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Castrols Next Steps


Castrol is focused on creating innovative and relevant solutions to the challenges posed by changes in lubricant technology, said new CEO Paul Waterman.

For me, the biggest challenge lies in helping to make these technology advances relevant for our customers, Waterman told LubesnGreases. Increased technology comes at a cost, and we must ensure that our customers and consumers see value in the products we are offering.

Waterman became CEO of Castrol and senior executive vice president of BP Lubricants on July 1, succeeding Mike Johnson, who will retire at the end of 2013 after 20 years with the business. Waterman will be based at BP Lubricants headquarters in Swindon, U.K.

Waterman grew up near Detroit, has a degree in packaging engineering from Michigan State and an MBA from New York University, and has literally circumnavigated the globe since joining Castrol in 1994. For the past three years he ran BPs fuels supply chain in Australia and New Zealand, but prior to that he spent 11 years in the lubricants business, out of his total of 20 years in the downstream area. He was made general manager of the U.S. lubricants business in 2006, promoted to vice president of the Americas region for Castrol Automotive in 2007, and in 2009 was tapped to be vice president of B2B lubricant businesses (that is, markets other than automotive, including marine, industrial, energy and aviation lubes).

Castrol is the marquee brand within BP Lubricants portfolio, alongside sister labels BP and Aral, and employs more than 12,000 people in 130 countries. It sells directly to customers in 45 of these, and works with local distributors in the others. The automotive lubricants segment accounts for more than two-thirds of its sales.

Acquired by BP for more than $4.7 billion in 2000, the brand itself dates back to the early 1900s, when British oilman Charles Wakefield dubbed his newly created line of lubricants Castrol Oil.

Today the market research firm Kline & Co. ranks BP Castrol as third among global suppliers of finished lubricants, behind Shell and ExxonMobil. Unlike these rivals, Castrol does not engage in base oil or additive manufacturing, but it is one of the worlds largest buyers of base oils. It has 30 blending plants around the globe to keep supplied, 25 wholly owned and operated and five with partners. In 2012, Castrol delivered to its parent a replacement-cost profit of $1.3 billion, before interest and taxes.

Although BP said global lubricants demand saw only weak growth in 2012, Castrol came out of it with a clutch of high-value additions to its product line:

Ford Castrol Magnatec Professional, an SAE 5W-20 motor oil that is co-branded with Ford and was developed in close cooperation with the automaker to service its EcoBoost engine.

The Performance Biolubes line, launched by Castrol Industrial as a biobased option for metalworking fuids and maintenance lubricants.

Castrol Edge professional range, a lineup of premium lubricants targeted to the franchised workshops of Europe and Africa.

Castrol Marines new 80 BN cylinder oil, designed to meet the needs of slow-steaming marine engines.

Thanks to rapid introductions like these and an emphasis on branding and differentiation, premium product sales amounted to 39 percent of BP Lubricants 2012 total, compared with 37 percent in 2011 and 34 percent in 2010.

The shape of market demand varies considerably across the world, but in general we are seeing an accelerating shift to synthetics in automotive, as OEMs demand ever-higher levels of performance in pursuit of driving down both emissions and cost of ownership, Waterman noted. In marine, higher fuel costs for ship operators are driving a shift to so-called slow steaming, which places additional demands on cylinder lubricants.

In aviation, he went on, new engine designs are calling for higher performance lubricants – and the inaugural flight of the Airbus A350 [in June] used our BPTO 2197 product in its Rolls-Royce Trent XWB engines. Our industrial customers also continue to look to us to deliver higher performance fluids that can help them meet their challenging goals.

He pointed out that Castrol is already a strong and successful brand in many markets.

In addition to our leading position in developed markets, we also have a great position in newly emerged markets like India and South Africa, where we have operated for many decades, Waterman said. Rapid income growth and economic liberalization is driving strong demand for lubricants in markets like Brazil, Mexico, Russia, Indonesia and China. We have already positioned ourselves to succeed in these markets, and we will continue to invest to support the growth of the Castrol brand.

On the automotive lubricants side, consumers are becoming less involved with the category because of a shift towards do-it-for-me automotive service, Waterman observed.

For a variety of reasons, fewer motorists change their own oil these days, and increasing vehicle complexity is convincing more owners to leave maintenance to others, he said. The challenge for marketers is how to build and maintain a relationship with a consumer whos not that interested in your product. In addition, the online social revolution has given consumers and customers the ability to vocalize and amplify what they need and expect from brands and organizations.

As a brand, he observed that Castrol has continued to innovate in ways to create meaningful relationships, with an increasing focus on digital solutions that empower the consumer. At the same time, we also recognize the steadily growing influence of OEMs and of lubricant professionals such as workshop mechanics and service writers.

Waterman emphasized that in the business-to-business world, the focus remains on the bottom line. Having a great brand and a strong reputation as a company that delivers on its promises is an expectation, he said. You need to be able to demonstrate how your products create value for the customer in a way that others cant.

Looking to the future, outgoing CEO Mike Johnson said that a key challenge is ensuring Castrol continues to produce products with demonstrable and meaningful benefits that differentiate them from the competition. Castrol has always been at the forefront of delivering such products to the market, and we continue to focus on how pioneering technology can be applied to create value for our customers, whether theyre a motorcyclist in Vietnam or a global shipping company, Johnson told LubesnGreases.

Johnson also noted that changing technology continues to create new opportunities for growth. For example, the fracking boom in the U.S. has reignited interest in gas engines, especially for heavy-duty applications, he pointed out. At the same time, countries like Brazil are leading the adoption of ethanol and other renewable fuels. OEMs continue to work to make zero-emission drive-trains, both electric and hybrids, attractive to their customers while striving for efficiency improvements in their hydrocarbon engines.

All of these present both challenges and opportunities for forward-thinking lubricant marketers. But the biggest opportunity undoubtedly stems from global growth and the millions of people each year who are buying their first motorbike or first car as a way to improve life for themselves and their families.

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