Rural Distribution

PRESENTED BY
GROUP 5
ANJALI AGRAWAL
NIKHIL JHANB
RIDDHI KUNDU
PAVAN SHETTY
NISHANT VATS
TEJAL MEHTA
VIJAY DOSAPATI

- C004
- C023
- C026
- C050
- C056
- C063
- C064

Agenda

Lubricant
Industry

About
Castrol

Distribution
Network

Castrol
Rural
Distribution

Channel
Partners

Lubricant
Industry

About
Castrol

Distribution
Network

4th largest lubricant market in volume behind US, China and

Japan
One of the fastest growing industries in the world with a
CAGR of 11.5%
Value INR 230 Billion, expected to be INR 462 Billion by
2017
Volume 1.8 million tonnes in 2013
A very competitive market with 30 established national,
international and local players

Green
technologies

Channel
Partners

Major Players
Others
20%

IOCL
40%

HPCL/
BPCL
18%
Castrol
22%

Key Drivers
Growth in
automobile
production

Castrol Rural
Distribution

Legislative
compliances

Improved
design &
economies

Source: http://www.researchandmarkets.com/research/dlnfw9/indian_automotive
*Castrol internal documents

Lubricant
Industry

About
Castrol

Lubricant Segments
Automobile
- 45% of the lubricant market
- Commercial and non-commercial
vehicles
- 86% Revenues of Castrol
- High Margin

Industrial
- 55% of the lubricant market
- Power, chemicals, railways, metals and
marine

Distribution
Network

Castrol Rural
Distribution

Channel
Partners

Sales Channels
Original Equipment Manufacturers (OEMs)
OEMs like Harley Davidson and Volkswagen use only
Castrol and recommend Castrol
Castrol Manufactures Co-Branded oils for OEMs

Bazaar Trade
Spare part shops; dedicated lubricant dealers; mechanic
workshops and authorised service stations
Castrol leads with 19% share compared to IOCL (14%)

Petrol Pumps
PSUs enjoy higher margins through monopolistic petrol
pumps
Source: * Castrol Internal Documents

Lubricant
Industry

About
Castrol

Castrol India Limited is a part

of Castrol Limited UK (Part
of BP Group)
CIL is the 2nd largest
manufacturer of lubricants in
India

Distribution
Network
It holds ~22% market share
CIL has a very robust
distribution network all over
India

Castrol Rural
Distribution

Channel
Partners

Castrol focuses on three main

things: affordability, advocacy
and availability
For FY 2012-2013
Turnover- Rs.3,500 Cr
Net Profit- Rs.500 Cr

Castrol

AMIE

Truck and
Bus

Car

Engine Oil

Automobile

ATF

Engine Oils

Motorcycles
and Scooters

Off-Road

Engine Oil

Coolant

ATF

Manual
Transmissio
n Fluid

Engine Oils

Driveline
Fluids

Greases

Lubricant
Industry

About
Castrol

Distribution
Network

Castrol Rural
Distribution

Channel
Partners

Product Flow
Information Flow
Cash Flow

Factory

C&F Agent

Warehouse

Head Office
Consumer

Dealer

Distributor

Lubricant
Industry

About
Castrol

Distribution
Network

Castrol Rural
Distribution

Pre 2005 Phase ( 1991 - 2005)

Emergence of the Indian Middle class
Service Sector explosion
Shift in Personal Consumption patterns

Why Rural ?
Post 2005 Phase
Limited growth (300 million) in urban areas
and high potential in rural areas (700 million)
Significant increase in the Per Capita Income
levels
Dramatic improvement in Connectivity and
other Government policies

Channel
Partners

All India( PCO + MCO + Agri)

Market Data

Castrol Data

Population

Total Potential
(KL)

Pot Split
(%)

MCO
(KL)

PCO
(KL)

Tractor
(KL)

Total Vol
(KL)

Dealers
Billed

Vol Share
(%)

40 Lakh + Towns

63314

14.42%

25497

37817

9887

7359

16%

10-40 Lakh
Towns

52698

12.00%

27205

25494

8528

7865

16%

1-10 Lakh Towns

66419

15.13%

37456

28964

28036

25945

42%

Below 1 Lakh
Towns

34643

7.89%

24734

9909

31250

38081

90%

5000 + Villages

43883

9.99%

23404

8689

11789

1000-5000
Villages

137518

31.32%

59729

16218

61571

Below 1000
Villages

40579

9.24%

15625

4733

20222

Total

439054

77701

79250

18%

213650 131824

93582

Source : Primary Research

~60% of the potential is in the small towns and villages

Lubricant
Industry

About
Castrol

Distribution
Network

Castrol Rural
Distribution

Channel
Partners

Product Flow
Information Flow
Cash Flow

Warehouse

Factory

C&F Agent

Head Office

Consumer

Dealer

CSD

Distributor

Lubricant
Industry

About
Castrol

Distribution
Network

Castrol Rural
Distribution

Manufacturing
Three manufacturing facilities
across India
Patalganga
Paharpur
Silvassa
Base oils are sourced from Indian
National Oil companies such as
IOCL, BPCL, HPCL and from
abroad such as Exxon
Base oils are directly sent to the
manufacturing plants
These 3 plants produce all products
Paharpur plant is used to service
Eastern Zone
Patalganga & Silvassa plants
service rest of India

Channel
Partners

C&FA

Silvassa

Paharpur

Three mother warehouses

located close to the
manufacturing plants
C&FA pick up goods from
these warehouses and
transport to the 270
distributors across the country
35 CFAs all over India
operating over 1000 trucks

Patalganga

Lubricant
Industry

About
Castrol

Distribution
Network

Castrol Rural
Distribution

Channel
Partners

Distributors
Distribution Network

Catchment Area

Over 270 distributors across the country

Service over 70,000 retailers

Stock Norm
Have to maintain a certain amount of Lubricants at all times
Urban 14kL; Upcountry - 20kL

Distributor Service Area

The service area for a distributor is decided on the following parameters
Geography; Lubricant potential; Total population

Distributor Replenishment Model

As soon as a DSR takes an order, it gets registered as a secondary sale
Thus the amount ordered is reduced from the total inventory of the Distributor
At the end of every day, if the inventory with the Distributor falls below the stock norm,
automatically a primary sale order is created

10

Lubricant
Industry

About
Castrol

Distribution
Network

Castrol Rural
Distribution

Channel
Partners

Distributors
Credit

Staff

Margin

Offered by Castrol- 7 days ; Extended to

retailer- 14 days
Based on these figures Castrol calculates the
ROI for the Distributor
But in reality, the credit extends to upto 30
days, thus impacting the distributors ROI

Distributor Sales Representative; Godown

Operater; Sales officer; Computer operator

The distributors are offered a margin of 4.3%

ROI

Servicing

Distributors can earn an ROI of 18% in case

if they follow all the norms set by Castrol
For the distributor to earn an ROI, the
minimum volume that is to be sold should be
35 kL

The distributors employ DSRs for order

collection
The DSRs are provided with a PDA for order
collection
Each DSR has a PJP, which encompasses 15
to 30 outlets
Each DSR works for 6 days a week and
repeats the cycle every week

11

Distributors Return on Investment

Volume (kL)
Turnover (Annual)
Turnover (Monthly)
Margin
Gross Margin -Monthly
Working Capital
WC (Days)
Salary & Admin
Delivery Charges
Godown Rent
Misc.
Total Expenses
Net Margin = GM - Exp
Net Margin (Annual)
ROI = Net Margin/ Investment

Ideal
Revenue
36
12,00,00,000
1,00,00,000
4.30%
4,30,000
Investment
48,00,658
14
Expense
1,56,838
1,00,000
1,00,000
3,56,838
73,162
8,77,944.00
18.29%

Actual
36
12,00,00,000
1,00,00,000
4.30%
4,30,000
1,29,50,000
35
1,56,838
95,616
99,500
3,51,954
78,046
9,36,552.00
7.23%
12

Lubricant
Industry

About
Castrol

Distribution
Network

Castrol Rural
Distribution

Channel
Partners

Rural Castrol Sub Distributor

Network
Castrol has over 650 CSDs all across the country
These CSDs enable Castrol to service towns with less than 1 lakh population

Distributor and CSD

catchment

Hub n spoke
The Rural CSD is located in a town
This CSD would service all the town and all the villages in the 20 km radius

Profile

30 km
CSD 1

CSD 4

Usually a large retailer/wholesaler

Outlet with at least 250 sq. ft. space

CSD Area
The CSD area is decided on the basis of
Geography, Population, Lubricant Potential

CSD 2

CSD 3

Norms
Recommended 30 days
Actual stocked 7 to 14 days

13

Lubricant
Industry

About
Castrol

Distribution
Network

Castrol Rural
Distribution

Channel
Partners

Rural Castrol Sub Distributor

Ordering

Credit

Castrol support

ROI

A DSR from the Distributor would visit the CSD once a week to take the order
Further the CSD employs a salesman who would go to the nearby villages to take orders from the
retailers
The Rural CSDs are serviced just like a normal retailer
No extra credit is provided to them
Credit period is 14 days
But usually this depends on the relation between the Distributor and the CSD

When a CSD is setup, Castrol offers Rs 9500, apart from 2% on the DLP
After the CSD reaches sales of 2kL per month, he is given 4% discount on the DLP

If the CSD follows all the norms set by Castrol, he should be able to earn an ROI of 25-30%
But for this, the minimum Volume sold needs to be 2 kL

14

CSDs Return on Investment

Revenue
Volume (kL)
Turnover (Annual)
Turnover (Monthly)
Margin
Gross Margin -Monthly
Investment
Working Capital
WC (Days)
Expense
Salary
Misc.
Total Expenses
Net Margin = GM - Exp
Net Margin (Annual)
ROI = Net Margin/ Investment

2
69,53,388.96
5,79,449.08
4.00%
23,177.96
4,16,060.31
7.00
8,000
6,000
14,000
9,178
1,10,136
26.47%

15

Lubricant
Industry

About
Castrol

Distribution
Network

Castrol Rural
Distribution

Channel
Partners

Dealers
Strong Network
Currently the Castrol distribution network boasts of over 70,000 retailers consisting of Oil shops, Spare parts shops, Mechanics, Garages

Margins
Castrol offers margins between 10 15%
Apart from the margins there are quarterly schemes
Also yearly schemes on sale exceeding certain quantity

Credit
Ideal case- 14 days; Real life scenario 15 days to 60 days

Support
Retailers doing brisk business for Castrol are enrolled for Retail transformation and given Castrol branding, and monetary support
Also top selling retailers are enrolled in the Castrol Anmol Ratna program

Servicing
Retailers are serviced by the DSR who visits them on a fixed day every week
Usually retailers stock 14 days worth inventory
The DSR informs the retailer of the various schemes, promotions
16

References
Amitesh Bajpai ASM, Mumbai, Castrol
Abhishek Majumdar Sales and Marketing Excellence Manager, Castrol
Jagdish Malik Management Trainee
Western Lubes, Vashi Castrol Distributors
Castrol Annual Report, 2012-13
http://www.researchandmarkets.com/research/dlnfw9/indian_automotive

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