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April 25, 2017

Volume 7 Issue 8

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Pundit Advises Segmented Strategy in India

Mumbai, India – While India’s economy continues growing faster than any other, and its superlative tractor and two-wheeler parcs expand, opportunities only exist for automotive lubricants suppliers that play their cards right, according to a consultant who relayed some tips at an industry event here this month. 

“Many other countries’ lubricants markets are flat at best, and in some cases they’re declining,” Agashe, president of United States-based Geeta Agashe & Associates, told attendees of the ICIS Indian Base Oils & Lubricants Conference on April 6. “India is the largest manufacturer of two-wheelers, three-wheelers and tractors worldwide and the fourth- and sixth-largest producer of commercial vehicles and passenger cars, respectively. Meanwhile, purchase power is growing and vehicle ownership rates are increasing. In terms of today’s automotive lubricants market, India certainly is the land of milk and honey.” 

Although elbow room seems minimal in a market crowded with major global brands, mid-tier international firms, four strong national oil companies and very active independent nationals, there’s still room for more lube suppliers – but only if they are savvy about India’s particulars, she explained. 

To succeed in India, marketers need a specific business model, a long-term development and investment plan, and local management. Don’t assume a strategy that works in China will work in India; don’t plan to jump into the market and make a quick buck; and don’t think that you can succeed in India via headquarters in North America or Singapore, she emphasized. 

India is huge, she continued, and the first mistake a supplier can make is to treat it as one homogenous country. A segmentation, targeting and positioning strategy should always be the first step in India. “Successful marketers have different strategies for different states and regions.” 

“Western India is the country’s most profitable region for lubes, followed by southern, northern, and finally eastern India,” she suggested. Most marketers mistakenly put too much focus on urban areas, where growth is actually stagnating. Instead, opportunities lay more in rural areas, where 65 to 75 percent of Indians live. State-owned companies do particularly well in rural areas, where other players could improve. 

“The most successful lube suppliers of late have been ones that sell motorcycle oils – the most profitable segment – or high-end passenger car oils and high-end heavy-duty engine oils, which follow in terms of profitability,” Agashe added. Most that sell non-engine oil lubricants such as gear oils, greases and automatic transmission fluids have a tough time competing with the national oil companies, she elaborated. 

Profitable suppliers are selling increasing volumes of premium products such as synthetics and semi-synthetics; focusing on smaller packages rather than bulk volumes; and offering more branded products than non-branded or genuine oils. Tie-ups with original equipment manufacturers producing in India are increasingly important as well. 

Instead of direct sales, strong suppliers focus on India’s bazaar trade, including sales to independent workshops, spare part shops and dealerships. “Finding and keeping motivated distributors with good micro-distribution models and maintaining a tight credit control policy is key.” 

Finally, Agashe made the case that while technology can be a big differentiator in any lubricants market, it’s not necessarily the most important one in India. “Because the highest-performance base oils and additives packages and additive components are readily available, technology is not as important as a differentiator. Companies that focus on differentiating themselves through marketing strategies are more successful.” 

To be a competitor, suppliers must treat motor oils as a fast-moving consumer good. As a benchmark in India, she gleaned, successful companies are directing 5 to 6 percent of revenue to advertising and promotion. “Successful companies understand that for a lubricant brand to be successful in India, there needs to be both a push and pull strategy,” she continued. “They spend significant dollars for both above-the-line and below-the-line marketing.” 

“The most effective lubricant marketers are associating their brands with Bollywood, along with sporting events such as cricket, motocross, and car rallies – using iconic figures like Sachin Paaji, M.S. Dhoni, Virat Kohli, Suresh Raina, Rahul Dravid, Shahid Kapoor and othes as brand ambassadors.” 

Outdoor campaigns, hoardings and shop banners are still key in India, a market that is still catching up on digital media. “E-commerce could be a game-changer, as social media and mobile phone usage becomes more important and internet mobile phones become more accessible.” But in the short-term, markets are still finding success in television and radio advertisements, along with product placement in movies and shows.”

Photo: Joe Beeton / Lube Report Asia

Outdoor campaigns, hoardings and shop banners remain key for advertising motor oils in India, a market that is still catching up on digital media.