Indian Lubricant Industry An Introduction Marketing Essay

Indian Lubricant Industry An Introduction Marketing Essay Indian lubricant industry in a recent past has presented new market opportunities. Firm growth in the Indian power, engineering and automotive sectors has been a boon for lubricant manufacturers. In automotive sector, as consumers migrate to efficient vehicles and motorbikes, they use higher grade lubricants. As a result, multi-grade lubricant products are getting benefitted. In the industrial segment, high level of investment in manufacturing, transport and power sectors have the potential to drive very strong growth for marine aviation lubricants and transformer oil. The automotive lubricant market in India is highly price sensitive the volume growth is getting stagnated due to longer lasting lubricants. The retail trade and original equipment segment are two major marketing channels in the Indian context. Due to ever growing competition, tie-ups OEMs are becoming important as they provide the value proposition of a brand. In retail trade, Petrol pumps (ROs) form the major distribution channel. Sales of lubricants via ROs or the bazaar trade has changed the Indian automotive lubricant market into a FMCG sector. The other marketing channels are garages, super markets, rural and agricultural dealers, authorized service stations and wholesale distributors. PSU companies manufacture their own base oil and follow a different distribution strategy as compared to their private counterparts that solely dependent on imports. PSUs sell from their own wide spread network of ROs while private manufacturers prefer supermarkets. Engine oil plays the most important role in deciding the market share of lubricant manufacturers. Increase in demand for 4-stroke motorcycles, tie ups with OEMs and implementation of new norms of pollution are few of the key drivers of the growth of the engine oil segment. Growth in heavy commercial vehicle segment, increasing awareness among the customer base, new cooling technologies and OEM tie-ups has led to increase in coolant demand which has become the next largest segment in the automotive lubricants market. In brake oil segment, introduction of new brake systems, increasing growth in LCVs, consumption of lubes by CPVs and changing customer mindset related to specialty lubricants are believed to push demand further. The gear oil market is also growing fast and has high potential owing to increasing number of vehicles on road. Vehicles of new generation with advanced gear system technologies automatic transmission systems need special type of lubricants conceiving greater demand for API synthetic and multi axel gear oil, API MT-1, API GL-5 ultra-Matic, which reduces the oil changing intervals. In the long run, the overall picture for automotive lubricants sector looks bright due to growth of Indian economy along with increased purchasing power of consumers. BPCLs Lube Division Bharat Petroleum offers a complete range of Gear Oils, Automotive Engine Oils, Specialty Oils, Transmission oils and Greases. The fine quality of the lubricant and its correct usage ensures longer engine life and trouble free operation. Lubricants were totally deregulated during the liberation era of early nineties. Thereafter, a large number of players have forayed into this market. Despite operating in a totally competitive environment, BPCLs Lubricants SBU has been registering a growth in lubricant sales continuously over the past couple of years. As compared to 2008-2009, a growth of 13.73% has been achieved and sales volume of 231.12 TMT has been achieved. The channels viz. retail and direct saw a growth of 20%. BPCL has a strong RD competency, extensive distribution network; own source of Group II+ base oil, highly motivated and dedicated workforce which serves as a strengthening mechanism for it but due to increased competition and continuous phasing out of 2-stroke engines are threat to the company in its growth path. Birth of MAK In 1998, BPCL re-launched lubricants in new attractive packs. It was mainly in automotive category with three major brands- Automol for Petrol Engine oils, MAK for Diesel Engine oils and Glide for 2-3 wheelers. The year 2003, MAK was named as an umbrella brand and subsequently all industrial grades too were branded with it. MAK Lubricants sales and its market share The Lubricants business of BPCL delivered a sales volume of 231.12 TMT in 2009-10 as compared to 203.22 TMT in 2008-09, a growth of 13.73%. The volume of finished lubricants grew by 23% during the last year. Both the reseller channel and direct channel grew by over 20%. MAK Lubricants are now available at more than 23,000 retail counters across the country apart from the small mechanic shops and authorized service stations. Products like MAK Chakda and MAK Boat XP were launched during the year. There has been an expansion in customer base across the segments with prime focus on the key growth sectors. The wide range of products cater to normal applications like Engine oils to Hydraulic, Marine, Cutting and very specialized products for Defense applications and Railways. Products catering to specific applications like MAK Amocam Plus, MAK Steel for steel plant applications and superior Industrial Gear Oils were launched. In the retail channel, focus was on generating secondary sales at the retail outlet. Initiatives like One Day Wonder and MAK QUIK improved visibility of the brand and also offered a value proposition to the customers. Segment specific oils like MAK Auto XL and MAK D-Gen were introduced to cater to niche markets. The network of MAK distributors was further expanded with the objective of achieving leadership position in the high value grades. On the exports front, BPCL entered Sharjah and consolidated its presence in Nepal, Sri Lanka and Bangladesh. Point of Purchase Lubes Shop They are exclusive lubricants reselling points to facilitate the customers for their Lubricants requirement and confirming with the Quality and other standards of BPCL. The deregulation in the industry along with entry of multinationals has led to a shift of trade to the bazaar. Owing to huge potential with competitors providing huge discounts, BPCL too has forayed in this direction and has started giving discounts to the end customer instead of the channel. These branded lubes shops are available all across the country in all major cities. These C:UsersRomioDesktopLubeshoppe.gif MAK Garage BPCL started a campaign by enrolling the mechanic segment under the umbrella network of MAK Garage. It was launched in 2006 to promote the MAK lubricants and currently about 800 MAK garages across the country exclusively uses MAK Lubricants C:UsersRomioDesktopmak_garage.gif Hero Honda Service Stations JV between Hero Honda and Bharat Petroleum. The initiative is to utilize the vast BPCL network across the country to provide value added services to the customers through the City Work network at our ROs. Currently, there are around 170 Hero Honda City Works operating across the country C:UsersRomioDesktopcitywrk.png TASS TATA Authorized Service Station is yet another initiative for strengthening our relationship with TATA, Indian Auto Major. There is a joint collaboration for marketing co-branded greases, lubricants and specialty products MAK TATA products. TASS provides TATA vehicle service network throughout Dealer network across the country. This network of service is of two types SUVIDHA for TATA Ace vehicles and TASS for heavy vehicles C:UsersRomioDesktoptass.jpg VCC BPCL launched a new initiative VEHICLE CARE CENTRE at the retail outlets. This ought to provide esteemed customers state of the art facility at affordable rates. The network is in growth phase and is gaining huge popularity across the country. C:UsersRomioDesktopvcare.png MAK Quik Lube Oil Change To value the time proposition of the esteemed customers, new initiative MAK Quik Lube oil Change has been started at various outlets. It mainly caters to the Bike and Car/SUV customers for changing the Engine oil in the vehicles within a short span of time. The major advantages to the customer out of this initiative is à ¢Ã¢â€š ¬Ã‚ ¢ Quick Oil change in front of eyes à ¢Ã¢â€š ¬Ã‚ ¢Mechanized system of changing Oil which helps in removing the layer of old oil completely. à ¢Ã¢â€š ¬Ã‚ ¢Genuine MAK product à ¢Ã¢â€š ¬Ã‚ ¢ No Servicing cost- only the cost of product needs to be paid by the customers. à ¢Ã¢â€š ¬Ã‚ ¢ Fast turnaround time for the customers. à ¢Ã¢â€š ¬Ã‚ ¢ Exceptional offers to the customers C:UsersRomioDesktopservice_makquik.jpg OEM Tie-ups   Due to the ever growing competition, the tie-ups with OEMs have become important as they help in reinforcing the value proposition of a brand. BPCL is continuously working with OEMs to help them in providing the best value for money to the customers by developing and upgrading genuine oils for the vehicles and equipments by addressing the requirements of the changing technology. The marketing and RD teams have been providing the solutions for specialized lubricant applications in cement, power, steel, road construction, engineering and other leading industries in India. The RD team has developed about 300 different formulations in last 10 years out of which last 3 years saw about 50. BPCL has started its own LOBS plant in Mumbai by using the latest All Hydro Processing Technology a Chevron Lummus Global patent. This has enabled them to manufacture finer quality MAK Base oils beyond the requirement of API Group II which is rated as Group II plus. OEMs acknowledge BPCLs identity in producing quality base oil, best of RD capabilities and deep marketing acumen. OEM Partnerships BPCL has agreements with top notch automotive manufacturers which have both National and International presence. This is in addition to presence across the country with plethora of options available for all the sections of the industry. With superior technology, strong brands and vast distribution, MAK Lubricants is a perfect partner for OEMs looking for offering their consumers the best of products and services. Hero Honda Motor Limited It has an association with BPCL since the year 2004. MAK Lubricants has become the biggest supplier of engine oils in a span of first five years for initial fill and to Hero Honda Motor Limited dealers, Authorized service stations spare part stockists.   BPCL has been developing speciality products like Engine oils Shock Absorber with joint working with HHML that can meet the stringent HONDA, Japan specifications. Also, BPCL has started Hero Honda City Works exclusive service outlets for HHML customers  at BPCL ROs.http://www.maklubes.com/Images/HHSuperPremium4TPlus.jpg http://www.maklubes.com/Images/Hero_Honda.jpg This is the largest manufacturer of commercial vehicles in India. There exists a strategic alliance with Authorized Service Network, Tata Motors dealerships and Tata Motor Spare part dealerships for supply of Engine oils and Co-branded engine oils speciality products to. MAK Lubricants jointly works with Tata Motors in areas including joint product development, customer service promotion. MAK TATA MOTORS CH4 15W40, specially developed for Tata Motors, is authorized by Tata Motors to use in all commercial vehicles fitted with Tata Cummins Engine. Tata Motors Commercial Vehicles Division http://www.maklubes.com/Images/MAK_ATF-A.jpg http://www.maklubes.com/Images/tata_motors.jpg BPCL and GM have entered a strategic alliance to supply Co-branded engine oils and speciality products to the GM dealerships authorized service networks across the country. BPCLs GM MAK Genuine 15W40 Diesel Petrol Engine Oils are specially developed for GM is endorsed by GM for use in all its passenger cars and Utility vehicles.  General Motors India http://www.maklubes.com/Images/MAK_Genuine_Diesel_Engine_O.jpg http://www.maklubes.com/Images/general_motors.jpg The 3rd largest 2-wheeler manufacturer in India and among top ten in the world, TVS had an annual turnover of more than $1 billion in 2008-2009. BPCL and TVS Motor Company have an exclusive tie-up to supply engine-oils for initial service fill TVSM dealers, spare part stockists Authorized service stations. TVS TRU 4;  the 1st JASO MA2 specification oil of its type has been manufactured by BPCL for TVSM two- wheelers. It is available at all TVS Motor authorized dealerships workshops and BPCLs extensive reseller network. TVS Motor Company Limited http://www.maklubes.com/Images/Mak_TVS_tru4.jpg http://www.maklubes.com/Images/tvs_motors.jpg   LT KOMATSU A market leader in excavator segment, it commands greater than 50% of the market share. Tie-up for past 5 years for supplying oils LT Komatsu dealerships and users. BPCL also develop, manufacture supply specially formulated speciality products and hydraulic transmission oils for use in to LT Komatsu excavatorshttp://www.maklubes.com/Images/LT_Komatsu.jpg . Competitors of Bharat Petroleum Corporation Limited (BPCL) Lubricants HPCL IOCL Honda Engine Oil Yamaha Lubes Castrol India Ltd Savita Group Total Group, India Gulf Oil Corporation Ltd (Lubricant Division) Apar Industries Ltd The Andrew Yule Group Gagan Gases Ltd Balmer Lawrie Co Ltd Major Competitors Engine Oils used at authorized Service Stations Honda Engine Oil Honda 4-stroke engine oil is developed by the RD, Honda Motors Ltd., Japan. It conforms to International specifications of SAE 20W40 and API SJ. It has been developed keeping difficult driving conditions prevalent in India. Savita Chemicals Limited In 1961, it started as a small manufacturing unit in Mumbai started producing white mineral oil. Presently, SCL specializes in manufacturing of petroleum specialty products like petroleum jelly, liquid paraffin, white mineral oil, transformer oil, automotive other industrial lubricants. It is in technical collaboration with largest independent oil company of Japa, Idemitsu Kosan, for manufacturing automotive and industrial lubricants. It supplies lubricants to OEMs like Honda Siel, Toyota and HMSI. Yamalube ® These are made by combining base oils, additives and solvents; chosen and mixed to work perfectly for the vehicle. It was designed to work in harmony with the important mechanical components of vehicle. 4-stroke fully synthetic engine-oil for high-performance bikes and competition engines. 4-stroke semi-synthetic engine-oil Æ’Â   a unique blend for all road bikes in normal conditions. 4-stroke mineral engine oil premium quality 2-stroke semi-synthetic engine oil for 2-stroke engines Æ’Â  for standard or unleaded petrol engines. The Marketing Channels **Pie areas not to the scale Till date, the Indian consumers associate filling of lubricants to petrol stations. With the deregulation of market fierce competition, lubricant is being positioned as high involvement consumer goods. Hence, there is a resultant drift outside the petrol stations, shift to bazaar trade. In the developed World, Do-it-Yourself concept has evolved for filling up of engine oil as customers have high degree of awareness sensitivity. This is still the job of mechanics service stations in India. This shift had the following effects: Dumping of products in bazaar. Decline in Market Share of oil companies in public sector. Industry got transformed to FMCG owing to crowding of the market Entry of spurious lubricants. War of trade discounts ending in lesser margins for dealers. Consumer Buying Behavior To start the understanding of the behavior, first we need to know who the consumer is or rather we should define the consumer. A consumer is one who owns a motor vehicle; it can be a motor-bike, a car, a truck or an auto. Let us take example of a farmer who owns a tractor, jeep and a truck. He does not buy separate lubricants for his truck or tractor but rather he would buy for one in bulk and would use it for other two. This might be due to his belief that diesel oils are better than petrol ones. Also, in many parts of country, the farmers use left-over/old oils in their tractors/trucks into the agricultural pump sets. Motivators The main motivators or influencers in the buying decision of customers are retailers/mechanics/dealers. As quite obvious, the owner of the vehicle or the driver has a very little chance of knowing about the intricacies or the composition of the lubricant oils in the market. Initial purchase of lubricant for hi is influenced by the brand recommended by the dealer or the mechanic. Subsequent purchases may be influenced by the petrol pump attendants or dealers. He would go for the brand which provides him value for money and would not consider the costliest one. Favorite brands As seen during the study, the consumers are bargain seeker and can shift their loyalty for a matter of few bucks. This can be attributed to the fact that the purchase of lubricants is a low involvement purchase for the majority of people. For a person having multiple motor vehicles can purchase the engine oil and subsequently use them in some other means as for example in pumps as discussed earlier. But one who is having a sole motor vehicle say a truck would rather prefer to buy diesel than lubricants as this would directly have an effect on his livelihood. His choice of lubricants would be influenced by:- Promotions Now-a-days, by adopting a customer-oriented approach, companies focus on creating brand awareness via print and visual media. E.g., promotional campaigns and trade shows offer gifts to their customers; these are ways of driving sales of the automotive lubricants MAK MALAMAAL DAILY JEET KI KHUSHI SCRATCH WIN This promotional offer provides a chance to win up to Rs. 30 on MAK 4T plus 900 ml 1 ltr pack and a chance to win up to Rs.100 on selected MAK Petrol Diesel Engine oil packs from 3-5 ltrs. http://www.maklubes.com/MAKADMIN/Promotiondata/8_Image_JEET_%20KI_KHUSHI.jpg This promises the customers a Promise Tooth Paste and Binaca Toothbrush free with every pack of MAK GE 20W-50 : 1 ltr pack MAK PUMP 3.5 ltr pack. GADI MEIN DHAMAK HASI MEIN DHAMAK! http://www.maklubes.com/MAKADMIN/Promotiondata/10_Image_HASI_MEINDHAMAK.jpg MAK MALAMAAL DAILY KISMAT KI BALTI KHOLO This provides a chance to win up to Rs. 500 on purchase of MAK Lubricants Engine/gear oils packs from 7.5 -20 ltr packs. Double offer An unbreakable LED torch light free with every pack of 15 20 ltr http://www.maklubes.com/MAKADMIN/Promotiondata/2_Image_Kismat_ki_balti.jpg Awareness/Sales Booster Mechanism Diversification Going on the lines of innovation, BPCL MAK have embarked upon thinking beyond Lubricants. As a part of this inventiveness, MAK lubricants have through dynamic RD have offered new products catering to specific requirements and the problems faced by the customers. MAK All-Season HMO Apple Spray Tea Spray Oils This Horticultural Mineral oil is manufactured out of Group II plus MAK Base oils which are environment friendly, therefore, they not only protect the tender plants and fruits but also their users. It is superior to both Summer and Dormant Oils and has no side effects. All season protection Reduces number of sprays Broad spectrum protection against pests and diseases Avoids usage of synthetic pesticides Excellent crop return Valuable tool when it comes to integrated pest management programs Reduces pest control costs Environmental benefits Eco-friendly approach No residue on evaporation Organic biodegradable Safe on predatory complexes No toxic elements No interference with plant respiration Authentication Increases crop value