‘India is a very big market and we would love to break through.’

Andrew Hepher, who has been associated with Shell for more than 26 years, spoke to Autocar Professional recently in Qatar about his perception of the Indian market, Shell’s exclusive relationships with vehicle OEMs and the unique gas-to-liquids (GTL) plant, which will drive Shell’s growth in the years to come.

The Qatar plant produces various grades of superior engine oils based on PurePlus technology (using natural gas-based purer base oil) that offers extended engine life and enhanced performance, low maintenance costs, better mileage and reduced oil consumption. Excerpts from the interview with Amit Panday:

Coming from a background of B2B marketing of Shell products, how do you find the B2C marketing of lubricants?
From a marketer’s perspective, this is a very challenging category. Of course, there are a number of people who are interested in these products, particularly from the trade. In the context of end consumers, which are bikers and motorists, a majority of them don’t know what lubricant goes in their vehicles and they really don’t care.

One of the things we are looking at is how can we actually find ways to make our brand relevant in a way that is interesting to the end consumer. The Asia Talent Cup is a good example of that. That is bringing brand visibility without telling the consumers that this (Shell Advance Ultra lubricant) is a great product, it gives extra mileage and it’s got lower volatility and all that. I think that’s the secret. That could be through motorsports or through social media or other ways. If BMW says only use this product, then people driving other brands will think the product is good enough for a BMW. The message across markets is delivered.

Shell has a relationship with India’s Tata Motors. Can you throw some light on that?Yes, we do share a relationship with Tata Motors in the area of commercial vehicles. (Shell Lubricants, in association with Tata Motors, had recently launched Shell Rimula T5 E 10W-30 diesel engine oil in India. The product uses an advanced combination of the GTL base oils along with high performance additives, which help deliver improved fuel economy and protection for operating pressures and temperatures found in Tata engines.)

While Shell has exclusive relationships with Ducati, BMW and others, are you not working on a few such exclusive tie-ups with 2-wheeler companies in India? Annually, the Indian two-wheeler market size stands at more than 16 million units.
India is a very big market and we would love to break through. It is a very significant market for Shell. But again it is a very competitive market where Castrol has a very strong position, which they built over many years. So we, at Shell, need to find ways to compete, but compete smartly. It is very interesting to see that in the Indian market, we have exclusive relationships with big Indian companies but they are more on the B2B side and less on the B2C side. So we are trying to work on that. We continue to have discussions with several companies.

How do you plan to push brand awareness along with PurePlus technology in India?It is not always about a Ducati. It is also about small scooters and motorcycles and we need to serve that market. We need to make our brand relevant and find ways to connect with those people. That is still the majority of the market. For example, the Shell Helix brand (premium engine oil for cars) is growing pretty well in Indonesia and I think in a country like India or Indonesia, success depends on a strong distribution network.

We are pushing for it, particularly in digital. Realistically, we cannot be out there matching Castrol as they have close to five-six times our market share. So we have to find ways to educate people about the quality and our brand proposition through smart ways via digital media, earned media rather than paid media as a way of getting our message across. I don’t think that in India big, above-the-line campaigns will be cost effective for us. (Shell’s PurePlus technology is a process that converts natural gas to crystal-clear base oil which is used for making efficient engine lubricants.)

What is your outlook of the emerging economies, particularly in the context of growth of Shell?
In my view, there aren’t global markets. There is a collection of countries. What we have seen very clearly over the past few years is that the BRIC markets on the whole struggle. China has continued to grow but is slowing now. Brazil has had very difficult times because of economic and political challenges, India is relatively slow and Russia, at the moment, has any number of challenges. Currency devaluation is one of the major challenges and the strength of the US dollar is very difficult.

We are very strong in North America, China and a number of other countries. Now we need to get our growth trajectories in markets like Brazil, Indonesia, India, and Russia back on track. We can do that to a degree but ultimately those markets also need to recover.  Hopefully, we can grow faster than the market. But if the market is flat, then the most we can do is one or two percent. It is a challenge to sustain growth in the developing markets because of political tensions, currency issues, economic woes, and other factors.

I think globally the lubricant business in the consumer space is growing by one or two percent per year. It is flat-to-down in Europe and in North America but it is the premium business that is growing. You need to distinguish between premium and mainstream. Mainstream is going down by more than five percent per year but that is being offset by the growth in premium products.

Tell us about the Shell-BMW story.
This is a unique story for Shell. I think one area that we will be developing a lot in the near future is the storyline with BMW. The relationship with BMW, which also covers bikes, only started a few months ago and therefore it is still very fresh. So the message there is that we have an exclusive relationship with BMW, where they say only use this product. That does mean that the product is good enough for the BMW vehicles. As I perceive, that sends out a very strong message in the market.

While Ducati has now officially set up its subsidiary in India, BMW too is developing smaller, performance motorcycles for emerging markets including India, where it has a technical tie-up with TVS Motor Company. Will you extend Shell’s relationship with them in India as well?
Yes, I am aware of Ducati’s new developments. It is great to see Ducati going back to India. I didn’t know about the BMW-TVS relationship but that sounds exciting to me. We would certainly look at doing something about that.

Lastly, what is the current capacity utilisation of the Pearl gas to liquids (GTL) plant in Qatar?
I think we are running at may be 60-70 percent of capacity at the Pearl GTL plant (for base oils), this plant can produce enough oil to change the engine oil of 250 million cars a year. This is the only commercial oil plant in the world that produces gas to liquid lubricants, and I think it will continue to be the only such plant for next 10-20 years.