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Castrol sales & distribution mgmt

Castrol India Sales & Distribution Mgmt

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Castrol sales & distribution mgmt

  1. 1. Castrol India – Sale & Distribution Amit Kumar_G10006 XLRI , GMP 10-11Disclaimer:The work is authentic and has not been copied from anywhere else or has not been submitted in part orfull for any other degree or award.
  2. 2. Company BackgroundPresence in India from last 100 years, Castrol India, also known as Castrol India Limited, isan automotive and industrial lubricant manufacturing company which has been operating inIndia since 1910. Castrol India is a public limited company and its parent company, CastrolLimited (UK) holds 70.92% equity of Castrol India Limited. Castrol India manufactures andmarkets both, automotive and industrial lubricants. Castrol India is the 2nd largestmanufacturer of automotive and industrial lubricants in the Indian lubricant market and ownsaround 22% market share in the overall Indian lubricant market. Castrol India is a part ofthe BP Group and operates in more than 56 countries.Product MixCastrol markets its automotive lubricants under two brands - Castrol and BP. Castrol Indiaenjoys market leadership in passenger car engine oils, premium 2-stroke and 4-stroke oils, andmulti-grade diesel engine oils. Castrol India Ltd. has 5 manufacturing plants that aremeticulously networked with 270 distributors, serving over 70,000 retail outlets. Further, it isalso equipped with a state-of-the-art plant in Silvasa. As the leading lubricant-manufacturing
  3. 3. company, Castrol is the proud owner of the largest manufacturing facilities and marketingnetwork amongst the lubricant companies operating in India.Commercial vehicle Engine OilsThe product lines of Castrol India include the following - Industrial - The full range of Castrolmetalworking fluids, cleaners, corrosion preventives and lubricants.Marine - Cylinder oils-crosshead, crankcase oils-crosshead, truck piston engine oils, hydraulicoils, 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 around30 high selling products. There is a product Line of 7-8 SKU for each product.High performance ProductsCastrol India is also involved with motor sports both, at the international and national level. Atthe international level, Castrol partners BMW Williams F1 team as well as other BMWMotorsports and it also hosts the famous Dakar Rally. Further, the company alsoprovides technical assistance on the race track and in test events. Furthermore, it is aworldwide strategic lubricants partner for automobile giants like Jaguar Cars Ltd., LandRover, Volvo Car Corporation, and Aston Martin. In India, Castrol has a major presencedue to an extensive network of dealers. Apart from this, the company has also entered into
  4. 4. strategic tie-ups with companies like Tata Cummins, Godrej, ITC, and Reliance whoact as original equipment manufacturers (OEM) for Castrol.Industry OverviewIndia 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 fourstate owned refining and marketing companies – Indian Oil Corporation (IOC), BharatPetroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL) and IBP (now part ofIOC) dominated the market. The lack of availability of key raw material (base oil) and highimport duties restricted private players. The only major private players were Castrol (now partof BP), Tide Water (Veedol).After reforms in 1991, the opening of the lubricants market attracted a large number of foreignand domestic players. Whilst there are no restrictions on foreign lubricant manufacturers fromestablishing 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 inorder 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. 5. The market is largely price sensitive and volume growth in lubricant demand hasdecelerated in recent times due to lower OEM sales, and a decline in replacement sales due tolonger 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 awide range of industrial customers. Automobile lubricant sales account for 60% of the totallubricant market while the industrial segment accounts for the remaining 40%. The market ishas over 30 big and small manufacturers. Intense competition has led to an increase inmarketing efforts of lubricant players. This includes advertising, brand building, customerservice, and introduction of high quality products.Political factorsWith the distribution & canalization of base oil import being controlled by theGovernment of India, the PSU Oil Companies controlled 90% of the market share. Therecanalization of the lube base oil imports in 1993 by the Govt. of India followed by reduction ofimport duty on lube base oils from 85% to 30% and gradual scrapping of administered pricingobserved the announcement of almost a new lube venture every month during 1994.Economical factorsAfter reforms in 1991, there are no restrictions on foreign lubricant manufacturers fromestablishing 100%-owned operations in India. Entry barriers were nil down. This was agreen signal to attract a large number of foreign and domestic players. Most of the newentrants formed associations with Indian companies both in the Private & Public sectors. Theseare exciting times for the lube industry in India. Each one of the vast contingent of 22Multinationals 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 theirfoothold in the 6th largest lubricant market in the World.Technological factorsEngine technology must respond to stringent emission regulations being legislatedglobally. 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 technologyupgrades. It has been launching four or five products every year to keep pace with changingtechnology, emission norms and consumer needs.
  6. 6. Selling StrategyAccording to AC Nielsen Brand Tracker, the Castrol master brand enjoys anunprompted brand awareness of 92 per cent among consumers.Castrol’s branding has an enduring appeal because the company chooses all routes to market totake the message to the consumer. Take advertising, for instance. Be it sponsorship ofHonda Super bikes or appointing Sport star, Sachin Tendulkar as a brandambassador, the company tries to create loyalty among consumers who are concerned aboutperformance and delivery.But this industry, the real battle for brand visibility is fought not just on the advertising andpromotion mat, it is fought also in the open corridors of trade marketing. A big part of thepromotional spending of the public sector lubricant makers goes into trade promotions andprice support mechanisms. So the absolute spend could be much higher. On its part, Castroluses trade management another strong marketing tool not only to build brand visibility but alsoto effectively implement inventory, pricing and market expansion initiatives.
  7. 7. Market SegmentThe 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 TrendTill recently, the Indian consumers linked filling of lubricants to that of petrol & diesel in petrolstations. With the advent of deregulated market scenario & fierce competition, efforts are beingmade to position lubricant as high involvement consumer goods. Hence, the resultantdrift towards the bazaar trade i.e., outside the petrol stations. The sales of automotivelubricants through bazaar trade increased from a mere 10% prior to 1993 to a handsomepresent 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 hasevolved for filling of engine oil. People buy from super markets & fill it themselves. In India, thisjob is still left to the mechanics & service stations. During these years this shift in trade had thefollowing 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 NeedConsumer need for lubricant is safety, insurance. Fleet owners preferred the Castrol’s engine oildespite 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. 8. A large portion of targeted segment, i.e. Truck drivers are not well educated & are unaware ofvarious insurance schemes. Truck drivers were very worried for their family, in case if theymeet an accident. Castrol launched Castrol “Suraksha Yojna” accidental insurancepolicy with the purchase of Castrol Diesel Super. The scheme was extremely successful. Thetarget in terms of participation was exceeded by 30% by the drivers & market share increasedby 10%.Distribution NetworkCastrol 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 anotherstrategic step. It is a franchise initiative. This (Bike Zone) strategy is about preparing fortomorrow’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 _OEMsAutomobile OEMs and industrial lubricant customers are laying more emphasis on customerservice besides testing performance of lubricants while entering into long-term purchaseagreements.Distribution Channel _RetailPetrol pumps form a major distribution channel in retail trade. However sales of lubricantsthrough retail outlets have been increasing. While the state owned oil marketing companies cansell through their own nationwide network of 30,000 petrol stations, private manufacturers haveto 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. 9. Channel Structure of Castrol Castrol Industrial Commercial Automotive WorkshopXCSP 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. 10. Margin Structure & Credit TermsDistributor owns the stock & responsible for sale, company has changed its focus fromcustomer care center model to retail distribution center model; company provides specialincentives to dealers for excellent customer service based on assessment. Laptop provided tosales people based on exceptional performance. Company provides 21 days credit forindustrial 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 to15%. Price is constant across pan India.LogisticsCastrol 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 withERP system. Distributors also use internet, mobile & fax for taking remote orders. Oneregional manager is appointed per region, one distribution executive is appointedfor four industrial distributors.Minimum order quantity is 45 barrels for direct dispatch, for lower quantity dispatch isdone from ware house, if distributor orders more than 3000L transportation is borne by thecompany. Company uses own transportation/contracted vehicle facility from factory todistributor. Once consignment is received at distributors end, it is transferred by distributorowned vehicle or third part logistics. Implementation of IT has helped company tomanage demand & inventory in the channel system. Mfg Unit (Mumbai/ Silvasa) WH WH Automotive Industrial Distributors
  11. 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 OpsArea 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. 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. 13. Channel PromotionPartnership ModelAmong the marketing channel adopted as part of tie-ups, Castrol India Ltd. entered in astrategic 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. 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 websitePromotional BudgetThough smaller in size than its public sector rivals, Castrol’s advertising and promotion budgetsare 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 biggerin 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 tradepromotions and price support mechanisms. So the absolute spend could be much higher. On itspart, Castrol uses trade management another strong marketing tool not only to buildbrand visibility but also to effectively implement inventory, pricing and marketexpansion 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 (
  15. 15. Channel Promotion SchemesSome 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 systemsDISCLAIMER: No data is available confirming on such alliances supported by Castrol India Ltd.Focus areas for Castrol IndiaCastrol India has a simplified organization (through recent reorganizations) which isperformance-driven. It has reorganized its sales and marketing force with a customer-centricfocus.The company has formed three groups: retail specialists to focus on retail trade, workshopspecialists to serve large workshops and institutional specialist to focus on key customeraccounts. 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. 16. A number of training and development initiatives directed towards people development areundertaken every year. Castrol also undertakes a talent deep dive across key functions toidentify and manage challenges to build its talent pipeline. Communication and employeeengagement are also focus areas.With regard to its Sales force, building the capability of frontline sales force and development offrontline leadership continues to be a priority. Castrol has embarked upon a number ofinitiatives to improve the Company’s brand as an employer so as to attract and retain talent andto 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 companiesin recognition of best global practices.The award was instituted by Steel Authority of India Limited (SAIL) and Indian Institute ofManagement, Ahmedabad (IIMA).It has also received the Best Employer Brand award in the Oiland Gas(Private sector) sector in the Regional Round, from the Employer Branding Institute,Pune.Training and DevelopmentThe company has a number of structured interventions that are in place to support the agendaof training and leadership development. The Castrol global leadership framework focuses onValuing Expertise, Energizing People, acting decisively and delivering results. There is astructured 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 bedeveloped.The company invests hugely in identifying potential leaders through processes of “PersonalDevelopment Plans”, and “Self Advocacy Forums” and then developing themthrough 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. 17. RecruitmentOnce recruited, the company has holistic induction programmes, focusing on the specific needsof the individuals and businesses/functions. It ensures that the new joiners feel comfortable andare 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 toapply against the open positions and get reviewed by a cross-functional selection panel.CompensationEmployees get a competitive compensation package that includes salary, allowances, bonuses,share plans and health and retirement provisions as well as other benefits. The packagestructure is designed to attract and retain the highest quality employees to help maintainsuccess as a business and to encourage employees to continually develop their skills andenhance their contribution. Employees undergo an annual salary review to ensure that itremains competitive. This is done by comparing it with current levels of pay in the market andpeers. The top-performers are differentiated on rewards. The company rewards topperformance with a Total Reward program that tops in the industry.Other than the retiral benefits mentioned above, the company has some employee-friendly andprogressive 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. Thereis a comprehensive health and medical coverage plan. Apart from a distinguishing groupaccident cover, Castrol offers domiciliary medical insurance cover, a competitive hospitalizationcover including an annual health check-up offer. Sickness leave is provided on need basis.Health and SafetyCastrol maintains high levels for Health, Safety, Security and Environment (HSSE)performance. It makes sure that all employees, contractors and others connected with thecompany are well informed, well trained, engaged and committed to the HSE improvementprocess through several initiatives throughout the year like Safe to Go!!, Go Green!!, T 20challenge and poster campaigns. Compliance to environmental laws and regulatory standardson a worldwide basis is taken seriously. The HSSE stated goals are:
  18. 18.  no accidents  no harm to people  no damage to the environmentThe company’s road safety program has been successfully running for the past several yearsand is now recognized as the benchmark on road safety initiatives in India. It has a drivingbehavior monitoring program in place for all its drivers including third-party contractors. Thishas greatly helped improve the driving behavior and in turn has positively impacted thecompany’s road safety performance. This and other road safety programs undertaken havebeen recognized externally, as well as internally within the BP Group.All the blending plants are certified for Environmental Management System (ISO 14001)andOccupational Health & Safety Management System (OHSAS 18001). The systems have beencertified by accredited bodies recognized internationally. Castrol is now putting in place the BPOperating Management System (OMS) as an enabler for better safety performance.Product ManagementCastrol India has changed from a “Company depot / Consignment Stockist -Wholesaler-Retailer” to a “Distributor” channel system. The company reaches itsconsumers through a distribution network of 270 distributors, servicing over 70,000 retailoutlets.Broadly, 2 segments are targeted:  The retailer automotive lubricants market  Industrial lubricantsCastrol commands strong brand equity and brand loyalty towards its lubricants and some ofits well-known brands include GTX, GTX Magnatec, Activ 4T, Super TT, CRB, RX Supermax andBP Vanellus. Many of these are leaders in their segments. Castrol has focused on brand drivenconsumer focused marketing strategy. The key to loyalty is strong and lastingrelationships with customers.Pricing Strategy : PremiumCastrol has offered superior customer value propositions in terms of product quality withrelevant consumer benefits and therefore prices the products at a premium-to-market. It
  19. 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 longerdrain times, and evolution of more sophisticated engines demand for lubricants has declined. Ashrinking market and competition have made price undercutting the common strategy, bothin automotive and industrial lubricant segments.The public sector oil companies resort to this strategy as they can afford to make up any losshere from their other businesses; that they can afford to make up mask their promotionalexpenses given the overall size of their businesses.Castrol has been active on the product innovation front. It has leveraged technology tooffer a range of products, including high-performance synthetic lubricants, giving it an edgeover competition. Strong pricing power has enabled the company, for the most part, to passsignificant 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 looksat the overall spend, without cutting costs blindly. Castrol is planning to take away thoseadvertising and promotion costs which may not lead to the development of their brand. Forexample, sometimes simplistic price rebates do not reach the end user nor benefit brandvolumes they are just pocketed by middlemen.To ensure high brand equity and brand visibility Castrol invests significantly towards advertisingand promotion. Viewed as per cent of turnover (five per cent), it is lower than the industryaverage. Though smaller in size than its public sector rivals, Castrol’s advertising and promotionbudgets are comparable. Hindustan Petroleum, for example, spent about the same as Castrol in2008 — around Rs 100 crore under the head advertising and publicity, though it is several timesbigger 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 ofthe 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 buildbrand visibility but also to effectively implement inventory, pricing and market expansioninitiatives.
  20. 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 OutlookIn the future, growth in the automotive lubricants industry will largely depend on the overallperformance of the economy. In the past one and a half years, the scenario has improved withhigher sales of commercial vehicles and two-wheelers. However, in the future volume growthwill be affected because of use of better quality, long drain lubes. This will increase thereplacement cycle for lubes. In the shorter term, one will witness intense competition in a slowgrowing market marked by a consolidation activity, which has the potential to change the faceof the lubricant industry. Given the rising competition, success of a product would largelydepend how well it is branded and distributed.Source: Frost & SullivanThus Castrol India needs to maintain its high brand equity along with superior channelmanagement, to keep pace with future trends