CASTROL INDIA LIMITED

AN INNOVATIVE DISTRIBUTION CHANNEL

SUBMITTED BY
GROUP 1, SECTION B
 Macro Environment & Its Impact
•The segments seekers, strivers & Globals are increasing multifold from 2005 to 2025. (Seekers-675%,
Strivers-800%, Globals-1800%)
•As the concerned year is 2006, by then the trend of inflation is declining and GDP is positive. Forex
reserve is quite stagnant. However the impact on Castrol is less. Import & Exchange Rate is also
negatively trended
•Market potential for two wheelers (Castrol’s primary market) is projected 140% increase (Assuming 50
million in 2006)
•Increasing disposable income & Aspiration to own motor-cycles, Increased awareness about
automobile maintenance
•The population of the country is younger. Since lubricants are complementary products of automobiles,
the potential for Castrol is positively trended
•Technological changes adopted by Automobile industry also affecting Castrol positively. And Castrol is
well equipped to make technological advances.
Competitive Environment & Its Impact
•Castrol stands with 20.4% (Market leader of Non PSU’s Oil Companies)
•Though PSU’s have advantage of having forecourts, Castrol was able to top with its distribution
& Marketing efforts through Bazaar & NFWs
•Brand Awareness, Channel Advocacy, & distribution played a major role. Also long existence
from 1920s gave the reliability to distributors.
•Since the demolition of license raj, Big MNCs like Shell, Gulf are coming into play. Adding to the
foray, genuine oils also getting into the market
Consumer Purchase Process for lubricants
After market need for maintenance and Consumer gets to hold of Castrol’s
oil-change of an bike arises after 18-24 product at its very first service at after-
months of warranty period market, at a non-franchised workshop

Biker has the choice of buying engine oil Mechanic buys oil from other shops or
from the market by its own. If not keeps a narrow stock of engine oil for
possible mechanics take the purchase convenience and in that process he is
decision for the consumer able to save Rs 3-5 per oil bottle

Consumer gets his bike serviced at much

Mechanic charges for service and oil (if he
cheaper costs than that in authorized
uses it from his inventory)
service centers
Existing Segments
Minimalists Appreciators Enthusiasts
• Utility seekers • Looking for reliability • Performance seekers
• Looking for money and take good care and want unique
of the bike performance
• Use bike for • Are ready to pay
commute for premium prices
professional and • Aspirational group
personal reasons and keep bike in
good shape
• Has excellent channel relationships • Low coverage across after market
• Has a comprehensive promotion strategy through channels
various media • Cannot manage the volumes
• Has a capable sales force under pressure
• Focusses on volume and value both

Weaknesse
Strengths s

Threats Opportuni
ties

• Changing dynamics of their business world
• Newer technologies cropping up in quick succession
• Giving oil to NFW on credit
• New competition arising every year
• Can focus on growth through partnerships
• Can afford a being a little lax in exchange
control
• Can shift from selling products to offering
services
Channels of distribution of lubricants
Direct Channels
◦ Forecourt: Petrol Pumps and Gas stations .
◦ Couldn’t market products from competitors.
◦ Major Competitors: PSUs who own forecourts
◦ IOCL (20.8%), BPCL (23.4%), HPCL (16.3%)
◦ Domination of PSUs in two- stroke category

Franchise Workshops(FW)
◦ Bike maintenance during 18-24 month warranty period
◦ Association with OEM was critical
◦ Customer was likely to buy OEM approved market even in bazaar trade after warranty period
was over
 Channels of distribution of lubricants
Distributors
◦ Institutional- cooperatives, associations
◦ Agri stores – Stores selling fertilizers, seeds and companies
◦ Wholesalers
◦ Markets and stores
◦ Company branded workshops- Hero Honda Motors sold Hero Honda 4T packaged engine oil in their
dealership
◦ Expanding in Tier 2 and Tier 3 towns through authorized service centers

Bazaars –
◦ 70,000 retail outlets
◦ Spare Part shops
◦ Pure Lubricant outlets – Castrol had 20% market share in MCO 4T oil
 Channels of distribution of lubricants
Non Franchise Workshops(NFW) –
became critical after usage of 4 stroke engine, providing convenience and information for
recommendation to customers
1. Stock and Sell mechanics-
◦ ustaad mechanics , 10% market share but 30% oil changes
◦ Highly skilled, charged premium prices

2. Mechanics with work experience in FW and set up own shops

◦ Highly skilled , low finances, obtained MCOs from nearby spare parts shops settled on daily basis
◦ 40% market share and 50% oil changes

3. mechanics for small jobs – minor issues

◦ 50% market share and oil changes for customer owned MCO
◦ Lack of clientele
◦ First two categories of NFWs buy at discounted prices of MOP and sell at MRP
 Channel Needing The Greatest Push
•According to the data given, we think that the NFW channel needed the greatest push
•The market potential forecast of 2010 is expected to be 30 million litres as compared to 8 million
currently
•There will be a 16.4% sale through NFW channel as compared to the current 10.3%
•NFWs will contribute a growth of 30% CAGR which is almost equal to the CAGR of Spare Part Outlets
•Currently NFW channel’s coverage is 6.3% which is just 10.6% of the total potential that is being
tapped
•According to Castrol India, channel’s share is expected to grow up to 23.8% from current 7.1%
•According to the company’s sources these channels were expected to be the growth drivers of the
future.
 Challenges Faced
•There is a huge credit risk involved in providing these low return mechanics
•The location of the NFWs are in remote locations so are very hard to serve
•Majority of the NFWs are also very scattered
•Local vendors can retaliate, if we service their customers directly
•DSRs reluctant to visit because of social reason and fear of exposing poor knowledge of the bikes
PROS

Propose an innovative channel to service only

Create a parallel set of Motor Cycle Oil
Non Franchised Workshops

distributors

these new NFWs

Ask the distributors to supply directly to the
• Distributors were comfortable
PROS PROS
dealing with Castrol
• Existing network can be • Regular contact with NFWs can • The specific NFWs will unlikely
leveraged for expansion be maintained use any other brand
• Extreme bulk breaking can be • Castrol will have better control
CONS materialized • The reach through NFWs can
• Sale of distributor was • Credit risk will be with new be maximized
suspected to drop from distributors
dealers
• Delivering small quantities will
incur high distribution cost CONS
• Loyal dealers might get CONS • Credit risk will be huge
enraged with distributors • Significant investment will be • Micromanaging multiple new
supplying directly to their needed outlets will require intensive
customers network buildup
• Credit risk is high for
distributor
Steps to implement new distribution
strategy
Firstly company has to recruit entry level sales people who can do door-to-door delivery of
Castrol products to NFWs
◦ Salesmen would collect the stock from the distributor and sell them to NFWs in the nearby area on cash
basis or 1-2 days credit period

The company would also have to open stores at multiple locations under each distribution
center
◦ These stores would reduce the movement of salesmen as distributors would be located in far away
places

The lubricants would be sold to NFWs at a price lower than the MOP but higher than the dealer
billing price to create value to them as well as the company
Resources required
Manpower
•A separate sales force would be required for this purpose that would include salesmen and Sales
Manager
•The Sales Manager can report to the existing channel Area Sales Manager

Infrastructure
•Apart from manpower, stores have to be opened at various locations which would require
capital expenditure
Thank you