The global market leader in finished lubricants, Shell Lubricants displayed its flagship products at EXCON 2017. In India, the company is a significant player offering cutting-edge lubricant technology to its customers. Siva Kasturi, Global OEM Manager – India & South East Asia, Shell Global Lubricants speaks to Shashidhar V on the sidelines of EXCON 2017 about the immense potential that India offers lubricant players like Shell and why it is important to offer value to the customer rather than just focusing on increasing market share.

How do you read the Indian lubricant market vis-a-vis the rest of the Asia-Pacific markets?
I think that the Indian lubricant market is certainly quite dynamic in terms of the opportunities and the size. Today, we are the third largest market globally. All the major lubricant manufacturing companies already have their presence here in India. We have a market requirement of 2.6 billion litres per year, which is the third largest in the world. The kind of applications, the kind of OEM partners and customers is certainly humungous.
The GDP growth that the country is witnessing for the past couple of years and the kind of projections which is being talked about gives us hopes that the opportunities for growth are immense here. I heard Amitabh Kant speak at Excon 2017 where he said that the kind of infrastructure development that will take place in the next five years, India has not witnessed such growth in the past 1000 years! That only means that there will be a high demand for equipment with a lot of sectors opening up, like ports, railways, irrigation, etc. In the process, requirement for lubricants should go up substantially as well.

In a crowded market place which is dominated by domestic majors and the global players fighting for the rest of the market, how would Shell differentiate itself?
We are the leading lubricant player globally in terms of market share. When we talk of sectors like power, construction, or wind, we already enjoy a very good market share. And, so, when we come to our offering in terms of our value proposition to our OEMs and customers, how Shell differentiates is we try to offer a value to the end user.
If you are an end user, what is the kind of value that you perceive the product? It could be in terms of how I reduce the Total Cost of Ownership (TCO). Our objective is to present this value proposition more strongly and prominently to our OEMs in terms of what percentage of the TCO that I can reduce for you. And, that is the key difference between us and a lot of other players.

In the Total Cost of Ownership conferences and Webinars that were held by Shell recently, one of the points discussed was the longer drainage intervals due to better engine technologies and better performing lubricants that lubricant companies are now offering. Wouldn’t that really be harming your growth and market share since less of lubrication would be required?
I don’t think so. Today, everybody is looking for reliability, and enhancing the life of the component. What you are saying could hold true for someone who enjoys high market share or has a monopoly over the market. But, for players like Shell, who enjoy a very limited market share, our job is to demonstrate our value to the customer.
I will be able to do that by not only enhancing his oil drain interval but by also focusing on protecting the component. How do I enhance the life of his components, of his engine?
For example, if we talk about gear boxes or hydraulic systems, the cost of breakdown is very critical. And, very often, people really don’t care much about oil drain intervals, but their focus is more in terms of how do they enhance the component life, how do they protect their components from breaking down which could set their business back.
We did a survey with about 1800 respondents from about six countries and we shared the results of that at the conference that you are referring to. One fact that came out of that survey was that about 60 percent of the respondents were ignorant of lubricants. It could be identifying the various grades of products, viscosity, or matching the right lubricant with the right application, or training within their own teams of maintenance managers or engineers who are actually operating the machines.
So, there is certainly a whole lot of value leakage in the whole eco system. And, what we realised is that it is all the more important for us to focus on offering the right product to our OEM partners and customers.
A myth in the industry is the loss incurred in value terms during a breakdown of the equipment was often thought to be around 5-6 percent of the budget, whereas in reality, it is around 30-32 percent. And, the industry is not aware of this. So, this is one of the areas where we wanted to communicate effectively in terms of the impact that the usage of right lubricants can create in their whole value chain.

How do you foster growth?
To foster growth, you need to have the machines perform more productively. It means that friction, wear and tear, reliability, etc., matter a lot. And, that is where we believe we are one of the strong contenders in that space being the leaders in the global lubricants business. Technology insights to OEMs will be very critical aspect from a lubricant side.
And, while it is, to a great extent, linked to research and development, apart from it, it depends on how we communicate this to the OEMs as well. For example, I may design a fantastic technology centre and if I don’t offer these kinds of offerings to my OEM partners, a lot of the work what we are doing would actually go waste. I think communicating constantly to the OEMs about our technology and work that we do is the most critical aspect.

Companies are increasingly using technology to enhance the productivity or performance of their machines. How is Shell making use of technology to reach out to its OEM partners and customers about the work that you do and the offerings that you have?
We have launched a new service called the Lube Chart service. So, a customer can download the Lube Chart App on his or her phone, and ask any question related to lubricants. Say, for instance, a customer may ask how he can increase the oil drain interval for a given machine or engine. So, this App is like a virtual assistant. It will try to provide all the answers related to your query. We just launched this service at Excon 2017.
Moreover, we have a Shell Virtual Assistant service – called Shelly – which has a repository of innumerable questions. You can ask any question related to the use of lubricant for your machine, say for a wheel loader, or excavator, and Shelly will provide solutions that you could use. This will also help you to choose the right product for your application.
Today, the biggest challenge what we are facing is that the industry is actually a victim of lot of ignorance, especially related to lubricants. And, that is where many end users are not aware of the specifications and are using the wrong product.
Users may invest a lot in the purchase of the wrong solution for their engines or machines. The moment they choose a wrong product for that application, that would directly impact the reliability of the machine. You need to realise that all these high-end machines are basically operated by semi-skilled or illiterate workers.
One other initiative that we launched is the QR Code. Now, what we have is machine plate programme wherein we have embedded the QR Code in the machine plate. All that the operator has to do is scan the QR Code and it will list out the specific lubricants that can be used on that machine, and other such information. So, this is another new initiative that we have taken. This is also helping the OEMs and end-users to have better control on their components.

You say that there exists a lot of ignorance amongst users and OEMs. Isn’t the onus also on lubricant majors to create the awareness rather than just saying that users and OEMs are not aware?
You are absolutely right. When I said ignorance, I mean a lack of awareness. I think ignorance was the wrong word to use. Generally, what we have seen is, if I own a big machine, say a wheel loader or an excavator, for example, the general tendency of the end user is to maintain the machine with his or her own thumb rules.
Now, there is a lot of development happening on the machines. For example, the size of gear boxes is shrinking, there are a lot of developments on hydraulic pumps, there are many modifications in gear boxes. The parts are increasing, and the speeds too are increasing. So, with all these advent of new technologies in the geometry of mechanical designs, there is a lot happening in terms of the sheer rate of lubricants which the end user may not be updated on a day-to-day basis.
To give you an example, there is one OEM who has updated the specifications for their gear boxes almost 12 times in the last 15 years. It has all been done for better performance of the gear box. They have made the specifications more stringent. So, if the end user is not updated about all those improvements and specifications, he may continue to use an old lubricant that is suitable for an old gear box.
So, it is as much our responsibility to create this awareness amongst our end users on a regular basis. We try and do that by conducting Knowledge Webinar Series every few months in a year. We have partnered with CII to see how we can improve upon this and we are planning another 25-30 such Webinars next year. We plan to offer better insights to our end-users on applications, knowledge, by bringing in various technical experts and train our OEM partners and customers as well.

How difficult is it for Shell to keep up with the changes in technologies and designs to come up with suitable lubricants that match those new specifications, taking into consideration the rapid pace of change that is taking place when it comes to engine technology, or of gear boxes, etc.? Shell, if I am not mistaken, works with many engine manufacturers to collaborate on new designs.
You are right, and that is one of the key reasons why OEMs are keen to collaborate with us on new engines and designs. Now, to give you an example, I work very closely with the Bureau of Indian Standards (BIS), and I am also a member of the BIS Committee. And, like me, a lot of my colleagues also work very closely with industry bodies and OEMs. All major OEMs keep their specifications updated, and we, as the largest lubricant supplies, we work with all the OEMs very closely and understand how exactly these specifications have changed, and we get back to the OEMs with an updated lubricant that would match the new specifications. And, we also ensure that a lot of these updates on the lubricants are specified in their equipment manuals. So, we keep abreast with the latest developments that are taking place in engine designs, etc., and, so, it is less of a challenge for us.

Was it a conscious decision to focus on B2B industrial lubricants segment considering that the B2C segment is crowded?
In fact, we are strong on both the B2B and B2C markets, with a very similar amount of market share in both these spaces. In the B2B space, we have a very strong partnership with many OEMs. In construction domain, we have partnered with Putzmeister, Sany, XCMG, Schwing Stetter, and Propel, to name a few.
Again, in the B2C space, we have partnerships with many OEMs. It all depends on how strongly we continue those partnerships, depending on how we leverage those partnerships. But, in terms of our focus, we are present in both the markets very strongly.

Renewable Energy is a market that is keenly being watching by many lubricant manufacturers.
Yes, we too are there in the renewable energy market. We are a strong player in the Wind energy sector, but we are not present in Solar. In the wind energy market in India, we hold around 36 percent of the market share. Globally too we work very closely with all the key OEMs, including Suzlon, Gamesa, GE, etc.
Moreover, in the last three years, we have been chosen as the lubricant company of the year by the India Wind Energy Forum. So, that should represent the kind of work that we are contributing to the wind energy sector in terms of offering new products, new technology, new services.

Companies, in their eagerness to corner greater market share, have often resorted to price cutting or squeezing of margins. How do you view such methods?
I may not be the best person to comment on the pricing strategies of companies, but it all depends on focus sectors. Each and every competitor in the lubricant space will have their own specific focus sectors and strategies and priorities. And, so is the case with Shell.
We have our own defined focus sectors and markets. Based on this, we offer collectively, in terms of our product offering, value to our customer rather than just reducing the price or squeezing the margins. I believe that we will be more convinced if we offered a value to the end user or OEM partner. That is where we conduct a dip-stick check to ascertain how exactly is our strategy working, is my customer happy, is my OEM partner happy about the kind of offering.
I think the whole thing is about value. It is not a price game. Am I offering a customer a value proposition, or am I offering him or her price advantage? And, we certainly believe that we are offering a lot of value to our customers.
To be honest, in the last six years, when we made a simple calculation, we have a process called Demonstrating Value Records, which we call DVR in short. This is an internal process that we follow in Shell. The moment I offer my product to any OEM partner or customer, we are also conscious to check to see if the product is really offering any real value to the customer or OEM partner. And, when we collated this data for the last five years, the value was almost $139-million, which is a huge sum. And, if I have to only pull out the value for construction sector, it would amount to about 25-30 percent.

Lastly, how positive are you about the future growth prospects for the industry in general, and Shell in particular?
There are extremely enormous amount of opportunities in a market like India, whereas there is a lot of consolidation happening in other markets. In India, every sector is opening up. I think, in 2012-13 we had the highest amount of construction equipment sales. Thereafter, it took a dip, and I hear that around 86,000 units were sold last year. And, indications are that another 35,000-40,000 units will be sold in the next five years.
If one were to look at the projects that have been announced, there is a scope for growth in sales going ahead. And, so, I am sure there is lot for us to work in terms of how do we offer value to our partners, OEMs, customers, and how do we ensure that right amount of awareness is created in the whole value chain.

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We have a market requirement of 2.6 billion litres per year, which is the third largest in the world. The kind of applications, the kind of OEM partners and customers is certainly humungous.

There are extremely enormous amount of opportunities in a market like India, whereas there is a lot of consolidation happening in other markets.