Vendor Newsmaker Q&A: Steve Harman

Jan. 1, 2020
Steve Harman is President, Americas, Shell Lubricants
Steve Harman is President, Americas, Shell Lubricants

In the motor oil realm, is there a lot of competition from other countries?

Most of the lubricants in the U.S. are U.S. companies. On the car care side, you get a lot of Asian companies coming in. There are enough competitors in the U.S. to worry about and others coming in from outside.

Is a lot of lubricant business U.S. based, because of the science and engineering behind it?

If I was a Chinese or a European supplier of lubricants, there are a lot of barriers. Technology is very high in the U.S.; the marketplace is sophisticated. It's huge geography. Building a brand in the U.S. is not a cheap activity. Huge sums of money go into supporting the brand. And it's a highly fragmented market as well. There is a lot of competition in the U.S., a lot of choices and customers. For a third party to come in from another country would be financially ruinous.

Where do you see Shell putting the most emphasis, if you had to choose between the car care side and the lubricants side?

It depends on the customer. In the retail channel in the U.S., the DIY channel, customers are increasingly asking us to run their categories for them. Whereas if you're talking about the industrial business in the U.S., they're not really interested in car care, it's not part of their game. They're much more interested in factories running efficiently and the cost of ownership — it depends on the channel. Another example would be the Jiffy Lube channel, the fast lube channel, where people are there mainly to have their car serviced. The secondary objective is to get new wiper blades or to do something about that. Generally they're there to have their engine checked and to have their oil changed.

Are you familiar with category management strategies in the U.S.?

One of the exciting things we've done in the last couple of years is we've built up our category management capability from originally having one or two specific accounts that we manage, and we now have a category management skill center where we've actually built up a skill center for our customers.

Shell is a very recognized brand. And that brand has been built over many years. What are some of the challenges to maintaining that level of being known as a premium provider of products?

There are some challenges. Fortunately we're lucky to have some of the leading brands in the U.S. — Pennzoil, Quaker State, Rain-X. The challenges are that competition in the U.S. is growing, choice for customers is growing and in some ways supporting a large number of high quality brands can become more expensive. We spend unprecedented sums of money in technology, supporting those brands, bringing in new technology, refreshing those brands. We'll be launching something soon for (2008), which will be showing further advancement in those brands and those technologies. An example of that is Rotella. We introduced Rotella T, which is a new concept in engine oil, in line with the new emissions legislation that came in about a year ago. In all those examples, you're bringing in a new technology and a new feature every couple of years, and that's a big challenge.

How do you see distribution channels changing? How does consolidation of retailers and wholesalers change your strategy to push products through?

It's a slow trend for U.S. customers to move from DIY to DIFM. There's a slow trend toward do-it-for-me. I think that's one trend. I think there's definitely a trend toward consolidation in the U.S., whether it be distributors or wholesalers or retailers.

I think there's a trend for much more choice and much more selectivity. I think the U.S. customers are the most demanding customers in the world. They demand very high quality education, they demand very strong solutions and they demand unprecedented service worldwide. If you compare the service levels required of the U.S. [to those of other countries] the expectations are high and the choices are high. It's the fastest-moving market in the world in terms of choices, too, and you have to take a serious look at that. So those are all significant market trends. You have to push new products on the shelves more quickly. There are a lot of choices emerging faster in the U.S.

How do we manage that? We have to bring in new technologies, we have to be proactive not reactive and we have to make sure that we communicate really well to tens of millions of customers what's going on with our product lines and our solutions. On the industrial side, it's a little bit different. The industrial side is becoming increasingly solutions based. The cost of lubricant is extremely small in relation to what you're trying to do in terms of keeping a factory running more efficiently.

There seems to be a trend among wholesalers to capture market share through lower pricing strategies. Is that something you advise against being a premium line provider? Is there a pushback? How do you compromise on that?

Price competition is always there. We don't introduce product and services to be the cheapest. But we do introduce product and services to be high value. The scorecards we have with customers are primarily related to value. We're never going to be the cheapest. We trade in the quality and value area. We are absolutely in the value business. It's very easy for us to sell cheap products and flood the market with minimum quality products, but that's not what we're into. The reason we have so many NASCAR drivers in the chase using Pennzoil or Quaker State is they're choosing it to be successful.

Do you find the company having to keep up with R&D and engineering to accommodate alternative fuel and other technologies?

Big time. We happen to have a research and development laboratory in Houston. We spend more on technology than anybody else. That's a big plus. Customers come to us, (and ask), 'what are you doing, what are you testing?' Major R&D investment is growing in the U.S. We've got the investment in traditional areas, like Q, like Rain-X. We're also putting a lot of work into diesel, hybrid and other environmental fuel-efficiency options. We are spending a lot of time, a lot of resources, a lot of money. We were the first to introduce a hybrid engine oil in the U.S. market. We hope to be the first in a number of these areas. And we have very, very big business in Shell anyways with biofuels, with hybrids and a lot of engine technologies. The good news is we have contracts with a lot of the big OEMs. We're right in the middle and all the car technology going forward; we're tightly aligned.