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Sale & Distribution Management: End Term Project ON
Sale & Distribution Management: End Term Project ON
MANAGEMENT
END TERM PROJECT
ON
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.
Selling Strategy
According to AC Nielsen Brand Tracker, the Castrol master brand enjoys an unprompted
brand awareness of 92 per cent among consumers
Castrol’s 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 Petrol Stations
o Wholesale Distributors
o Lube Oil Shops
o Auto Spare Shops
o Authorized Service Stations
o Garages
o Rural & Agricultural dealers
o 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 Decline in Market Share of PSU oil companies.
o Market became heavily crowded & the industry got transformed into FMCG.
o Dumping of products in the bazaar.
o War of trade discounts resulting in rice war & lesser margins for dealers.
o Entry of spurious lubricants.
Consumers Need
Consumer need for lubricant is safety, insurance. Fleet owners preferred the Castrol’s 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 tomorrow’s 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 The original equipment manufacturers (OEMs)
o Retail trade.
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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.
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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.
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.
o 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.
o The product is available through the 2500 Escorts outlets including their
franchise dealers, spare part distributors and authorized service centers.
Tie-up with Essar Oil Ltd , for sale of Castrol lubricants through Essar Oil Fuel
outlets throughout the country.
Promotional Budget
Though smaller in size than its public sector rivals, Castrol’s 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 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, e-
learning ,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.
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