Lubes oil the HP brand

Lubes oil the HP brandThere is a quiet transformation that oil marketing companyHindustan Petroleum (HPCL) is undertaking. The PSU is clubbing its profitable and consumer-facing lubricants business under an umbrella brand HP Lubricants. And taking a leaf out of its competitors’ books, (Castrol, Gulf Oil and Elf among others), it is gearing up for an aggressive campaign to promote its lubes brands.

While oil and gas per se is a core-sector business, the lubricants division is angled towards the consumer. Lubes are used in automobiles besides areas such as energy, marine and industrial products. Its B2C application comes with its use in auto, which is also where the big brands resonate. Names such as Castrol, Veedol, Gulf Oil, Elf, Servo, Mak etc are not uncommon to Indian consumers thanks to their aggressive advertising and marketing. These names also ring a bell because of the bright and colourful branding and catchy messaging used on posters and hoardings at fuel pumps.

HPCL’s lubricants portfolio, which contributes over 80 per cent to the company’s profitability, has been largely led by brands such as Razor4, Milcy, Lal Ghoda among others. These brands are still to find the same recognition as their competitors and this is what the PSU hopes to change, with its image makeover. Leo Burnett, HPCL’s ad agency, has for the first time since coming on board as its creative partner in 2008, helped the public sector major create an umbrella-brand architecture under which the above-mentioned brands will sit.

Leo Burnett, for the record, is part of HPCL’s roster of agencies. The PSU major also works with RK Swamy/ BBDO for other portions of its business. Rakesh Hinduja, executive vice-president, Leo Burnett India, describes this effort as the ‘hero halo effect’. “In other words,” he says, “there was a need to push brand muscle. The product brands were not consolidating into one large brand, which could then be marketed to consumers. Seeing the gap, we now have an umbrella brand called HP Lubricants under which all the sub-brands will sit. This way, we are driving one currency into the market as opposed to multiple brands.”

Leo Burnett has also done away with HPCL’s earlier tagline for its lubricants business which was ‘The Engine’s Engineer’ for a more emotive – ‘Zindagi Chale Smooth‘. The new tagline is intended to help HP make the transition from commodity to brands. “It was time to move from a functional plane as represented by the earlier tagline to something that establishes some kind of an emotional connect. As long as consumers don’t see something as part of their lives, it is difficult to drive brand pull,” Hinduja says.

HPCL’s endeavours come at a time when the lubricants market is poised for growth. It is also getting competitive. According to industry sources, Indians are the fifth largest consumers of lubricants in the world after the US, China, Russia and Japan. Growing disposable incomes, improvement in the road infrastructure, increasing usage of automotive transport and rural demand are some of the reasons why the domestic lubricants market shows potential.

Industry revenues, say experts, are expected to touch $7.7 billion (Rs 50,820 crore) by 2017. This growth will be led by the auto industry, experts say. To put things in perspective, the lubricants market was $1.6 billion (or Rs 8,000 crore) in size in 2006, which even after accounting for exchange rate shifts, is a growth of over six times in nine years.

In India PSU majors such as Indian Oil, Bharat Petroleum and HPCL account for almost half the lubricants market. The rest is the domain of multinationals including Shell, Exxon Mobil and Total among others. But foreign players are expected to grow their share as demand for lubricants increases. It is in this context that HP’s brand makeover should be seen, market experts said.

A sense of the impending competition can be gathered from this: Last month, global major Lyondell Basell Industries bought the polypropylene compounding assets of India-based Zylog Plastalloys. The deal comes just a few months after Lyondell Basell bought another Indian company SJS Plastiblends, which also manufactures polypropylene compounds used to make plastic automotive parts. Lyondell Basell said the Zylog deal will double its automotive customer base in India and make it the third largest producer of polypropylene compounds (which is used to make lubes) in the country with an annual capacity of 97 million pounds.

“Opportunities for mergers and acquisitions in the lubricants industry in India will increase, propelled by rapid expansion of automobile and capital goods industry. Though there is immense potential for consolidation, M&A activities will be limited by non-availability of companies with scalable size. However, companies with innovative technologies could be potential takeover targets,” Mahesh Singhi, MD, Singhi Advisors, said. Singhi, for the record, had advised SJS Plastibends on the transaction.

In the interim, UAE-based Gulf Petrochem has already consolidated last year’s acquisition of Indian lubricant maker Sah Petroleums Ltd, renaming the latter as GP Petroleums. Plans are to take the erstwhile Sah’s lubricant brand IPOL international. HPCL clearly has to watch out.
[“source -business-standard”]