Executive Summary
Increasing globalization, new products and services and innovative marketing have resulted in a very marketsavvy consumer. The production-based success philosophy of marketers has now been replaced by a customeroriented philosophy. The Indian lubes market was regulated till 1993, with the market dominated by the 4 public sector undertakings including IOCL, BPCL, HPCL and IBP. It encouraged foreign majors to set shop in India.
The number of players increased overnight to over 25 with entry of MNCs like Shell, Exxon, Mobil, Caltex, Elf, etc. Competition has become intense. This sector will witness severe competition, which may lead to a price war. With the entry of MNCs with deep pockets, better technology and brand power, the exit of marginal Indian players is imminent. After this will emerge a period of consolidation marked with mergers and acquisitions, which will change the face of the lubes industry. Our analysis provides BPCL Lubes SBU to make future strategies as per the projected data for the total market capacity.
The data we have acquired ; calculated would enable BPCL Lubes SBU to define its marketing, advertising, promotional offers to be provided ; how to make the customer think better of MAK lubricant. This project is a step towards understanding the consumer and mechanic needs that can help MAK4T plus to establish itself as a leading player in the 4-stroke lubricant segment. In this we briefly talk about the industry and its key success, BPCL overview, MAK Base Oils and MAK4T plus. STP analysis for MAK4T plus was carried out and a brief analysis of the competitors was carried out.
Then we move to the consumer and mechanic response analysis. These responses were collected with the help of a questionnaire and the analysis was carried out in MS-Excel and SPSS. Finally, recommendations and strategies were formed.
Introduction
Bharat Petroleum Corporation Limited (BPCL) is a Global fortune 500 company. On 24 January 1976, the Burmah Shell Group of Companies was taken over by the Government of India to form Bharat Refineries Limited. On 1 August 1977, it was renamed Bharat Petroleum Corporation Limited.
It was also the first refinery to process newly found indigenous crude Bombay High, in the country. Today, BPCL with a sales turnover of over Rs. 77,000 crores ($27. 873 Billion) is the second largest oil marketing company in the country with a market share of over 22% and 3 refineries under its fold. BPCL has Refineries at Mumbai and Kochi (Kochi Refineries) with a capacity of 12 Million Metric Tonnes (MMT) and 7. 5 MMTPA respectively for refining crude oil. BPCL’s subsidiary at Numaligarh (Assam) has a capacity of 3 MMTPA. Mahendra Singh Dhoni signed on as the Brand Ambassador for BPCL in 2006.
Narain Karthikeyan is another brand ambassador for BPCL. It is headquartered at Ballard Estate, Mumbai. To bring sharp customer focus and address customer requirements, BPCL has been structured in six Strategic Business Units (SBU? s) i. e. Retail, Lubricants, Aviation, Industrial and Commercial, LPG and Refinery. It has more than 7300 Retail outlets, over 2000 LPG Distributors, a large number of Kerosene Dealers and over 150 Lubricants Distributors across the length and breadth of the country. It has over 400 grades of lubricants manufactured through four manufacturing units.
Lubricants SBU
BPCL manufactures and markets world class lubricants under the brand name of MAK. It has over 30 years of experience in the field of manufacturing and marketing lubricants. BPCL markets over 400 grades of Automotive and Industrial Lubricants, Greases and Specialties. It has recently commissioned state-of-the-art facilities for manufacturing 180 TMT of Group II Base Oil with minimum Viscosity Index of 105 at its Mumbai refinery.
This has provided BPCL an opportunity to enhance its offerings to its customers. BPCL has its blending and filling plants at Mumbai (Wadi Lube), Kolkata (Budge Budge Plant), Mumbai (Tondiarpet) and Delhi, with a total installed capacity of 135000 MT. They meet the highest quality standards and are in fact accredited and certified by NABL. It is the first company in Asia to implement SAP R/3 enterprise vision – Enterprise Resource Planning (ERP) software with over 3000 users. This provides state-of-the-art back bone support to the business processes of the organization.
BPCL is the first oil company in India to implement Supply chain Management – Advanced Planning and Optimization (SCM-APO) software in its Lubricants SBU. Its marketing efforts are backed by a robust network of 80 depot locations and a number of dealers and distributors (apart from the 7300 Retail Outlets) all over the country. BPCL has R&D centres at Mumbai and Greater Noida, which are well equipped with state – of – the – art lubes and fuels development and testing facilities. Both the R&D centres are recognized by the Dept. of Scientific & Industrial Research, Ministry of Science and Technology.
This enables BPCL to develop products tailor – made to suit the requirements of its esteemed customers. BPCL has well trained technical staff deployed all over the country at its various Regional and Territory offices. The technical staff help their customers with prompt value-added services like proper selection and application of products, conditioning, monitoring, troubleshooting, lube rationalizing studies, complaint redressal, etc. Recently it has successfully demonstrated its ability to carry out Total Lubrication Management at one of its valued customer’s works.
To assist its technical staff in providing value-added services to their customers, BPCL has 22 Quality Control Laboratories spread all over the country besides equal number of mobile laboratories. Despite operating in a highly competitive environment, MAK lubricants have had an impressive growth over the years. Today MAK has its presence in major automotive markets, reseller segment, rural sector and industrial segment. It is patronized by renowned manufacturing units in the country in such major sectors like automotive, automotive ancillaries, power, steel, fertilizers ; chemicals, state transport etc.
It is one of the major suppliers to Railways, Defence and Coast Guards. MAK Lubricants have today established very strong brand equity, especially in the field of automotive, earth moving and engineering industries. It has major genuine oil tie–ups with M/s. Hero Honda, M/s. Tata Motors, M/s. TVS Limited, M/s. L;T Komatsu, M/s. Elgi Compressors, M/s. Kirloskar Oil Engines Ltd and M/s. ZF Steering India to name a few. BPCL has also embarked on another thrust area of enrolling garages across the country in the network of “MAK Garages”, there-by providing standardized service across the network.
This initiative not only provides opportunity for the garages to enhance their business opportunity but also provides an assurance to the end-customers that their vehicles are getting the right kind of lubricant. BPCL exports lubricants to various countries like Nepal, Bangladesh, Afghanistan, UAE, Nigeria, Sudan, Tanzania, Mozambique, Bahrain, Sri lanka and others. BPCL also has tie ups with M/s. ITC Ltd. for marketing MAK Lubricants and Bharat gas through their vast and well-established rural network of e-Choupals.
The following table sums up the entire discussion so far and as the famous quote goes the numbers speak for themselves. During the year, products for specific applications like MAK LLPO, a white oil application and another range of industrial grades for steel mills requirements were launched. Export sale continues to show a healthy growth of 17%.
The Indian Lubricants market would continue to be an attractive market for all leading lubes makers. The growth in the automotive and industrial segments is driving the market. Technological improvements in the OEM space would encourage the lubes manufacturers to develop new improved alternate formulations, which would deliver better performance and enhance the life of the lubricants.
While the intensity of competition is expected to continue, BPCL remains confident of being successful by meeting the evolving needs of the consumer. Lubricants A lubricant (sometimes referred to as “lube”) is a substance (often a liquid) introduced between two moving surfaces to reduce the friction between them, improving efficiency and reducing wear. They may also have the function of dissolving or transporting foreign particles and of distributing heat. One of the single largest applications for lubricants, in the form of motor oil, is to protect the internal combustion engines in motor vehicles and powered equipment.
Typically lubricants contain 90% base oil (most often petroleum fractions, called mineral oils) and less than 10% additives. Vegetable oils or synthetic liquids such as hydrogenated polyolefin, esters, silicone, fluorocarbons and many others are sometimes used as base oils. Additives deliver reduced friction and wear, increased viscosity, improved viscosity index, resistance to corrosion and oxidation, aging or contamination, etc. Non-liquid lubricants include grease, powders (dry graphite, PTFE, Molybdenum disulfide, tungsten disulfide,etc. ), Teflon tape used in plumbing, air cushion and others.
Dry lubricants such as graphite, molybdenum disulfide and tungsten disulfide also offer lubrication at temperatures (up to 350 °C) higher than liquid and oil-based lubricants are able to operate. In addition to industrial applications, lubricants are used for many other purposes. Other uses include biomedical applications (e. g. lubricants for artificial joints). Marketing The global lubricant market is generally competitive with numerous manufacturers and marketers. Overall the western market may be considered mature with a flat to declining overall volumes while there is a strong growth in the emerging economies.
The lubricant marketers generally pursue one or more of the following strategies when pursuing business. Specification: The lubricant is said to meet a certain specification. In the consumer market, this is often supported by a logo, symbol or words that inform the consumer that the lubricant marketer has obtained independent verification of conformance to the specification. Examples of these include the API’s donut logo or the NSF tick mark. The most widely perceived is SAE viscosity specification, like SAE 10W-40. Lubricity specifications are institute and manufacturer-based.
In the U. S. institute: API S for petrol engines, API C for diesel engines. For 2007, the current specs are API SM and API CJ. Higher second letter marks better oil properties, like lower engine wear supported by tests. In EU, the ACEA specifications are used. There are classes A, B, C, and E with number following the letter. Japan introduced the JASO specification for motorbike engines. In the industrial market place, the specification may take the form of a legal contract to supply a conforming fluid or purchasers may choose to buy on the basis of a manufacturer? self-published specification.
Original equipment manufacturer (OEM) approval
Specifications often denote a minimum acceptable performance levels. Thus many equipment manufacturers add their own requirements or tighten the tolerance on a general specification to meet their particular needs (or doing a different set of tests or using different/own tested engine). This gives the lubricant marketer an avenue to differentiate their product by designing it to meet an OEM specification. This is a powerful marketing tool in the lubricant marketplace.
Text on the back of the motor oil label usually has a list of conformity to some OEM specifications, such as MB, MAN, Volvo, Cummins, VW, BMW or others. Performance: The lubricant marketer claims benefits for the customer based on the superior performance of the lubricant. Such marketing is supported by glamorous advertising, sponsorships of typically sporting events and endorsements. Unfortunately broad performance claims are common in the consumer marketplace, which are difficult or impossible for a typical consumer to verify.
In the B2B market place the marketer is normally expected to show data that supports the claims, hence reducing the use of broad claims. Increasing performance, reducing wear and fuel consumption is also aim of the later API, ACEA and car manufacturer oil specifications, so lubricant marketers can back their claims by doing extensive (and expensive) testing. Longevity: The marketer claims that their lubricant maintains its performance over a longer period of time. For example in the consumer market, a typical motor oil change interval is around the 3000-6000 miles (7500-15000 km).
The lubricant marketer may offer a lubricant that lasts for 12000 (30000km) miles or more to convince a user to pay a premium. Typically, the consumer would need to check or balance the longer life and any warranties offered by the lubricant manufacturer with the possible loss of equipment manufacturer warranties by not following its schedule. Many car and engine manufacturers support extended drain intervals, but request extended drain interval certified oil used in that case; and sometimes a special oil filter.
In older Mercedes-Benz engines and in truck engines one can use engine oil MB 228. for basic drain interval. When using lower grade fuel or worn engine, the oil change interval has to shorten accordingly. In the industrial market place, the longevity is generally measured in time units and the lubricant marketer can suffer large financial penalties, if their claims are not substantiated. Operational tolerance: The lubricant is claimed to cope with specific operational environment needs. Some common environments include dry, wet, cold, hot, fire risk, high load, high or low speed, chemical compatibility, atmospheric compatibility, pressure or vacuum and various combinations.
The usual thermal characteristics are outlined with SAE viscosity given for 100°C, like SAE 30, SAE 40. For low temperature viscosity the SAE xxW mark is used. Both markings can be combined together to form a SAE 0W-60 for example. Viscosity index (VI) marks viscosity change with temperature, with higher VI numbers being more temperature stable.
The marketer offers a lubricant at a lower cost than rivals either in the same grade or a similar one that will fill the purpose for lesser price. (Stationary installations with short drain intervals. Alternative may be offering a more expensive lubricant and promise return in lower wear, specific fuel consumption or longer drain intervals. Environment friendly: The lubricant is said to be environmentally friendly. Typically this is supported by qualifying statements or conformance to generally accepted approvals. Several organizations, typically government sponsored, exist globally to qualify and approve such lubricants by evaluating their potential for environmental harm. Typically, the lubricant manufacturer is allowed to indicate such approval by showing some special mark.
Examples include the German
Blue Angel”, European “Daisy” Eco label, Global Eco-Label “GEN mark”, Nordic, “White Swan”, Japanese “Earth friendly mark”; USA “Green Seal”, Canadian “Environmental Choice”, Chinese “Huan”, Singapore “Green Label” and the French “NF Environment mark”. Composition: The marketer claims novel composition of the lubricant which improves some tangible performance over its rivals. Typically the technology is protected via formal patents or other intellectual property protection mechanism to prevent rivals from copying.
Lot of claims in this area are simple marketing buzzwords, since most of them are related to a manufacturer-specific process naming (which achieves similar results than other ones) but the competition is prohibited from using a trademark. Quality: The marketer claims broad superior quality of its lubricant with no factual evidence. The quality is “proven” by references to famous brand, sporting figure, racing team, some professional endorsement or some similar subjective claim. All motor oil labels wear mark similar to “of outstanding quality” or “quality additives,” the actual comparative evidence is always lacking.
BPCL in Lubricants Business Overview
Bharat Petroleum offers a full range of Automotive Engine Oils, Gear Oils, Transmission oils, Specialty Oils and Greases. The correct usage of these Lubricants of right quality ensures prolonged and trouble free vehicle operation, providing maximum benefits to the users of present day modern vehicles. In line with the economic liberalization in India, Lubricants was the first downstream Petroleum product to be totally deregulated with effect from 1991. Since then a large number of players – National, MNCs as well as Global Players – have entered the Indian Lubricants market.
Despite operating in a totally competitive environment, BPCL’s Lubricants SBU has been registering a growth in lubricant sales continuously over the past couple of years. In 2010-11, an overall growth of 10% has been registered, with a healthy turnover of Rs. 1680 crores (approx USD 350 million). In 1998, BPCL re-launched its Lubricants in new attractive packs, mainly in Automotive category with three major brands depicting each segment- Mak for Diesel Engine oils, Automol for Petrol Engine oils and Glide for Two/Three wheelers(mainly 2T then).
In the year 2003, BPCL decided to go for Umbrella Brand-MAK Lubricants, in subsequent years, branded all its industrial grades with MAK. The 4P’s for the MAK Lubricants will be discussed as:
- Product
- Price
- Place
- Promotion
In the recent past, the Indian lubricant market has witnessed a phase of consolidation. Multinationals with better technology, brand name and finances have the power to launch themselves on their own in the market. However, with increasing number of competitors it is not possible for everyone to carve a niche in the market. This sector has witnessed considerable amount of mergers and acquisitions. The Indian lubes market is a combative market place and lubricant companies find themselves fighting a tough battle for survival. In the OE sector also lubricant manufacturing, companies are entering into collaborations with vehicle
Maruti Udyog, Hyundai Motors, Hindustan Motors, TAFE, Toyota, and Skoda have entered into collaboration with IOC and Castrol for some of their models. Initiatives undertaken by the SBU are setting up of Hero Honda City Works, Tata Authorized Service Station (TASS) and installation of Quick Oil Change Machines at retail outlets. Bazaar Channel With a network of 190 PLDs (Primary Lube Distributorship), 600 MAK Garages and MAK Mobile Vans established to improve reach and penetration in rural and unrepresented areas of MAK Brand, the SBU could reach to the last mile as far as the customers are concerned. BPCL continues to improve its brand visibility across the network and thereby increasing its market share across the segments.
Industrial Channel Large number of prestigious customers has been added during the year to its already existing prestigious customer list. BPCL is also suppliers of initial engine oil fill to TATA Motors, TVS, and Hero Moto Corporation etc. BPCL also holds respectable share of Railway and Defence business. Infrastructure The Lube Plants at Wadilube (Mumbai), Budge Budge (Calcutta), Loni (Delhi) and Tondiarpet (Chennai) have organized themselves as close-knit teams to maximize levels of production and dispatch. The Plant at Wadilube is an ISO 9002 certified plant.As part of the ongoing improvements in packaging, the new series of packages developed entirely in-house have been introduced.
Other initiatives
To support the business initiatives, a major thrust has been given for improving BPCL’s product offering and increasing its market presence. The new R;D Centre at Sewree, Mumbai, has developed a number of new products in the automotive and industrial categories. The entire distribution system has been revamped with the formation of Supply Chain Management department to ensure that products are more conveniently available and distinctively visible in the market price.
Exclusive branded Lube Shoppe’s have been opened all over the country to improve its reach, as well as many innovative & unconventional methods are being used to create brand awareness especially in the diesel oils segments. Another major initiative has been to reach the products to the rural population through the tie-up with ITC – e-choupal network which has spread the MAK brand across the country in rural areas also. Currently this network is available in Uttar Pradesh, Maharashtra, Rajasthan, and Madhya Pradesh and is likely to extend to other states also shortly.
MAK also embarked on another thrust area of enrolling garages across the country in the network of “MAK Garages” there by providing standardized service across the network. This initiative not only provides opportunity for the garages to enhance their business opportunity but also provides an assurance to the end customers that their vehicles are getting the right kind of lubricants. Brand Ambassador To promote MAK brand among the youth and improve the brand visibility, MAK signed up M. S. Dhoni as Brand ambassador in the year 2006.
The rise of MAK brand in the minds of the consumers as well as market share coincided with the rise of Dhoni also, who today is the Youth icon of the year and also the Captain of the Indian team for all versions of the game – like MAK being the “Champion of All Engines”. BPCL is confident that it will continue to make substantial and sustained efforts with appropriate investments, synergies business between channels, improve quality and quantity standards, invest in R&D for new product development and aggressively build the brands to result in maximising the value addition for both the business and its customers.
MAK Services Lubes Shop To facilitate customers an easy accessibility for procurement of their Lubricants requirement and meeting them at their point of need compelled Bharat Petroleum to open Lube shops. These shops are exclusive lubricants reselling points, which cater to customer satisfaction confirming with the ‘Quality’ and other standards of Bharat Petroleum. With the deregulation and entry of multinationals in the lubricants market, BPCL have experienced a shift of trade to the ‘bazaar’.
Recognizing the potential and the fact that competitors have utilized this channel segment to their advantage by allowing huge discounts Bharat Petroleum is also determined to address this customer segment and passing the discount to the end customer instead of the channel. These branded lubes shops are available in all major cities. MAK Garage MAK lubricants has launched this initiative in the year 2006 to promote MAK lubricants among the mechanic segment by enrolling them in to the umbrella network of MAK Garage.Currently BPCL have approximately 800 MAK garages across the country – exclusively using MAK Lubricants.
Hero Honda Service Stations
A Joint venture initiative between Hero Honda – the worlds largest bike manufacturer and Bharat Petroleum. This initiative is to utilise the BPCL network across the country to provide value added services to our customers through this City Work network at our retail outlets. Currently we have around 170 HH city works operating in the country. TASS TATA Authorized Service Station is another initiative for strengthening our strong relationship with Auto Major TATA.
We have a tie-up for marketing cobranded Lubricants/greases/specialty products – MAK TATA products. TASS is an extension of this tie-up – providing TATA vehicle service network across the country through out Dealer network. This service network is of two types – TASS for heavy vehicles and “SUVIDHA” for TATA Ace vehicles. VCC Bharat Petroleum launched this new initiative “VEHICLE CARE CENTRE” at our retail outlets mainly to provide state of the art servicing facility to our esteemed customers at an affordable rates. The network is growing and is gaining popularity across the country.
