Marketing Strategy of Castrol

Industry Overview for Lubricants

Broadly divided into 3 major sectors :1. Automotive2. Industrial3. 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

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

• 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

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

Industry RivalryDomestically there is competition from :- • IOCL’s Servo (the market leader), • BPCL’s MAK, and • HPCL’s HP Lube.

•Among international players there is Royal Dutch Shell, the global market leader. Therefore, there is no shortage of contenders wanting to usurp CIL’s 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

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%

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

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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 MixProduct

&Price:-

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•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.

Place

Promotion

• 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 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 marketby innovations and conti-nuous product development

• 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

Differentiation

• 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.

Positioning

Strategic fit express the degree to which an organization is matching its resources and capabilities with the opportunities in the external environment.

Financial Resource UtilizationCastrol 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 UtilizationTechnological 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.

Strategic Business Fit

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

Sustainable Competitive Advantage

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.

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• 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.

New Marketing Strategy

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

Government initiatives