Marketing Challenges in Indian Lubricating Oil Industry

The importance of oil in the engine is just like blood in the body. Blood flows through all the eins to
ital organs to keep them healthy and alie! similar is the function of lubricating oil in the engine.
"cross the world! lubricant oil is primarily used for cooling automobile engine! marine engine and for
industrial purposes. #lobally! more than $%& of the total lubricant olume is being used for
automobile! around '%& is for industrial purpose and rest is for marine industry. (hell! )**onMobil!
B+ , Castrol! (inopec! Cheron - Te*aco! Total! Lukoil! .uchs! /ippon Oil and 0aloline are the major
global players in lubricant manufacturing industry.
In the coming future global demand of lubricant will remain stagnated or grow at a ery low rate due
to following reasons1
Low emission norms for industries and automobile sector
Advancement in engine oil technology
Use of high performance oil
Saturation in automobile sector for developed countries
Currently! 2(" is the largest consumer of lubricant oil across the world. China and India comes at
second and third position respectiely. But! in the ne*t 3,4 years china will oertake 2(" in terms
lubricant consumption. 5eason behind this is that 2( automobile sector has reached at its saturation
leel! while the deeloping countries like India and China! it is still growing.
The consumption pattern In Indian lubricant oil industry is similar to world lube industry. Majority of
lubricant is being consumed by automobile sector 6$$&7! rest is being used for Industrial purpose and
marine industry. Major players of the Indian lubricant oil industry are IOCL , (ero! B+CL,M"8! 9+CL
and Castrol.
These four players appro*imately hold 4%& of the market share in Indian lubricant industry. IOCL is
the market leader in the oerall lubricants industry! with its market share at '%&. 9oweer! Castrol
dominates the automotie lubricant oil market! with :;& share of the ba<<ar segment! followed by
IOCL! which has :'& share of the ba<<ar segment according to industry estimates. +riate players
like Castrol! (hell! #ulf Oil! etc. account for 3$& of the ba<<ar segment while the oil +(2s account for
=$&.
In :;;> lubricant industry in India got liberali<ed! which attracted the priate players to enter into the
Indian lube market. Before liberali<ation auto lube oil in India was sold mainly through petrol filling
stations. ?ecline in margin due to rising base oil 6main raw material for lubricating oil production7
prices! increasing competition due to large number of priate players! ery low consumer awareness
about the brands and @uality and too much price sensitiity has led Indian lube oil industry to a major
marketing challenge for the companies inoled with it.
.or understanding the marketing issues pertaining to the lubricating oil market in India let us first
understand the oerall common flow followed by almost all companies to sell their product into the
market.
Blending plant is the place where base oil is processedA addities are mi*ed and conerted into final
product i.e. lubricating oil. These final products are moe towards carrying and forwarding agents i.e.
stock points or depots! as the name suggests these CB. agents are third party and they proide the
infrastructure support for storing of goods and in turn earn commission. On an aerage >3,'$ stock
points or depots are there for any lube oil company in India. That is on an aerage :%,:= distributors
order from a single CB. agent or depot! thus they are geographically positioned accordingly. +rimary
sale is the CB.s sale to ?istributors! (econdary sale is the ?istributors sale to ?ealers and Tertiary
sale is ?ealers sale to consumers. Thus in this flow! three of the important stakeholders for lube oil
sales are distributors! mechanics and the ?(5s 6?istributors (ales 5epresentatie7 employed by
distributors. Chy each of them is important is e*plained one by one.
.irst let us discuss about the distributors! an important channel partner for sales of any product. They
can greatly affect the sales in a market that is drien on credit dealings. The greater the credit period
he can offer the more the trust the mechanicsDdealers hae on him. 5obustness of distributor plays a
major role. In case of lubricant oils following are some of the important roles of a distributor.
E Market Information
E Buying and "ssortment Building
E (elling and promotion
E Customer 5elations
E 5isk Bearing
E Branding
E .inancing !Carehousing B Transporting
E Management of ?(5s
"nother major stakeholder that affects sale in lube oil is mechanic. )nd users are mostly less or not
aware about the @uality! brand and other technical factors associated with the product. If it is a
commodity like toothpaste or a shampoo than consumer can differentiate but for the product that is
meant for their ehicle they usually follow the suggestions of their mechanic. Mechanic is also a
person who is less aware about technicalities and works with different myths spread around in market
and spreads that to end customers. .or a mechanic earning some e*tra money on filling a pack of
engine oil of a particular brand which gies him good return will be lucratie business and thus comes
the role of sales and marketing at the companies end. Company which is able to come up with good
promotional offer for their dealers and mechanics wins the battle. It is sometimes distributor also who
come up with offers in order to increase their sales olume and get good return. But! company can
bear the cost of promotional cost all the time so comes the role of adertising and branding.
"mbassador like M.( ?honi will create more connect with mechanics and consumers than any other as
cricket is being loed and watched by mechanics as well as end consumers. "lso the FdesiG image of
?honi grabs attention of mechanics.
?(5 that is ?istributors (ales 5epresentatie! these are the people who become the face of the
company in terms of sales to dealers and mechanics. ?istributor must be smart enough to appoint
them wisely and manage them properly. They must be gien proper route plans and soft skill training
as sweetness and calmness in their nature can earn more sales olume for the company. They must
strike the balance between distributors and companies reputation in market! though they are paid by
distributor but they are liable towards the brand image of company. (ome of the major problems
faced oerall in the market are ?eliery time from distributor to dealer! tracking of the scheme issued
to dealers or mechanics! proper use of branding materials. (o these are the things to be taken care by
?(5.
To conclude! the major parameters are margin! schemes! promotional actiities! and branding of
product. In India a product canFt be placed in the market on the basis of brand only! but it should
match the spending power of customers. "n industry where switching cost is negligible! person
relationship plays an important role to capture ma*imum market share. 5egular schemes hae
become part of the lube market. /ot only the product! but also the superior serice differentiates one
company from another. "n effectie distribution channel as well as hard working sales team dries a
company on front foot.
The article has been authored by Samarth Mewada School of Petroleum Management,PDPU,
Gandhinagar.

References
8line. 6=%:=7. The ?ynamics of the #lobal Lubricants Industry! =%:= to =%=%. International
Symopsium on Lubricants, Additives and fluides. (ao +aolo.
Bothra! (. 6=%:=7. Castrol India. Motilal Oswal.