Sreejit Banerjee, chief operating officer of the greases & lubricants business at Balmer Lawrie & Co., granted an intervew with Lube Report recently. Based in Kolkata, the government-owned company is one of Indias largest grease suppliers.
Banerjee said lubricant companies in India should have opportunity for sales growth in coming years but that they also face challenges due to rising lubricant performance demands and tightening of regulations. Following are excerpts of the interview.
What do you expect in terms of demand growth for lubricants and greases in India?
Indias finished lubricant demand is estimated to be growing at around 2 percent to 2.5 percent annually, and this trend is expected to continue going forward. At the moment, there is some slowdown in the economy, which is affecting, but it is temporary and growth will rebound in the coming months due to the governments focus on infrastructure development and several other initiatives to boost economic growth. I think auto demand should also come back to normal levels in two quarters.
India is poised to grow as an economy on a macro level, and that will see our energy consumption grow, including lubricants. The segments that have largely supported the growth of lubricant business in India are primarily personal mobility, transport and fleets, and infrastructure. We expect more demand in the coming years from the construction segment. Coupled with this, growth in industries and manufacturing will also drive lubricant consumption. We will see some shift towards higher grades, resulting in a higher growth rate in value terms.
What are the biggest challenges faced by lubricant companies in the market today?
Lubricant developers are under constant scrutiny as they need to raise the performance bar as well as improve fuel economy and contribute toward lowering emissions. Transition to lower-viscosity oils to improve fuel economy in the case of engine oils and transmission oils as well as energy efficient oils for industrial application remains a challenge for lubricant companies. The tightening emission standards will need more fuel-efficient vehicles, and this will also pose a challenge to lube suppliers to meet the desired objective.
What impact do you see on greases and lubricants as electric vehicles penetration rises in India?
The EVs penetration will affect the engine oil demand but transmission oil and greases will continue to remain relevant. The different trends are observed in different geographies and different parts of the world as far as grease uses are concerned. In general, production of lithium complex greases has significantly increased due to the versatility and stable performance of the thickener. Aluminum complex greases are also becoming popular. Greases in general will be in new forms way forward. We may see usage of functional soaps (like lithium-bismuth), non-polar thickeners (poly-non-urea), nano particles, liquid crystals and bio greases making inroads going forward.
What role does your company play in the greases and lubricants market?
We are one of the largest grease sellers in India under the Balmerol brand and in the top 10 grease sellers in Asia. We have been primarily in the business-to-business segment for many years, servicing core sector industries like railways, defense, steel plants and automobiles (trucks). We have been growing more than average industry standard in the last few years both in value and profitability terms. We aim to achieve double-digit growth in the next few years to become one of the significant players in India in the lubricant business.
What are your companys future plans to drive its greases and lubricants growth?
To unlock the potential of the Balmerol brand, we forayed into the retail market with our entire range of automotive and industrial lubricants. We are looking to build a robust distribution network in select markets in the next few years, backed by strong below-the-line advertising activities to increase our brand visibility. We will continue to bring innovative and high-performance products like Synthplex Grease, which is a semi-synthetic grease with life of over 200,000 kilometers, and an entire range of synthetic ester-based biodegradable products for our customers. We aim to grow the market share of our greases and lubricants business from the current level of 2 percent to 5 percent in the next three years. We are also focusing to double our automotive retail channel business to 20,000 kiloliters in the next two years from about 10,000 kiloliters currently. We will make continuous investments in our research and development center in creating new products.
Where in the market your company faces the most difficulty?
In a country like India with its geographical spread, building a distribution network is a time consuming and challenging task. Also, state-owned companies with fuel stations have the advantage of a wide distribution network to play on volume while others, including us, will have to focus on value selling in order to achieve better realization and margin. Apart from building a robust distribution network, increasing brand visibility in a fiercely competitive market is a key challenge. However, we are going through a transformation process of making it big in retail space from predominantly being a B2B player. Managing these two verticals and continue to grow more than average industry standard will be a challenge that we aim to overcome in the next few years.
Where your competition lies in the market?
We supply our products on a proprietary basis to many of our customers, including to a few major [original equipment manufacturers] in the commercial vehicle segment. We dont see that we will lose our market in these segments as we continuously work on giving better value proposition to our customers with improved and new performance standards to meet their requirements. The retail market is a space where all the other multinational oil companies along with the Indian companies are fighting to grab the share. The real fight will be in this market space, which is largely business-to-consumer.
Tell us about your companys lube facilities and distribution network.
Currently we have three manufacturing plants at Kolkata, Silvassa and Chennai that can produce about 70,000 kiloliters annually in single shift, but we have the flexibility to increase the production to 100,000 kiloliters. Greases account for about 55 percent of our total production while lubricants the rest. We have 13 depots to stock our products and service 400 distributors and several customers throughout India. We have plans to add another 300 distributors in the next two years to achieve our business plan targets. We have our own Application Research Laboratory in Kolkata where we have developed high performance specific products like semi-synthetic grease, fire resistance greases, synthetic mold oils and biodegradable products. We are the only lubricant company where we produce synthetic esters in our in-house ester plant. We spend around 1.5 percent of our turnover and 20 percent of our profit in R&D activities.