Pursuing Growth in a Flat Lubes Market


CHICAGO – Although North Americas flat industrial lubricants market makes organic growth challenging, companies can still find other ways to grow, an industry insider advised a conference here last week.

The global industrial lubricants business generated roughly $30 billion in revenue last year, Suzan Jagger, president of Jagger Advisory, said Sept. 19 at the ICIS and European Lubricating Grease Institutes North American Industrial Lubricants Congress. North Americas contribution was about $7.2 billion or 24 percent.

Demand in North Americas industrial lube market is relatively flat, which limits organic opportunities for growth, Jagger said. This is driving us to consider moving along the value chain, to look at a whole host of different opportunities outside of anything wed considered even three to five years ago, she added.

Companies big and small are looking to try to leverage core competencies, core technology, core service capability, core customers, into various other areas of the business.

For some in the lubricant industry, moving along the supply chain means backward integrating into refining, chemicals and specialties, while others are moving forward into distribution and service areas they havent been involved in before. Many of them have never even considered it before the last couple of years, she said. That is the level of change weve seen in the mindset.

Jagger said companies branching into new businesses can improve their chances for success by leveraging technologies, such as digital technology, that make those operations more efficient.

Its essential those plays be enabled by digital technology in order to take down costs, expand market reach and drive service support. In some of these consolidations that hasnt happened. She noted that digital technologies can be used in manufacturing, distribution, warehouse facilities, to control inventory, to reduce inventory costs, to assure delivery on time and services to customers.

While encouraging companies to consider branching into new areas, Jagger also advised them to carefully consider whether the moves that they consider are wise – specifically, whether they play to a companys strengths.

Its moving outside your box, she explained. One of the key things is that sometimes companies dont appreciate their culture, dont appreciate what their core strengths are, and they get enticed by various people coming in to say, theres this exciting opportunity adjacent to you. You can move into services business, move into distribution, have assets to leverage. Its vital in this exercise to not move too far away from your cultural and core capabilities base. This is where we see some of these moves going off the rails – not delivering expectations.

She also suggested companies consider another strategy that may be easier to grasp — rebalancing product portfolios. In particular she suggested favoring commercial and industrial products and services in sectors that are undergoing automation and technology transformation.

Big multinationals such as Shell, ExxonMobil, Total and BP are taking a step in that direction, she noted. They understand the dynamics and are moving in that direction, Jagger said.

A third possible approach is to consider an adjacency strategy – that is, to leverage a companys core strengths into trade channels, such as quick lubes, workshops, auto parts distribution and service centers. This type of strategy can also mean backward integration into refining, chemicals and specialties.

As examples of the latter, Jagger cited the way that Lubrizol Corp. developed a specialty chemicals business over the years. She also cited Shells investments in the utilities sector and in the manufacturing of chargers for electric vehicles.

Related Topics