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Power Couple


Can a well-known lubricant brand and a major engine manufacturer find happiness together?

Bearing all the classical promise of a marriage between two prominent clans, Valvoline Cummins India Ltd. (VCL) has been an ingenious exercise in mutual promotion. A 50-50 joint venture between Valvoline International Inc. and Cummins Diesel Sales and Service (I) Ltd., the lubricant marketing partnership has borne out its promise with steady year-on-year growth since the nuptials seven years ago.

General industry wisdom regards VCL a player to watch out for. By leveraging Valvolines lubricants technology and Cummins extensive Indian network, it recorded a turnover last year of Rs. 241 crore (U.S. $55 million), up 22 percent from the previous year. Cornering around 3 percent of the overall lubricant market with production of 34 million liters last fiscal year, company figures indicate an average annual growth of 24 percent, after starting from a modest 7 million liters in 1998. Headquartered in New Delhi, VCL has a traditional focus on Indias north, particularly in Punjab, Haryana and Delhi where it controls 10 percent of the bazaar trade. Inroads have also been carved into the Nepal market, though sales are lukewarm due to a volatile political climate.

Although the Valvoline brand made its Indian debut in 1995 through a tie-up with the Gadgil Group, it didnt really take off until the joint venture with Cummins became reality. This was the first time ever that a tie-up was forged between a lubricant company and an engine manufacturer, reveals Managing Director Naveen Gupta. Today, not only is it a respectable member of the global Valvoline family but the j.v. concept has been replicated with Cummins in China and the United Kingdom.

The Indian Valvoline team recently received a pat on the back from the parent company brass. At a conference held earlier this year Craig Moughler, president, Valvoline International, complimented us on the maturity of our operating systems and indicated an interest in sourcing our manpower for overseas locations, reveals Gupta. Remarking that he was proud to be associated with VCL, Durgesh Chandavarkar, managing director of Standard Greases, Indias largest grease maker, adds: Gupta has ably steered the companys remarkable growth to its present position.

Partnership Power

Unlike markets of developed nations, where high-end passenger car motor oils account for a major chunk of profits, the Indian market is heavily dependent on diesel engine oils, which account for 65 percent of automotive lubes. Little wonder then that the Cummins association has yielded rich dividends for the Valvoline brand; Cummins is a formidable leader in diesel engines for vehicular, railway, marine and oil rig applications as well as a strong player in the diesel generator business. In a severely power deficient nation where power cuts are the norm, every enterprise worth its salt invests in back-up generators. The 80 or so Cummins Diesel Sales and Service dealerships for generators serve to sell and showcase Valvoline products.

Cummins also powers a massive chunk of heavy vehicles, in particular the fast growing 35-plus ton range, of the Tata Motors stable, the largest commercial vehicle player in the country by far. The Cummins relationship also helps to keep its partner abreast of developments in engine technology and in the production, testing and validation of suitable oils.

Diverse Applications

VCLs entire range of automotive and industrial grades are blended at a fully dedicated ISO 9001 outsourced plant at Navi Mumbai, and its grease requirement is sourced from toll manufacturer Standard Greases. It has OEM approvals in various segments and has cobranding arrangements with Elgi, Kirloskar and of course with Cummins. Valvoline is the front runner in new generation CF-4 engine oils for technologically advanced on- highway and off-highway applications since the year 2000, notes Gupta.

In 2004 we achieved the No. 1 position in the CNG [compressed natural gas] green lube segment and were the sole suppliers to the Delhi Transport Corporation, the worlds largest CNG fleet, says Alok Sharman, vice president of marketing. This is one niche area where volumes are bound to grow, as more and more Indian cities with catastrophic emission levels opt for cleaner fuels. For instance, all taxis and an increasing number of buses and three-wheelers in Mumbai run on CNG.

The specially selected additive chemistry used in Valvoline CNG Special, recommended for cars, vans and three-wheelers, dissipates heat and provides excellent protection to engines against wear and deposits, explains Gupta. Gas engine oils keep the engine cool, enhance valve performance and minimize carbon deposits on pistons to enable longer drain intervals. We continue to be the leading player in this segment and also supply to Telco and Ashok Leyland authorized service centers, says Gupta.

VCL has a firm foothold in the tractor market – its stronghold Punjab, better known as Indias granary, is agriculturally a more prosperous state than most. VCLs reach in the southern markets is gradually deepening, too, and the western region has grown as much as 60 percent albeit from a low base.

Like most oil companies VCL has targeted the commercial vehicle and two-wheeler markets, both of which have clocked double-digit growth. The companys recently launched Bike Care Centers are slated to take off in a big way, aimed as they are at the middle ground between pricey OEM-authorized service centers and rough-and-ready mechanic outlets where mechanics have no formal training. At the Bike Care Centers, trained mechanics will attend to vehicles, and the entire range of Valvoline lubricants, coolants, etc. are provided, with VCL underwritten standardized operating systems.

Market Muscle

The arena for hardcore contention remains the bazaar, that cutthroat hurly burly of discounts, undercutting, free rides and inducements, where each automotive lube player has to carve out a niche and then go about fiercely protecting it. Like all automotive players, VCL goes the extra mile in evolving new schemes to attract mechanics and dealers through 50 stock points, over 500 distributors and 10,000 dealers.

In addition, exclusive Valvoline Shoppes and Customer Care Centers ensuring greater brand visibility are being established at strategic locations. Our major brand strengthening initiatives this year are to focus on channel management, sales force effectiveness and visibility at points of sales, explains Gupta. Bazaar sales account for the lions share though there is a firm focus on industrial sales as well


Boosting VCLs product range and profits is the line of Eagle One Car Care products stocked at gas stations of Indian Oil Corp. and Indo Burma Petroleum, at showrooms of Hyundai, Maruti and Tata Motors, and naturally the bazaar channel. Launched two years ago, we aim to double sales of this high-margin, internationally styled offering, declares Gupta. We have taken advantage of lateral marketers – and fared rather well. The manufacture and sale of Valvoline filters, launched recently, is another lucrative foray into a related market, again adding value to and harnessing a common sales channel.

Bullish base oil prices, driven by crude, are a countrywide concern, and consumers are expected to react by extending drain intervals. In the last eight months lubricant makers have raised prices three times, and an overall slowdown in the off take is likely, Gupta says ruefully. Competition remains thick as ever, even as the much-anticipated shakeout has largely been at the instance of consolidation of upstream companies, and the only brand to exit the bazaar is Fuchs. Some deep pocket biggies continue to hang in there in spite of infinitesimal market shares.

A decade and more after lube business deregulation, does a level playing field exist for private players? Avers Gupta, An atmosphere of fair competition definitely exists – the industry has matured, and the customer has benefited greatly from the wide choice available. The transformation from a sellers market to a buyers market is complete.

What is VCLs blueprint for the near future? Gupta is confident of maintaining current growth: We will generate value for customers and shareholders by a clear focus on high-end lubes, and provide solutions for customers and profitable partnerships for the channel.

Despite high crude oil prices the Indian economy continues with buoyant growth. The Index of Industrial Production for May 2005 reveals that the sector as a whole grew by 10.8 percent versus May 2004, and manufacturing by 11.5 percent – the highest monthly growth in eight years. As growth in the more mature Western markets flattens out, the emerging markets of India and China are on the radar of every transnational corporation and the Indian operation will become an increasingly important part of Valvoline International, receiving greater inputs, predicts Gupta.

Continued double-digit growth in commercial vehicle sales, which saw Cummins India declare a climb of 22 percent in net profit last fiscal year, is naturally good news for VCL. A successful marriage can always use a greater infusion of the clout that made it successful in the first place.

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