SALE & DISTRIBUTION MANAGEMENT END TERM PROJECT ON
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DR AMIT JAIN (140701008)
SHARDA PRASANA PAREDA RAHUL KUMAWAT (14070101) SHREYANSH SHREYANSH JAIN (1407010!") SOURABH SA#ENA (140701041)
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 !"#$ holds %09&' e(uity of Castrol India Limited Castrol India manufactures and markets both, automotive and industrial lubricants Castrol India is the &nd largest manufacturer of automotive and industrial lubricants in the Indian lubricant market and owns around &&' market share in the overall Indian lubricant market Castrol India is a part of the )P *roup and operates in more than + countries
Product Mix
Castrol markets its automotive lubricants under two brands - Castrol and )P Castrol India en.oys market leadership in passenger car engine oils, premium &-stroke and /-stroke oils, and multi-grade diesel engine oils Castrol India Ltd has manufacturing plants that are meticulously networked with &%0 distributors, serving over %0,000 retail outlets urther, it is also e(uipped with a state-of-the-art plant in 2ilvassa 3s the leading lubricant-manufacturing 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
4he product lines of Castrol India include the following - Industrial - 4he full range of Castrol metal working fluids, cleaners, corrosion preventives and lubricants 5arine - Cylinder oils-crosshead, crankcase oils-crosshead, truck piston engine oils, hydraulic coils, 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 around0 high selling products 4here is a product Line of %-6 2#" for each product
High performance Products
Castrol India is also involved with motor sports both, at the international and national level 3t the international level, Castrol partners )57 7illiams 1 team as well as other )57 5otorsports and it also hosts the famous 8akar ally urther, the company also provides technical assistance on the race track and in test events urthermore, it is a worldwide strategic lubricants partner for automobile giants like :aguar Cars Ltd, Land over, ;olvo Car Corporation, and 3ston 5artin In India, Castrol has a ma.or presence due to an e
5$ for Castrol Industry Overview
India is the fifth largest finished lubricant market in the world with estimated revenues of s1&0 billion in &006 4ill 1991, the Indian government regulated the lubricant market 4he four state owned refining and marketing companies ? Indian =il Corporation !I=C$, )harat Petroleum Corporation !)PCL$, @industan Petroleum Corporation !@PCL$ and I)P !now part of I=C$ dominated the market 4he lack of availability of key raw material !base oil$ and high import duties restricted private players 4he only ma.or private players were Castrol !now part of )P$, 4ide 7ater !;eedol$ 3fter reforms in 1991, the opening of the lubricants market attracted a large number of foreign and domestic players 7hilst there are no restrictions on foreign lubricant manufacturers from establishing 100'-owned operations in India, many chose to partner with local companies 5obil, ><lf, 5otul, PennAoil, >BI - formed .oint ventures with the private sector groups 4he market is largely price sensitive and volume growth in lubricant demand has decelerated in recent times due to lower =>5 sales, and a decline in replacement sales due to longer life of lubricants and better engine technology resulting in longer drain cycles 4he lubricant industry in India caters to two distinct segments automobile users and a wide range of industrial customers 3utomobile lubricant sales account for 0' of the total lubricant market while the industrial segment accounts for the remaining /0' 4he market is has over 0 big and small manufacturers Intense competition has led to an increase in
marketing efforts of lubricant players 4his includes advertising, brand building, customer service, and introduction of high (uality products Political factors
7ith the distribution D canaliAation of base oil import being controlled by the *overnment of India, the P2" =il Companies controlled 90' of the market share 4here canaliAation of the lube base oil imports in 199 by the *ovt of India followed by reduction of import duty on lube base oils from 6+' to 0' and gradual scrapping of administered pricing observed the announcement of almost a new lube venture every month during 199/ Economical factors
3fter reforms in 1991, there are no restrictions on foreign lubricant manufacturers from establishing 100'-owned operations in India >ntry barriers were nil down 4his was a green signal to attract a large number of foreign and domestic players 5ost of the new entrants formed associations with Indian companies both in the Private D Public sectors 4hese are each one of the vast contingent of &&5ultinationals and a total of 60 big D small players are vying for a pie of s+,+00 Crore market 7orldwide established brands, some of them albeit new to India, like 2hell, 5obil, Calte<, >lf, PennAoil are fighting it out with established Indian brands like 2>;= D others to establish their foothold in the th largest lubricant market in the 7orld echnological factors
>ngine technology must respond to stringent emission regulations being legislated globally 5odern engine and engine oil technologies often result in longer oil change intervals, which, in turn, results in less oil top-ups )ut 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
!elling !trategy
3ccording to 3C Bielsen )rand 4racker, the Castrol master brand en.oys an unprompted brand awareness of 9& per cent among consumers
CastrolEs branding has an enduring appeal because the company chooses all routes to market to take the message to the consumer 4ake advertising, for instance )e it sponsorship of @onda 2uper bikes or appointing 2port star, 2achin 4endulkar as a brand ambassador, the company tries to create loyalty among consumers who are concerned about performance and delivery )ut this industry, the real battle for brand visibility is fought not .ust on the advertising and promotion mat, it is fought also in the open corridors of trade marketing 3 big part of the promotional spending of the public sector lubricant makers goes into trade promotions and price support mechanisms 2o the absolute spend could be much higher =n 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 e
Market !egment
4he marketing channels for automotive lubricants in India consist of the following o o o o o o o o
Petrol 2tations 7holesale 8istributors Lube =il 2hops 3uto 2pare 2hops 3uthoriAed 2ervice 2tations *arages ural D 3gricultural dealers 2uper 5arkets
5arket buying 4rend 4ill recently, the Indian consumers linked filling of lubricants to that of petrol D diesel in petrol stations 7ith the advent of deregulated market scenario D fierce competition, efforts are being made to position lubricant as high involvement consumer goods @ence, the resultant drift towards the baAaar trade ie, outside the petrol stations 4he sales of automotive lubricants through baAaar trade increased from a mere 10' prior to 199 to a handsome present level of /0' compared to 7orldwide 4rend of more than %0'In the developed 7orld, because of high degree of customer sensitivity D awareness, 8o-it-Fourself
!8IF$ concept has evolved for filling of engine oil People buy from super markets D fill it themselves In India, this .ob is still left to the mechanics D service stations 8uring these years this shift in trade had the following effectsG o o o o o
8ecline in 5arket 2hare of P2" oil companies 5arket became heavily crowded D the industry got transformed into 5C* 8umping of products in the baAaar 7ar of trade discounts resulting in rice war D lesser margins for dealers >ntry of spurious lubricants
Consumers "eed
Consumer need for lubricant is safety, insurance leet owners preferred the CastrolEs engine oil despite a marginal price premium, because of better (uality, ie lubricant with insurance, although around one third of the engine oil is purchased by drivers while on the road 3 large portion of targeted segment, ie 4ruck drivers are not well educated D are unaware of various insurance schemes 4ruck drivers were very worried for their family, in case if they meet an accident Castrol launched Castrol H2uraksha Fo.na accidental insurance policy with the purchase of Castrol 8iesel 2uper 4he scheme was e
#istri$ution "etwork
Castrol has a nationwide network of &%0 distributors who service over %0,000 outlets 5oreover, the company set up the Castrol authoriAed 2ervice 3ssociates network in &00%4oday, the network is /00-strong and it services over 1&,000 independent mechanic workshops )ike Jone, a multi-brand two-wheeler service centre initiative launched in &00+, was another strategic step It is a franchise initiative 4his !)ike Jone$ strategy is about preparing for tomorrowEs growth 5ost of the sales in the last five or si< years have come from select cities In the future, growth is going to come from 4ier & and cities as well as rural areas 4he two ma.or marketing channels for automotive lubricants areG o o
4he original e(uipment manufacturers !=>5s$ etail trade
8istribution Channel =>5s 3utomobile =>5s and industrial lubricant customers are laying more emphasis on customer service besides testing performance of lubricants while entering into long-term purchase agreements 8istribution Channel etail Petrol pumps form a ma.or distribution channel in retail trade @owever sales of lubricants through retail outlets have been increasing 7hile the state owned oil marketing companies
can sell through their own nationwide network of 0,000 petrol stations, private manufacturers have to use the retail route consisting of auto spare stores, garages, authoriAed service stations, super markets and agricultural dealers Channel !tructure of Castrol
CASTROL
COMMERCIA L
INDUSTRIAL
#CSP
DISTRIBUTO R
ISP
AGENT
DISTRIBUTO R
AUTOMOTI$ E
WORKSHOP
DISTRIBUTO R
COMPANY
COMMERCIA L AGENT
RETAILER
SMALL RETAILER
%arage #istri$utor for &uto OEM! ' (etails )*ttar Pradesh+
*argi distributors Lucknow D )arabanki area for auto companies =>5, 7hole sellers, retailers, workshop D =>52 4hey have one ware house D average inventory stored is around &1 days 8istributor is having 6 temporary D one company roll one sales manager D two .unior e
@e serves entire "P e
Margin !tructure ' Credit erms
8istributor owns the stock D responsible for sale, company has changed its focus from customer care centre model to retail distribution centre model company provides special incentives to dealers for e5 distributors Industrial distributorEs margin is to +', while other distributorsE margin is %-6'etailers are given 1+ to &0 days with cash support system D margin for retailers is 10 to1+' Price is constant across pan India
,ogistics
Castrol uses eP system 8istributors also use internet, mobile D fa< for taking remote orders =ne regional manager is appointed per region, one distribution e
MANU%ACTURIN G UNIT (M&'*+S*,-. )
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(etail #istri$ution -low
%ACTORY
CDC
C&%A
DISTRIBUT OR
DEALER
SUB5 DEALER
DISTRIBUT OR
WORKSHO P OR RETAILER
C8CG C=B2=LI834>8 8I24I)"4I=B C=P=34I=B 2ub 8ealers D CK3 agent depending on the volume handled in particular Aone, mostly they are appointed in west Aone
Organi.ation !tructure of Castrol India
;ice-presidents are at each regional level !Borth, 2outh, >ast, 7est$ Bumber of 3rea 2ales 5anagers depends on the volume of business
$P6AUTOMOTI$ E
GM5 MARKETING
AREA SALES MANAGER
DEPUTY MANAGER
GM5 SALES
ASSISTANT MANAGER
GM5 SALES6OPERATI ONS
SENIOR E#ECUTI$E
E#ECUTI$E
DISTRIBITORS SALES %ORCE
Institutional !ales at Castrol
Castrol does some institutional sales too 2ome of Institutional customers like LD4, )@>L are dealt by company directly through third party logistics 2ales hierarchy is headed by Institutional ;P, national account manager reports to Institutional ;P D subse(uently regional manager, area manager D senior e
!ales -orce Management o o o o o o o
o
eferrals are the primary source of candidates for recruitment "se of e
!ales -orce Evaluation o o
o
o
o
Point based evaluation scheme for sales force /0' weight age is given to ;olume of sales, *ross margin per liter, total revenue generated from territory 0' weight age is given to sales process, new business lead generation, @22> enforcement D adherence 1+0 point based scheme is followed 2coring 1&0 points ensures 100 ' variable pay @igh performers can earn 1&+-1+0' variable pay 2ales manager promotion is decided on innovation, creativity !managing channel conflict$, business practices, leadership (ualities D team work
Best Practices at Castrol
Less sales pressure compared with other competitors o @igher emphasis on selling process o Castrol academy for online sales forces training o 2ale accounted for only after goods actually leave the CD3 Castrol academy, the knowledge centre for both the company, and its distribution partner helps deliver value and act as a motivator 4racking of purchase order and invoice o C5 for industrial customers o o
o
Channel Promotion Partnership Model
3mong the marketing channel adopted as part of tie-ups, Castrol India Ltd entered in astrategic agreement as followsG •
4ie-up with >scorts !3utomotive =>5$, for e
o
o
o
•
4ie-up with >ssar =il Ltd , for sale of Castrol lubricants through >ssar =il uel outlets throughout the country o
o
o
•
3s per the agreement signed in &00/, Castrol India Ltd developed and launched MCastrol 4ractorma< PowerE, diesel-engine oil escorts tractors Castrol 4ractoma< Power is the only engine oil to be recommended by >scorts for use in their tractors namely arm 4rac, Power 4rac and >scort It also carries an on-pack endorsement from >scorts 4he product is available through the &+00 >scorts outlets including their franchise dealers, spare part distributors and authoriAed service centers
4his tie-up allows Castrol to have access to an additional distribution channel through >ssarEs fuel forecourts across the country while >ssar is able to offer premium (uality international lubricants to its customers 4he agreement is especially aimed at scooter owners, who earlier did not have access to Castrol lubricants at petrol forecourts 4his tie-up also increases Castrol productsE availability along the highways 3s per agreement, >ssar etail outlets are serviced by authoriAed Castrol distributors 4he tie up uses the promotion synergy of both companies, through highway promotion vans, mechanic and fleet ownersE meets to the mutual benefit of both companies
4ie-up with 5ahindra 4ractors,!another e5 tie-up$, to supply diesel engine oils for their tractors o
o
o
3s per the agreement, Castrol manufactures and supplies a specially formulated diesel engine oil for use in 5ahindra tractors 4he diesel engine oil is called Castrol C) Prima is a variant of Castrol C) Plus ? market leader in the multi- grade diesel engine oil segment C) Prima is e
Source: Castrol India website Promotional Budget
4hough smaller in siAe than its public sector rivals, CastrolEs advertising and promotion budgets are comparable @industan Petroleum, for e
could be much higher =n its part, Castrol uses trade management another strong marketing tool not only to build brand visibility but also to effectively implement inventory, pricing and market e
4he company set up the Castrol 3uthorised 2ervice 3ssociates network in &00% 4oday, the network is /00-strong and it services over 1&,000 independent mechanic workshops
•
)ike Jone, a multi-brand two-wheeler service centre initiative launched in &00+, was another strategic step It is a franchise initiative 4his !)ike Jone$ strategy is about preparing for tomorrowEs growth 5ost of the sales in the last five or si< years have come from select cities In the future, growth is going to come from 4ier & and cities as well as rural areas Source: CiteMan Network (www.citeman.com)
Channel Promotion !chemes
2ome of the channel promotion schemes, which the company follows globall y, are as followsG Castrol inancial assistance program G Includes >(uipment Loans and Payback loans for Lube center needs Castrol Customer etention programG Includes MPunch-a-deal loyaltyE programs, • which allows channel member to design customiAed loyalty products Castrol 5arketing programs G 4his includes providing • )usiness Intelligence studiesK data , that allow the Lube centers to better o understand the local market Imaging Programs G provides channel partner assistance in all their o branding needs through CastrolEs signage partner 5a<-pro warrantyG Company sponsored free limited warranty o o 5edia )uilderG web-access to software solution for designing various newspaper advertisements, flyers , coupon sheets and direct mail pieces o Payment programG a P=2 retail processing solution for all Lube centers o ;endor alliancesG In select countries, vendor relations with following companies to help dealership customers with respective servicesG Clore-automotiveG Coolant drain and flush rey-moss G 5odular oil change building shipped and installed Integrated 2ervices Inc ComputeriAed 5anagement Information systems -ocus areas for Castrol India •
Castrol India has a simplified organiAation !through recent reorganiAations$ which is performance-driven It has reorganiAed its sales and marketing force with a customer-centric focus 4he company has formed three groupsG retail specialists to focus on retail trade, workshop specialists to serve large workshops and institutional specialist to focus on key
customer accounts 4he company identifies the development of leadership capability as a key focus area, and lays emphasis on leadership behaviours and its integration with all people processes 3 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 7ith regard to its 2ales force, building the capability of frontline sales force and development of front line leadership continues to be a priority Castrol has embarked upon a number of initiatives to improve the CompanyEs brand as an employer so as to attract and retain talent and to realiAe its vision of making Castrol a great place to work In recent years, the Castrol India has received the @ >mployer )rand award in the =il and *as !Private sector$ sector in the egional ound, from the >mployer )randing Institute, Pune raining and #evelopment
4he company has a number of structured interventions that are in place to support the agenda of training and leadership development 4he Castrol global leadership framework focuses on ;aluing >nergiAing People, acting decisively and delivering results 4here is a structured capability building agenda that is linked to technical and core competencies 4he opportunities for training and learning range from on .ob assignments, pro.ect roles, learning fairs, class room training, coaching and mentoring to develop special skills, elearning ,shadow stints 4hese are offered in combination based on the capability that needs to be developed 4he company invests hugely in identifying potential leaders through processes of HPersonal 8evelopment Plans, and H2elf 3dvocacy orums and then developing them through >L !>merging Leaders$ and Career 3dvancement Programs !C3Ps$4hese programs are completely structured and range from customiAed classroom programs, long duration integrated training programs, .ob enrichment opportunities, mentoring program Castrol has also embarked upon an ambitious mechanic training programme - >klavya, aimed at large scale training to enhance technical capability of independent mechanics 4o date, the company has trained over &0,000 mechanics (ecruitment
=nce recruited, the company has holistic induction programmes, focusing on the specific needs of the individuals and businessesKfunctions It ensures that the new .oiners feel comfortable and are included in the organiAation as fast as possible In addition to hiring e
>mployees get a competitive compensation package that includes salary, allowances, bonuses, share plans and health and retirement provisions as well as other benefits 4he package structure is designed to attract and retain the highest (uality employees to help
maintain success as a business and to encourage employees to continually develop their skills and enhance their contribution >mployees undergo an annual salary review to ensure that it remains competitive 4his is done by comparing it with current levels of pay in the market and peers 4he top-performers are differentiated on rewards 4he company rewards top performance with a 4otal eward program that tops in the industry =ther than the retiral benefits mentioned above, the company has some employee-friendly and progressive benefit offers le
Health and !afety
Castrol maintains high levels for @ealth, 2afety, 2ecurity and >nvironment !@22>$ performance It makes sure that all employees, contractors and others connected with the company are well informed, well trained, engaged and committed to the @2> improvement process through several initiatives throughout the year like 2afe to *oOO, *o *reenOO, 4 &0challenge and poster campaigns Compliance to environmental laws and regulatory standards on a worldwide basis is taken seriously 4he @22> stated goals areG • • •
no accidents no harm to people no damage to the environment
4he companyEs road safety program has been successfully running for the past several years and is now recogniAed as the benchmark on road safety initiatives in India It has a driving behaviour monitoring program in place for all its drivers including third-party contractors 4his has greatly helped improve the driving behaviour and in turn has positively impacted the companyEs road safety performance 4his and other road s afety programs undertaken have been recogniAed environmental 5anagement 2ystem !I2= 1/001$ and =ccupational @ealth D 2afety 5anagement 2ystem !=@232 16001$ 4he systems have been certified by accredited bodies recogniAed internationally Castrol is now putting in place the )P =perating 5anagement 2ystem !=52$ as an enabler for better safety performance Product Management
Castrol India has changed from a HCompany depot K Consignment 2tockist -7holesaleretailer to a H8istributor channel system 4he company reaches its consumers through a distribution network of &%0 distributors, servicing over %0,000 retail outlets )roadly, & segments are targetedG • •
4he retailer automotive lubricants market Industrial lubricants
Castrol commands strong brand e(uity and brand loyalty towards its lubricants and some of its well-known brands include *4, *4 5agnatec, 3ctiv /4, 2uper 44, C), 2uperma< and )P ;anellus 5any of these are leaders in their segments Castrol has focused on brand driven consumer focused marketing strategy 4he key to loyalty is strong and lasting relationships with customers Pricing !trategy/ Premium
Castrol has offered superior customer value propositions in terms of product (uality with relevant consumer benefits and therefore prices the products at a premium-to-market It has also pioneered new distribution systems to make products easily available to consumers 4his is to ensure that consumers see Castrol products as good value for money CastrolEs main competitors are the P2"Es such as Indian =il, )PCL etc )ecause the longer drain times, and evolution of more sophisticated engines demand for lubricants has declined 3 shrinking market and competition have made price undercutting the common strategy, both in automotive and industrial lubricant segments 4he 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 e
-uture Challenges • •
• •
• •
Intensifying brand competition from other players in the market )argaining power shift to workshop D service stations, due to change in customer behaviour Castrol less focus on )&) selling =>5Es having high bargaining power for permitting Castrol to be used at authoriAed dealers D service stations of =>5Es Bew channel conflict due to shift in business from retailers to Castrol bike Aone Limited success of C5
-uture 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 @owever, in the future volume growth will be affected because of use of better (uality, long drain lubes 4his 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 *iven the rising competition, success of a product would largely depend how well it is branded and distributed 2ourceG rost D 2ullivan 4hus Castrol India needs to maintain its high brand e(uity along with superior channel management, to keep pace with future trends
