SALE & DISTRIBUTION

MANAGEMENT
END TERM PROJECT
ON

SUBMITTED TO:

SUBMITTED BY:

DR AMIT JAIN
(140701008)

SHARDA PRASANA PAREDA

RAHUL KUMAWAT (140701012)
SHREYANSH JAIN (140701036)
SOURABH SAXENA (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 (UK) holds 70.92% equity of Castrol India Limited. Castrol India manufactures and
markets both, automotive and industrial lubricants. Castrol India is the 2nd largest
manufacturer of automotive and industrial lubricants in the Indian lubricant market and owns
around 22% market share in the overall Indian lubricant market. Castrol India is a part of the
BP Group and operates in more than 56 countries.

Product Mix
Castrol markets its automotive lubricants under two brands - Castrol and BP. Castrol India
enjoys market leadership in passenger car engine oils, premium 2-stroke and 4-stroke oils,
and multi-grade diesel engine oils. Castrol India Ltd. has 3 manufacturing plants that are
meticulously networked with 270 distributors, serving over 70,000 retail outlets. Further, it is
also equipped with a state-of-the-art plant in Silvassa. As 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

The product lines of Castrol India include the following - Industrial - The full range of
Castrol metal working fluids, cleaners, corrosion preventives and lubricants.
Marine - 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 around30 high selling products. There is a product Line of 7-8 SKU for each
product.

High performance Products

Castrol India is also involved with motor sports both, at the international and national level.
At the international level, Castrol partners BMW Williams F1 team as well as other BMW
Motorsports and it also hosts the famous Dakar Rally. Further, the company also provides
technical assistance on the race track and in test events.
Furthermore, it is a worldwide strategic lubricants partner for automobile giants like Jaguar
Cars Ltd., Land Rover, Volvo Car Corporation, and Aston Martin. In India, Castrol has a
major presence due to an extensive network of dealers. Apart from this, the company has also
entered into strategic tie-ups with companies like Tata Cummins, Godrej, ITC, and Reliance
who act as original equipment manufacturers (OEM) for Castrol.
Industry Overview
India 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
four state owned refining and marketing companies Indian Oil Corporation (IOC), Bharat
Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL) and IBP (now
part of IOC) dominated the market. The lack of availability of key raw material (base oil) and
high import duties restricted private players. The only major private players were Castrol
(now part of BP), Tide Water (Veedol).
After reforms in 1991, the opening of the lubricants market attracted a large number of
foreign and domestic players. Whilst there are no restrictions on foreign lubricant
manufacturers from establishing 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 in order 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. The
market is largely price sensitive and volume growth in lubricant demand has decelerated in
recent times due to lower OEM sales, and a decline in replacement sales due to longer 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 a wide
range of industrial customers. Automobile lubricant sales account for 60% of the total
lubricant market while the industrial segment accounts for the remaining 40%. The market is
has over 30 big and small manufacturers. Intense competition has led to an increase in

marketing efforts of lubricant players. This includes advertising, brand building, customer
service, and introduction of high quality products.
Political factors
With the distribution & canalization of base oil import being controlled by the Government
of India, the PSU Oil Companies controlled 90% of the market share. There canalization of
the lube base oil imports in 1993 by the Govt. of India followed by reduction of import duty
on lube base oils from 85% to 30% and gradual scrapping of administered pricing observed
the announcement of almost a new lube venture every month during 1994.
Economical factors
After reforms in 1991, there are no restrictions on foreign lubricant manufacturers from
establishing 100%-owned operations in India. Entry barriers were nil down. This was a green
signal to attract a large number of foreign and domestic players. Most of the new entrants
formed associations with Indian companies both in the Private & Public sectors. These are
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 their foothold in the 6th largest lubricant market in the World.
Technological factors
Engine technology must respond to stringent emission regulations being legislated globally.
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 technology
upgrades. It has been launching four or five products every year to keep pace with changing
technology, emission norms and consumer needs.

Selling Strategy
According to AC Nielsen Brand Tracker, the Castrol master brand enjoys an unprompted
brand awareness of 92 per cent among consumers

Castrols 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 Sport star, Sachin Tendulkar as a brand ambassador, the
company tries to create loyalty among consumers who are concerned about performance and
delivery.
But this industry, the real battle for brand visibility is fought not just on the advertising and
promotion mat, it is fought also in the open corridors of trade marketing. A big part of the
promotional spending of the public sector lubricant makers goes into trade promotions and
price support mechanisms. So the absolute spend could be much higher. On 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 expansion initiatives.

Market Segment
The marketing channels for automotive lubricants in India consist of the following
o
o
o
o
o
o
o
o

Petrol Stations
Wholesale Distributors
Lube Oil Shops
Auto Spare Shops
Authorized Service Stations
Garages
Rural & Agricultural dealers
Super Markets.

Market buying Trend

Till recently, the Indian consumers linked filling of lubricants to that of petrol & diesel in
petrol stations. With the advent of deregulated market scenario & fierce competition, efforts
are being made to position lubricant as high involvement consumer goods. Hence, the
resultant drift towards the bazaar trade i.e., outside the petrol stations. The sales of
automotive lubricants through bazaar trade increased from a mere 10% prior to 1993 to a
handsome present 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 has evolved for filling of engine oil. People buy from super markets & fill it
themselves. In India, this job is still left to the mechanics & service stations.
During these years this shift in trade had the following effects:
o
o
o
o
o

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 Need
Consumer need for lubricant is safety, insurance. Fleet owners preferred the Castrols engine
oil despite 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.
A large portion of targeted segment, i.e. Truck drivers are not well educated & are unaware
of various insurance schemes. Truck drivers were very worried for their family, in case if they
meet an accident. Castrol launched Castrol Suraksha Yojna accidental insurance policy
with the purchase of Castrol Diesel Super. The scheme was extremely successful. The target
in terms of participation was exceeded by 30% by the drivers & market share increased by
10%.

Distribution Network
Castrol 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 another strategic step. It is a franchise initiative. This (Bike Zone) strategy is about
preparing for tomorrows 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:
o
o

The original equipment manufacturers (OEMs)

Retail trade.

Distribution Channel _OEMs

Automobile OEMs and industrial lubricant customers are laying more emphasis on customer
service besides testing performance of lubricants while entering into long-term purchase
agreements.
Distribution Channel _Retail
Petrol pumps form a major distribution channel in retail trade. However sales of lubricants
through retail outlets have been increasing. While the state owned oil marketing companies

can sell through their own nationwide network of 30,000 petrol stations, private
manufacturers have to use the retail route consisting of auto spare stores, garages, authorized
service stations, super markets and agricultural dealers.
Channel Structure of Castrol
CASTROL

COMMERCIA
L

INDUSTRIAL

XCSP

DISTRIBUTO
R

ISP

AGENT

DISTRIBUTO
R

AUTOMOTIV
E

WORKSHOP

DISTRIBUTO
R

COMPANY

COMMERCIA
L AGENT

RETAILER

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 temporary & 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 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.

Margin Structure & Credit Terms

Distributor owns the stock & 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 excellent customer service based on assessment. Laptop provided to
sales people based on exceptional performance. Company provides 21 days credit for
industrial distributors, while only 4-5 days for auto/OEM distributors. Industrial distributors
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.

Logistics
Castrol uses extensive automation at distributors end for placing the order, billing, and
accounting, inventory at warehouse & customer details. Total supply chain is integrated end
to end with ERP system. Distributors also use internet, mobile & fax for taking remote
orders. One regional manager is appointed per region, one distribution executive is appointed
for four industrial distributors. Minimum order quantity is 45 barrels for direct dispatch, for
lower quantity dispatch is done from ware house, if distributor orders more than 3000L
transportation is borne by the company. Company uses own transportation/contracted vehicle
facility from factory to distributor. Once consignment is received at distributors end, it is
transferred by distributor owned vehicle or third part logistics. Implementation of IT has
helped company to manage demand & inventory in the channel system.

MANUFACTURIN
G UNIT
(Mumbai/Silvas
a)

WH
Automotive

WH
Industrial

Distributors

Retail Distribution Flow

FACTORY

CDC

C&FA

DISTRIBUT
OR

DEALER

SUBDEALER

DISTRIBUT
OR

WORKSHO
P OR
RETAILER

CDC: CONSOLIDATED DISTRIBUTION CORPORATION

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,AUTOMOTIV
E

GMMARKETING

AREA SALES
MANAGER

DEPUTY
MANAGER

GM- SALES

ASSISTANT
MANAGER

GMSALES,OPERATI
ONS

SENIOR
EXECUTIVE

EXECUTIVE

DISTRIBITORS 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.

Sales Force Management

o
o
o
o
o
o
o
o

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 distributors 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

o
o
o
o
o

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

o
Less sales pressure compared with other competitors.
o
Higher emphasis on selling process
o
Castrol academy for online sales forces training.
o
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.
o
Tracking of purchase order and invoice.
o
CRM for industrial customers.

Channel Promotion
Partnership Model
Among 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.

Tie-up with Essar Oil Ltd , for sale of Castrol lubricants through Essar Oil Fuel
outlets throughout the country.
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.
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.
The product is available through the 2500 Escorts outlets including their
franchise dealers, spare part distributors and authorized service centers.

This tie-up allows Castrol to have access to an additional distribution

channel through Essars fuel forecourts across the country; while Essar is
able to offer premium quality international lubricants to its customers.
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.
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.
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.
CRB Prima is exclusively recommended by Mahindra and carries onpack M&M endorsement. It is available in all M&M authorized
workshops as well as Castrols extensive retail outlet.
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 website

Promotional Budget
Though smaller in size than its public sector rivals, Castrols advertising and promotion
budgets are 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 bigger in 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 trade promotions and price support mechanisms. So the absolute spend

could be much higher. On 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 expansion 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 tomorrows 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 (www.citeman.com)

Channel Promotion Schemes

Some 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 Castrols 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
systems
Focus areas for Castrol India
Castrol India has a simplified organization (through recent reorganizations) which is
performance-driven. It has reorganized its sales and marketing force with a customer-centric
focus. The company has formed three groups: retail specialists to focus on retail trade,
workshop specialists to serve large workshops and institutional specialist to focus on key

customer accounts. The 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.
A 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. With regard to its Sales 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 Companys brand as an
employer so as to attract and retain talent and to 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 companies in recognition of best global practices. The award was instituted by Steel
Authority of India Limited (SAIL) and Indian Institute of Management, Ahmedabad
(IIMA).It has also received the Best Employer Brand award in the Oil and Gas (Private
sector) sector in the Regional Round, from the Employer Branding Institute, Pune.
Training and Development
The company has a number of structured interventions that are in place to support the agenda
of training and leadership development. The Castrol global leadership framework focuses on
Valuing Expertise, Energizing People, acting decisively and delivering results. There is a
structured 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, elearning ,shadow stints. These are offered in combination based on the capability that needs
to be developed.
The company invests hugely in identifying potential leaders through processes of Personal
Development Plans, and Self Advocacy Forums and then developing them through 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.
Recruitment
Once recruited, the company has holistic induction programmes, focusing on the specific
needs of the individuals and businesses/functions. It ensures that the new joiners feel
comfortable and are 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 to apply against the
open positions and get reviewed by a cross-functional selection panel.
Compensation
Employees get a competitive compensation package that includes salary, allowances,
bonuses, share plans and health and retirement provisions as well as other benefits. The
package structure is designed to attract and retain the highest quality employees to help

maintain success as a business and to encourage employees to continually develop their skills
and enhance their contribution. Employees undergo an annual salary review to ensure that it
remains competitive. This is done by comparing it with current levels of pay in the market
and peers. The top-performers are differentiated on rewards. The company rewards top
performance with a Total Reward program that tops in the industry.
Other than the retiral benefits mentioned above, the company has some employee-friendly
and progressive 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. There is a comprehensive health and medical coverage plan. Apart from a
distinguishing group accident cover, Castrol offers domiciliary medical insurance cover, a
competitive hospitalization cover including an annual health check-up offer. Sickness leave is
provided on need basis.

Health and Safety

Castrol maintains high levels for Health, Safety, Security and Environment (HSSE)
performance. It makes sure that all employees, contractors and others connected with the
company are well informed, well trained, engaged and committed to the HSE improvement
process through several initiatives throughout the year like Safe to Go!!, Go Green!!, T
20challenge and poster campaigns. Compliance to environmental laws and regulatory
standards on a worldwide basis is taken seriously. The HSSE stated goals are:

no accidents
no harm to people
no damage to the environment

The companys road safety program has been successfully running for the past several years
and is now recognized 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.
This has greatly helped improve the driving behaviour and in turn has positively impacted the
companys road safety performance. This and other road safety programs undertaken have
been recognized externally, as well as internally within the BP Group. All the blending plants
are certified for Environmental Management System (ISO 14001) and Occupational Health &
Safety Management System (OHSAS 18001). The systems have been certified by accredited
bodies recognized internationally. Castrol is now putting in place the BP Operating
Management System (OMS) as an enabler for better safety performance.
Product Management
Castrol India has changed from a Company depot / Consignment Stockist -WholesalerRetailer to a Distributor channel system. The company reaches its consumers through a
distribution network of 270 distributors, servicing over 70,000 retail outlets.
Broadly, 2 segments are targeted:

The retailer automotive lubricants market

Industrial lubricants

Castrol commands strong brand equity and brand loyalty towards its lubricants and some of
its well-known brands include GTX, GTX Magnatec, Activ 4T, Super TT, CRB, RX
Supermax and BP Vanellus. Many of these are leaders in their segments. Castrol has focused
on brand driven consumer focused marketing strategy. The key to loyalty is strong and lasting
relationships with customers.
Pricing Strategy: Premium
Castrol has offered superior customer value propositions in terms of product quality 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. This
is to ensure that consumers see Castrol products as good value for money.
Castrols main competitors are the PSUs such as Indian Oil, BPCL etc. Because the longer
drain times, and evolution of more sophisticated engines demand for lubricants has declined.
A shrinking market and competition have made price undercutting the common strategy, both
in automotive and industrial lubricant segments. The 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 expenses given the overall size of their businesses.
Castrol has been active on the product innovation front. It has leveraged technology to offer a
range of products, including high-performance synthetic lubricants, giving it an edge over
competition. Strong pricing power has enabled the company, for the most part, to pass
significant 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 looks at
the overall spend, without cutting costs blindly. Castrol is planning to take away those
advertising and promotion costs which may not lead to the development of their brand. For
example, sometimes simplistic price rebates do not reach the end user nor benefit brand
volumes they are just pocketed by middlemen. To ensure high brand equity and brand
visibility Castrol invests significantly towards advertising and promotion. Viewed as per cent
of turnover (five per cent), it is lower than the industry average. Though smaller in size than
its public sector rivals, Castrols advertising and promotion budgets 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 times bigger 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 of
the 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 build
brand visibility but also to effectively implement inventory, pricing and market expansion
initiatives.

Future Challenges

Intensifying brand competition from other players in the market.

Bargaining power shift to workshop & service stations, due to change in customer
behaviour.
Castrol less focus on B2B selling.
OEMs having high bargaining power for permitting Castrol to be used at authorized
dealers & service stations of OEMs.
New channel conflict due to shift in business from retailers to Castrol bike zone.
Limited success of CRM.

Future 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. However, in the future volume growth
will be affected because of use of better quality, long drain lubes. This 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. Given the rising competition, success of a product would
largely depend how well it is branded and distributed.
Source: Frost & Sullivan
Thus Castrol India needs to maintain its high brand equity along with superior channel
management, to keep pace with future trends