After entering the U.S. market for synthetic passenger car motor oil (PCMO) in mid-December 2019 with its own branded full synthetic PCMO, Costco extended its product line into heavy duty motor oil (HDMO) with its Kirkland Signature conventional SAE 15W-40 HDMO in July 2020. Kirkland HDMO meets the current API Service Category of CK-4, which means the product meets OEM specifications for service-fill applications and will not compromise an OEMs’ warranty—provided the end-user follows OEM-recommended oil drain intervals based on operating conditions.
Packed in a case of three 1-gallon jugs with a posted shelf price of USD 26.99 or 9.00 per gallon, Kirkland Signature HDMO offers an attractive option for owners and operators of light and heavy-duty diesel-fueled vehicles and equipment.
According to Kline’s latest analysis, the United States is a 390.0 million gallon market for HDMO used in on- and off-highway applications in 2019 and is forecast for moderate volumetric declines over the next 10 years, factoring in the impact of COVID-19, changes in oil drain intervals enabled by CK-4 HDMO, and efficiency gains in logistics across all fleet types. At the viscosity grade level, SAE 15W-40 accounts for 80% of total HDMO demand in 2019, declining to 58% by 2028. Vehicle OEMs are moving to lower viscosity grades such as 10W-30 and 5Ws for factory and service-fill applications, which provides improvements in fuel economy compared to 15W-40. However, as the industry workhorse, 15W-40 will continue as the leading grade in the United States, so Kirkland can extend its HDMO line to lower viscosity grades and formulation types as the market and consumer demand evolves. Consumer demand and identifying the target end-user profile for this product may prove difficult for Costco/Kirkland to grasp as opposed to its Kirkland Signature Full Synthetic PCMO product line. For example, 15W-40’s market sweet spot is heavy-duty, over the road, class 8 diesel-fueled tractors and heavy-duty, off-road vehicles and equipment. Fleets employing these types of vehicles are performing routine preventive maintenance which includes a complete lube, oil, and filter (LOF) change at defined intervals either in-house or through installed service providers such as lease-rental operators, OEM workshops, independent workshops and truck stops/quick lubes through operators such as Pilot, TA, Love’s and Speedco. HDMO is sourced either directly from lubricant manufacturers such as BP, Chevron, CITGO, ExxonMobil, Phillips 66, and Shell, among others, or through their distributor channel partners in volumes other than three 1-gallon jugs. Truck drivers do carry a container of HDMO—usually a 1-gallon jug in the cab for top-off applications as needed—but given the HDMO brand loyalty of truckers and fleets, it is unlikely that they would use a different brand of HDMO than the service-fill for top-off applications.
So who, then, is Costco’s ideal target customer for its Kirkland Signature HDMO? As any loyal Costco member knows, there are two types of members: individual and business. The business member is easy to find, as he or she is usually pushing a full pallet cart of bottled water, soda, paper products, snacks, candy, or all of the above back to their business for re-sale or use. Many of these business owners drive either a pick-up truck or light-duty van, either gasoline or diesel-fueled. Kirkland Signature offers these vehicles owners/operators a cost-effective alternative to major branded HDMO without compromising product performance or jeopardizing an OEM warranty. Products can either be used for a DIY LOF or “Buy and Bring” to a trusted installed service provider, which is an option that is gaining acceptance in the United States. Other potential target customers could be warehouse/logistics/materials handling operations utilizing propane or diesel-fueled forklifts that require automotive engine oil, property managers/landscapers, and private transportation service providers.
Knowing what we know about the U.S. automotive engine oil market, it is Kline’s opinion that Kirkland Signature has more potential to penetrate the market in PCMO than HDMO, but time will tell.
Kline will continue to monitor the roll-out of Kirkland Signature HDMO over the coming months.