The evolution of customers in the automotive lubricants market...

Transcription

1 09/06/2015 The evolution of customers in the automotive lubricants market what is going on, why is it happening and how can you best face the challenges ahead!! Presented at the Benelux Technical Lubricants seminar June 2015 Who are RPS? FTSE 250 company with a turnover of RPS Group $700m+ employing over 4,000 employees RPS Energy operates globally and is one of Energy Environment Health & Safety Infrastructure the world s leading suppliers of independent commercial advisory services for the energy sector RPS E&P and Downstream have a team of Operations Support Technical Studies Commercial Advisory Emerging Areas 200+ sector specialists who have extensive practical business experience across all elements of the oil value chain Clients include Governments, National Oil Exploration & Production Gas & LNG Downstream Companies, Integrated Majors, Independents, Financial Institutions 1

2 The Downstream Offer SPECIALIST PRACTISES 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 Agenda Understand what s driving change Understand your Universe Understand you Customer 4 2

3 Understand what s driving change 5 Regional economic prospects and vehicle ownership will drive lubricants growth... North America GDP Growth (avg) 2.4% Per Capita (avg) 1.6% Lubes Growth (1%) 1% Europe GDP Growth (avg) 1.7% Per Capita (avg) 1.5% Lubes Growth (1%) 0.5% Mid East & Africa Other Americas 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% 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% 3

4 ... but also how a number of megatrends will impact the market East Up West Down East Up Living for the City Resources re-sourced A New Disorder West Down Megatrends Grey is the new Black Share generates spare Industrial Revolution #3 Green from Hero to Zero Product quality assumed through specification and brand Driving Channel Evolution - Customer Expectations (B2B) Evidence that traditional added services are now only a license to operate Source : RPS Research project in a major European market 4

5 Driving Channel Evolution - Commoditisation Driven by: Specification-led product development with technology accessible for all Dampening effect on demand due to technology shifts Easy Access to higher quality base oils and additives R&D Budgets dictated by OEM agendas Announced capacity increases Source : RPS Research Client Project, EIU, World Bank Driving Channel Evolution - Distributors increasingly own the customer Direct models expensive Distributors demand multi-brand offer It is all about the margin opportunity Source : RPS Research project in a developed market 5

6 Three key drivers therefor underpin Lubesco s strategies today MINIMISE COST MAXIMISE IMPACT Additives Branding Base Oil Finished Lubricant Sales & Distribution Customers & Channels Packaging Marketing OPTIMISE OPERATIONS... but it starts with understanding Customers & Channels Forecourts Auto Shops Large Retailer OEM Workshops Independent Workshops Quick Service Heavy Duty (Off Road) Heavy Duty (Transport) 6

7 Understand your Universe 13 Creating a Market Map helps focus strategy development 213 ml Market Example : 2012 Mature European Geography Source : RPS Research Client Project 7

8 Creating a Market Map helps focus strategy development 213 ml 139 ml Market Transport 74 ml Industrial Example : 2012 Mature European Geography Source : RPS Research Client Project Creating a Market Map helps focus strategy development 213 ml 139 ml Market Transport 74 ml Industrial 82 ml Direct Channel 57 ml Distributor Channel Example : 2012 Mature European Geography Source : RPS Research Client Project 8

9 Creating a Market Map helps focus strategy development 213 ml 139 ml Market Transport 74 ml Industrial 82 ml Direct Channel 57 ml Distributor Channel 1.0 ml 2.9 ml 1.0 ml 5.4 ml 3.7 ml 0.9 ml Example : 2012 Mature European Geography 35.0 ml 5.1 ml Auto Large OEM Independent Quick HD HD Forecourt Shops Retailer Workshop Workshop Service Off Road On Road 3.9 ml 6.4 ml 4.6 ml 40.1 ml 38.8 ml 10.8 ml 12.1 ml 30.2 ml 3.5 ml 35.3 ml 8.9 ml 1.9 ml 2.5 ml 9.6 ml 18.1 ml 12.1 ml Source : RPS Research Client Project Driving Channel Evolution The Market Impact 1.1% Market Transport Industrial 1.4% Direct Channel 3.2% Distributor Channel Forecourt Auto Shops Large Retailer OEM Workshop Independent Workshop Quick Service HD Off Road HD On Road 0.2% 1.5% 0.5% 2.1% 1.2% 0.8% 0.5% 0.2% CAGR based upon Source : RPS Research Client Project 9

10 Understand your Customer 19 Getting under the skin of the channel is challenging... Passenger Car Lubricants Market 563 ml Auto Specialist Forecourts Independent Workshops Auto Centres Retail OEM Workshops 71 ml 25 ml 126 ml 39 ml 87 ml 215 ml % Sales of Passenger Car Lubricants 63% 37% Other : OEM UK France Germany Spain 66% : 34% 59% : 41% 58% : 42% 76% : 24% *Source : RPS analysis of France, Germany, UK, Spain 10

11 You need to delve deeper to get real insight e.g. Car Aftermarket European Aftermarket Sales estimated at 165bn+ per annum Upstream Downstream Product Development Logistics Manufacturing (Assembly) New Car Sales Financial Services AFTER SALES Used Car Sales Recycling Parts Services Accessories Appearance Products Lubricants & Tyres Replacement Parts Service Repairs Telematic / Navigation Entertainment Sources : RPS, AT Kearney, Cap Gemini Consulting... and you will need to understand how multiple elements interact Services Suppliers OEM Franchised Workshops Automotive Service Groups Independent Workshops Retail outlets Maintenance Consumables Accident repairs Repairs Services Bought Individual owners (0-3 yrs old)* Individual owners (4yrs+) Fleets Customers Legislation Insurance Co s Influencers OEMs Leasing Co s Influencers 11

12 Aftermarket activities are absolutely critical to profitability especially as published returns posted by dealer groups are GUESS? 7% 10% * Estimated contribution of lubricants to total workshop profitability Source: Company Annual Reports, RPS This creates an interesting landscape for Lubesco.s % of new car sales in EU27 11% - Large Groups 89% - Smaller Groups, Individual Dealerships 20 large groups needing growth through scale in order to generate returns Held Privately or Publicly with associated management behaviours and practices Position of strength with OEM given scale At global level only targetable by majors Combination of smaller groups and individual dealerships Privately held with associated management behaviours and practices OEM able to exert more influence dependant upon the level of control they have over the network Acquisition targets for groups Targetable by local / regional players directly Targetable by majors directly or through distributors dependant upon business model Inorganic growth led 12% - Public PLCs 88% - Privately held businesses estimated % of franchise outlets in EU27 12

13 ... and continued consolidation is expected given the low industry returns Dealer groups now encompass multibrand and multi-oem Expected change of aftermarket margins Increases 25-50% 0% Dealer groups at different stages of evolution but centralisation an obvious efficiency they can chase Increases 10-25% Increases 0-10% Remain unchanged Decreases 0-10% 6% 11% 21% 45% 38% Lubesco s need to address power shifts towards mega-dealers / mega distributors Decreases 10-25% Decreases 25-50% 9% 8% 62% * A T Kearney Aftermarket Participants 2020 Trends Survey Example Group Profile -Emil Frey Emil Frey Family-run Swiss company with a large presence in Germany. Dealerships: Switzerland, Germany, France, Czech Republic, Hungary and Poland Brands:

14 Wrap Up 27 Lubesco s strategy must be based on : - customer/channel understanding - relevant customer/channel needs 14

15 Agenda Understand what s driving change Understand your Universe Understand you Customer 29 Benelux Market Map 100% 57% Market Transport 43% Industrial 72% Direct Channel 28% Distributor Channel 78% 22% 76% 24% 75% 25% 95% 5% Auto Large OEM Independent Quick HD HD Forecourt Shops Retailer Workshop Workshop Service Off Road On Road 3% 11% 9% 40% 14% 2% 5% 16% 43% 57% 94% 6% 27% 73% 76% 24% 15

16 RPS Energy - Downstream 14 Cornhill London EC3V 3ND United Kingdom T: +44 (0) F: +44 (0) downstream@rpsgroup.com UK USA Canada Australia Malaysia Singapore Russia UAE 16