Castrol India Limited is the largest manufacturer of automotive and industrial lubricants in India with a 48% market share. It has 5 manufacturing plants and distributes products through 270 distributors serving over 70,000 retail outlets. The document discusses Castrol's distribution channels and market share in India. It notes opportunities for Castrol to expand its market share from non-franchised workshops (NFWs), which are becoming an important distribution channel as consumer behavior shifts from dealerships to workshops. However, directly supplying NFWs presents challenges around credit risk, remote locations, and low order volumes.

1. Castrol India Limited:
An innovative
distribution channel
Made by-
Ayat Khursheed
Esha Kumar
Yatharth Suri
Tanishq Dahiya
Noopur Narang

3. • Castrol India Limited is an automotive and industrial
lubricant manufacturing company.
• Castrol India is the largest manufacturer of automotive
and industrial lubricants in the Indian lubricant market.
• IT owns around 48% market share in the overall Indian
lubricant market. Its a part of Castrol Limited UK.
• It has 5 manufacturing plants that are networked with 270
distributors, serving over 70,000 retail outlets.

4. Growing Economy
of India

5.  India being the fasted growing economy, majorly
consisting of middle class that is expanding.
 The growth indicators pointed towards stable and
market oriented economy. Thus, Benefiting the Castrol
India lmt.
 Motor cycle oil was divided into two categories:
a) Two stroke (2T) oil.
b) Oil and four stroke (4T) oil.
 Once the warranty period expired, most motor cycle
enter into the after warranty market for service and oil
changes.

6.  The total no. of two wheelers in India were expected to
increase from 42 million units in 2004 to 80 millions in
2010.
 This was driven by combination of factors:
a) Including customers increasing disposable incomes.
b) The aspiration to own a motorized vehicle.
c) The availability of easy financing.

7. Castrol India
Limited

8.  Castrol was Founded by Charles Cheers Wakefield
 It is globally regarded as the leading lubricant specialist, providing premium
lubricating oils, greases, and related services to automotive, industrial, and
marine customers across the world.
 The company is headquartered in the United Kingdom and operated directly
in more than 40 countries, employing approximately 7,000 staff worldwide.
 Castrol is renowned for its technological innovation and marketing expertise.
 In nearly 100 other markets, Castrol was represented by third-party
distributors who marketed and sold their products locally.
 The Castrol delivery network extends across 140 countries, covering 800 ports
and partnering with more than 2,000 distributors and agents.

9.  Castrol had been in India for more than 85 years, selling lubricants that
covered a wide range of automotive and industrial applications.
 Castrol had redefined the lubricant marketing channels in India.
 In the 1970s, more than 90 per cent of all lubricant sales occurred at retail
forecourts.
 Following the nationalization of the industry, when government-owned
national oil companies took over these forecourts, Castrol cultivated and
developed the bazaar channel, which eventually contributed more than 65
per cent of the industry’s lubricant sales.

10.  Being technology leaders, Castrol had many achievements in the Indian
lubricants market, including being first to introduce several new products:
a) Multi-grade oils in India in 1982 (CRB)
b) A dedicated passenger car oil in 1983 (GTX)
c) A dedicated two-stroke oil in 1984 (Super TT)
d) A dedicated four-stroke oil in India in 1993 (Grand Prix, later migrated to
Active 4T)
e) New pack formats, including the 40-millilitre pouch (Scooted 2T) and the
50-litre garage pack

11. • Castrol also set up the first distributor model across the country as
route-to-market.
• The company was known for its technology innovations and
marketing expertise.
• It is a respected brand that commanded a good premium.
• Its tagline is , “It’s more than just oil, it’s liquid engineering.

12. Competition

13.  The Indian automotive lubricants market was largely price-sensitive.
 Changes in engine design and newer technology meant that the oil
sump sizes were getting smaller, and the periods between oil changes
were longer.
 The market had more than 22 large and small manufacturers,
represented by a mix of public sector undertakings
a) 3 PSUs like : Indian Oil Corporation Limited, Bharat Petroleum
Corporation Limited, and Hindustan Petroleum Corporation Limited
b) multinational lubricant companies like Shell, Gulf, Valvoline and Elf.
c) Other local manufacturers.

14.  Castrol faced a growing threat from “genuine oils.”
 For example:
a) some motorcycle manufacturers, such as Hero Honda Motors, packaged
engine oils under their brand name e.g., Hero Honda 4T.
 Which they sold through both their own dealerships and the bazaar trade.
 Technological innovations enabled Castrol to maintain its leadership in the
four-stroke category; strong sales and marketing initiatives ensured its success
in the after-market.

15. Behavior of Motorcycle
Consumer

16.  During the vehicle’s warranty period that is 18 to 24 months,
consumers visited motorcycle dealerships, or franchised workshops ,
for warranty benefits provided by the manufacturers.
 Once the warranty period was over, these bikes entered the after-
warranty market, or after-market.
 Consumers had previously chosen to buy the oil of their choice and
take it to their preferred mechanic for service,
 Now they were now more likely to take the bike directly to the
mechanic’s shop and trust the mechanic to use the right oil.
 Rai called this change in behavior a move “from shop to workshop.”

17.  The factors driving this behavioral change were:
a) Trust
b) Convenience
c) personal attention from the mechanic - who was seen as a credible source of
information for recommending the right oil for the bike
 These mechanics were called non-franchised workshops (NFW).

18. DISTRIBUTION IN
THE INDUSTRY

19.  Apart from the bazaar trade, FWs were a critical distribution channel in the
Indian automotive lubricants market.
 Due to growing competition, an association with original equipment
manufacturers was becoming important.
 In recent years, all the major motorcycle manufacturers were expanding their
service network into Tier 2 and Tier 3 towns through authorized service centers.
 The sales of lubricants through the bazaar or high street channel had
transformed the Indian automotive lubricants market into a fast-moving
consumer goods sector.
 PSU companies also sold products through their own widespread network of
forecourts.

20.  Therefore, lubricants were sold broadly through three different channels:
a) FWs
b) Forecourts
c) Bazaars
 The bazaar trade was the most profitable distribution channel.
 It consisted of spare parts shops, dedicated oil shops, and mechanic workshops
or NFWs.

21. Castrol’s Current
Channels of Distribution

22.  Castrol marketed its products mainly through the bazaar channel using
distributors and retailers.
 It dominated the retail lubricant market with access to more than 70,000 retail
outlets.
 All factors indicated that Castrol four-stroke oil was the fastest moving brand and
the preferred choice of consumers, despite its price premium of 15–18 per cent
over the competition.
 This positioning was also corroborated by market research data, which indicated
that for every 10 bottles of MCO 4T oil sold, two bottles were Castrol products.
 Competition was highly fragmented, with many different brands competing in
various different markets.

23. PROJECT TEAM’S
FINDINGS

24.  To initiate the problem investigation, the team divided the country geographically
into four sections based on population statistics:
 Greater than 5 million people (the top eight metropolitan areas)
 5 million to 1 million
 1 million to 500,000
 Less than 500,000
 In each category, they looked at some sample towns and conducted a distribution
analysis for the following services:
a) Motorcycle spare part and accessory shops
b) Oil shops
c) Motorcycle NFWs

25.  The team drew three key inferences:
a) There was low coverage across key after-market channels.
b) The gap was larger in the towns with lower population.
c) The last category afforded great potential.

26. Non Franchised
Workshop Classification

27.  A study of NFWs classify them into three segments:
a) The first segment consisted of mechanics workshops that stocked and sold
lubricants. This segment was very small. Contributed 30 per cent of the oil
changes. They had developed a high level of skill through years of experience
and were trusted by consumers to conduct major jobs on their bikes. These
mechanics commanded a premium price for their services, and customers
never questioned their abilities.
b) The second segment constituted mechanics who had worked at the franchised
workshops and were ready to set up their own business. They were highly
skilled but short on finances, and were looking for financial support. This
category accounted for 40 per cent of mechanics and 50 per cent of oil
changes.
c) The third segment included mechanics who were approached for small jobs.
Consumers would trust them with minor issues such as clutch wire changes and
brake adjustments. They comprised 50 per cent of the mechanic base.

28.  Customers approaching the first two categories of NFWs would often clarify the
issue with the bicycle, after which the mechanic would perform a test drive and
provide an estimate of costs.
 They'd leave the bicycle with the mechanic, who they'd trust to use the right oil
selection.
 The mechanics would purchase the item for a tiny discount on the working
price of the market7 and charge the client up to maximum retail price.
 There was no doubt that the stock-and-sell mechanic offered lubricant
businesses a wonderful opportunity to increase their brand visibility and
advocacy.

29. NFW Buying Behaviour

30.  A deeper study of NFWs' purchasing habits showed that the pattern of
consumption of lubricant for consumers was erratic.
 There have been times with very few requests for changes in oil and
other times with a rush for immediate service from consumers. A
distributor regularly served mechanical store-and-sell shops.
 However, for a few reasons, mechanic shops in the second category
were hesitant to store oil products. They were concerned that their
customers would ask for credit for the MCO's cost, and were reluctant
to burden their existing suppliers of spare parts with more requests.

31.  Supplying directly to NFW mechanics was a significant challenge for
retailers as they lacked a fundamental knowledge of cash flows and
payment cycles unlike typical shopkeepers.
 If credit were extended to these mechanical shops, it is likely that the
available cash would be spent on daily needs. In order to provide a
sustainable service to this segment of mechanical stores, the Castrol
project team recognized several actions linked to concentrate, region
and company size and local service.

32. THE
CHALLENGE

33. • In 2005, the total market for MCO 4T was 76 million litres, and was slated to grow at a
compound annual growth rate of 23 per cent. This growth would be spearheaded by the after-
market channel, which was growing at a rate of 27 per cent, considerably higher than the
market’s rate.
MARKET POTENTIAL FORECAST OF FOUR-STROKE OILS IN INDIA
Channel
Four‐Stroke Oil Market in 2005
(in millions of litres)
Four‐stroke Oil Market Potential in
2010
(in millions of litres)
CAGR %
Franchised Workshops 30 65 17
After Market:
Spare Part Outlets 22 90 33
Oil Shops 16 25 9
Non‐Franchised
Workshops 8 30 30
Total 76 210 23

34. • Castrol had approximately 16 per cent coverage in the after-market with
maximum penetration in the oil outlets . It was evident that Castrol’s opportunity
to tap the potential to sell MCOs could come from spare parts shops and NFWs.
MARKET COVERAGE OF CASTROL’S FOUR-STROKE OIL IN INDIA, 2005
•
Channel
Outlet
Universe
Outlets
Selling
CastrolOil
Coverage (%)
Four‐Stroke
Oil Market
Potential in
2005
(inmillionsof
litres)
Castrol’s
Four‐Stroke
Oil Sales
(in million of
litres)
Potential
Tapped
Franchised
Workshops 4,500 665 14.8 30 3.54 11.8
After Market:
Spare Part Outlets 38,000 6,235 16.4 22 3.6 16.4
Oil Shops 14,500 4,411 30.4 16 3.9 24.4
Non‐Franchised
Workshops 20,000 1,267 6.3 8 0.85 10.6
Total 77,000 12,578 N/A 76 11.89 N/A

35. Channel
Four-Stroke Oil Sales in
2005 (in million of litres) Channel Share (2005)
%
Projected Four- Stroke Oil
Sales in 2010
(in millions of litres)
Channel Share (2010)
%
Franchised
Workshops
3.54 29.8 11 17.5
After Market:
Spare Parts
Outlets
3.6 30.3 24 38.1
Oil Shops 3.9 32.8 13 20.6
Non-
Franchised
Workshops
0.85 7.1 15 23.8
Total 11.89 100 63 100
CASTROL INDIA’S CHANNEL EVALUATION—CURRENT VERSUS FUTURE SHARES

36. • Rai contemplated that to generate interest from distributors and the sales team, it was
important to develop a critical mass for the MCO business. One way was to grow organically,
which would lead to an increase in the two-wheeler market share to approximately 24 per
cent. However, disproportionate growth would also be a consideration, with a goal for a 30 per
cent market share in the MCO market in the next five years. This would mean benchmarking
with its champion brand, CRB, which commanded a 30 per cent market share and had virtually
ruled the diesel engine oil market for more than 20 years. In comparison, Activ 4T was barely
six years old.
• Rai’s keen understanding of the market gave him the confidence to push his team to expand
the coverage of the spare parts and oil shops because distributors were comfortable dealing
with Castrol. Further, by focusing trade promotions, sales incentives plans, and marketing
support, he could potentially reach a 24 per cent market share. How could the remaining 6 per
cent of the market share be achieved? Could the NFWs help Castrol achieve this gap, or was
this disproportionate growth even possible? It was clear that there was a great opportunity to
get NFWs to stock, display, and sell Castrol. Consumer behaviour was said to be moving “from
shop to workshop.” If this was true, the potential benefits of a first-mover advantage were
immense.
• He recalled his conversation with a Castrol distributor who had doubts. The distributor was
aghast at the suggestion that the company was expecting him to distribute to these outlets:

37. • They were already buying Castrol from the nearby dealer, so the sale would drop
from those counters. Most of these mechanics were unauthorized and could
close shop any day. Since they buy on credit, it would mean a big risk to them.
Also they were highly scattered and in remote locations, so the delivery costs
would rise phenomenally. And imagine delivering such small quantities every day.

38. THANK YOU