Chinese Blenders Adapt to Economic Downturn


XI’AN, China – Amid a weak economy that is on the brink of deflation, Chinese blenders are keen to seek alternative options to keep their businesses running, including selling products online and servicing the needs of emerging energy sources, such as hydropower and nuclear power, speakers said at the Mu Cheng You lube forum here on Aug. 18.

Aganzol, a lube marketer based in Dalian, Liaoning province, expressed enthusiasm about its experience using social media to sell lubricants. The company, which used to focus on original equipment manufacturer business, is now almost exclusively selling its own motor oil lubes through Douyin, the Chinese version of TikTok.

“Turning to Douyin is the best decision we’ve ever made,” Aganzol General Manager Zhang Hongchi said. He noted that the company lost ¥30 million (U.S. $4 million) on its OEM business during the three pandemic years, when many businesses were severely hurt by strict government restrictions. But since moving onto Douyin in 2021, it made more than ¥10 million.

“With over 600 million daily active users in China, Douyin is an ideal tool for each company to reach potential customers,” he said. “For small blenders like us, it’s especially useful because it saves companies from investing heavily to build a nationwide sales team.” Instead, Aganzol only has several people to run the Douyin business, including four staff for live streaming and one for warehousing management.

Zhang said his company uses only hosts who have oil know-how for live streaming, including himself.

“It’s important for us because we want to attract fans who want to learn about oils before placing orders,” Zhang said. “We also want to use Douyin as an opportunity to tell people that Chinese branded oils are not inferior to foreign brands, and sometimes even better. This is a strategy that makes us different from our competitors.”

He added that the OEM business allowed Aganzol to gain knowledge about how to make high quality motor oils. The company now has over 27,000 followers across China on Douyin and 120 car repair shops, which it takes as evidence that its strategy is working.

The lube market, as Zhang sees it, will become only more competitive because there is little sign that the economy will improve. “But trying to compete with low prices is quite self-destructive because poor quality will be abandoned by consumers quickly,” he said, alluding to customers’ negative perception of lower-cost products.

Although Zhang recommended Chinese blenders should look into Douyin, it is not for everyone. A case in point is Beijing-based car care products supplier Senkia. The company does not sell motor oils; instead, it sells oils to lubricate small car parts, such as hinges and locks.

While acknowledging the important role that social media plays in business development, the company itself failed to sell over Douyin, Senkia general manager Gao Yuchao said.

“With a huge cost, we learned it’s not easy to do business on social media,” he said. “But it’s a good way to reach your target quickly.”

For Senkia, new opportunities lay in niche markets. For example, Gao said ride-hailing service providers, including Didi and Cao Cao, all need car care solutions, and smaller, regional car repair chains also need reliable suppliers.

“You just need to look into the market carefully to find these opportunities,” Gao said.

For industrial lube suppliers, opportunities are likely in the industries deemed as priorities by the Chinese government, said Zhang Yueyi, a retired industry guru who now works as a technology consultant for research institutions in the defense industry.

He suggested companies could look into nuclear power plants and hydroelectric stations, both of which are in the “14th five-year modern energy system plan” (from 2021 to 2025) issued in January 2022 by China’s central government.

“But suppliers need to pay close attention to the very different requirements for lubrication products for hydropower stations and nuclear power plants,” Zhang said.

For example, the heavy duty water turbines used in hydropower stations run slowly and usually are placed underground, so they need high quality anti-corrosion greases that have very long re-lubrication intervals, he said.

For lube products used in nuclear power plants, radiation resistance is the key as regular oils and greases tend to become thin when exposed to radiation, Zhang continued.

He added that nuclear power plants and hydropower stations only generate about 2% and 22% of power in China, which still relies heavily on coal power, but this will change as China is marching towards its carbon peak and carbon neutrality goal in 2030 and 2060. “Nuclear power and hydropower will be the major power source in China,” Zhang said.

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