BRANDYLANE has done lub market analysis on behalf of BNO Lubricants, Lube market grows by leaps and bounds!

Lubricant Market Overview:

The number of motor vehicles in Bangladesh is growing at an exponential rate, and the demand for engine oil or lubricants is growing with it. Expansion in transportation, driven by development in communication infrastructure and availability of finance, is fuelling the growth of the country's lubricant market at a rapid rate. The size of the local lubricant market stood at about Tk 5,000cr to Tk6,000cr in 2018-19 fiscal year, as the market grows by 5% to 7% per annum. Increased economic activities, rising power sector, vibrant transportation and mobility sector and ease of getting finance have boosted lubricant market. According to the industry insiders, the annual lubricant demand pegged at 1.75 lakh tons in the 2018-19 fiscal year, which reached two lakh tons in the 2019-20 fiscal year. 

The lubricant business in Bangladesh in the private sector is a little over a decade old. Until 2000, only the state-owned oil companies were allowed to import, blend and distribute lubricants here. At that time, majority lube oils (65 percent) contained no additives. The government liberalized the market and banned non-additive lubricants in 2001, to ensure minimum standards.

Existing Market Competition:

According to industry people, there are more than 100 plus lubricant brands in Bangladesh, with imported brands dominating the market. They meet around 60% of the local demand, leaving the rest around 40% to local brands. 

BNO lubricant of Lub-rref (Bangladesh) Ltd, FUCHS lubricant of Fuchs Lubricants Bangladesh Ltd and Omera lubricant of Omera Petroleum Ltd, a subsidiary of MJL Bangladesh, are other major local brands. 

There are also many imported brands in the local lubricant market. BP (British Petroleum), Total, Shell, Castrol, Caltex, GULF, HP (Hindustan Petroleum), Motul and Mak available in the local market. Many low-quality imported brands are also available here.

Market share of major brands

MJL Bangladesh is the major player in the local lubricant market with an unassailable 26% market share. Mobil is a popular brand manufactured by MJL Bangladesh. They are enjoying 70% market share of the industrial lubricant sector.

According to a market research by an importer company, Mobil is by far the market leader with a 26% share, followed by BP with 12%, Total 8%, FUCHS 7%, Shell 3%, Castrol 3%, Caltex 2%, GULF 1% and Servo 1%. The rest 37% is dominated by other around 100 low-quality and low-cost brands

The automotive sector accounts for 70 percent of total lubricant consumption in Bangladesh and the industries the remaining 30 percent. But the growth in the lubricant industry in the last few years has mostly been due to the growth in the industrial sectors, especially the power sector. Cement, steel and fertilizer industries also consume a good amount of lubricants. The proportion of lubricant used by industrial sector is expected to increase even more in the future as industries grow and the demand for lubricant to be used in this sector increases.

Major challenges facing the sector : As there is no designated monitoring authorities for the sector, anybody can enter the lubricant industry, which has rendered it difficult to ensure quality. 

There should be strict regulations to ensure that no low-quality brand enter the industry, there are too many players, the market has been flooded with inferior quality products with minimum accountability. Counterfeit products have been another problem area for this industry.

There is no strong restriction on importing lubricants. Anyone can import and sell, but all products are not of good quality. As a result, lubricant market is full with unknown brands.

Lack of awareness is another major issue faced by the industry. For cost cutting, many people use low quality lubes marketed by unscrupulous traders. Lube oil cost is only 1%-2% of what is required for running an engine or equipment, but it can ensure almost 100% safety of the equipment if it is of good quality. 

Consumer Insight: Price is the major decision making criteria that customers consider when buying lubricants. In areas like Dhanmondi, people do not bargain much with the retailers when buying lubricants; they assume that they are getting excellent product for the price they are paying. In contrast, in Mohammadpur, customers are more doubtful about the product quality and they often argue and negotiate with the retailers to decide upon a price.

  People are most concerned about the quality of the lubricant. They do not want to risk anything happening to their car for not using high-quality lubricant. This is corroborated by the fact that in areas like Dhanmondi, where many affluent people live, the market leading product – with respect to quality – sells the most.

 According to retailers most customers are quite knowledgeable about the lubricant brand and quality. In fact, for consumers, the main source of information arises from peer suggestions. Findings suggest that consumers themselves and their peer groups play the most significant and equal roles. 42.86% of the responses from retailers interviewed stated that the consumers themselves make the purchase decision. An equal percentage of responses stated that the consumers’ purchase decision is a result of suggestions from peer groups like family, friends or colleagues. Retailer suggestions also play a part in affecting the purchase. Retail shop owners recommend their preferred brand to the customers most of the time. Due to this, customers often purchase brands as referred by the retailers (14.29% responses from the survey). What’s interesting to note is that the promoted brands tend to be aligned with the greatest profit margin or largest volume. This, in turn, puts less pressure on the retailers as cost of the next lot gets reduced. This, however, doesn’t reflect the true state of the brands in the market. Moreover, the suggestions they make vary depending on whether a car runs on petrol or natural gas. According to them, the lubricant needed is subject to the fuel used.  Finally, Availability of brand doesn’t affect people’s purchase decision. Rather, it’s dictated by the brand’s popularity.

Global lubricants market

The global lubricants market was valued at about US$90bn in 2016 and is forecast to reach a size of about $103 billion by 2021, reporting a moderate 2.7% CAGR (Compound annual growth rate) during the forecast period of 2016-21.

The lubricant market is growing at almost 3% a year, which is on par with India but behind China. With the falling oil prices, the industry can expand at an even faster rate. However, one caveat is a potential disruption in manufacturing and industrial activities should there be an energy paucity. Because of this, the growth potential of this industry may become stunted.

BRANDYLANE Observations:

On behalf of BNO brandylane conducted a Bike1 a 3 months long trade activation in Dhaka Metro(1st September -30th November,2020) & Khulna Metro(1st October-31st December,2020).

During these activation period brandylane visited nearly 3263 retail points/shops in Dhaka Metropolitan area:

As per our data analysis, the avg per day per shop sale was 250 ltr which indicates 815750 ltr sale per month in Dhaka metro worth 285512500 BDT

In Khuna Metro brandylane team visited 1490 retail outlets. The avg daily sales in Khulna is 150 ltr with 223500 ltr monthly avg sales worth 78225000 BDT per month.

 During our visit we have identified below strength, weakness, Threat & market opportunity for BNO:

 Strengths:

1.      BNO holds a competitive market advantage of being a local brand.

2.      BNO is the only local brand having the latest testing Lab in Bangladesh.

3.      The biggest strength for BNO is their price competitiveness & superior quality product.

Weaknesses:

1.      Brand image & brand visibility

2.      Gap in distribution network resulting in delay in product delivery.

3.      Lack of trust worthiness amongst the consumers & retailers.

4.      Relationship with retailers

5.      Lack of product availability at the retail shelves.

6.      There persists a significant gap between strategic and practical implication.

Threat:

BNO fails to create a brand identity & trustworthiness which is indicating in the sales drop & market share.

Suggestions/Opportunities:

To compete with existing brands BNO needs to strategize on various issues:

1.      Brand visibility & awareness buildup exercise with consumers and retailers.

2.      Price competitiveness & price flexibility across different market segment.

3.      Identifying the low performing areas and conduct a micro level survey to understand the reasons for sale drop.

4.      Trade campaign & trade activation activities to build up a rapport with the retailers.

5.      Improve the distribution channel for faster delivery of products

6.      Taking initiatives for end user campaign for building brand loyalty & brand image.