Valvoline Cummins aftermarket biz gets big boost with co-branded lubes

Valvoline Cummins Ltd. (VCL), one of the fastest growing lubricant marketers and producer of quality branded automotive and industrial products in India, has gained a strategic foothold in the aftermarket space on the back of forging alliances with Tata Motors and AMW this year. The decade-and-a-half old company, which made significant inroads into both the on-highway and off-highway vehicle segments, is already running a formidable network of around 450 distributors which supplies to 50,000 retailers and 38 warehouses in the country. Going forward, VCL is confident of tying up with global OEMs.

Even though the company doesn’t reveal the figures, industry analysts peg its annual turnover at around Rs. 1,500 crores. At present, Valvoline Cummins’ automotive aftermarket accounts for 60-75 per cent of its total revenue with 20-25 per cent coming from the off-highway and industrial segments and the remaining five per cent derived from the OEM segment.

In an exclusive interaction with MOTORINDIA at its corporate office, Mr. Sandeep Kalia, CEO, Valvoline Cummins Ltd., stated: “There was a major shift in the thought process of our end customers. Even though the domestic CV market has been witnessing some recessionary headwinds, Valvoline is doing pretty well in the heavy duty space. In the second half of calendar year 2013, we received approval from Tata Motors (CV segment) to roll out co-branded lubricants in the aftermarket space. That was a huge platform for us to enhance our business (in the non-direct market). Secondly, we renewed our contract with AMW during the middle of this year. So we are the exclusive lube supplier to both direct (dealers) and indirect domains of both the afore-mentioned Indian vehicle makers. This is a win-win situation for Valvoline and our (OEM) partners. While we have gained access to an additional distribution channel through their dealer locations in major parts of the country, they will be able to offer premium quality international lubricants to customers. We plan to use the promotion synergy through co-branded dealer boards at all dealer locations, highway promotion vans, retail merchandising and various other schemes to market the product. We would like to reinforce our presence in the aftermarket segment. In the automotive segment, more that 60 per cent is derived from the CV segment.”

It is to be mentioned that VCL offers multiple product lines in the Indian market comprising automotive lubricants, transmission fluids, gear oils, hydraulic lubricants, specialty products, greases and coolants. However, its flagship product among diesel engine oils (DEOs) remains “Premium Plus” for trucks and ‘Premium Blue’ for Cummins diesel generators. The company claims that the engine oil is designed to provide advanced lubricant performance in modern, low emission diesel engines, including those with EGR, operating under a wide variety of service conditions. It is also known to be equipped with the Unique Dispersant and Detergent (UDD) technology using premium base oils. The extended TBN reserve in the oil enables extended drain interval capability as well as high viscosity index. The product also provides excellent protection against soot related abrasive wear and corrosion and controls oil thickening.

Mr. Kalia stated: “The ‘Premium Blue’ has been our flagship product across the globe. This is the product on which all Cummins engines are tested. The product is manufactured from specially selected base oils and with the state-of-the-art additive technology to comply with the stringent performance standards. The primary reason is that the oil is equipped with the advanced product technology, which ensures the engine’s longevity and extended drain capability. So for co-branded lubes with Tata Motors, we have christened our products ‘Tata Motors Premium Plus’ and ‘Tata Motors Premium Classic.’ It is recommended by Tata Motors across its vehicle range starting from the Ace (LCV) to the Prima (premium HCV). We had earlier launched premium quality lubricants called AMW-Valvoline Genuine. These premium quality genuine lubricants cater to AMW’s new generation range of tractor-trailers & tippers to ensure peak performance from all the aggregates. Therefore, they decided to renew our association with them.”

Asked to shed some light on the strategies which led to the breakthrough, Mr. Kalia observed: “We are able to connect better to our customers by reducing the lead time. Our growth in the on-highway segment has been very strong, especially on the heavy-duty trucks side, with our 50,000 retail outlets fully equipped to cater to the demands in the segment. Moreover, we also offer professional training for mechanics which includes hands-on sessions at Tata-Cummins’ manufacturing facility. After the training, the mechanics receive a certificate that qualifies them for professional service of on-road trucks. Till date, we have trained nearly 350 mechanics on the BS series and ISB electronics series engines. So these were the key growth drivers to penetrate the domestic fleet market even though the overall market has been somewhat turbulent.”

Talking about VCL’s marketing and promotional initiatives, Mr. Kalia said: “We do a lot of ground level activity which has helped create awareness & brand affinity. We conducted extensive van campaigns pan India with multiple vehicles traversing in tier-1 and tier-II cities.”

True, Valvoline is a well-reckoned lubricants and solutions provider for a wide range of applications. The Lexington, Kentucky-based business established way back in 1866, is a leading producer, distributor and marketer of high quality lubricants and specialized automotive, commercial and industrial solutions. In India, Valvoline Cummins Ltd. (VCL) was set up in 1998 as a joint venture between Valvoline, a commercial unit of Ashland Inc., USA, and Cummins India Ltd.

Despite being a late entrant vis-à-vis other firms, VCL has been able to crack strategic deals with OEMs across different segments. The 16-year-old firm had forayed into the construction and mining segment in 2010 and currently offers a complete range of solutions catering to all the requirements in this space. In the process, it has partnered leading construction companies like L&T, IVRCL, ILFS and JKC, among others, and also works closely with leading OEMs like Cummins, BEML, Sonalika Tractors, Mahindra & Mahindra, Terex Vectra, etc. But of late, the CE segment has hit a soft landing. “One of the biggest challenges for us was the imposition of ban in construction and mining activities. As a result, a lot of construction equipment and mining vehicles are lying idle”, said Mr. Kalia.

During H2 CY2013, Valvoline shifted its entire output from a third party blending facility to a brand new manufacturing and packaging unit in the Ambernath Industrial Area, near Mumbai in Maharashtra. The new facility, which also has an in-house engine training centre, POST lab, engine training lab, etc., is being set up at an investment of $30 million and primarily produces lubricants for consumer, industrial and heavy-duty markets. The initial annual production capacity of the plant is 120 million litres which is expandable to over 150 million litres to meet the growing demand. We are also exporting to Singapore, Nepal, Sri Lanka and Bangladesh.

“India is a core market for us. We believe there are opportunities to grow our business to eventually rank among the largest foreign lubricant brands in the country,” added Mr. Kalia.