October 11, 2000

Market Background

DIFM Strategies
1

Quarts Based
Total United States
By Selected Time Periods
% D-I-Y % Installed
12 Months Ending June, 1996 - 2000
43.4
45.5
46.9
50.0
50.4
56.6
54.5
53.1
50.0
49.6
1996 1997 1998 1999 2000

Market Continues to Shift
From DIY to DIFM
Factors Causing Shift From DIY To DIFM
• Age The aging population is more inclined to be DIFM’s
• Convenience Higher demand as less leisure time is available
• Increased Installed Outlets Emergence of new outlets and competitive pricing
• Environmental Concerns Public awareness on hazards of improper used oil disposal
• Female Influence Increased number of female drivers, decision-makers
• Strong Economy Increased disposable income decreases DIY activity
Conclusions
•
More Profitable Packaged Volume Declining While Less Profitable Bulk
Volume Increasing
•
Less Brand Recognition / Influence in DIFM
3

MOTOR OIL BRAND SHARE TRENDS
Installed Quarts
Total United States
12 Months Ending June, 1996 -2000
1996 1997 1998 1999 2000
Valvoline
(0.5)*
Pennzoil Quaker State Castrol
(0.7) (0.6) (0.4)
Havoline
(0.4)
* Share point change required for statistically significant difference between years, at the 90% confidence level.
Mobil
(0.3)

10.7
8.6
11.8
10.9
24.3
Installed Quarts
Total United States
12 Months Ending June, 1996 - 2000
Quick Lube
Repair Garage
Mass Merchant
10.2
8.0
10.6
11.7
9.8
7.8
9.8
11.3
Car Dealer
Service Station
All Others
11.7
8.3
9.1
9.6
24.6
24.8
25.6
9.9
7.7
8.2
11.2
27.1
36.7
35.7
35.9
33.7
1996
34.7
1997 1998 1999 2000

Brand Share within Top 3 Installed Channels
Installed Quarts
Total United States
12 Months Ending June, 2000
Quick Car Repair
Lubes Dealers Garages
Valvoline
Pennzoil
17.8

37.4

Quaker State 19.8

Castrol
Havoline
8.0
7.1

Mobil 3.0
11.3
20.3
17.8

8.6

3.4

4.2

15.3
26.2
15.5

10.2
7.5

7.9

6

Top 10 Quick Lubes by Centers
(Fast Lubes Only)
Company
1. Jiffy Lube
2. PZ 10 minute
3. Texaco Xpress
4. VIOC
5. Kwik Kar
6. Grease Monkey
7. Phillips Fast Lube
8. SpeeDee
Independent /
Company Owned Franchises
540 1,603
791
740
358
9. Citgo Lube
10. Express Oil Change
111
13
Total: 3,055
Source: National Oil & Lube News, March 2000
289
34
126
3
0
0
252
0
177
0
117
0
95
2,244
Total
2-29-00
2,143
791
740
610
289
211
126
120
111
108
5,249
Add. Stores
12-31-00
100
n/a
60
35
47
18
28
8
n/a
20
316
7

 GM Goodwrench Quick Lube Plus 4500
 Midas Auto Systems Experts
 Firestone Tire & Service Center
 Wal-Mart Lube Express
 Motorcraft Fast Lube
 DaimlerChrysler Mopar Express Lube 970
 Shell Auto Care 900
 Gemini Auto Service Center (Goodyear) 806
 Penske Auto Center (Kmart)
 Meineke Discount Muffler
SOURCE: National Oil & Lube News / as of March 2000
660
622
1500
1363
1200
1000
8

700
600
500
400
300
200
100
0
360
45
315
'92
407
66
341 347
'93
422
75
455
474
90
100
574
584
630
519
137
183 207
272
365 374 382 391 377
'99
358
'00 '94 '95
Company
'96 '97 '98
Franchise
9

October 11, 2000

Market Background

DIFM Strategies
10

Challenge
• Slow Market Growth and Shift to DIFM
• Outlets less Brand Loyal /
Switching Costs Low
• Differentiate
Response
Grow market share in installed segment
Improve bulk oil margins
Alliances with distributors / grow together
“Controlled” Outlets
- Company-owned oil changes
- Franchised oil changes
- Mid-tier Program: Express Care
- Tougher Supply Contracts
Understand the oil change business
- Offer solutions
“Family of Brands”
11

12

 Accelerate Growth for Valvoline’s DIFM Business
 Provides Offerings for Three Distinct Installer Groups: VIOC,
Valvoline Express Care and the “We Feature” Program
 Provides a “Branded” Program to a Customer Valvoline is not
Currently Positioned to Sell
 Competitive Program to Sell Against Texaco Xpress Lube,
Pennzoil 10 Minute Oil Change and other Branded Independent
Programs
 Increased “Family of Brands” Purchases, Longer Term (10 Year)
Contract, Consistent Marketing and Image Management of
Independent Operators
 Pulls Several Fragments into One Program

l
Challenges
Location, location, location l Labor expense and turnover l l
Offering new products and services
Trade-offs between price and brand l
Response
Site Selection Models l
“People. Cars. Greatness.”
(Become a ‘Most Admired’ Company) l l
Benefits
New Hiring Methods l l
Convenience
Ability to sell / focus l Trust l l
Constantly shop motor oil company deals
Understand impact on customer base
14

l
Challenges
Controlling Expenses l Investment Base l Geographic Expansion
Strength l
Differentiate l l l l l l l l l
Response
Real-time Management Systems
Labor Scheduling
Internal Benchmarking
Greater Percentage of Franchisees
Protect Existing Markets - 3 Tiers
Stay within Areas of Valvoline Brand
Concentrate to Leverage Advertising
MVP Program
Service / Trust
15

• Protect Your Markets
– Concentrate / contiguous
– Fill out existing markets
• Stay in Areas of Strength
– Good distribution (cost advantage)
– High DIY market share
• Areas Where You Compete Head-to-Head
– Service (Employee Friendliness / Recognition)
– Trust
– Best Location / Convenience
– Promotions
– Service (Product and Service Offering)
16