Thus, in 2016, winning in the game of synthetics is less a technology play and more a marketing play, said Suzan Jagger, president of United States-based Jagger Advisory. In Europe, sales growth is more dependent on conveying value than on increasing volumes, she told the UEIL Congress in Malta last October.

In 15 years, global lubricant demand has inched up only 4 percent while the markets gross margins (realizations less cost of goods sold) has more than doubled. Lubricant suppliers have been able to maintain profit margins despite years of steadily escalating base oil prices.

Jagger Advisory anticipates that nearly U.S. $8 billion in gross margins is up for grabs in the branded lubricants business over the next five years. Since 2000, marketers have captured the lions share of gross margins at 43 percent, followed by retail trade channels at 20 percent, base oil suppliers at 17 percent, distributors at 14 percent and additives suppliers at 6 percent.

However, the game is changing, she said. The top end of the synthetics market [in terms of quality] is eroding, and the developing tier structure is one of good, better and best. Its up to the marketer to come up with claims for differentiation, and its becoming more difficult.

Outward-bound Europeans will notice that both national oil companies and local marketers are more competitive than ever before. As the technology to produce synthetics becomes more and more accessible for independents to develop products, the race is to get products to market, and independents can get them there faster than majors can in many cases.

Geographically, marketers must make important decisions. Brazil, Russia, India and China are financial rollercoasters for investments, but they represent some of the largest potentials for growth. Europe and the Americas have ratable returns, she noted, but are on the decline in terms of volume.

Marketers must focus on supply chain integration where possible to try to minimize costs, and decide how to reach the market in each region they are in. [Should suppliers] go direct-to-market or through distributors or resellers? she posited. Europe still has a sizeable direct-to-market business compared to the rest of the world. Direct marketing is a strength of Europeans, but when you throw [European companies] into growing markets where distributors are necessary as physical arms for up to 60 percent of sales, its a big challenge.

It is also important to manage growing product portfolios. As companies grow and proliferate in the number of stock-keeping units, [Jagger Advisory] looks at returns and helps businesses peel back and find out where value is being generated. She noted that large, multinational oil companies are removing products that tend to come with high support costs and create a drag on their bottom line earnings.

In the automotive segment, the big value drivers are the synthetics and premium categories, she noted. But while growth will continue in trade channels spanning across original equipment manufacturers factory fills, do-it-for-me service fills and do-it-myself aftermarket sales, marketers must high-grade their portfolios to focus only on products with the best returns.

Pruning portfolios is especially relevant in light of the booming demand for synthetics in the extremely complex industrial segment, which Jagger said is a challenge. On average, product categories such as metalworking fluids and hydraulic fluids represent the largest chunks of the gross margin pool. This is true despite lower average gross margin yields per liter compared to specialty products like refrigeration fluids, compressor oils and greases.

What were finding is that complexities are causing [larger players] to pull away from many of these segments, and its providing competitive space for independent marketers to command the areas where a high customer touch and service are needed, as differentiators.