SDM Project on Study of Distribution Channels Employed

by Castrol India Limited for the Motor Cycle Oils in Delhi

by

Group-6; Section B
Mayank Vimal, 15P093
Naman Ratan, 15P094
Samveda Sharma, 15P105
Sumit Kumar Das, 15P112
Vikrant Wakhlu, 15P117
Madhur Bangur, 15P150

Management Development Institute

Gurgaon 122 007

Situation Analysis:
Castrol India limited is a 100+ year old company, with strong brand positioning and
superior distribution network which has allowed it to command higher pricing power
and premium for its products over its competitors. The company is currently focused
on the fast growing personal mobility segment and the commercial vehicle segment
has remained stagnant for some years now.
In the present report we are focusing on the two-wheeler segment in the Delhi
Market.
In this space, Castrol has following products and respective SKUs,

Castrol Power1: - This is the semi-synthetic offering of Castrol and is for those
who look for superior acceleration at the touch of the throttle. The value
proposition is that its Power Release Formula flows fast and reduces internal
engine losses to friction delivering improved acceleration. It is available in the
viscosity grades of 10W-30, 15W-40 and 20W-50. All of these sell in the pack
of 1l.
o

Castrol Activ: - Castrol Activ is the highest selling offering by Castrol. It is

specifically designed to provide reliability and protection to the bike at all
times. The value proposition it offers is that its additives cling and provide
continuous protection, even when the engine is off. It is available in the
viscosity grades of 20W-40, 20W-50 and 10W-30. All these viscosity grades
are available in the pack size of both 900ml and 1l.
o

Castrol Power1 Racing: - It is the fully synthetic variant offered by

Castrol and is for those who want even enhanced acceleration and
superior protection

Castrol Activ Scooter: - This oil was specifically designed by Castrol for
the gearless scooters. The value proposition it offers is that the
additives fight the zip robbing deposits giving nonstop protection in the
stop-go city traffic. It is available in the viscosity grade of 10W-30.

Castrol Go!: - Castrol Go! is the value product by Castrol which helps keep the
bike in good running condition to ensure a trouble-free ride. The value
proposition it offers is that it meets the requirements of all the three zones Engine, Clutch and Gear of the bike to give a trouble free ride. It is available
in the viscosity range of 20W-40.

Distribution channels employed by Castrol

B2B SEGMENTS

CFA

MANUFACTURING PLANT
Description

CFA: - Carrying and

Forwarding Agents
(CFA)
are various third party
agents
who take up the
responsibilities for last
mile
delivery to various
locations. They take
care of
both warehousing and logistics.
B2B Segments: - In
the
Motor Cycle Oil (MCO)
space,
there are two
segments which can
be
considered as follow: o Franchisee
Workshops
(FW): These are the licensed workshops which are often found
attached with the authorized bike dealers. These usually use the
engine oil which are recommended by the motorbike manufacturer. For
e.g. Hero Honda Workshops exclusively use engine oils from Tide Water
Oil called Veedol, or from Savita Oil Technologies called Savsol or from
BPCL called MAK. These are directly serviced by the CFA.
o Original Equipment Manufacturers (OEM): - These are the companies
like Hero Honda, Yamaha etc. which manufacture the respective
vehicles. With these the company can do following agreement among
others
Authorized Engine Oil Contract: - As mentioned earlier, most of
the OEMs recommend the engine oils which should be used in
their bikes. For these, they usually sign agreements. For e.g.
Castrol has such an agreement with Suzuki. This may not be
very relevant from a distribution point of view.
First-Fill: - These constitute the first time when the engine oil is
filled in a bike which is ready to be shipped outside of the
manufacturing plant. These are also served by the CFA
B2C Segments: - These are typically served by the Distributors via the field
representatives called Distributor Sales Representatives (DSRs). Few of the
segments which constitute these are as follows: -

CASTROL BIKE POINTS

RETAILERS

DISTRIBUTORS

WHOLESALERS/RETAILERS

CFA

o
o

Castrol Bike Points: - These are the exclusive outlets licensed by

Castrol which get exclusive branding from Castrol and are supposed to
sell exclusively Castrol. These are serviced directly by the distributor.
Wholesalers: - These are serviced by the distributors and are the last
mile delivery channel for most of the retailers
Retailers: - Retailer distribution are via two channels
From the wholesaler
From the Distributors: - These often get goods at a lower price
but have to promise a certain quantity every month.

Castrol Bike Points

Given the importance an influencer carries in this channel, to foster relationships
and drive sales, Castrol has a Bike Point program in place. The Workshops which fall
under this program avail a number of advantages such as better schemes, complete
Castrol branding, regular visits by the company personnel, servicing by the
distributor, invites to Bike Point Conferences etc. The Bike Points are chosen on the
following parameters:

Size of the shop: - There is a minimum size of 150 square feet which is
prescribed by Castrol. Alternatively there is a minimum no of bays which is
required. However, this is not strictly followed in Delhi due to space
constraints

Volume: - The Bike Point should sell a minimum of 225l per quarter of Castrol
products. This ensures that the investment by Castrol is well taken care of.

Exclusivity: - The Bike Points should sell only Castrol and no other brand.
However, due to intense competition in Delhi Market and the lucrative
schemes and offers by the competitors, this is often not the case.

Financial Profile: - Castrol has a credit period of 14 days and hence it is

extremely important that the selected workshop should have the financial
capability and reputation to adhere to that.

Overall Profile: - Castrol is a very reputed brand in the market and it seeks to
associate with only those workshops who are good enough to carry the brand
equity of Castrol with themselves. Such workshops should be forward looking,
ambitious and growth-oriented such that alongside with them, the revenues
of Castrol also grows.

Castrol Bike Points in Delhi constitute less than 5% of the total NonFranchisee Workshop space but their contribution is more than 30% in the
total Motorcycle Oils Category. Hence, they assume a lot of importance for
the company.

Problem Symptoms

Loss of exclusivity among Bike Points: - A lot of outlets, especially bigger

Bike Points dont sell Castrol exclusively even if they are supposed to do so.
This is even after Castrol has immense brand pull
Counterfeiting: - There is a significant market for counterfeit Castrol in
Delhi. This is a problem even if the customers dont want to compromise with
the bike performance.
Differences in Retail Prices: - Because of schemes, Bike Points are
supposed to have the best margin and are supposed to sell at the cheapest
price. However, due to large volumes and illegal practices, many wholesalers
sell at lower price. This creates distribution challenges.

Problem Statement
Castrol, although a company with one of the best distribution system, suffers from
irregular distribution in Delhi market characterized by uncharacteristically
concentrated Bike Points, heavy counterfeiting, and low satisfaction among the
retailers and distributors alike. The objective will be to identify the distribution gaps
and find ways to resolve them.