Home / Companies / People /  'Next leg of growth will come from businesses next to lubricants category'

As the auto sector reels under slowdown, the lubricants industry is feeling the pinch too. The automotive lubricants market is expected to grow at a meager pace of 2-3% over the next few years. Castrol sees the current economic slowdown as short-term and will continue to invest in India as it has, over the past two decades. The company has identified three strands of growth strategy, A.S. Ramchander, Vice President- Global Marketing, Castrol, explains. Edited excerpts from an interview:

How do you see the current market for Castrol in India?

When we look at the Indian market from a global perspective, we look at it as a fundamental growth market and our lubricants sales and consumption does not depend on in-year sales of vehicles. For us, the base is substantial. So, in-year fluctuations do not affect our long term potential nor our growth projections. If you see the auto sector, there are a lot of headwinds but the fundamentals of the Indian economy as we see it continue to grow as would personal disposable income. At Castrol, we have considered the India market to be a growth market for nearly two decades so our investment attitude in India will be in that mindset.

So what would be Castrol's investment strategy for India?

While I can't give numbers, there are areas where we will continue to invest. One, in the segment of new product launches and new partnerships, we will not stop expansion because the auto industry is slowing down. We are continuing to invest in advertising, marketing and human resources. Secondly, we will continue to invest in product technology. It might not be physically happening in India as a lot of product development for Castrol happens globally at our technology centres around the world. But we continue to develop for the Indian market and Indian businesses and there is no change in our investment attitude towards that.

India is moving to BS 6 next April plus there is the advent of electric vehicles. Has Castrol factored these changes in, in its growth strategy?

We have an equivalent of Bharat 6 in Europe as Euro 6. Across the world, countries move to different fuel norms so these products have already been developed and implemented. We have product formulations and technology. It is just a question of getting the local production done, the label on and moving it to implementation. Castrol has already launched its product range for BS 6 in India this June. Besides, we have a stance that we will defend our market share in all the key participating segments that we are in. And that has two implications. One, that we will constantly keep upgrading our value proposition and offers in the market space to hold on to our pricing and premiums and defend our margins. At the same time if we have to fight the battle for market share we will fight that in these segments. So in the light of the automotive slowdown, our business is still based on the vehicle population going forward. If anything, we have gained market share in the Indian business as per the latest Nielsen data in any of the business we are participating in and our profitability is not violently negatively impacted. In retail, we are about 18%. A leading indicator of performance is that of the top 13 automotive markets in the world, the Castrol brand is number 1 in the top 10 markets and in the rest of the markets we are number 2.

What would be Castrol's focus going forward-- core lubes or engine oil?

By and large, our strategy is to focus on personal mobility. For India, it is a lot of emphasis on motorcycle category which continues to grow in addition to the fast-growing scooter category. And of course, the emerging passenger car category and I am saying emerging because in the global context, India is still an emerging vehicle market and we see huge growth opportunity in that space subject to infrastructure etc catching up. So these two will continue to be the focus of our core business going forward both in terms of investments, marketing support, resource allocation and product technology, everything.

So which segment does Castrol see its next leg of expansion and growth in?

Well, we have basically three strands of growth strategy. First is cars and bikes which we call our growth segment. We will continue to invest in these segments. The second element of growth where actually India is quite strong is what we call as widening the portfolio and in that context, we talk about two market spaces or two segments. One is the commercial vehicle segment where we are very strong and the industrial segment (industrial manufacturing activity consumes a lot of fluids) and that is an area where we will aggressively grow in the next five to 10 years time through targetted technology and people investment.

The third element of the strategy is about investing in carefully chosen adjacent market spaces which is slightly beyond the lubricant category where we will try and create the second or third leg of growth for Castrol. Basically, businesses next to the lubricants category. A classic example would be car care fluids we don't exist in that today but by expanding the footprint of our brand in that category, it could provide reliable third leg of growth not only in India but around the world. We are also exploring other adjacent segments beyong car care fluids. And that is the sort of thing which would be fuelling the Castrol growth for the next few decades for us.

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