Its common in the world of market research to include an others segment in a table when presenting data on the size and makeup of the lubricants business. Its a convenient and often necessary bucket into which to drop countries, suppliers, products and others too small to include with the more detailed data on the big segments.
Unfortunately, once a segment of the business is relegated to the others bucket, its often treated by both writers and readers of the research data as little more than a footnote. It shouldn’t be. In fact many opportunities in the lubricants business can be found in the bleary others category.
One example is seen by looking at countries in Asia other than those hogging the spotlight. Sure, China is hot when you consider it accounts for roughly 40 percent of lubricant demand in Asia and is forecast to grow at an average annual rate of 5percent to 6percent over the next five years. And with growth forecast at nearly 4percent a year over the next five, few would argue with the notion that India is also the place to be.
But what about Thailand? Although it accounts for only about 4percent of Asia’s lubricants demand, Thailand has been dubbed the Detroit of Asia and is on track to become one of the worlds top producers of automobiles. To fuel this growth, Thailand’s appetite for lubricants is forecast to increase at an average annual rate of 4percent over the next five years. Even more impressive, demand for metalworking fluids, passenger car engine oils and other lubricants going directly to Thailand’s automotive industry is expected to grow over 5percent a year.
Thailand is not the only other in the world offering growth opportunities. Take a look at the evolution of lubricant demand in Singapore, Taiwan, South Korea, Vietnam, South Africa and Brazil, to name a few. And for those who think U.S. and European markets are flat to declining, take a look at the nearly 30 percent spike in demand for lubricants used by wind turbines in these regions over the past five years.
There are also significant opportunities in product types often homogenized into the category of others. The industrial segment is the most notable when it comes to housing and hiding these, and there is little wonder why. With demand for industrial lubricants in the United States alone estimated at nearly 1.4 billion gallons in 2006, what chance does a lubricant product type with less than 75 million gallons in sales (or 5 percent market share) have of getting attention? Although many may overlook products in this other category because they represent small volumes, most of the highest-profit products and growth opportunities reside here. These include biodegradable lubricants, food-grade white oils, calcium sulfonate greases, fire-resistant hydraulic fluids, wind turbine oil, and a wide range of other industrial lubricants based on PAO, esters, glycol, polyphenyl ether and other synthetic base stocks.
And then there are the niches within the niches -the others among the others -where some of the highest-margin lubricants in the business are sold. Take for example the diminutive amounts of lubricant used for hair clippers and animal shears. Although there is certainly nothing highly specialized about these oils, they can fetch anywhere from $50 to $500 a gallon when packaged in 2- to 4-ounce plastic bottles. Other examples include wire rope lubricants used in elevators, bridge cables and ski lifts; calibration fluids; escalator lubricants; pipe dope for oil well drilling; thermal compounds (grease) used for electronic heat sinks; fork oil for motorcycles; gun oil; oil for aircraft and electronic instruments; impregnating oil; food-grade compressor oils with FDA-approved microbicide -the list goes on.
Finally, there are the others among end-users. Take the industrial market as an example. Whereas such high-volume applications as rubber, transportation equipment, chemical and allied products, primary metals, food processing and wood and paper products usually get the attention, there are others that offer higher growth and significantly better margins. One example is medical devices and equipment. Just look at dental hand pieces. By simply adding some alpha-tocopherol (vitamin E) to food-grade white oil and packaging it in 1-oz. plastic bottles or a500-ml spray cans, this juice can sell for several thousand dollars a gallon. Another example is lubricants designed for vacuum diffusion pumps; some of this liquid gold can sell for as much as $4,000 a gallon.
And maybe the biggest opportunities aren’t even found in the others column of the market research studies. Maybe they’re in such products as hoses, belts, additives, fittings, tools, containers and other complementary parts and services sold by lubricant suppliers. For many, this is where the action is -the growth segment with the highest margins. In the words of one supplier, I would have to sell a truck load of engine oil to make the same profit I do from a pallet of the others.
Take a closer look at the others. Its easy to say selling them takes unique products and special skill. But not always. Sometimes all it takes is awareness that the others exist.