Lopal Reinvents Itself

The Nanjing-based company is not a large player in the industry, but gained an inordinate amount of notoriety earlier this year when video of a stunt car jumping the Amur River went viral across China. Lopal sponsored the vehicle, which had the companys brand name emblazoned on it.

Thanks to these kinds of efforts, somewhat over 50 percent of Lopals revenue eventually should come from gasoline engine oils, up from a prior 15 percent, said company President Shi Junfeng. Meanwhile, diesel engine lubes will taper down from 60 percent to become 35 percent of sales.

Chinas auto market is no doubt going to grow continuously. Since we are a little late, we have to catch up with the trend by providing a variety of high-quality lubes, and to achieve this, we need to be innovative, Shi told LubenGreases.

Innovation hinges on research and development, the core competency in which Lopal invests about 3 percent of its revenue, he added. We are constantly looking for unmet demand in Chinas highly fragmented, diversified market. For example, we have lubes for extreme cold weather to meet demand in the north, and we have anti-leak oil for car owners who are troubled by oil leaks. Chinese companies across industries in general lack creativity, and they missed a lot of opportunities. But we are not one of them, Shi said.

In 2013, after years of double-digit growth, the companys sales reached 1 billion yuan (U.S. $160.3 million), according to Lopal.

Its new plant in the northeastern city of Tianjin, costing about 1 billion yuan, is in the final stage of construction, and was scheduled to start operations in October, as this issue goes to press. The plant will be able to produce 200,000 additional metric tons of lubricants, bringing Lopals annual capacity to 300,000 metric tons.

Shi revealed the company has attracted a large state-owned company as its strategic investor, and it also is in talks with advisors about an initial public offering in Shanghai or Shenzhen, hopefully in the near future, he said.

Like other blenders, Lopal buys API Group II, III and synthetic base stocks as well as additives to produce lubes. But unlike other private Chinese lube producers, it prefers paying a little more for quality than going strictly for the lowest-cost components. We buy almost all of our materials from multinationals to ensure high quality, which we believe, rather than low prices, is the ultimate advantage to win customers, Shi said.

With this idea in mind, Lopal Tech on July 30 signed a three-year deal with South Korean refiner SK Lubricants to secure base oil supply. According to Lopal, ExxonMobil and Taiwan-based refiner Formosa Petrochemical are also among its base stock suppliers.

Consumers who want to seek a cheap deal at Lopal will surely be disappointed, Shi acknowledged, because its products are priced as much as multinational brands, and sometimes even higher. For example, Lopal Gold No. 1 synthetic engine oil (an SAE 0W-40 meeting API SN) is priced at 559 yuan (about U.S. $90) per 4-liter package, compared with 320 yuan for the equivalent grade of oil from Castrol and 450 yuan for Mobils offering.

Engine oils only account for about 5 percent of the cost a car owner would pay for auto maintenance, so its really no point to wage a price war over such a less-important product. Consumers are willing to pay for good quality and services, which are exactly what Lopal is offering, he said.

Also due to open in October, he added, were a chain of Lopal storefronts, beginning in Nanjing where the company is based. These will sell Lopals auto-care products under the 3ECare name. 3ECare products, which include coolant, detergent and glass cleaner, previously had been available only at Lopals online store at Chinas largest business-to-business website, Tmall.

Eventually we want to build an online-to-offline business model, which could offer better experience and services to customers, Shi said, estimating that the project will initially cost about 600 million yuan.

Aside from engine oils, Lopals R&D team also develops industrial lubricants, such as calcium sulfonate greases for steel industry, as well as automatic transmission fluid.

A lot of R&D has to be done as lubes evolve over time to meet demands from regulators and consumers, Shi said, adding that the current trends point to products that are high-performance, energy efficient and eco-friendly. So we have to develop such products accordingly.

Innovation is a goal in marketing and branding as well, Shi went on. He is especially interested in multichannel marketing as a way to reach the younger generation who are accustomed to a digital life. So we have developed a product line exclusively for our online store to attract people who love online shopping, and we are using all kinds of social media to stay connected with our customers, said Shi. In his late 40s and quite tech-savvy himself, Shi uses a smartphone, wears a smart bracelet and constantly updates company activities at Chinas most popular social network application, Wechat.

We welcome innovation. In Lopal, no one has been punished because of a failed try for being creative, Shi said.

While many Chinese entrepreneurs are probably known for making quick money but paying little attention to management, Shi spends money to improve management by hiring well-known consultant companies to regularly train its managers and analyze their performance. He said that he himself prefers Western-style, systematic process management to run his company.

Aside from lubes, Lopal also manufactures Kelas brand diesel exhaust fluid, which is approved to Europes AdBlue standard.

China will continue to tighten environmental policies, which clearly shows the direction for our business. We welcome all kinds of cooperation in developing eco-friendly products, including lubes and auto-care products, Shi said.