How important is vertical integration to you?

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Jun 3, 2021
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Something I've been thinking about a lot lately when it comes to oil is vertical integration versus buyers and blenders.

I'm going to pick on Valvoline here as an example. I've used Valvoline products many times over the years, but when you look at the pricing of Valvoline against Mobil and Pennzoil and how they basically all swap pricing positions to where sometimes Valvoline's synthetic costs more than M1, or costs the same as Platinum, what incentive is there to choose the blender's option instead of the companies that actually produced the base oils and the additive packs?

Can a blender really produce a better finished product than the mothership can for an equal price point?

Does the vertical integration of the giants play into your purchasing decision or do you find it irrelevant? The more I've thought about it, the more I'm inclined to always just buy Mobil or Shell products and ignore everything else because they seem to have the most resources available.
 
Does the vertical integration of the giants play into your purchasing decision or do you find it irrelevant?

I find it irrelevant and none of what you wrote comes into my thought process when selecting and buying oil. I pay more attention to whatever oil is meeting my grade and licensing spec and buy whatever is on sale or clearance that meets that.
 
I mean it does because at the end of the day there are special certifications which dictate the minimum performance requirements and these Giants should be able to meet these minimum requirements at a lower price because they are as you said vertically integrated. Yet they can still price match a blender or because they are a big well-known brand like Mobil they can justify charging a little premium because they have a loyal customer base so they can actually line their pockets even better which is what they're in business to do. They aren't really buying base stocks though sometimes they do but not always. But it doesn't really play into my decision because an oil that's blended to meet the spec at a higher regular price but is being discounted below a regular price of a vertically integrated brand that still has the same spec is going to get bought by me at the end of the day. For me at the end of the day it always comes down to finding the cheapest oil which meets the certification because that's really all that should matter.
 
Mothership can provide a lower price point if you buy direct. Take a motorcycle oil purchased from a motorcycle shop for example. How many markups between you and the blender and packager? A drum of ISO 22 AW synthetic hydraulic fluid might cost $7 a litre, but a 500 ml bottle of motorcycle suspension fluid, $19.95
 
Oil is a commodity. Oil standards are highly monitored by regulatory organizations (not judicial) and the industry itself keeps the competitors in check. There are only so many ways to make and API SP product. Not every company has their own additive stream so they buy an approved additive package from an additive supplier and then they become blenders. That's how it's done. A couple of the big players make their own additive packages but the packages are designed to pass the requirements set forth by the vehicle producers and other regulatory organizations so there's not a lot they can do.

Vertical integration is the act of a company taking control of the manufacturing process at each step. If a company doesn't control all aspects of their process then their control is limited. Valvoline, for example, was sold off from Ashland Chemical and became a stand-alone oil blending company. A few years later the Saudi oil company ARAMCO bought them out. Valvoline still pays a dividend to their share holders and they were concerned enough about their reputation and name that in 2019 (I think) they went out and bought all of the franchised Valvoline quick lube companies and put them under corporate control. This was a good move for them and strengthened the brand.

Is it any concern for the consumer whether their oil company owns their own additive supplier? Not to me it isn't. Marketers and salesmen have ruined the industry on the retail level with their terminologies and publishing performance numbers that mean absolutely nothing in the grand scheme of things. There are no 100% group IV or group V oils. Chemistry doesn't work that way. And if you can stand to listen to the stupidity on youtube by Eben, the "YOULUBER", even Amsoil published an article stating that "100%" and "FULL" synthetic are simply synonyms of each other. I have literally seen fist fights over this debate.

Like the TÜV laboratory in München told the presidents of Miller and Budweiser beer - "we can't tell which beer is of the higher quality, but... your horse has diabetes."

Buy what you're comfortable with and what meets the requirements of your equipment. Monitor your engine, watch for varnish or sludge, cut the filters open and inspect them when you do an oil change, and change brands until you find something you're happy with. Or, just change the oil when you're supposed to with whatever meets requirements and enjoy your time with family and friends. Life's short - eat desert first.
 
Oil is a commodity. Oil standards are highly monitored by regulatory organizations (not judicial) and the industry itself keeps the competitors in check. There are only so many ways to make and API SP product. Not every company has their own additive stream so they buy an approved additive package from an additive supplier and then they become blenders. That's how it's done. A couple of the big players make their own additive packages but the packages are designed to pass the requirements set forth by the vehicle producers and other regulatory organizations so there's not a lot they can do.

Vertical integration is the act of a company taking control of the manufacturing process at each step. If a company doesn't control all aspects of their process then their control is limited. Valvoline, for example, was sold off from Ashland Chemical and became a stand-alone oil blending company. A few years later the Saudi oil company ARAMCO bought them out. Valvoline still pays a dividend to their share holders and they were concerned enough about their reputation and name that in 2019 (I think) they went out and bought all of the franchised Valvoline quick lube companies and put them under corporate control. This was a good move for them and strengthened the brand.

Is it any concern for the consumer whether their oil company owns their own additive supplier? Not to me it isn't. Marketers and salesmen have ruined the industry on the retail level with their terminologies and publishing performance numbers that mean absolutely nothing in the grand scheme of things. There are no 100% group IV or group V oils. Chemistry doesn't work that way. And if you can stand to listen to the stupidity on youtube by Eben, the "YOULUBER", even Amsoil published an article stating that "100%" and "FULL" synthetic are simply synonyms of each other. I have literally seen fist fights over this debate.

Like the TÜV laboratory in München told the presidents of Miller and Budweiser beer - "we can't tell which beer is of the higher quality, but... your horse has diabetes."

Buy what you're comfortable with and what meets the requirements of your equipment. Monitor your engine, watch for varnish or sludge, cut the filters open and inspect them when you do an oil change, and change brands until you find something you're happy with. Or, just change the oil when you're supposed to with whatever meets requirements and enjoy your time with family and friends. Life's short - eat desert first.


And if you can stand to listen to the stupidity on youtube by Eben, the "YOULUBER", even Amsoil published an article stating that "100%" and "FULL" synthetic are simply synonyms of each other.


Finally, someone seen it. His disgusting description of using porn-like jargon on how to apply,fill,etc on the vehicles. If I was in charge of the people who represent their lubricant, I would yank his butt off being part of the company. I don't care how much sales he makes; you couldn't get me to buy anything from this d-bag. If I needed Amsoil I would buy from @Pablo even if I had to pay more. First impressions are everything and that Eben character couldn't not know that the way he carries himself is appropriate. Glad he's not selling for Mobil, Redline,Liquimoly, and @High Performance Lubricants. I still use various products from these guys for nothing else than it's not from that clown and that the products I use have very professional people.
 
Samsung is the epitome of vertical integration, in contrast to Apple. Yet Apple is able to produce high quality product, while utilising and tweeking Samsung material.
 
Oil is a commodity. Oil standards are highly monitored by regulatory organizations (not judicial) and the industry itself keeps the competitors in check. There are only so many ways to make and API SP product. Not every company has their own additive stream so they buy an approved additive package from an additive supplier and then they become blenders. That's how it's done. A couple of the big players make their own additive packages but the packages are designed to pass the requirements set forth by the vehicle producers and other regulatory organizations so there's not a lot they can do.

Vertical integration is the act of a company taking control of the manufacturing process at each step. If a company doesn't control all aspects of their process then their control is limited. Valvoline, for example, was sold off from Ashland Chemical and became a stand-alone oil blending company. A few years later the Saudi oil company ARAMCO bought them out. Valvoline still pays a dividend to their share holders and they were concerned enough about their reputation and name that in 2019 (I think) they went out and bought all of the franchised Valvoline quick lube companies and put them under corporate control. This was a good move for them and strengthened the brand.

Is it any concern for the consumer whether their oil company owns their own additive supplier? Not to me it isn't. Marketers and salesmen have ruined the industry on the retail level with their terminologies and publishing performance numbers that mean absolutely nothing in the grand scheme of things. There are no 100% group IV or group V oils. Chemistry doesn't work that way. And if you can stand to listen to the stupidity on youtube by Eben, the "YOULUBER", even Amsoil published an article stating that "100%" and "FULL" synthetic are simply synonyms of each other. I have literally seen fist fights over this debate.

Like the TÜV laboratory in München told the presidents of Miller and Budweiser beer - "we can't tell which beer is of the higher quality, but... your horse has diabetes."

Buy what you're comfortable with and what meets the requirements of your equipment. Monitor your engine, watch for varnish or sludge, cut the filters open and inspect them when you do an oil change, and change brands until you find something you're happy with. Or, just change the oil when you're supposed to with whatever meets requirements and enjoy your time with family and friends. Life's short - eat desert first.
I thought the horse was pregnant.
 
Vertical integration is a double-edged sword. On the one hand yes, an integrated supplier may have access to materials and at costs that an independent doesn't. But on the other hand the integrated company may have less freedom to play the market and use whatever is best, rather than whatever is best for their company. Refineries and processing units need to be kept busy.
 
I'm going to pick on Valvoline here as an example
You mean Aramco.
Samsung is the epitome of vertical integration, in contrast to Apple.
I'd argue the opposite is true. Apple went all in on vertical integration when they decided to make their own processors. Samsung still depends on Qualcomm tech.

Yes, IMO Shell and Mobil hold an advantage over the smaller players, but the main effect is likely on their own bottom line. Perhaps one of the reasons Valvoline became a takeover target.
 
I can't answer your question for oil - but I have spent a lifetime working with manufacturing, and I can tell you:

Retail sale price - cost isn't in the equation. You sell at market price. If you can't make it cheap enough to profit you go out of business. Retail margins are huge. So are advertising budgets. Neither have a bearing on production cost.

The more vertically integrated the more you can control production, but it doesn't always make it cheaper. In fact the trend in discrete manufacturing is to go to contract manufacturing and make the same thing for everyone, hence benefiting from the economies of scale.

Even if one oil is better than another, it likely has nothing to do with vertical integration.
 
You mean Aramco.

I'd argue the opposite is true. Apple went all in on vertical integration when they decided to make their own processors. Samsung still depends on Qualcomm tech.

Yes, IMO Shell and Mobil hold an advantage over the smaller players, but the main effect is likely on their own bottom line. Perhaps one of the reasons Valvoline became a takeover target.
Apple designs the components.
However Samsung manufacturers the components to Apple's spec for them.

Thr Apple chip is fabricated by TSMC, along with Samsung almost hold a monopoly on the production of the specific processors (SOC) used for mobile devices.

Qualcomm silicons are also manufactured by Samsung and TSMC.
 
No one is fully vertically integrated anymore. So it doesn’t matter. Those days are gone.


Just because Mobil/Shell own Infineum doesn’t mean they use the additives that Infineum makes. We learned that 2021/2022 publicly.

Infineum / Afton / Lubrizol, et al, don’t make all their own raw materials. They outsource that to each other, or to other petrochemical companies.

Just because a company uses their own base oils in one line, doesn’t mean they don’t use someone else’s in another product line. Or even better, just because they use their base oils in one region of the US, doesn’t mean they don’t change formulations for logistical purposes in other regions of the US.

Just because they have their “own” blend plants, doesn’t mean they don’t use toll blenders and bottlers all around the US.

Etc.

Valvoline, with the Motiva/Aramaco purchase will be just as “vertically integrated” as Shell and Mobil.
 
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