1. Castrol India – Sale &
Distribution
Amit Kumar_G10006
XLRI , GMP 10-11
Disclaimer:
The work is authentic and has not been copied from anywhere else or has not been submitted in part or
full for any other degree or award.
2. Company Background
Presence in India from last 100 years, Castrol India, also known as Castrol India Limited, is
an automotive and industrial lubricant manufacturing company which has been operating in
India since 1910. Castrol India is a public limited company and its parent company, Castrol
Limited (UK) holds 70.92% equity of Castrol India Limited. Castrol India manufactures and
markets both, automotive and industrial lubricants. Castrol India is the 2nd largest
manufacturer of automotive and industrial lubricants in the Indian lubricant market and owns
around 22% market share in the overall Indian lubricant market. Castrol India is a part of
the BP Group and operates in more than 56 countries.
Product Mix
Castrol markets its automotive lubricants under two brands - Castrol and BP. Castrol India
enjoys market leadership in passenger car engine oils, premium 2-stroke and 4-stroke oils, and
multi-grade diesel engine oils. Castrol India Ltd. has 5 manufacturing plants that are
meticulously networked with 270 distributors, serving over 70,000 retail outlets. Further, it is
also equipped with a state-of-the-art plant in Silvasa. As the leading lubricant-manufacturing
3. company, Castrol is the proud owner of the largest manufacturing facilities and marketing
network amongst the lubricant companies operating in India.
Commercial vehicle Engine Oils
The product lines of Castrol India include the following - Industrial - The full range of Castrol
metalworking fluids, cleaners, corrosion preventives and lubricants.
Marine - Cylinder oils-crosshead, crankcase oils-crosshead, truck piston engine oils, hydraulic
oils, gear oils, compressor oils, turbine oils, refrigeration oils, emulsifiable oils, multi-grades,
heat transfer oils, greases, and fishing. Products range of more than 100 products has around
30 high selling products. There is a product Line of 7-8 SKU for each product.
High performance Products
Castrol India is also involved with motor sports both, at the international and national level. At
the international level, Castrol partners BMW Williams F1 team as well as other BMW
Motorsports and it also hosts the famous Dakar Rally. Further, the company also
provides technical assistance on the race track and in test events. Furthermore, it is a
worldwide 'strategic lubricants partner' for automobile giants like Jaguar Cars Ltd., Land
Rover, Volvo Car Corporation, and Aston Martin. In India, Castrol has a major presence
due to an extensive network of dealers. Apart from this, the company has also entered into
4. strategic tie-ups with companies like Tata Cummins, Godrej, ITC, and Reliance who
act as original equipment manufacturers (OEM) for Castrol.
Industry Overview
India is the fifth largest finished lubricant market in the world with estimated revenues of Rs.
120 billion in 2008. Till 1991, the Indian government regulated the lubricant market. The four
state owned refining and marketing companies – Indian Oil Corporation (IOC), Bharat
Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL) and IBP (now part of
IOC) dominated the market. The lack of availability of key raw material (base oil) and high
import duties restricted private players. The only major private players were Castrol (now part
of BP), Tide Water (Veedol).
After reforms in 1991, the opening of the lubricants market attracted a large number of foreign
and domestic players. Whilst there are no restrictions on foreign lubricant manufacturers from
establishing 100%-owned operations in India, many chose to partner with local companies.
Mobil, Exxon, Caltex, Shell- scrambled to form alliances with the state owned companies in
order to get access to their vast network of petrol pumps. Later entrants –Total, Elf, Motul,
Pennzoil, ENI - formed joint ventures with the private sector groups.
5. The market is largely price sensitive and volume growth in lubricant demand has
decelerated in recent times due to lower OEM sales, and a decline in replacement sales due to
longer life of lubricants and better engine technology resulting in longer drain cycles.
The lubricant industry in India caters to two distinct segments _automobile users and a
wide range of industrial customers. Automobile lubricant sales account for 60% of the total
lubricant market while the industrial segment accounts for the remaining 40%. The market is
has over 30 big and small manufacturers. Intense competition has led to an increase in
marketing efforts of lubricant players. This includes advertising, brand building, customer
service, and introduction of high quality products.
Political factors
With the distribution & canalization of base oil import being controlled by the
Government of India, the PSU Oil Companies controlled 90% of the market share. The
recanalization of the lube base oil imports in 1993 by the Govt. of India followed by reduction of
import duty on lube base oils from 85% to 30% and gradual scrapping of administered pricing
observed the announcement of almost a new lube venture every month during 1994.
Economical factors
After reforms in 1991, there are no restrictions on foreign lubricant manufacturers from
establishing 100%-owned operations in India. Entry barriers were nil down. This was a
green signal to attract a large number of foreign and domestic players. Most of the new
entrants formed associations with Indian companies both in the Private & Public sectors. These
are exciting times for the lube industry in India. Each one of the vast contingent of 22
Multinationals and a total of 80 big & small players are vying for a pie of Rs.5,500 Crore market.
Worldwide established brands, some of them albeit new to India, like Shell, Mobil, Caltex, Elf,
Pennzoil are fighting it out with established Indian brands like SERVO & others to establish their
foothold in the 6th largest lubricant market in the World.
Technological factors
Engine technology must respond to stringent emission regulations being legislated
globally. Modern engine and engine oil technologies often result in longer oil change intervals,
which, in turn, results in less oil top-ups. But Castrol backs its brand recall with technology
upgrades. It has been launching four or five products every year to keep pace with changing
technology, emission norms and consumer needs.
6. Selling Strategy
According to AC Nielsen Brand Tracker, the Castrol master brand enjoys an
unprompted brand awareness of 92 per cent among consumers.
Castrol’s 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 Sport star, Sachin Tendulkar as a brand
ambassador, the company tries to create loyalty among consumers who are concerned about
performance and delivery.
But this industry, the real battle for brand visibility is fought not just on the advertising and
promotion mat, it is fought also in the open corridors of trade marketing. A big part of the
promotional spending of the public sector lubricant makers goes into trade promotions and
price support mechanisms. So the absolute spend could be much higher. On its part, Castrol
uses trade management another strong marketing tool not only to build brand visibility but also
to effectively implement inventory, pricing and market expansion initiatives.
7. Market Segment
The marketing channels for automotive lubricants in India consist of the following,
Petrol Stations
Wholesale Distributors
Lube Oil Shops
Auto Spare Shops
Authorized Service Stations
Garages
Rural & Agricultural dealers
Super Markets.
Market buying Trend
Till recently, the Indian consumers linked filling of lubricants to that of petrol & diesel in petrol
stations. With the advent of deregulated market scenario & fierce competition, efforts are being
made to position lubricant as high involvement consumer goods. Hence, the resultant
drift towards the bazaar trade i.e., outside the petrol stations. The sales of automotive
lubricants through bazaar trade increased from a mere 10% prior to 1993 to a handsome
present level of 40% compared to Worldwide Trend of more than 70%.In the developed World,
because of high degree of customer sensitivity & awareness, Do-it-Yourself (DIY) concept has
evolved for filling of engine oil. People buy from super markets & fill it themselves. In India, this
job is still left to the mechanics & service stations. During these years this shift in trade had the
following effects:
Decline in Market Share of PSU oil companies.
Market became heavily crowded & the industry got transformed into FMCG.
Dumping of products in the bazaar.
War of trade discounts resulting in rice war & lesser margins for dealers.
Entry of spurious lubricants.
Consumers Need
Consumer need for lubricant is safety, insurance. Fleet owners preferred the Castrol’s engine oil
despite a marginal price premium, because of better quality, i.e. lubricant with insurance,
although around one third of the engine oil is purchased by drivers while on the road.
8. A large portion of targeted segment, i.e. Truck drivers are not well educated & are unaware of
various insurance schemes. Truck drivers were very worried for their family, in case if they
meet an accident. Castrol launched Castrol “Suraksha Yojna” accidental insurance
policy with the purchase of Castrol Diesel Super. The scheme was extremely successful. The
target in terms of participation was exceeded by 30% by the drivers & market share increased
by 10%.
Distribution Network
Castrol has a nationwide network of 270 distributors who service over 70,000 outlets.
Moreover, the company set up the Castrol authorized Service Associates network in 2007.
Today, the network is 400-strong and it services over 12,000 independent mechanic workshops.
Bike Zone, a multi-brand two-wheeler service centre initiative launched in 2005, was another
strategic step. It is a franchise initiative. This (Bike Zone) strategy is about preparing for
tomorrow’s growth. Most of the sales in the last five or six years have come from select cities.
In the future, growth is going to come from Tier 2 and 3 cities as well as rural areas.
The two major marketing channels for automotive lubricants are:
* The original equipment manufacturers (OEMs)
* Retail trade.
Distribution Channel _OEMs
Automobile OEMs and industrial lubricant customers are laying more emphasis on customer
service besides testing performance of lubricants while entering into long-term purchase
agreements.
Distribution Channel _Retail
Petrol pumps form a major distribution channel in retail trade. However sales of lubricants
through retail outlets have been increasing. While the state owned oil marketing companies can
sell through their own nationwide network of 30,000 petrol stations, private manufacturers have
to use the retail route consisting of auto spare stores, garages, authorized service stations,
super markets and agricultural dealers.
We would be having a look on distributor / garage structure in Uttar Pradesh
9. Channel Structure of Castrol
Castrol
Industrial Commercial Automotive Workshop
XCSP Distributor ISP Agent Distributor Distributor Direct
Company
Commercial Retailer
Agent
Small
Retailer
Garage Distributor for Auto OEMS & Retails (Uttar Pradesh)
Gargi distributors Lucknow & Barabanki area for auto companies OEM, Whole sellers, retailers,
workshop & OEMS. They have one ware house & average inventory stored is around 21 days.
Distributor is having 8 DSA & one company roll one sales manager & two junior executives.
Company invests heavily for training of distributors, this helps in motivation Castrol distribution
partners. Customer meet is organized by company & distributors which motivates distributor &
dealer people to share common goal.
Shani Enterprises, Industrial distributor
He serves entire UP except adjoining NCR regions. And it does annual turnover of approx. 20
crores in Lucknow region. His prominent customers are TATA Motors, Lucknow, Auto ancillary
companies, LML etc.
Distributor strength: 3 sales executives, 2 office staffs & one ware house manager.
25000 sq ft ware house at Lucknow Kanpur highway.
Dealer is having around 20 trucks for distribution in Lucknow / Kanpur territory.
10. Margin Structure & Credit Terms
Distributor owns the stock & responsible for sale, company has changed its focus from
customer care center model to retail distribution center model; company provides special
incentives to dealers for excellent customer service based on assessment. Laptop provided to
sales people based on exceptional performance. Company provides 21 days credit for
industrial distributors, while only 4-5 days for auto/OEM distributors.
Industrial distributor’s margin is 3 to 5%, while other distributors’ margin is 7-8%.
Retailers are given 15 to 20 days with cash support system & margin for retailers is 10 to
15%. Price is constant across pan India.
Logistics
Castrol uses extensive automation at distributors end for placing the order, billing, accounting,
inventory at warehouse & customer details. Total supply chain is integrated end to end with
ERP system. Distributors also use internet, mobile & fax for taking remote orders. One
regional manager is appointed per region, one distribution executive is appointed
for four industrial distributors.
Minimum order quantity is 45 barrels for direct dispatch, for lower quantity dispatch is
done from ware house, if distributor orders more than 3000L transportation is borne by the
company. Company uses own transportation/contracted vehicle facility from factory to
distributor. Once consignment is received at distributors end, it is transferred by distributor
owned vehicle or third part logistics. Implementation of IT has helped company to
manage demand & inventory in the channel system.
Mfg Unit (Mumbai/
Silvasa)
WH WH
Automotive Industrial
Distributors
11. Retail Distribution Flow
Sub Workshop
Factory CDC C&FA Distributor Dealers Distributors
Dealers or Retailers
Sub Dealers & C/FA agent depending on the volume handled in particular zone, mostly they are
appointed in west zone.
Organization Structure of Castrol India
Vice-presidents are at each regional level (North, South, East, West).
Number of Area Sales Managers depends on the volume of business.
VP, Automotive
GM -Marketing GM-Sales GM-Sales Ops
Area Sales Mgr Deputy Mgr Asst Mgr Senior Executive Executive
Distributors Sales Force
Institutional Sales at Castrol
Castrol does some institutional sales too. Some of Institutional customers like L&T, BHEL are
dealt by company directly through third party logistics. Sales hierarchy is headed by
Institutional VP, national account manager reports to Institutional VP & subsequently regional
manager, area manager & senior executives.
12. Sales Force Management
Referrals are the primary source of candidates for recruitment
Use of external consultant
Based on educational background & part exp, candidates screened for the interview.
Training of distributor’s sales staff is arranged by Castrol every quarter.
Includes training on professional grooming, technical background & safety techniques
Training is organized & conducted by people having prior exp in field selling.
Castrol having tied up with IIMA for special training as reward to high performing
assistant manager.
Online Castrol academy trains sales forces on various topics of selling techniques.
Certification is awarded to sales force successfully completing the course.
Sales Force Evaluation
Point based evaluation scheme for sales force.
40% weight age is given to Volume of sales, Gross margin per liter, total revenue
generated from territory.
60% weight age is given to sales process, new business lead generation, HSSE
enforcement & adherence.
150 point based scheme is followed. Scoring 120 points ensures 100 % variable pay.
High performers can earn 125-150% variable pay.
Sales manager promotion is decided on innovation, creativity (managing channel
conflict), business practices, leadership qualities & team work.
Best Practices at Castrol
Less sales pressure compared with other competitors.
Higher emphasis on selling process
Castrol academy for online sales forces training.
Sale accounted for only after goods actually leave the C&FA
Castrol academy, the knowledge centre for both the company, and its distribution
partner helps deliver value and act as a motivator.
Tracking of purchase order and invoice.
CRM for industrial customers.
13. Channel Promotion
Partnership Model
Among the marketing channel adopted as part of tie-ups, Castrol India Ltd. entered in a
strategic agreement as follows:
Tie-up with Escorts (Automotive OEM), for exclusive supply of engine oils for
service fill as well as after-market sales.
o As per the agreement signed in 2004, Castrol India Ltd developed and launched
‘Castrol Tractormax Power’, diesel-engine oil exclusively for use in Escorts
tractors.
o Castrol Tractomax Power is the only engine oil to be recommended by Escorts
for use in their tractors namely Farm Trac, Power Trac and Escort. It also carries
an on-pack endorsement from Escorts.
o The product is available through the 2500 Escorts outlets including their
franchise dealers, spare part distributors and authorized service centers.
Tie-up with Essar Oil Ltd , for sale of Castrol lubricants through Essar Oil Fuel outlets
throughout the country.
o This tie-up allows Castrol to have access to an additional distribution channel
through Essar’s fuel forecourts across the country; while Essar is able to offer
premium quality international lubricants to its customers.
o The agreement is especially aimed at scooter owners, who earlier did not have
access to Castrol lubricants at petrol forecourts. This tie-up also increases Castrol
products’ availability along the highways.
o As per agreement, Essar Retail outlets are serviced by authorized Castrol
distributors. The tie up uses the promotion synergy of both companies, through
highway promotion vans, mechanic and fleet owners’ meets to the mutual
benefit of both companies.
Tie-up with Mahindra Tractors,(another exclusive Automotive OEM tie-up), to supply
diesel engine oils for their tractors.
14. o As per the agreement, Castrol manufactures and supplies a specially formulated
diesel engine oil for use in Mahindra tractors. The diesel engine oil is called
Castrol CRB Prima is a variant of Castrol CRB Plus – market leader in the multi-
grade diesel engine oil segment.
o CRB Prima is exclusively recommended by Mahindra and carries on-pack M&M
endorsement. It is available in all M&M authorized workshops as well as Castrol’s
extensive retail outlet.
o The marketing and sales teams of both the companies, jointly promotes the new
brand through on-ground marketing and sales promotions activities.
Source: Castrol India website
Promotional Budget
Though smaller in size than its public sector rivals, Castrol’s advertising and promotion budgets
are comparable. Hindustan Petroleum, for example, spent about the same as Castrol in 2008 —
around Rs 100 crore under the head advertising and publicity, though it is several times bigger
in size. But the brand visibility in the industry is also dependent on trade marketing.
A big part of the promotional spending of the public sector lubricant makers goes into trade
promotions and price support mechanisms. So the absolute spend could be much higher. On its
part, Castrol uses trade management another strong marketing tool not only to build
brand visibility but also to effectively implement inventory, pricing and market
expansion initiatives.
Castrol has a nationwide network of 270 distributors who service over 70,000
outlets.
The company set up the Castrol Authorised Service Associates network in 2007.
Today, the network is 400-strong and it services over 12,000 independent mechanic
workshops.
Bike Zone, a multi-brand two-wheeler service centre initiative launched in 2005, was
another strategic step. It is a franchise initiative. This (Bike Zone) strategy is about
preparing for tomorrow’s growth. Most of the sales in the last five or six years have
come from select cities. In the future, growth is going to come from Tier 2 and 3 cities
as well as rural areas.
Source: CiteMan Network (www.citeman.com)
15. Channel Promotion Schemes
Some of the channel promotion schemes, which the company follows globally, are as follows:
Castrol Financial assistance program : Includes Equipment Loans and Payback
loans for Lube center needs
Castrol Customer Retention program: Includes ‘Punch-a-deal loyalty’ programs,
which allows channel member to design customized loyalty products
Castrol Marketing programs : This includes providing
o Business Intelligence studies/ data , that allow the Lube centers to better
understand the local market
o Imaging Programs : provides channel partner assistance in all their branding
needs through Castrol’s signage partner
o Max-pro warranty: Company sponsored free limited warranty
o Media Builder: web-access to software solution for designing various newspaper
advertisements, flyers , coupon sheets and direct mail pieces.
o Payment program: a POS retail processing solution for all Lube centers.
o Vendor alliances: In select countries, vendor relations with following companies
to help dealership customers with respective services:
Clore-automotive: Coolant drain and flush
Frey-moss : Modular oil change building shipped and installed
Integrated Services Inc. Computerized Management Information systems
DISCLAIMER: No data is available confirming on such alliances supported by Castrol India Ltd.
Focus areas for Castrol India
Castrol India has a simplified organization (through recent reorganizations) which is
performance-driven. It has reorganized its sales and marketing force with a customer-centric
focus.
The company has formed three groups: retail specialists to focus on retail trade, workshop
specialists to serve large workshops and institutional specialist to focus on key customer
accounts. The company identifies the development of leadership capability as a key focus area,
and lays emphasis on leadership behaviors and its integration with all people processes.
16. A number of training and development initiatives directed towards people development are
undertaken every year. Castrol also undertakes a talent deep dive across key functions to
identify and manage challenges to build its talent pipeline. Communication and employee
engagement are also focus areas.
With regard to its Sales force, building the capability of frontline sales force and development of
frontline leadership continues to be a priority. Castrol has embarked upon a number of
initiatives to improve the Company’s brand as an employer so as to attract and retain talent and
to realize its vision of making Castrol a great place to work.
In recent years, the Castrol India has received the HR Excellence award for mid cap companies
in recognition of best global practices.
The award was instituted by Steel Authority of India Limited (SAIL) and Indian Institute of
Management, Ahmedabad (IIMA).It has also received the Best Employer Brand award in the Oil
and Gas(Private sector) sector in the Regional Round, from the Employer Branding Institute,
Pune.
Training and Development
The company has a number of structured interventions that are in place to support the agenda
of training and leadership development. The Castrol global leadership framework focuses on
Valuing Expertise, Energizing People, acting decisively and delivering results. There is a
structured capability building agenda that is linked to technical and core competencies.
The opportunities for training and learning range from on job assignments, project roles,
learning fairs, class room training, coaching and mentoring to develop special skills, e- learning,
shadow stints. These are offered in combination based on the capability that needs to be
developed.
The company invests hugely in identifying potential leaders through processes of “Personal
Development Plans”, and “Self Advocacy Forums” and then developing them
through EL (Emerging Leaders) and Career Advancement Programs (CAPs).
These programs are completely structured and range from customized classroom programs,
long duration integrated training programs, job enrichment opportunities, mentoring program.
Castrol has also embarked upon an ambitious mechanic training programme - Eklavya,
aimed at large scale training to enhance technical capability of independent mechanics. To date,
the company has trained over 20,000 mechanics.
17. Recruitment
Once recruited, the company has holistic induction programmes, focusing on the specific needs
of the individuals and businesses/functions. It ensures that the new joiners feel comfortable and
are included in the organization as fast as possible.
In addition to hiring externally, the company has a robust process of internal recruitments,
wherein all open positions are first advertised to employees, who get the first opportunity to
apply against the open positions and get reviewed by a cross-functional selection panel.
Compensation
Employees get a competitive compensation package that includes salary, allowances, bonuses,
share plans and health and retirement provisions as well as other benefits. The package
structure is designed to attract and retain the highest quality employees to help maintain
success as a business and to encourage employees to continually develop their skills and
enhance their contribution. Employees undergo an annual salary review to ensure that it
remains competitive. This is done by comparing it with current levels of pay in the market and
peers. The top-performers are differentiated on rewards. The company rewards top
performance with a Total Reward program that tops in the industry.
Other than the retiral benefits mentioned above, the company has some employee-friendly and
progressive benefit offers. Flexible Work Hours, Career Breaks, Leave (including Paternity/
Adoption Leave), an organization wide Fun and Fitness program and an almost free lunch –
Where healthy and hygienic food at highly subsidized rates is provided to the employees. There
is a comprehensive health and medical coverage plan. Apart from a distinguishing group
accident cover, Castrol offers domiciliary medical insurance cover, a competitive hospitalization
cover including an annual health check-up offer. Sickness leave is provided on need basis.
Health and Safety
Castrol maintains high levels for Health, Safety, Security and Environment (HSSE)
performance. It makes sure that all employees, contractors and others connected with the
company are well informed, well trained, engaged and committed to the HSE improvement
process through several initiatives throughout the year like Safe to Go!!, Go Green!!, T 20
challenge and poster campaigns. Compliance to environmental laws and regulatory standards
on a worldwide basis is taken seriously. The HSSE stated goals are:
18. no accidents
no harm to people
no damage to the environment
The company’s road safety program has been successfully running for the past several years
and is now recognized as the benchmark on road safety initiatives in India. It has a driving
behavior monitoring program in place for all its drivers including third-party contractors. This
has greatly helped improve the driving behavior and in turn has positively impacted the
company’s road safety performance. This and other road safety programs undertaken have
been recognized externally, as well as internally within the BP Group.
All the blending plants are certified for Environmental Management System (ISO 14001)and
Occupational Health & Safety Management System (OHSAS 18001). The systems have been
certified by accredited bodies recognized internationally. Castrol is now putting in place the BP
Operating Management System (OMS) as an enabler for better safety performance.
Product Management
Castrol India has changed from a “Company depot / Consignment Stockist -
Wholesaler-Retailer” to a “Distributor” channel system. The company reaches its
consumers through a distribution network of 270 distributors, servicing over 70,000 retail
outlets.
Broadly, 2 segments are targeted:
The retailer automotive lubricants market
Industrial lubricants
Castrol commands strong brand equity and brand loyalty towards its lubricants and some of
its well-known brands include GTX, GTX Magnatec, Activ 4T, Super TT, CRB, RX Supermax and
BP Vanellus. Many of these are leaders in their segments. Castrol has focused on brand driven
consumer focused marketing strategy. The key to loyalty is strong and lasting
relationships with customers.
Pricing Strategy : Premium
Castrol has offered superior customer value propositions in terms of product quality with
relevant consumer benefits and therefore prices the products at a premium-to-market. It
19. has also pioneered new distribution systems to make products easily available to consumers.
This is to ensure that consumers see Castrol products as good value for money.
Castrol’s main competitors are the PSU’s such as Indian Oil , BPCL etc. Because the longer
drain times, and evolution of more sophisticated engines demand for lubricants has declined. A
shrinking market and competition have made price undercutting the common strategy, both
in automotive and industrial lubricant segments.
The public sector oil companies resort to this strategy as they can afford to make up any loss
here from their other businesses; that they can afford to make up mask their promotional
expenses given the overall size of their businesses.
Castrol has been active on the product innovation front. It has leveraged technology to
offer a range of products, including high-performance synthetic lubricants, giving it an edge
over competition. Strong pricing power has enabled the company, for the most part, to pass
significant cost increases in base oil, its main raw material.
Historically, Castrol has adopted a strategy of effecting price hikes ahead of the cost curve,
helping ring-fence its margins.
Castrol follows a policy of defending margins and attacking cost inefficiencies. It looks
at the overall spend, without cutting costs blindly. Castrol is planning to take away those
advertising and promotion costs which may not lead to the development of their brand. For
example, sometimes simplistic price rebates do not reach the end user nor benefit brand
volumes they are just pocketed by middlemen.
To ensure high brand equity and brand visibility Castrol invests significantly towards advertising
and promotion. Viewed as per cent of turnover (five per cent), it is lower than the industry
average. Though smaller in size than its public sector rivals, Castrol’s advertising and promotion
budgets are comparable. Hindustan Petroleum, for example, spent about the same as Castrol in
2008 — around Rs 100 crore under the head advertising and publicity, though it is several times
bigger in size. It is in fact a Fortune 500 company.
Castrol spends a good share in trade marketing too. A big part of the promotional spending of
the public sector lubricant makers goes into trade promotions and price support mechanisms..
On its part, Castrol uses trade management another strong marketing tool not only to build
brand visibility but also to effectively implement inventory, pricing and market expansion
initiatives.
20. Future Challenges
Intensifying brand competition from other players in the market.
Bargaining power shift to workshop & service stations, due to change in customer
behavior.
Castrol less focus on B2B selling.
OEM’s having high bargaining power for permitting Castrol to be used at authorized
dealers & service stations of OEM’s.
New channel conflict due to shift in business from retailers to Castrol bike zone.
Limited success of CRM.
Future Outlook
In the future, growth in the automotive lubricants industry will largely depend on the overall
performance of the economy. In the past one and a half years, the scenario has improved with
higher sales of commercial vehicles and two-wheelers. However, in the future volume growth
will be affected because of use of better quality, long drain lubes. This will increase the
replacement cycle for lubes. In the shorter term, one will witness intense competition in a slow
growing market marked by a consolidation activity, which has the potential to change the face
of the lubricant industry. Given the rising competition, success of a product would largely
depend how well it is branded and distributed.
Source: Frost & Sullivan
Thus Castrol India needs to maintain its high brand equity along with superior channel
management, to keep pace with future trends
