Company Description: Shell
Lubricants India is a 100pc subsidiary of Shell. With corporate office in
Gurgaon and 6 regional offices Shell Lubricants India employs around 400 people
across the board. The Indian arm of the multinational firm sells its lubes
through a network of 250 distributors across the country in high-street,
franchisee workshops, independent workshops etc. Shell Lubricants has set up a
Customer Service Centre (CSC) in Chennai in 2008 for an effective lubricants
supply chain. Since 1997, Shell India has been manufacturing its lubricants at
its blending plant at Taloja, near Mumbai. In India, Shell Lubricants has
entered marketing alliances with companies like Maruti Suzuki, Hyundai,
Mahindra & Mahindra, Skoda, Ford, Wartsila, Same and Thermax. Shell is also
the largest and most diversified international investor in India’s energy
sector, with nearly US$1 billion already invested.
You have held several positions of
responsibility within Shell. How exciting and challenging is it for you to head
the India operations?
All my positions were actually very
rewarding. At Shell, we strongly believe in people and more importantly about
leadership development. So one of the big things that we do, as an
organisation, is that we ensure that people have roles and responsibilities
that are stretched. We also develop individuals in areas with leadership
attributes. For example: one of the big things that is really important in an
organisation is managing operations. That was what my last role was all about.
We were moving 5 or 6 billion tonnes of product all across Asia Pacific and
Middle East. I was also responsible for the operational startup of a
multi-billion dollar facility in Jurong Island and Bukom Island in Singapore.
It was a very exciting stint to be involved in building such a massive facility
there and it has its own set of unique challenges. I enjoyed all my roles in
Shell and this is (heading Indian operations) the next step to take up another
challenging role and an exciting opportunity.
How important is the Indian market
among BRIC nations for Shell when it comes to contributions to global operations?
The answer is that the Indian market
is very important. Shell is investing quite heavily in India. It is clearly one
of our key focus markets, specifically for lubricant even though other sectors
are equally important. If you look at our operations here, we have a manpower
strength of 2,500-3,000 on the ground across the range of various
opportunities. We have invested over US$ 1 billion in this country and we are
investing even beyond that across different options. I think we are already the
most diversified firm in the oil and gas industry in India. Specifically for
lubricants, the BRIC nations are very important. If you look at China as an
example, we are considered one of the leading players here for lubricants. In
India also, we have a similar aspiration to reach that level.
Shell is renowned globally to make
3,000 different lubricants to meet customer needs across a wide range of
applications. Do you have plans to gradually bring all your products here? Or
would you consider churning out India-specific products?
The answer is yes to both. But you
must understand that across the range of 3,000 lubes that we are selling
globally, there are some products which are country-specific. There may be some
lubes which are OEM-specific for the country to operate in. So we won’t bring
in those products unless there is a particular materiality of scale of business
over here. So what we do is that we have a constant evaluation on an annual or
six-monthly basis to take a look at our portfolio and decide on what lubricants
we want to bring in. Today, we feel that we are covering around 90pc of the
market. We will be introducing more grades this year and we will cover about
95pc of the domestic lubricant market. There are some grades that are too
specialised and too low-volume that we will evaluate on a strategic basis. In
terms of India-specific products, we always have specific grades. For example:
we work very closely with our OEMs like Maruti Suzuki and Tata Motors. For Tata
Motors, we are working on a co-engineering basis to evaluate new lubricants for
them. So those are the kind of opportunities that may exist. There are also
vehicles that are unique to India and for them we have introduced lubricants
that are only available in our portfolio.
What about exporting lubricants from
India?
We are actually looking at exporting
some lubricants out of the country. We move into a few countries in terms of
their local or regional needs. We have a network of blending units across all
the Asia-Pacific nations and Europe. So some of our lubricants come in from
Canada, Europe, etc to India. What we like to do is take a look at what the
optimal point is to manufacture a specific lubricant based on scale and
capacity. It may be possible that it (the lubes) is not available in that
country itself but is centralised in one spot. It’s more economical for us to
then ship it across the globe (from that spot) but manufacture in that specific
location. From India, we generally consider shipping out our products to SAARC
nations, Middle East et al. There are of course constraints in terms of
shipping out lubricants from India. We do have a tax structure in terms of
manufacturing in India itself. The excise duty levied here does make us a bit
less competitive as compared to other nations in terms of providing a regional
export hub.
So do you support free trade
agreements with other countries?
As I mentioned earlier, we have a
network of plants and have products that are imported directly. We import base
oil to create our finished lubricants. We also bring in finished lubricants. So
from our perspective, it’s advantageous if there is a free trade agreement that
is available across various countries. If we have well-defined FTAs with
various countries, it would be an easier basis for us to export from here.
Honestly, the answer is that the government knows the best in these cases. We
look forward to seeing more from them.
Globally, Shell Lubricants has five
lubricants research and development centres in the UK, Germany, France, the US
and Japan. How crucial will be your
upcoming Indian centre at Bangalore?
Will it be contributing to your global operations too?
Absolutely! It will contribute to
our global operations. I think the important point to understand is that being
part of the Fortune 500 Group, technology is in our DNA. It’s one of the
biggest things that we are focusing on. Infact, as a Shell Group, it is touted
to be the most innovative and competitive company in this (lubricants)
industry. We have invested quite a handsome amount for the R&D centre in
Bangalore. We have just announced that we are going to expand that facility and
have acquired a new land for the same. Bangalore will be one of the three
central hubs for the group level technology development. The exact investment amount is confidential.
But what I can tell you is that we invest over US$1 billion in R&D globally
every year and Bangalore will be one of the central locations for the same. The
very same amount has been invested by Shell India across its operations, including
R&D. We are having about 800 people in that facility which will be growing
substantially for the next five years. Specifically, what we are looking at is
how the Bangalore unit supports not only the rest of the globe but also in
areas where it can help the domestic market. We have some options that we are
exploring. We will make an announcement on that front later on.
Shell’s worldwide portfolio of
lubricant brands includes Shell Helix, Shell Advance, Shell Rimula etc. It also
owns a portfolio of car care products and Jiffy Lube services. But in India you
have earmarked only a handful of them? Is there any specific reason?
This is the same question in terms
of 3,000 products in our global portfolio. We used to have ‘Pennzoil’ portfolio
in the country. We are continuing to have that. However, we would like to
transition to the ‘Shell’ portfolio that we have today. As far as rolling
‘Jiffy Lube’ as a service is concerned, it depends on the maturity in the
country. If you look at the car industry here, it’s largely centrailsed around
the franchised workshops. So we need the car parc to reach a certain age
wherein the consumers would be moving beyond the franchised workshops and are
looking for top quality service before a ‘Jiffy Lube’ type service makes sense.
We certainly have several competitors who are there in the marketplace and are
looking at various options in terms of servicing. But you still find them to be
more oriented towards full service workshops rather than a fast lube service.
So this is the question of governmental maturity in the industry and when the
industry is going to be ready for a service like that. There are a number of
cars that are beyond the franchised workshops in the aftermarket. That is
certainly a big focus for us. That’s why we continue to launch an increasing
set of products that offer benefits to the consumer. We have a number of
promotions, schemes and marketing programmes that communicate these benefits to
the consumers. And we continue to drive that through our distribution channel.
We will work on improving our distribution channel and will then ultimately
work closely with the mechanics on the ground and retailers to position our
products.
How important is the automotive
aftermarket for Shell India? What strategies do you have to enhance your
presence in that space?
It is very important. I think what
is important for Shell India is to be involved with the car parc throughout the
lifecycle of the car. So we work very closely with the OEMs when the car is at
the production line. We work very closely with them at the franchised workshop
space. One of the big areas that we focus at the workshops is to make sure that
our lubricants are lowering the total cost of ownership for the OEMs and its
customers. And we use technology specifically for that.
What are the benefits derived from
your partnership with Ferrari in Formula One racing?
Our association
with Ferrari is over 60 years old. And there are a number of benefits that we
derive out of it. Formula One is all about raw speed, power, engine
performance, etc. It is not only the question of heat and power, but also about
gearshifts and engine life of the vehicle.
We partner incredibly closely with Ferrari to work on fuels and
lubricants that can give them a performance edge on the track. Infact, we are
the only company that has a track lab that is available right next to the
Ferrari pit. We are constantly monitoring the fuels and lubricants that are
being used at the race itself. We develop and formulate specific lubricants and
fuels for them. The important part of this association is the level of
understanding that we have gathered from developing these products under extreme
performance conditions. It gives us the information and data to then be able to
develop lubricants for our regular customers that are based on the knowledge
that we develop there (for F1). For
example, our ‘Helix Ultra’ is based on the technology that we have developed
along with Ferrari. But now we have made it available for our consumers. So
that is one clear tangible benefit that we get out of this strong association.
There are of course other intangible benefits too. Ferrari is a well-known and well-recognised
brand and we certainly benefit from having a co-branded relationship with them. While the Shell brand
is known very well in some countries, similar is the case with Ferrari in other
countries. I think what works for us there is that both companies are well
understood as the pioneers in their fields. And there is a lot of synergy
between the Ferrari brand and the Shell brand.
Going forward, are you confident of
bagging new clients in India?Unfortunately, I can’t share the
details as they are very confidential and are under negotiations. But just take
a look at some of the companies, in terms of servicing, that account for
55-65pc of the passenger car market. It tells you that we have a proposition
that is attractive to the OEMs. Firstly, the technological benefits that we are
bringing to them are outstanding. The second thing is lowering their total cost
of ownership. We work very closely with the OEMs to improve the service level
that they can deliver to their customers. Some have a very strong proposition
for the market-leading OEMs which will appeal to others (new OEMs) too.
What is the size of the Indian
lubricant market? How much does the automotive segment account for?
It is estimated at around 2-2.5
billion litres per annum. It is evenly split between automotive and industrial
lubricants. Both sectors are equally important for us.
Lastly, do you foresee a lot of
growth in India in the next few years in your line of business?
We of course foresee a lot of growth
in our line of business. We have been in the Indian market since 1993 and have
been operating as a wholly-owned entity since 2008. We have been growing very
strongly on a year-on-year basis. We are proud to say that we have been growing
at double digits every year for the last couple of years. We plan to continue
that trend. We expect to see that level of growth coming through different
areas. We do invest quite heavily in the country. And the expectation is that
we want to see return on those investments. We would like to see ‘Shell’ as a
brand that is not only widely known in the marketplace, but is also widely
preferred amongst our buyers. And on the back of that, we want to widely
establish ourselves as a technology leader in the marketplace. We are investing
quite heavily for that at our Bangalore unit and also in some of our other
areas of ours. We aim to be recognised by our partners and customers as a
technology leader. We believe that if we get the brand and the technology
right, our business and sales will grow on the back of that.