Mobil 1 versus Amsoil (Margin)

[SnakeOil]

Here's a fun topic I'm sure everyone will have fun pontificating on.

Who makes more NET profit on a unit of synthetic oil? Big ole' Exxon/Mobil or Amsoil

I'll lay out some ground work, and then I let it go to you guys.

Mobil spends WAY more in advertising than Amsoil does. Mobil has to wholesale their product to stores so that it can be retailed.

Amsoil spends money on advertising as well, but is it more than or less than Mobil per unit of product used. Also, Amsoil only has to pay its direct distributors, and not 8-10 layers like Mobil.

Amsoil may have to order certain base stocks from other companies, but I would think there is less overhead.

I'm only talking about synthetics here. Who NETS more money per unit of oil? Amsoil or Mobil?

 

[c3po]

What is the purpose of this post, I hope this does not start a Mobil 1 versus Amsoil Fight.

 

[chet2]

my mechanic sells amsoil for 9$ a quart..china mart sells it for 5.20 a quart (five quart jug) ..i would say amsoil...i would like to try amsoil, but not at 45$ for 5 quarts

 

[farrarfan1]

c3po I don't think it's physically possible to fight at the same time you're pontificating.

 

[jldcol]

A simple economic based guess, economy of scale at work there.One supplies base for the other, at least sometimes, and for profit. Likely A over M, but probably from need not want.

 

[demarpaint]

I'd think Amsoil is making more $$$$$ per unit net profit than Mobil 1. The % is probably substantially more, so?

 

[MKZman]

I think one question is what is the wholesale price of Amsoil to the distributors. For mainstream brands found at regular places, the sellers do not make much money and rely on volume.

Companies with more direc sales force (like Amsoil) are usually marked up more to get dealers to carry and sell it. That is, Amsoil may make more per bottle at the wholesale level but the distributors make a lot more than say a parts place selling Pennzoil. That is, the dealer network, protected by territory and exclusivity, probably account for a significant part of the price.

 

[endeavor to persevere]

Remember as the number of units produced increases the overhead decreases per unit. Not to mention Xom makes a profit from Amsoil on base stock.

 

[tig1]

No way to answer your question, but keep this in mind. Mobil spends tons on R&D. Mobil is generally the company formulating new products for FF in engines all over the world. They spend money on new certifcations that often Ams or other companies doesn't do to the same extent.

 

[Spector]

Amsoil is a privately held company, AJs salary and perks could be into the high millions per year and it seems that Amsoil (more then the others) can raise prices at will and not see much in the way of sales fall off.

I vote for Amsoil

 

[buster]

Interesting question. I don't have an answer.

 

[Johnny]

Neither does anyone else, except for XOM and Amsoil.

 

[buster]

I'm sure XOM GREATLY appreciates Amsoil's business. Especially since Castrol went to Group III. They used to be XOM's largest customer so I'm told.

 

[Gary Allan]

Quote:
Also, Amsoil only has to pay its direct distributors, and not 8-10 layers like Mobil.


This isn't correct. I'd swap that around. I'd say that there is more layers with Amsoil than with XOM. XOM his production and fundamental distribution. I'm sure that all the chains aren't negotiating with the local XOM distributor ..or if they are getting it locally serviced, there's a concession somewhere in there for being the local outlet's warehouse.

I'd say XOM has 3 basic levels to the end user if they're buying at a major retail chain. 4-5 max if bought at the point of service.

Now if you're talking XOM chemical producing additives for XOM blending/refining ..etc...etc...etc ...but that's just labels. If you integrate all things in the XOM box from product production to end user ..it should be a fairly short list.

 

[buster]

Old....

Quote:
Action News: We'll talk more about the Dealers later, Al, but first, you mentioned the chemical suppliers. Those companies are some of the largest in the world. They supply the Quaker States and the Pennzoils. What kind of a relationship do you have with them?

Al Amatuzio: Let's face it, we don't carry the kind of weight that Pennzoil, Quaker State, Mobil and the other major motor oil manufacturers carry. They're so large they're in position to buy a lot more raw materials than we buy, so consequently they're in position to buy at lower prices. They have purchasing power. We have, however, made a name for ourselves. We're currently the second largest purchaser of synthetic raw materials. I've been in this business for a long time, and I know when suppliers are being honest and fair. That's all I've ever asked of anyone. Be honest and be fair. When suppliers deal with AMSOIL they know what to expect. We insist on the best prices, and we'll negotiate, but I don't expect something for nothing. I'm not out to take advantage of anybody, and I won't let anyone take advantage of me or the company. Our suppliers respect what we're doing and treat us well.

Action News: You talked about negotiating with your suppliers. Rumor has it you play hardball in the board room.

Al Amatuzio: Well, I don't know about that. I do know that I've built some great relationships with suppliers over the years. Some of them have become good friends, but they all know what to expect from AMSOIL. The company has to keep costs down. We can't just bump up our prices every time one of our suppliers raises our cost on a raw material. Our products have to be affordable so our Dealers can sell them.

 

[Mark888]

Originally Posted By: Gary Allan
Quote:
Also, Amsoil only has to pay its direct distributors, and not 8-10 layers like Mobil.
This isn't correct. I'd swap that around. I'd say that there is more layers with Amsoil than with XOM. XOM his production and fundamental distribution. I'm sure that all the chains aren't negotiating with the local XOM distributor ..or if they are getting it locally serviced, there's a concession somewhere in there for being the local outlet's warehouse.

I'd say XOM has 3 basic levels to the end user if they're buying at a major retail chain. 4-5 max if bought at the point of service.

Now if you're talking XOM chemical producing additives for XOM blending/refining ..etc...etc...etc ...but that's just labels. If you integrate all things in the XOM box from product production to end user ..it should be a fairly short list.

Gary is basically correct that M1 product has fewer levels than Amsoil to get to consumer. In fact retailers like Walmart negotiate directly with XOM and BP (Castrol) and don't go through any local distributor. Walmart has its own distribution warehouses around the country (and around the world) that has revolutionized the retail industry.

Walmart has a computer database that shows how much product is sold at every store each day and is available to major suppliers like XOM and BP to query against so the manufacturers can see how much of their product is moving almost instantaneously.

Also, next time you are in Walmart (or your garage), notice that the M1 product labels for the 5-quart jugs (and also Castrol Edge 5 quart jugs and maybe some other Castrol) have the Walmart logo on them, mentioning that Walmart recycles used oil. They don't get these from local distributors.

Walmart is the 800-lb gorilla of retail and they undoubtedly sell more oil at retail than any other store (and maybe more than all others combined). Of course, a lot of product is also distributed through service shops that do oil changes.

I would bet that the manufacturing, marketing, R&D, etc, costs for XOM (M1) and BP (Castrol) are about the same or lower per unit than Amsoil.