brand operates and franchises more than 1,070 Valvoline Instant Oil ChangeSM centers in the United States. The MaxLifeTM lubricants were created for higher-mileage engines. SynPowerTM synthetic motor oil and ZerexTM antifreeze were developed by Valvoline.
Valvoline is headquartered in Lexington, Kentucky. They have almost 300 stores that all use the same products and business model. Proprietary tools, marketing platforms, customer experience and talent, are the focus of their business model.
The company's core strategy in North America includes innovative products and packaging, targeted marketing and enhanced services.
The success of Valvoline is based on solid performance expressed by the growth in Valvoline's Instant Oil Change (VIOC) quick lube units, and international sales. Their business model is to:
• Continue same-store sales (SSS).
• Increase company stores.
In the 2016 annual report, the business model strategy of shifting to a "premium mix" increased customer demand. The volume of U.S. branded premium mix products increased from 30 to 41.4 between years 2013 and 2016.
The Valvoline brand is based on superior products and service. They focus on an excellent retail service model with innovative technology that improves speed and efficiency. The success of the Valvoline business model is demonstrated by its financial performance.
The Valvoline Inc.-VVV (U.S.: NYSE) annual income statement for 2017 provides financial results for sales, revenue and EBITDA growth over a 5-year period.
There was significant growth in the companies' revenue for 2017.
Valvoline has growth projections of $110 million USD of earnings before interest, tax, depreciation and amortization (EBITDA) by 2023. In 2017, 75% growth was projected for the last twelve months ending in the third quarter (LTMQ3) of EBITDA. Also, they expect acquisitions will increase growth in EBITDA.
Sales compound annual growth rate (CAGR) in core North America was 1.0%, quick lubes were 7.7%, and international sales were 6.4% in 2016.
The market share of fast lubes and fuel additives In the U.S. for 2016 compares six companies and a category for others below (Per Statista Figures):
• Lucas Oil 52%
• Solid Start 8%
• Valvoline 8%
• ITW Professional Auto Products 6%
• Mighty 6%
• Other 21%
Companies that sell fuel additives and fast lubes showed that Valvoline ranked second among its competitors. They maintained a market share of 8% in 2016. Their market share of motor oils in fast lubes in the U.S. from 2012 to 2017 was also provided by Statista.
Valvoline emerged as the U.S. market leader in 2017 ahead of Pennzoil and Mobile.
Do-it-yourself (DIY) customers have allowed Valvoline to establish its strong business. The strength of the auto industry and the consumer buying habits for automobiles do not have a direct correlation to the demand for Valvoline products. They exist outside of those parameters.
Competitors of Valvoline are part of integrated oil companies. Whereas, Valvoline exists as an independent automotive service and lubricant company that has direct control over their performance.
The five-year overview of Valvoline shows that the number of premium mix products increased in 2016 which has enhanced sales and profitability for the company. Valvoline had ten straight years of same-store sales (SSS) improvements. The businesses shift to premium mix products increased product volume from 30 to 41.4 between 2013 and 2016. Sales revenues for 2015 and 2016 were down, but in 2017, they have rebounded significantly at 8.04%.