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Price Competition and Consolidation Challenge Chemicals Aftermarket

1 March 1999

Severe Price Competition and Consolidation Pose Challenges for U.S. Automotive Appearance Chemicals Aftermarket Players

    MOUNTAIN VIEW, Calif., March 1 -- The U.S. automotive
appearance chemicals aftermarket is being confronted with a shift in consumer
behavior which, combined with the trend of consolidation, makes competing in
this market a challenge. Research and development, targeted marketing
strategies and strategic business development are the primary factors allowing
companies to remain competitive.
    According to new strategic research conducted by Frost & Sullivan
(http://www.frost.com), U.S. Automotive Appearance Chemicals Aftermarket, growth in
most segments remains modest, with revenues reaching $518 million in 1998. The
tire and wheel care segment is growing the fastest at an estimated seven
percent in 1998.
    One trend that has appeared in this market is that consumer preferences
are shifting toward premium products. This is a growth opportunity because
premium products provide higher margins to manufacturers and retailers, as
many companies have already recognized. In addition, an increasing number of
female drivers are interested in maintaining the appearance of their vehicles.
This presents another opportunity as long as companies adjust their marketing
strategies to address this market segment.
    Manufacturers are challenged by severe price competition, which is
squeezing their margins, says Frost & Sullivan Analyst Robin Salafia. Many of
the older, more traditional appearance chemical products have become
commodities, which is forcing manufacturers to compete based on price. In
addition, companies may need to compete based on price for a shrinking number
of accounts due to the decreasing number of distributors and retailers, says
Salafia.
    Contributing to the intense competition are mergers and acquisitions at
both the manufacturer and distributor level. Consolidation at the distributor
level is resulting in fewer accounts being available to suppliers, and
companies are responding by broadening their product lines through
acquisitions of companies in related fields.
    Frost & Sullivan presents Market Engineering awards to recognize companies
that have worked hard to make a positive contribution to the appearance
chemicals aftermarket. Winners are selected from an in-depth analysis of the
market competitors and interviews with those companies that make up the
industry. Frost & Sullivan honors Turtle Wax with the 1998 Market Engineering
Customer Focus Award for understanding and responding to the needs of
customers for over 50 years. The company blends information gathered from
customers with that of other studies to effectively develop products that meet
customer needs and increase retail sales.
    The 1998 Market Engineering Product Innovation Award is presented to No
Touch North America for being committed to developing products that are high
in quality, convenient to use, and environmentally responsible. In addition,
Frost & Sullivan grants its 1998 Market Engineering Product Quality Award to
Meguiar's for being consistently recognized among its many demanding customers
as the leading manufacturer of exceptional quality appearance products.
    This automotive industry research has integrated the Market Engineering
consulting philosophy into the entire research process. Critical phases of
this research include:  Identification of industry challenges, market
engineering measurements, strategic recommendations, planning and market
monitoring. All of the vital elements of this system help market participants
navigate successfully through the automotive market.
    The companies participating in this market include:  3D International,
L.L.C., 3M Company Automotive Aftermarket Division, Armor All Products Unit of
the Clorox Company, Auto Wax Company Inc., BAF Industries, Blue Coral, Inc.
Unit of Quaker State Corporation, Blue Magic Inc., Blue Ribbon Products Inc.,
Car Brite Inc., First Brands Corporation, Lexol Division of Summit Industries
Inc., Liquid Glass Enterprises Inc., Loctite Corporation, Meguiar's Inc.,
Mothers Polish Company, Northern Labs Inc., No Touch North America Subsidiary
of Taiho Industries Company Ltd., Pennzoil Products Company Division of
Pennzoil Company, Performance Distribution Inc., Prestone Products Corporation
Division of AlliedSignal Inc., Protect All Inc., Reed-Union Corporation,
Sunshine Makers Inc., Turtle Wax Inc., U.S. Chemicals & Plastics Inc. An Alco
Industries Company, Valvoline Company Unit of Ashland Inc., Related Companies:
303 Products Inc., Ardex Laboratories, Auto Kare, Automotive Chemical
Manufacturers Council, Car Care Council, Gem Industries, Gliptone
Manufacturing Inc., Howe Laboratories, International Carwash Association, Kiwi
Brands Inc. Unit of the Sara Lee Corporation, K&W Products, The Original
California Car Duster Company, Superior Products, Treatment Products Ltd.
    Frost & Sullivan is an international marketing consulting company that
monitors the automotive industry for market trends, market measurements and
strategies. This ongoing research is utilized to update a series of research
subscriptions such as the Automotive OEM Custom Subscription, and to support
industry participants with customized consulting needs.
    Visit Frost & Sullivan's web site:  http://www.frost.com.

    U.S. Automotive Appearance Chemicals Aftermarket
    Report:  5460-18      Publication Date:  Feb. 1999      Price:  $3450