Lubricant Demand

Some straws in the wind

Stuart Speding,
Director, Downstream Consulting
RPS Energy
stuart.speding@rpsgroup.com
+44(0)7775 99 66 58

Originally presented at the ACI European Base Oils & Lubricant Summit

Agenda

Who are RPS?

Lubricant Demand

Major trends impacting Lubesco.s

Strategies for capturing growth

Who are RPS?

FTSE 250 company with a

RPS
Group

turnover of $700m+ employing

over 4,000 employees

RPS Energy operates globally

Energy

Environment

Health & Safety

Infrastructure

Operations
Support

Technical
Studies

Commercial
Advisory

Emerging Areas

and is one of the worlds leading

suppliers of independent
commercial advisory services for
the energy sector

RPS Downstream has

Exploration &
Production

LNG

Downstream

assembled a team of 50+ sector

specialists who have extensive
practical business experience
across all elements of the
Downstream Value Chain

The Downstream Offer

SPECIALIST PRACTICES
Refining, Trading &
Supply

Commercial Fuels &

Specialties

OPERATIONAL OPTIMISATION

Lubricants

Retail

STRATEGY DELIVERY

Offer & Pricing Development

Market & Competitor Analysis

Brand & Marketing

Strategic Planning & Option Generation

Organisation & Capability

M&A and Business Integration Support

Supply Chain

Strategy Implementation

HSSE

Market Entry Support

The Lubricants Practice spans the entire

value chain
New Market Entry Strategy
Additives
Branding
Base Oil

Finished
Lubricant

Distribution
Marketing

Packaging

Manufacturing

Marketing

Customers
& Channels

Agriculture
Retail
Distributors
OEM Workshops
OEM Direct
Ind. Workshops
Forecourts
B2B (Industrial)
B2B (Transport)

Sales

Assessing working capital and

inventory management processes to
identify sustainable efficiencies

Using market insight to help deliver

market winning products and service
offers

Analysing customer segmentation and

channels-to-market to deliver robust
account management processes

Product line simplification to reduce

complexity in operations

Brand, marketing and strategic reviews

using targeted research to deliver
actionable plans

Pricing strategies and efficient cost to

serve models

Operational assessments (incl. HSE

and Quality) to identify efficiency and
compliance opportunities

Critically assess revenue expenditure

vs. performance and optimise expense

Developing performance management

solutions within an integrated process

Regional economic prospects and vehicle

ownership will drive lubricants growth
Europe 2012-2023
North America 2012-2023
GDP Growth (avg)

2.4%

Per Capita (avg)

1.6%

Lubes Growth

(1%) 1%

GDP Growth (avg)

1.7%

Per Capita (avg)

1.5%

Lubes Growth

(1%) 0.5%

Mid East & Africa 2012 - 2023

Other Americas 2012-2023

GDP Growth (avg)

3.7%

Per Capita (avg)

2.8%

Lubes Growth

0% - 1.5%

GDP Growth (avg)

4.0%

Per Capita (avg)

2.3%

Lubes Growth

0.5% - 2%

Source : RPS , EIU, World Bank Estimates range from Low to High with global avg (0.1%) to 1.5%

Asia Pacific 2012-2023

GDP Growth (avg)

4.0%

Per Capita (avg)

3.6%

Lubes Growth

1% - 2%

Europe Total Volume Sales

Europe(*) Total Vol Sales

Markets trending to base level of

demand

Only a partial recovery to date

Challenging European macro outlook

Constrained opportunities for lubes

players

1200
1150
million litres

1100
1050
1000
950

09-17 CAGR 0.7%

900
850

800
2006

2008
Total

2009
Trend

(*) includes France, Germany, Benelux and Iberia

2010

2012
Forecast

2017

Some straws in the wind influencing

how demand growth will impact Lubescos
TECHNOLOGY

Continued dampening effect on demand

due to technology shifts / leapfrogging in
developing economies

120%
100%
80%

Technology no longer differentiator

Specification led industries trend toward
commoditisation

60%
40%
20%

R&D Budgets
dictated by
OEM agendas

0%
1980
Own Dvlpt

Maintenance

2012
OEM Approval

Some straws in the wind influencing

how demand growth will impact Lubescos
BASE OILS

Continued surplus - although its not necessarily in the right places

Refinery closures becoming a political issue rather than an economic argument
Access to higher quality base oils matched with access to technology opens market up to all
Industries with surplus and access trend toward commoditisation

Announced capacity increases 2012 - 2015

Source : RPS

Some straws in the wind influencing

how demand growth will impact Lubescos
DISTRIBUTORS A SHIFT IN THE RELATIONSHIP

Direct models expensive in developed economies and expensive to invest in market entry
models in developing economies

Distributors demand multi-brand offer in order to access broadest market and enhance their
profitability rise of the mega distributor (e.g. US)

Brand choice is delegated to Distributors its all about margin opportunity

Some straws in the wind influencing

how demand growth will impact Lubescos
OEMs THEIR TRIALS AND
TRIBULATIONS

Potential growth in vehicle ownership

frustrated by infrastructure in developing
economies

Mature markets plateauing in car

ownership

Hangover from economic crisis still

evident

OEM desire to capture more share of

wallet adopting aggressive own label,
warranty and service propositions
Source : RPS Research project (South Africa)

Some straws in the wind influencing

how demand growth will impact Lubescos
CUSTOMERS SEEING LITTLE DIFFERENCE WHILST EXPECTING MORE

Evidence that added services now seen as license to operate rather than a differentiator
Customers assume product quality based upon specification and brand

Source : RPS Research project in a developed market

Lubescos need to be clear where and how

to compete

Additives
Branding
Base Oil

Finished
Lubricant

Packaging

MINIMISE
COST

Distribution

Customers
& Channels

Marketing

OPTIMISE
OPERATIONS

MAXIMISE
IMPACT

Key to developing these strategies is to

understand each market at the channel level
Mature European Geography

213 ml

Total
Inland
Market

2017 Market Map

*

Source : RPS Research Client Project

139 ml

Total
Inland
Transport

74 ml
Total
Inland
Industrial

Key to developing these strategies is to

understand each market at the channel level
Mature European Geography

213 ml

Total
Inland
Market

74 ml
Total
Inland
Industrial

2017 Market Map

*

139 ml

82 ml*

Total
Direct
Channel

Source : RPS Research Client Project

Total
Inland
Transport

57 ml

Total
Distributor
Channel

Key to developing these strategies is to

understand each market at the channel level
Mature European Geography

Total
Inland
Market

213 ml

74 ml
Total
Inland
Industrial

2017 Market Map

*

139 ml

82 ml*
4.4 ml
5.0 ml

Total
Direct
Channel

2.0 ml
1.9 ml

Auto
Specialist

Forecourts

9.4 ml

3.9 ml

Total
Inland
Transport

Source : RPS Research Client Project

6.6 ml
22.2 ml

57 ml
3.4 ml

3.5 ml

Total
Distributor
Channel
50.6 ml

1.5 ml

1.4 ml

1.1 ml

14.6 ml

4.6 ml

Independent
Workshop

Light
Servicing

Mass
Merchandisers

OEM Auth
Workshop

Off Road

28.8 ml

4.8 ml

4.6 ml

65.2 ml

6.1 ml

26.1 ml
16.1 ml

On Road

44.2 ml

Key to developing these strategies is to

understand each market at the channel level
Mature European Geography

Total
Inland
Market

213 ml
CAGR**
0.2%

2017 Market Map

* Includes 3.0 ml First Fill
** CAGR based upon 2013 2017

139 ml
CAGR**
(0.2%)

82 ml*
4.4 ml
5.0 ml

1.9 ml

6.6 ml
22.2 ml

CAGR**
0.4%

Total
Inland
Industrial

Total
Inland
Transport

Total
Direct
Channel

2.0 ml

74 ml

57 ml
3.4 ml

3.5 ml

Total
Distributor
Channel
50.6 ml

1.5 ml

1.4 ml

1.1 ml

14.6 ml

4.6 ml

Independent
Workshop

Light
Servicing

Mass
Merchandisers

OEM Auth
Workshop

Off Road

26.1 ml
16.1 ml

Auto
Specialist

Forecourts

9.4 ml

3.9 ml

28.8 ml

4.8 ml

4.6 ml

65.2 ml

6.1 ml

44.2 ml

0.5 ml Bike
CAGR **
(1.4%)

1.3 ml Bike
CAGR **
(2% )

5.0 ml Truck
CAGR **
0.5%

CAGR **
0.4%

CAGR **
(1.2%)

18.1 ml Truck
CAGR **
0.2%

CAGR **
(0.5%)

CAGR **
(0.2%)

Source : RPS Research Client Project

On Road

... and when operating in multiple geographies

one size fits all does not work ....
Channel % Split 2013
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Source : RPS Research Client Projects (Countries 1,2 & 3 are developing economies, 4,5 & 6 are developed)

On-road transport
Off-road transport
OEM Authorised WS
Mass Merchandisers
Light Servicing
Independent WS

Forecourts
Auto Specialists

So whereas the headlines may present one picture

you have to dig a bit deeper for the real insights
Europe 2012-2023
North America 2012-2023
GDP Growth (avg)

2.4%

Per Capita (avg)

1.6%

Lubes Growth

(1%) 1%

GDP Growth (avg)

1.7%

Per Capita (avg)

1.5%

Lubes Growth

(1%) 0.5%

Mid East & Africa 2012 - 2023

Other Americas 2012-2023

GDP Growth (avg)

3.7%

Per Capita (avg)

2.8%

Lubes Growth

0% - 1.5%

GDP Growth (avg)

4.0%

Per Capita (avg)

2.3%

Lubes Growth

0.5% - 2%

Source : RPS , EIU, World Bank Estimates range from Low to High with global avg (0.1%) to 1.5%

Asia Pacific 2012-2023

GDP Growth (avg)

4.0%

Per Capita (avg)

3.6%

Lubes Growth

1% - 2%

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