Market Entry Plan for TIKO Auto Grease (Nigeria)

MARKET ENTRY PLANFOR

AUTOTIKO GREASE NIGERIA LTD.

developed by:Dele Ogundahunsi

+2348164969170Skype: deneri4

[email protected]

TIKO GREASE

Market Analysis (cont’d)

NOTE: this document is incomplete. To download the whole document (32 Slides) and another

document which discusses Engine Lube market entry, Go to

http://bit.ly/Marketing-Plan-for-Grease-and-Engine-Lube




Background: Market Overview

Market Analysis▪Nigeria is the third largest consumer of lubricating oils (including engine oils, grease, hydraulic fluids, etc) at about 600 million litres (one percent of the world total demand), with gross earnings of N150bn in 2013

▪It has been estimated that 75% of the total need of lubricating oils is produced locally while the remaining 25% consists of specialized products imported by marketing companies into the country

Crankcase Oils58%

Hydraulic Oils 26%

Process Oils 8%

Gear Oils0%

Metal Working Oils4%

Specialties3%

Other Greases1% Litres (millions)

Crankcase Oils (55.350)

Hydraulic Oils (25.150)

Process Oils (7.545)

Gear Oils (0.530)

Metal Working Oils (3.521)

Specialties (2.515)

Other Greases (1.059)

Lubricant Consumption Per Class in Nigeria (2013)

▪Among other lubricating oils, production and consumption of grease appears to be relatively low.


▪Globally, there have been environmental concerns for the toxicology of petrochemical constituents used in the manufacture of lubricants (grease inclusive) and their harmful effects on the environment, since they are non-biodegradable

▪Biodegradable greases which are made from renewable resources provide suitable alternative to the petroleum base greases that are environmentally toxic and non-biodegradable.

▪In Nigeria, apart from issues of environmental sustainability, the need for self-sufficiency also underlines the importance of a locally-sourced biodegradable grease as a reflection of government’s local content policy in Nigeria.

▪Most or all brands of grease in the market are based on petrochemicals and metal soap thickeners (e.g. lithium, calcium, aluminum, etc) and not biodegradable sources such as vegetable oils.

▪In the automotive sector, consumption of grease is relatively high during the rainy season as grease is often washed away on the roads, hence the need for more frequent re-application. In the industrial sector, consumption often peaks towards end of the year when production activities are generally on the increase.


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Brand Product Country of Origin/Marketer

Dropping Point

NLGI Grade Worked Penetration

Pack Size (kg)

Price (NGN)

Distribution

Standard (cont’d)

Magical Special Grease

Magical Special Grease

Nigeria/ PICO Brown & Sons Ltd., Lagos

N/A N/A N/A 400g 400 Auto Parts Mkt

LUBCON Lubgrease lithium Multipurpose Grease MPL -3

Nigeria / Lubcon Oil 190° NLGI 3 235 400g 400 LUBCON Stations / Auto Parts Mkt

HIGH-SPEED HiGH SPEED EP Grease Multipurpose

Nigeria / Grand Petroleum (Nosak Group)

184° NLGI 2 N/A 500 450 Auto Parts Mkt & Stores

A-Z A-Z APS – EPS 3 Nigeria /A-Z Petroleum N/A N/A N/A 400g 350 Auto Parts Mkt / A-Z Stations

Value For Money (VFM)

A-Z A-Z APS EP3 Nigeria /A-Z Petroleum N/A N/A N/A 180g 250 Auto Parts Mkt / A-Z Stations

SG Horse SG Horse Nigeria / SG Limited N/A N/A N/A 200g 200 Auto Parts Mkt

Major/Visible Brands of Auto Grease in Nigeria (cont’d)

▪The above are automotive products. All identifiable brands in the Premium and Standard segments come in re-sealable caps. In the VFM segment, SG Horse comes with a non re-sealable (not screw cap) protective cover.

▪In the industrial segment, firms such as Honeywell oil & Gas, LUBCON, Oando, etc control the market, supplying construction and manufacturing firms in such packaging as 25kg and 50kg . Honeywell for instance, has the Honeywell High Temperature Bentonite Grease NLG1 2 for Construction and Quarry Equipment. On the other hand, LUBCON has the FG-2 (dropping point: 450 ° and unworked penetration: 95), for electric motor bearings, pump shaft bearings, conveyor belts, food handling machinery, mobile equipments and wheel bearings

▪ Competitive Pricing Model


N/A6,000

NGN @ 500 NGN

7,200 NGN @

600 NGN

RETAILER =1,200 NGN

ABRO -454g x 12 (Premium Segment)

Manufacturer/Importer Price Distributor Price Retailer Price Retail Margin

3,800 NGN @ 316.65

NGN

4,300 NGN @ 358.33

NGN

5,400 NGN @ 450 NGN

RETAILER =1,100 NGN

FILTEX 500g x 12 (Standard Segment)


3,500 NGN @ 145.83

NGN

4,000 NGN @ 166.65

NGN

4,800 NGN @ 200 NGN

RETAILER =1000 NGN

A-Z -180g x 24 (VFM Segment)



Automotive Segment Customer Analysis






Industrial Segment Customer Analysis

Large Scale/Heavy Manufacturing

> Have in-house maintenance and purchasing units.

>Concerned about OEM requirements and therefore seek matching grease products.

>Mechanical engineers and purchasing managers have an important stake in the decision-making process.

> Large scale and medium size construction companies.

>Most have technical and purchasing managers who constitute a decision making unit.

>Usually have a steady relationship with supplier and buy in large quantities.

Construction Light Manufacturing SMEs

>MSMEs in the manufacturing sector and food processing firms.

>Usually, maintenance of machines is outsourced to a contract firm.

Strategy: Route To Market

About Tiko Grease

▪Tiko Grease is based on the R&D efforts of AutoTiko Auto-Grease Limited, owned by a Nigerian chemical engineer. The R&D activities were funded at the initial stage with a grant provided by the Nigeria Automotive Council (NAC), an agency of the Federal Ministry of Industry, Trade and Investment.

▪Certified by the Standards Organization of Nigeria (SON) and tested to international standards, Tiko Grease is produced from 82% local content raw materials (cassava) and its quality competes more favorably against other local and foreign brands.

S>Biodegradable and therefore environmental-friendly >Certified by the Standards Organization of Nigeria>Supported and recognized by the National Automotive Council>Formulation is adaptable for multipurpose applications (automotive and industrial)

W>New market entrant: largely unknown and un-tested in the market>Inability to take advantage of marketing economies of scale due to little market assets base (e.g distribution, etc) >Early stage production levels determined by market reaction and demand (production-on-demand)

O>Government industrialization and automotive policies support local content>Growth in the automotive and industrial sectors is on the increase>Buoyant auto parts channels available for leverage

T>Already established brands possess considerable market experience and assets to remain more competitive>Many end users especially in the automotive sector are unaware of or indifferent to environmental hazards posed by alternative brands>High customer loyalty and brand switching risk prevalent in the industrial segment

SWOT Analysis

Decision Factors (Automotive Segment)






Decision Factors (Industrial Segment)

Sub-Segments Description Needs Common Issues What to Offer

Civil Engineering Construction Companies

-Building and road construction companies-Buy in approx. 20kg containers-Critical deadlines-Heavy equipment leasing-In house or outsourced mechanical engineers

-Require grease specs toprotect bearings under extreme temperatures, heavy loads andcontaminated conditions-OEM specs important-May switch in the face of demonstrable superior quality-May switch for cost-saving reasons

-Strong brand loyalty-Concerned about the effects of switching to other brands-Referrals & networking with line engineers (managers) important

-One to one marketing-Product demos-Articulation of unique benefits-PR Support may be considered (e.g Presence Marketing at industry functions)-Sampling

Quarry Companies -Excavation and crushing of stone, etc

-Heavy duty grease requirements for excavators, crushers, etc-OEM requirements important-Purchase of large quantities--May switch in the face of demonstrable superior quality-May switch for cost-saving reasons

-Already have relationships with existing brands/suppliers-Referrals & Networking important

--One to one marketing-Product demos-Articulation of unique benefits-PR Support may be considered (e.g Presence Marketing at industry functions)-Sampling

Manufacturing firms -Mostly organized under Nigeria Association of Small Scale Industrialists (NASSI)-Includes such firms as plastic manufacturers, packaging firms, metal and glass production firms, printing firms, etc--Include food processing firms in the MSME sector -Mech engineering services sometimes outsourced to firms of industrial mechanical engineers.

-Price sensitive-Attention to OEM specs.

-Brand loyalty not strong-Consulting mech engineers makes spec decisions-Referrals & Networking

-Articulation of Unique benefits-Sampling-Product demos

Market Entry Strategic Options






Market Entry Formulation Chart(red marks denote strategic entry routes to be adopted)

DECISION FACTORS BLITZKRIEG ENTRY CAVALRY CHARGE STRIKE FORCE GUERILLA TACTICS

1. MARKET CONDITIONS

HOSTILE (+) (-) (+) (+)BENIGN (+) (+) (-) (-)BOUNTIFUL (+) (+) (-) (+)SPARSE (-) (-) (+) (-)

2. COMPANY RESOURCES

AMPLE (+) (+) (-) (-)RESTRICTED (-) (+) (+) (+)CRITICAL MASS NEEDED (+) (+) (-) (-)3. DIVERSITYGREAT (POOR FIT) (-) (-) (+) NSMALL ( GOOD FIT) (+) (+) (-) N

4. COMPANY CULTURE

RISK AVERSE (-) (-) (+) (+)EXPERIMENTAL (+) (+) (+) (+)

5. MARKET LIFE CYCLEEARLY STAGE (-) (-) (+) (+)

DEVELOPED STAGE (+) (+) N NMATURE STAGE (-) (-) (+) (+)6. MARKET SALIENCYHIGH TO ENTRY FIRM (+) (+) N N

LOW TO ENTRY FIRM (-) (-) (+) (+)

7. THREAT TO EXISTING CUSTOMERS

LOW (+) (+) N NHIGH (-) (-) (+) (-)

8. PROPRIETARY PROTECTIONSTRONG (+) (+) (+) (+)

WEAK (-) (-) (-) (-)

(+) = Appropriate / necessary strategy(-) = Not appropriate/not necessaryN = neutral

Key Decisions & Projections (from Market Entry to Market Consolidation)

*see next page for breakdown of short term sales projections







Execution: The 5 Ps (Short Term Only)

1. Product

▪Product line depth: At market entry (first 2-7 months), it is recommended that the Tiko Grease brand have the following SKUs positioned for the automotive sector of the market:

>0.4kg (400g) -Standard Segment>0.2kg (200g) -VFM segment

The following SKUs may be introduced for the industrial sector in the medium to long term: >4kg>20kg

▪Product logo to be developed. Bold fonts and colours recommended for logo and both should stand out from packaging. Text and visuals should be permanently imprinted on packaging (not on a removable wrap), while packaging colours should be such as to withstand any likely defacement by grease smear or dirt .

▪Packaging considerations:>Re-sealable (screw-capped) plastic especially for standard segment in the automotive sector>Disposable cover for VFM segment in the automotive sector>Include “biodegradable” and/or “environmentally safe”> For carton packaging, shrink-wrapping or tray and shrink-wrapping style may be adopted.

2. Pricing

▪A penetration pricing strategy may be adopted as part of overall market entry strategy. In the short term, it is recommended that pricing strategy be such as to make onboarding of trade easy and uptake of stock attractive to distributors and retailers, in relation to competition. At the end of say 6/7 months subsequent to market entry and promotional activities, pricing may be adjusted marginally (with an addition of say 10% - 20% margin to ex-factory price and 6% - 10% margin on shelf price) to reflect new realities of production costs and marketing spend, due to up-scaling .

▪Recommended Market Entry Prices & Trade Margins

2,700 NGN @ 225NGN

3,500 NGN291.67 NGN

4,700 NGN @ 391.67 (395)

NGN

RETAILER =1,200 NGN

Tiko -400g x 12 (Standard Segment)


Distributor Margin = 800 NGN/carton ( or 66.67 NGN per 400g) Retailer Margin = 1,200 NGN – 1,300 NGN/carton (or 100 NGN -108 . 33 NGN per 400g) Note: Retailer may sell @ 400 NGN (rounded off from 391.97 NGN or 395 NGN RRP to get a margin of 1,300 NGN/carton i.e. 108.33 NGN/400g)

Distributor Margin = 1,000 NGN/carton ( or 41.67 NGN per 200g) Retailer Margin = 1,280 NGN/carton (or 53.33 NGN per 200g)

2,520 NGN @ 105.00

NGN

3,520 NGN @ 146.67

NGN

4,800 NGN @ 200 NGN

RETAILER =1,280 NGN

Tiko -200g x 24 (VFM Segment)



NOTE: this document is incomplete. To download the whole document (32 Slides) and another

document which discusses Engine Lube market entry, Go to





Date post:	17-Feb-2017
Category:	Automotive
Upload:	dele-ogundahunsi
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