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On Slick Marketer

Most folks would see a gap as wide as the Grand Canyon between selling a can of soup and a …

Most folks would see a gap as wide as the Grand Canyon between selling a can of soup and a quart of motor oil. Not Herbert M. Baum, chairman and CEO of Quaker State. Baum arrived at the motor oil company in June 1993 after 18 years at Camden, NJ-based Campbell Soup, where he made his mark as a marketing whiz by building brands such as Prego spaghetti sauce. Disappointed after Campbell recruited an outsider for the top spot, he decided to move on when Quaker State came calling.

If Baum and Quaker State seemed a dubious match, one thing was certain: The company was badly in need of a marketing makeover. Once the ruler of the $4 billion motor oil marketplace, its 22 percent share had dwindled to 12.5 percent. “The company was literally failing,” says Baum, 59. Today, Quaker has fought its way to 14.9 percent, pulling away from a pack of competitors such as Castrol and Valvoline, to take the No. 2 spot behind Pennzoil. Total revenues from continuing operations for the first three quarters of this year leaped 52 percent, to $774 million from $509.7 million in 1994. Income from continuing operations for the same period, before restructuring charges, rose 80 percent.

Much of Quaker’s ongoing transformation from a motor oil company into what Baum calls a “marketing refining business” is right out of the consumer-goods marketing textbook. His second day on the job, he dismissed the company’s ad agency and Quaker State spokesman, actor Burt Reynolds. “The product ought to be the hero, not a celebrity,” he says. Quaker motor oil then got a spiffy new green bottle with an updated logo; the company’s Minit Lubes got a name change to Q Lube and a green-and-white color tie-in with the bottles'; and lube employees got new uniforms and customer-service training. All 450 Q Lube locations will have the new look by the end of 1996, and the makeover is proving successful as it is being rolled out: Average sales at each converted location have jumped 20 percent.

But brand makeovers aren’t the only force propelling sales at Quaker. Armed with cash from selling off an insurance business and natural gas operation, Baum is buying market share and new products, snapping up companies such as Specialty Oil, a maker of private-label motor oil for customers such as Wal-Mart, and Slick 50, an engine additive manufacturer. His strategy is to promote higher-margin products such as 4×4, Quaker’s new motor oil for mini-vans and jeeps, through the company’s Q Lube locations, “where we have a greeter who says, ‘Would you like to try this premium oil for your vehicle?'” Baum says. “Motor oil is a 2 percent to 3 percent after-tax business, but fast lubes are probably 5 percent,” he adds.

So far, so good, but the going is likely to be tougher from now on. Alarmed by Quaker’s unexpected resurgence, rivals who once wrote it off are determinedly guarding their turf. When Quaker’s market share edged up to 15.3 percent earlier this year, competitors “stepped in and started spending heavily,” pushing Quaker back below 15, Baum acknowledges. Others have displayed some marketing savvy of their own. Slick 50 owned 95 percent of the additive market until rival Duralube Oils Corp. launched an “infomercial” campaign that stole 30 percent of its business.

The hard-driving Baum, who is in the office at 5 a.m., six days a week, faced some difficult issues on other fronts, as well. The hardest by far: the decision to move Quaker from Oil City, PA-its home for 82 years-to the Southwest, where acquisitions are concentrating the company’s business. Now settled into new headquarters in Dallas, Baum recalls the day last April when he announced the move to the company’s 298 employees based at headquarters. “Some came to work dressed in black. Some were crying,” he says. “It was the toughest moment of my career.”

What’s on Baum’s agenda now? Though he has installed packaging executives in many key positions, he rocked the motor oil industry last spring by luring over John Barr, president of competitor Valvoline, as Quaker’s president. That will free Baum to beat the bushes for more U.S. and foreign acquisitions. Happily for him, that means more new products and brand building. “And that’s what I love,” he says, “because this is a brand business, and brand means margin.”


HERBERT M. BAUM

Chairman and Chief Executive

QUAKER STATE

Born: Chicago; December 6, 1936.

Education: BA, finance, Drake University.

Family: Wife, Karen; children, Dina, 24; Marc, 22.

Boards: Meredith Corp. and Whitman Corp.

Business philosophy: “I never want to be in a fair fight. I always want to go in with an edge.”

Outside interests: “I don’t do anything. Working is my whole life.” (Admits to having announced stock-car and motorcycle races at a track near Chicago for 15 years while working at an ad agency.)

Greatest influence: Jim McNutt, mentor at Campbell Soup.

Most recent book: “Buffett,” by Roger Lowenstein. “I bet I got five ideas out of it, and I’m only a third of the way through.”

Car: Red Porsche 911 Carrera, his sixth one.

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