Prabhar Oil Company, and Distribution Challenges in the Indian Lubricants Industry Essay Example

Delhi regional office. Alok had recently joined as the area sales manager in Izo, a leading MNC oil company that markets lubricants in India since 1998. Those present in the meeting included the financial controller office of Izo, Alok's reporting regional manager Vineet, and a representative from Izo’s Singapore office. During the meeting, Alok was informed that he had been accused of cheating and financial embezzlement by Prabhar oil company (POC), with evidence suggesting his guilt.

Alok was shocked during the meeting with Prabhar Oil Company (POC), one of the distributors in his sales territory. He was compelled to sign untrue declarations and even pleaded for leniency regarding future penalties, which he rejected. Throughout the discussion, Alok repeatedly informed the investigators about the fabricated case, insisting that it was built upon false evidence because POC was terminated as Izo's distributor on his suggestion. Alok felt deceived and betrayed by Izo, considering the immense effort he put into ensuring exceptional performance from the distributors in the fiercely competitive auto lubricants' market.

The Indian Automotive Lubricants Industry in India underwent significant changes after the country's economy was liberalized in the early 1990s. Prior to 1992, four major public sector companies, namely Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL), and Indian British Petroleum (IBP), dominated the industry. There were also a few private sector companies operating, including Castrol, Gulf, Tidewater, and others.

Around 90% of the Indian lube market was dominated by public sector undertakings (PSUs), while the remaining 10% was controlled by private sector players[1]. In 1992-93, as part of liberalization and policy deregulation, the government decided

to open the market, which had a demand of 38.5 million tonnes per annum and was growing at a rate of approximately 6% annually[2]. The market can be broadly categorized into three main segments: Automotive, Industrial, and Marine & Energy applications (Annexure IV). Among these segments, the automotive sector accounted for about 67% and included over 30 lubricant brands[3].

However, the lubricant industry is primarily controlled by four major companies – IOC, Castrol, HPCL, and BPCL – together holding over 70% of the market. The remaining 30% is divided among various players, including multinational corporations and the unorganized sector. This creates an intensely competitive market environment (Annexure V). Despite this, the public sector firms continue to dominate the lubricant market with a share of approximately 50%[5]. In terms of profitability, IOC has been the frontrunner with its Servo brand (Annexure VI). In the private sector, Castrol stands as the largest player, capturing around 20% of the domestic market share[6].

The other MNC competitors, such as Tidewater Oil, Elf, Shell, Mobil, Exxon, Pennzoil, Caltex, Gulf, among others, have only a small market share. Many believe that consolidation will have a significant impact on market share, positioning, business ranking, manufacturing, and the competitive environment. Industry analysts have also predicted that oil companies with refineries, strong R&D facilities, innovative business plans, wide distribution networks, strong brands, extensive infrastructure, and professionalized technical services are the ones that will survive in the market.

Recent times have seen a shift in competition towards brand identification rather than price. As a result, price wars, increased trade and consumer promotions, and the involvement of key influencers have diluted the brand

image and done little to improve consumer relationships.