Tongyi Loosens Purse Strings for R&D


Beijing Tongyi Petroleum Chemical Co. became Chinas largest privately owned lubricant supplier largely thanks to aggressive advertising. Now the company says it will ramp up research and development spending in order to continue its remarkable rate of growth.

Officials say the investments in know-how will allow the company to introduce more than 100 new products this year as it strives to break out of the prevalent practice of supplying generic lubes.

Established as a start-up in 1993, Tongyi has quickly grown to become a leading player in Chinas burgeoning lube market, with sales revenue of 2 billion yuan (U.S. $242 million) in 2004. The company says its flagship Monarch brand is the countrys leading motor oil brand, outpacing even those of government owned oil giants Sinopec and PetroChina.

The company has no plans of slowing down, according to General Manager Li Jia. Management projects revenue to reach 3.2 billion yuan this year, an increase of 60 percent that would be in line with the past few years. To help meet that goal, the company will boost research and development to between 48 million yuan and 64 million yuan, up from 20 million yuan last year.

Li said Tongyi will spend the money mostly on testing and to purchase formulation technology. It plans to introduce 120 new products this year.

Currently, many sellers in China provide the same kind of lubricant to almost all industry sectors, whether its for trucks, cars, fish boats, etc., Li told Lube Report. But, of course, there are differentrequirements for differentindustry sectors. We aim to provide the exact lubricant to each industry sector, fully understandingthis industrysspecial requirement.

In addition to formulating products for specific applications, Tongyi plans to offer energy conserving lubes. Li said demand for such products is growing in the face of steadily rising fuel costs.

This is not to say that image will take a backseat to substance. Tongyi officials have attributed much of the companys success to advertising campaigns that broke ground in the Chinese lube market. It was the first lube supplier to focus on establishing a nationally recognized brand name and the first to advertise on national television. Competing companies have since followed both strategies.

Tongyi has budgeted 112 million yuan for advertising this year. That is up from 100 million yuan last year, although the portion of revenue spent on advertising is dropping from 5 percent to 3.5 percent.

We still rank as one of the top in our industry on advertising budget, Li said.

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