Castrol_Distribution_Group 5.pptx

8/10/2019 Castrol_Distribution_Group 5.pptx

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Rural Distribution PRESENTED ANJALI AG

NIKHIL JHA

RIDDHI KUPAVAN SHE

NISHANT V

TEJAL MEH

VIJAY DOSA


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Agenda

Lubricant

Industry

AboutCastrol

DistributionNetwork

CastrolRuralDistribution


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4thlargest lubricant market in volume behind US, China andJapan

One of the fastest growing industries in the world with a

CAGR of 11.5%

ValueINR 230 Billion, expected to be INR 462 Billion by2017

Volume1.8 million tonnes in 2013

A very competitive market with 30 established national,international and local players

Growth inautomobileproduction

Greentechnologies

Legislativecompliances

Improveddesign &

economies

Key Drivers

Source: http://www.researchandmarkets.co

*Castrol internal documents

LubricantIndustry

AboutCastrol

DistributionNetwork

Castrol RuralDistribution

Castrol22%

HPCL/

BPCL

18%

Others

20%

Major Pla
http://www.researchandmarkets.com/research/dlnfw9/indian_automotivehttp://www.researchandmarkets.com/research/dlnfw9/indian_automotivehttp://www.researchandmarkets.com/research/dlnfw9/indian_automotivehttp://www.researchandmarkets.com/research/dlnfw9/indian_automotive


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Automobile

- 45% of the lubricant market

- Commercial and non-commercialvehicles

- 86% Revenues of Castrol

- High Margin

Industrial

- 55% of the lubricant market

- Power, chemicals, railways, metals andmarine

Lubricant Segments

Source: * Castrol Internal Documents

Sales Chann

Original Equipment Manufac

OEMs like Harley Davidson and VolCastrol and recommend Castrol

Castrol Manufactures Co-Branded oil

Bazaar Trade

Spare part shops; dedicated lubricant workshops and authorised service sta

Castrol leads with 19% share compar

Petrol Pumps

PSUs enjoy higher margins through mpumps

LubricantIndustry

AboutCastrol

DistributionNetwork



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LubricantIndustry

AboutCastrol

DistributionNetwork


Castrol India Limited is a partof Castrol Limited UK (Partof BP Group)

CIL is the 2ndlargest

manufacturer of lubricants inIndia

It holds ~22% market share

CIL has a very robustdistribution network all overIndia

Castrol focuses on ththings: affordability,and availability

For FY 2012-2013

Turnover- Rs.3,50 Net Profit- Rs.500

Castrol

AMIE Automobile

Car

Engine Oil ATF

Truck andBus

Engine Oils

Off-Road

Engine Oil Coolant ATFManual

Transmission Fluid

Engine Oils


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Factory Warehouse

Dealer

Head Office

Product Flow

Information Flow

Cash Flow

LubricantIndustry

AboutCastrol

DistributionNetwork


Consumer


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Pre 2005 Phase ( 1991 - 2005)

Emergence of the Indian Middle class

Service Sector explosion Shift in Personal Consumption patterns

Why Rural ?

Post 2005 Phase

Limited growth (300 million) in urban areasand high potential in rural areas (700 million)

Significant increase in the Per Capita Incomelevels

Dramatic improvement in Connectivity andother Government policies

~60% of the potential is in the small towns

LubricantIndustry

AboutCastrol

DistributionNetwork


All India( PCO + MCO + Agri

Population

Market Data

Total Potential

(KL)

Pot Split

(%)

MCO

(KL)

PCO

(KL)

Tract

(KL

40 Lakh + Towns 63314 14.42% 25497 37817 0

10-40 Lakh

Towns 52698 12.00% 27205 25494 0

1-10 Lakh Towns 66419 15.13% 37456 28964 0

Below 1 Lakh

Towns 34643 7.89% 24734 9909 0

5000 + Villages 43883 9.99% 23404 8689 1178

1000-5000

Villages 137518 31.32% 59729 16218 6157

Below 1000

Villages 40579 9.24% 15625 4733 2022

Total 439054 213650 131824 9358


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FactoryWarehouse

Dealer

Head Office

CSD

Product Flow

Information Flow

Cash Flow

LubricantIndustry

AboutCastrol

DistributionNetwork


Consumer

i A i i i C


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PaharpurSilvassa

Patalganga

LubricantIndustry

AboutCastrol

DistributionNetwork


Manufacturing

Three manufacturing facilitiesacross India

Patalganga Paharpur

Silvassa

Base oils are sourced from IndianNational Oil companies such asIOCL, BPCL, HPCL and fromabroad such as Exxon

Base oils are directly sent to the

manufacturing plants These 3 plants produce all products

Paharpur plant is used to serviceEastern Zone

Patalganga & Silvassa plantsservice rest of India

C&FA

Three moth

located clomanufactur

C&FA pickthese warehtransport todistributors

35 CFAs al

operating o

L b i t Ab t Di t ib ti C t l R l


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LubricantIndustry

AboutCastrol

DistributionNetwork


Distribution Network

Over 270 distributors across the country

Service over 70,000 retailers

Stock Norm

Have to maintain a certain amount of Lubricants at all times

Urban14kL; Upcountry - 20kL

Distributor Service Area

The service area for a distributor is decided on the following parameters

Geography; Lubricant potential; Total population

Distributor Replenishment Model

As soon as a DSR takes an order, it gets registered as a secondary sale

Thus the amount ordered is reduced from the total inventory of the Distributor

At the end of every day, if the inventory with the Distributor falls below the stock norm,automatically a primary sale order is created

DistributorsCatc

L b i t Ab t Di t ib ti C t l R l


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LubricantIndustry

AboutCastrol

DistributionNetwork


Credit

Offered by Castrol- 7 days ; Extended toretailer- 14 days

Based on these figures Castrol calculates theROI for the Distributor

But in reality, the credit extends to upto 30days, thus impacting the distributors ROI

Staff

Distributor Sales Representative; GodownOperater; Sales officer; Computer operator

Margin

The distributors are

ROI

Distributors can earn an ROI of 18% in caseif they follow all the norms set by Castrol

For the distributor to earn an ROI, theminimum volume that is to be sold should be35 kL

Servicing

The distributors employ DSRs for ordercollection

The DSRs are provided with a PDA for ordercollection

Each DSR has a PJP, which encompasses 15to 30 outlets

Each DSR works for 6 days a week andrepeats the cycle every week

Distributors


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Distributors Return on InvestmeIdeal Actual

Revenue

Volume (kL) 36 36

Turnover (Annual) 12,00,00,000 12,00,00,000

Turnover (Monthly) 1,00,00,000 1,00,00,000Margin 4.30% 4.30%

Gross Margin -Monthly 4,30,000 4,30,000

Investment

Working Capital 48,00,658 1,29,50,000

WC (Days) 14 35

Expense

Salary & Admin 1,56,838 1,56,838

Delivery Charges 1,00,000 95,616Godown Rent - -

Misc. 1,00,000 99,500

Total Expenses 3,56,838 3,51,954

Net Margin = GM - Exp 73,162 78,046

Net Margin (Annual) 8,77,944.00 9,36,552.00

ROI = Net Margin/ Investment18.29% 7.23%

Lubricant About Distribution Castrol Rural


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Rural Castrol Sub Distributor

LubricantIndustry

AboutCastrol

DistributionNetwork


Network Castrol has over 650 CSDs all across the country

These CSDs enable Castrol to service towns with less than 1 lakh population

Hub n spoke The Rural CSD is located in a town

This CSD would service all the town and all the villages in the 20 km radius

Profile Usually a large retailer/wholesaler

Outlet with at least 250 sq. ft. space

CSD Area The CSD area is decided on the basis of

Geography, Population, Lubricant Potential

Norms Recommended30 days

Actual stocked7 to 14 days

CSD 1

CSD 2

30 k

Distributor an

catchmen



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Rural Castrol Sub Distributor

LubricantIndustry

AboutCastrol

DistributionNetwork


A DSR from the Distributor would visit the CSD once a week to take the order

Further the CSD employs a salesman who would go to the nearby villages to ta

retailersOrdering

The Rural CSDs are serviced just like a normal retailer

No extra credit is provided to them

Credit period is 14 days

But usually this depends on the relation between the Distributor and the CSD

Credit

When a CSD is setup, Castrol offers Rs 9500, apart from 2% on the DLP

After the CSD reaches sales of 2kL per month, he is given 4% discount on the DCastrol support

If the CSD follows all the norms set by Castrol, he should be able to earn an RO

But for this, the minimum Volume sold needs to be 2 kLROI


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CSDs Return on InvestmentRevenue

Volume (kL) 2

Turnover (Annual) 69,53,388.96

Turnover (Monthly) 5,79,449.08

Margin 4.00%Gross Margin -Monthly 23,177.96

Investment

Working Capital 4,16,060.31

WC (Days) 7.00

Expense

Salary 8,000

Misc. 6,000

Total Expenses 14,000Net Margin = GM - Exp 9,178

Net Margin (Annual) 1,10,136

ROI = Net Margin/ Investment 26.47%



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LubricantIndustry

AboutCastrol

DistributionNetwork


StrongNetwork

Currently the Castrol distribution network boasts of over 70,000 retailers consisting of Oil shops, Spare parts sh

Margins Castrol offers margins between 1015%

Apart from the margins there are quarterly schemes

Also yearly schemes on sale exceeding certain quantity

Credit

Ideal case- 14 days; Real life scenario15 days to 60 days

Support

Retailers doing brisk business for Castrol are enrolled for Retail transformation and given Castrol branding, and

Also top selling retailers are enrolled in the Castrol Anmol Ratna program

Servicing

Retailers are serviced by the DSR who visits them on a fixed day every week

Usually retailers stock 14 days worth inventory

The DSR informs the retailer of the various schemes, promotions

Dealers


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References

Amitesh BajpaiASM, Mumbai, Castrol

Abhishek MajumdarSales and Marketing Excellence Manage

Jagdish MalikManagement Trainee

Western Lubes, VashiCastrol Distributors

Castrol Annual Report, 2012-13

http://www.researchandmarkets.com/research/dlnfw9/india
http://www.researchandmarkets.com/research/dlnfw9/indian_automotivehttp://www.researchandmarkets.com/research/dlnfw9/indian_automotivehttp://www.researchandmarkets.com/research/dlnfw9/indian_automotive


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