Lubricant Demand. Some straws in the wind. Stuart Speding, Director, Downstream Consulting RPS Energy. +44(0)

Transcription

1 Lubricant Demand Some straws in the wind Stuart Speding, Director, Downstream Consulting RPS Energy +44(0) Originally presented at the ACI European Base Oils & Lubricant Summit

2 Agenda Who are RPS? Lubricant Demand Major trends impacting Lubesco.s Strategies for capturing growth

3 Who are RPS? RPS Group FTSE 250 company with a turnover of $700m+ employing over 4,000 employees Energy Operations Support Environment Technical Studies Health & Safety Commercial Advisory Infrastructure Emerging Areas RPS Energy operates globally and is one of the world s leading suppliers of independent commercial advisory services for the energy sector Exploration & Production LNG Downstream RPS Downstream has assembled a team of 50+ sector specialists who have extensive practical business experience across all elements of the Downstream Value Chain

4 The Downstream Offer SPECIALIST PRACTICES Refining, Trading & Supply Commercial Fuels & Specialties Lubricants Retail OPERATIONAL OPTIMISATION Offer & Pricing Development Brand & Marketing Organisation & Capability Supply Chain HSSE STRATEGY DELIVERY Market & Competitor Analysis Strategic Planning & Option Generation M&A and Business Integration Support Strategy Implementation Market Entry Support

5 The Lubricants Practice spans the entire value chain New Market Entry Strategy Additives Base Oil Packaging Finished Lubricant Branding Marketing Distribution Customers & Channels Agriculture Retail Distributors OEM Workshops OEM Direct Ind. Workshops Forecourts B2B (Industrial) B2B (Transport) Manufacturing Assessing working capital and inventory management processes to identify sustainable efficiencies Product line simplification to reduce complexity in operations Operational assessments (incl. HSE and Quality) to identify efficiency and compliance opportunities Marketing Using market insight to help deliver market winning products and service offers Brand, marketing and strategic reviews using targeted research to deliver actionable plans Critically assess revenue expenditure vs. performance and optimise expense Sales Analysing customer segmentation and channels-to-market to deliver robust account management processes Pricing strategies and efficient cost to serve models Developing performance management solutions within an integrated process

6 Regional economic prospects and vehicle ownership will drive lubricants growth Europe North America 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% Other Americas GDP Growth (avg) 3.7% Per Capita (avg) 2.8% Lubes Growth 0% - 1.5% Mid East & Africa GDP Growth (avg) 4.0% Per Capita (avg) 2.3% Lubes Growth 0.5% - 2% Asia Pacific GDP Growth (avg) 4.0% Per Capita (avg) 3.6% Lubes Growth 1% - 2% Source : RPS, EIU, World Bank Estimates range from Low to High with global avg (0.1%) to 1.5%

7 7 million litres Europe Volume Sales Europe (*) Vol Sales CAGR 0.7% Markets trending to base level of demand Only a partial recovery to date Challenging European macro outlook Constrained opportunities for lubes players Trend Forecast (*) includes France, Germany, Benelux and Iberia

8 Some straws in the wind influencing how demand growth will impact Lubesco s TECHNOLOGY Continued dampening effect on demand due to technology shifts / leapfrogging in developing economies Technology no longer differentiator Specification led industries trend toward commoditisation R&D Budgets dictated by OEM agendas 120% 100% 80% 60% 40% 20% 0% Own Dvlpt Maintenance OEM Approval

9 Some straws in the wind influencing how demand growth will impact Lubesco s BASE OILS Continued surplus - although it s 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 Source : RPS Announced capacity increases

10 Some straws in the wind influencing how demand growth will impact Lubesco s 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 it s all about margin opportunity

11 Some straws in the wind influencing how demand growth will impact Lubesco s 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)

12 Some straws in the wind influencing how demand growth will impact Lubesco s 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

13 Lubesco s need to be clear where and how to compete Additives Branding Base Oil Finished Lubricant Distribution Customers & Channels Packaging Marketing MINIMISE COST OPTIMISE OPERATIONS MAXIMISE IMPACT

14 Key to developing these strategies is to understand each market at the channel level Mature European Geography * 2017 Market Map 213 ml 139 ml Market Transport 74 ml Industrial Source : RPS Research Client Project

15 Key to developing these strategies is to understand each market at the channel level Mature European Geography * 2017 Market Map 213 ml 139 ml Market Transport 74 ml Industrial Direct Channel 82 ml* 57 ml Distributor Channel Source : RPS Research Client Project

16 Key to developing these strategies is to understand each market at the channel level Mature European Geography * 2017 Market Map 213 ml 139 ml Market Transport 74 ml Industrial Direct Channel 82 ml* 57 ml Distributor Channel 4.4 ml 2.0 ml 6.6 ml 3.4 ml 3.5 ml 50.6 ml 1.5 ml 26.1 ml 5.0 ml Auto Specialist 9.4 ml 1.9 ml Forecourts 22.2 ml Independent Workshop 1.4 ml Light Servicing 1.1 ml Mass Merchandisers 14.6 ml OEM Auth Workshop 4.6 ml Off Road 16.1 ml On Road 3.9 ml 28.8 ml 4.8 ml 4.6 ml 65.2 ml 6.1 ml 44.2 ml Source : RPS Research Client Project

17 Key to developing these strategies is to understand each market at the channel level Mature European Geography 2017 Market Map * Includes 3.0 ml First Fill ** CAGR based upon ml CAGR** 0.2% 139 ml CAGR** (0.2%) Market Transport 74 ml CAGR** 0.4% Industrial Direct Channel 82 ml* 57 ml Distributor Channel 4.4 ml 2.0 ml 6.6 ml 3.4 ml 3.5 ml 50.6 ml 1.5 ml 26.1 ml 5.0 ml 1.9 ml 22.2 ml 1.4 ml 1.1 ml 14.6 ml 4.6 ml 16.1 ml Auto Specialist Forecourts Independent Workshop Light Servicing Mass Merchandisers OEM Auth Workshop Off Road On Road 9.4 ml 0.5 ml Bike CAGR ** (1.4%) 3.9 ml 1.3 ml Bike CAGR ** (2% ) 28.8 ml 5.0 ml Truck CAGR ** 0.5% 4.8 ml CAGR ** 0.4% 4.6 ml CAGR ** (1.2%) 65.2 ml 18.1 ml Truck CAGR ** 0.2% 6.1 ml CAGR ** (0.5%) 44.2 ml CAGR ** (0.2%) Source : RPS Research Client Project

18 ... and when operating in multiple geographies one size fits all does not work % Channel % Split % 80% 70% 60% 50% 40% 30% 20% On-road transport Off-road transport OEM Authorised WS Mass Merchandisers Light Servicing Independent WS Forecourts Auto Specialists 10% 0% Source : RPS Research Client Projects (Countries 1,2 & 3 are developing economies, 4,5 & 6 are developed)

19 So whereas the headlines may present one picture you have to dig a bit deeper for the real insights Europe North America 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% Other Americas GDP Growth (avg) 3.7% Per Capita (avg) 2.8% Lubes Growth 0% - 1.5% Mid East & Africa GDP Growth (avg) 4.0% Per Capita (avg) 2.3% Lubes Growth 0.5% - 2% Asia Pacific GDP Growth (avg) 4.0% Per Capita (avg) 3.6% Lubes Growth 1% - 2% Source : RPS, EIU, World Bank Estimates range from Low to High with global avg (0.1%) to 1.5%

20 UK USA Canada Australia Malaysia Singapore Russia UAE RPS Energy - Downstream 14 Cornhill London EC3V 3ND United Kingdom T: +44 (0) F: +44 (0) downstream@rpsgroup.com