Marketing Strategy of Castrol

Industry Overview for Lubricants

Broadly divided into 3 major sectors : 1. Automotive 2. Industrial 3. Marine & Energy Applications

Industrial production is expected to grow at 10 % during 2012-13. Consumption is also expected to grow in various sectors including automobiles, building and construction equipment and mining sectors.

Company Profile
Castrol India is an automotive and industrial lubricant manufacturing company.

2nd largest manufacturer of automotive and industrial lubricants in the Indian lubricant market.
Owns around 22% market share in the overall Indian lubricant market. Its part of Castrol Limited UK (part of BP Group). It has 5 manufacturing plants that are networked with 270 distributors, serving over 70,000 retail outlets.

Competitive Landscape

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3.5

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IOCL Castrol HPCL BPCL Gulf Oil Tide Water Oil ELF Shell Others

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Technology Used
The latest in lubricant technology SAE 5W-30 ACEA E6/E7 MB-APPROVAL 228.51 MAN M3477 APPROVED RVI RLD-2 APPROVED VOLVO VDS-3 APPROVED Scientists and Engineers spent more than 3,000 hours putting the oil through rigorous tests and assessing 69 different parameters just for the approvals on the product. But then Castrol ran even more tests to prove that Castrol Elixion Low SAPS achieved extreme performance across 7 critical engine factors

Factor 1: Fuel Economy Factor 2: Wear Protection Factor 3: Durability Factor 4: Emissions Reduction Factor 5: Oil Consumption Factor 6: Low Temperature Flow Factor 7: Performance

Industry Rivalry
Domestically there is competition from : IOCLs Servo (the market leader), BPCLs MAK, and HPCLs HP Lube. Among international players there is Royal Dutch Shell, the global market leader. Therefore, there is no shortage of contenders wanting to usurp CILs position.

However, till date nobody has been able to match CIL on strategy. In terms of brand recall or products so far no one has come close to CIL. In distribution only Servo comes close.
In spite of the cut-throat competition that prevails in the lubricant sector, no rival has resorted to undercutting so far. Even though the public sector oil marketing companies have the distribution muscle to undercut CIL, their existing losses from selling petrol and diesel have kept them from posing a serious threat to it. Moreover, as long as customers are prepared to pay a premium for quality, CIL will be able to retain its moat.

Financials
3,500 3,000 2,500 2,000 1,500 1,000 500 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net Sales 1,175 1,210 1,348 1,464 1,803 1,887 2,273 2,406

Net Sales (In Crores)

CAGR - 13%
3,093 2,805

Between CY07-11, sales grew from Rs 1,887 crore to Rs 3,093 at a (CAGR) of 13.16% and for last 10 years its 11.35%

600
500

Net Profit (In Crores)

CAGR - 22%
490

481

Profits grew at a much faster rate of 22% over the same period, which demonstrates the companys ability to manage its expenditures.

400 300 218 200 100 0 2002 2003 2004 2005 2006 2007 2008 153 137 127 147 154 262

381

2009

2010

2011

Reported Net Profit

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SWOT Analysis

Strength Global Leader Premium quality Solid Supplier relationship Strong Financial conditions Leading Edge Technology

Weakness High level of employee attrition Continued increase in drain intervals in the commercial vehicle segment. Hardening interest rates.

Opportunity
Government support for automotive, building and construction sectors. Growing demand for automobiles Changing lifestyle and Better workforce base in labour market Technological development Industrial Sector is growing at an increasing rate of 8 % approx High Demand for Lubricants

Threats
Changing market Environments . Downturn in automotive industry. Intense industrial competition. Strong buyer power Increase in crude oil prices. Price Undercutting

Marketing Mix
Product & Price:-

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Place

Six plants located at Patalganga, Paharpur, Silvassa, Ballabgarh, Tondiarpet and Hosakote Pan-Indian distribution infrastructure comprising of 270 distributors and 70,000 retail outlets. Also launched Castrol BikeZone motorcycle service stations in Chennai and Bangalore in CY-04 Mr. Ravi Kirpalani - COO, said, Our distribution now reaches 5000 7000 town and villages. Targeted at both tractors and trucks, to garner additional sales from the rural markets.

Promotion

Castrols branding has an enduring appeal because the company chooses all routes to market to take the message to the consumer. Take advertising, for instance. Be it sponsorship of Honda Super bikes or appointing actor John Abraham as a brand ambassador, the company tries to create loyalty among consumers who are concerned about performance and delivery.

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Segmentation
Segmentation by Product Category Motor cars Motor cycles Trucks Leisure boats Aircraft Equipments and Machinery Segmentation by Type of User A Different oil is needed for a rural vehicle, city car and racing car

Targeting

Targeting rural market by tie up with ITC-E chaoupal, Godrej Adhar, Reliance India

Targeting urban market by innovations and continuous product development

Differentiation

UMA Technology forms a protective layer on the engine and thus protects it from corrosion of engine due to over heating. Customize lubrication solution involving products and services that results in documented cost reductions and productivity improvements

Positioning

Positioning is articulated as Its more than just Oil . Its Liquid Engineering High Quality Performance Liquid Engineering is the special nature of Castrol Products which helps them work proactively within the vehicle to increase the protection and enhance performance. It provides the heat-proof formula in Castrol CRB plus,ETP formula for CRB turbo, Trizone technology for the motorcycle range, molecular attraction formula in castrol magnatec and liquid asset program for workshops and B2B customers. The new positioning is backed by new identity which makes the Castrol brand more recognizable to the consumer.

Strategic Business Fit

Strategic fit express the degree to which an organization is matching its resources and capabilities with the opportunities in the external environment. Financial Resource Utilization Castrol India has spent huge amounts in hiring Brand ambassadors belonging sports such as Cricket and Football and targeted the premium segment. A significant portion of its expenses is on advertisements (6 per cent) and it undertakes several marketing initiatives (sponsorship agreement with International Cricket Council for example) to improve its brand visibility and strengthen its relationships with dealers and customers. Technical Resource Utilization Technological innovations, supported by its parent company Castrol UK (part of BP group) and improvement efficiency has also helped it maintain and even improve margins. In fact, over FY06-FY10, its operating margin has almost doubled, from 14.49 per cent to 27.59 per cent.

Sustainable Competitive Advantage

Castrol India has clearly demonstrated its commitment to Indian consumers for over 80 years, by offering its international range of high performance products backed by the highest level of customer service. The company has managed to gain sustainable competitive advantage through:

Distinctiveness driven by continuous innovation in all areas of business Winning culture and a desire to excel Strong meaningful relationships with all stakeholders

Existing Marketing Strategy

Tie up with Essar oil , Reliance & Automobile companies like Mahindra and Mahindra, Tata Motors, BMW, Volks Wagon Brand Tie Up with Formula 1, Cricket World Cup, FIFA Retail outlets/stalls in villages it reached 1.5 lakh farmers in 65 districts through 1500 shows in 90 days Mechanic and retailer meets new Castrol formula Gel- Grease was introduced by a Gel-Man Heavy promotional expenditure using celebs like Rahul Dravid , Bret Lee, John Abraham

Loyalty programs users receive credits for participation which can be redeemed for Castrol-branded merchandise
CIL has also taken the entire Liquid Engineering concept to the consumers through road shows, above and below the line activities, dealer meets.

New Marketing Strategy

Performance Biolubes Technology Use Multi-channel capabilities for both purchase & distribution such as E-commerce, Tie-ups with more gas stations, auto-dealers such as Vitesse , True Value Develop & integrate economic low cost products. Innovation in packaging such as measuring scales on the oil boxes. Capture B2B markets by offering bulk discounts and customized products. Eg. Godrej, L&T and Shipping Companies.

Government initiatives
In 1993, the Govt liberalized the lubricants sector and announced a number of regulatory changes. these included: -Entry of Foreign Companies into the Indian Market. -De -canalization of imports of base oil. -Decontrol of pricing of base oil. -Reduction of Custom duty on base oil (progressively reduced from a peak of 85% to the current level of 25%) In the 2010 Finance Bill, the government announced that it would significantly increase spending on various infrastructure projects. This move will stimulate demand growth in the building and construction sector and thereby have a positive impact on lubricant demand. Government has increased focus on emission control measures and any future growth in technology being subject to the requirements of lower carbon emission. Its a challenge to company's like Castrol to provide global technology and products and services which are environmentally friendly and proven in markets across the world. The government has been taking many progressive measures to create a conducive policy and regulatory framework for attracting investments. FDI up to 100 per cent under the automatic route is permitted in exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products . India is building its strategic crude oil storage in an effort to insulate itself from supply disruptions. The country is building underground storages at Visakhapatnam in Andhra Pradesh