By Akhry Ameer
The Sri Lankan lubricants market, once a monopoly, was liberalised last year. Five entered the market after liberalisation. The sixth new entrant started operations a couple of weeks ago. Having entered the market and nearing a year of liberalisation most players have been complaining of an uneven playing field. They attribute a duty surcharge that works out to about 35 % and restrictive channels until 2004 as major barriers for fair competition. With most of these issues remaining as they are, the actual performance rests on the effective marketing of each player. The Sunday Times Business spoke to some of the leading lubricant manufacturers and importers on how the game is being played.
Marketing excellence helps -Caltex
Caltex Lanka Lubricants is of the view that it has created a vision for Sri Lanka that can be resourcefully managed. Fundamentally Caltex has built a brand in a market where lubricants was looked at as a commodity.
"Products and services have to be able to connect with the consumer, despite being the world's best, etc. Unlike Coke and Pepsi, lubricants should have intrinsic values that are only seen in the long term and is a value added proposition," explained Shibly Latiff, Deputy General Manager, Sales and Marketing.
In transforming a commodity into a brand, technology plays a major role and it is a challenge to transfer it in a country that is going through economic issues and having a major proportion of old vehicles. Acknowledging the benefit of having acquired Lanka Lubricants which had an almost 100 % market share, Latiff said that Caltex has devised a twin brand multi-propositional strategy.
For the Lanka brand that has been driven on trust, Caltex has moved the consumer to a position that Lanka is at the same price but run by a company that is technologically advanced. Further it has introduced Caltex's second tier package range for this brand. In addition, the various consumers have been educated and now have a personalised service. As for its original brand, Caltex has created an identity and a personality that carried inherent values. "I believe we've got our basics right and executed things flawlessly to secure this market share," said Latiff.
Latiff, who was recently presented with a regional marketing excellence award by Caltex, said that as market leader they have been one step ahead of competition by changing paradigms and strengthening customer beliefs. Caltex recently introduced 'Total Solutions' and 'Express Lube' with a long-term vision for virtual customer care and service. The award was introduced for the first time by Caltex internationally and is awarded to Caltex regions/geographies.
Asked about its exclusive distribution through CPC dealers, Latiff explained that although there are 1,200 outlets, only 700 are selling lubricants and out of that only about 50 % push volumes. Explaining this further he said that the absolute competition is in the 500 odd private service stations. In responding to allegations of exclusive tie-ups with a major number of these service stations, he said that it was more a business partnership where both parties are motivated and stand to benefit. "When you have a 98 % market share it's not about exclusive volume but about maintaining volumes," he added.
Asked how he viewed the competition, he said: "From the competitors point of view they need to be able to create a common over-arching threat through products and services they offer to consumers. As for Caltex, we have moved from a product-driven to truly service-driven consumer company. Even if we are ready to give the market share away the question is whether the end consumer will give it up."
More resources at point of sale - Mobil
Mobil, the leading contender to Caltex, has deployed most of its limited resources at the point of sale and hopes to emerge as a product that is clearly focused on quality. Explaining its approach, Trevor Reckerman, Joint Managing Director of McLarens Lubricants (Pvt) Limited, the distributors of Mobil said: "We are not going for volumes at any cost. We are clearly focused on quality."
According to Reckerman, Sri Lanka is an insignificant market to the world's biggest oil company (Mobil) and thus they have to work with limited resources. As such their local marketing strategy is to keep a lean cost structure, talk at a technical level and be effective at the point of sale.
He was of the view that importing and selling oil was not a totally viable proposition in the light of the 35 % duty surcharge on imports. Further the CPC fuel stations, which is the major channel for retail sale, cannot be accessed for sales till 2004 due to the government's agreement with Caltex.
In spite of these restrictions Mobil has pioneered alternate channels. "We were the first to market through spare parts shops," he added. Mobil also set new norms by venturing into CWE outlets to target new customers. Another one of its approaches has been to communicate with some of the prestige car owners like Mercedes and BMW.
Questioned on the marketing of its products through the second biggest channel for retail lubricant purchases - the service stations, Reckerman said that this too has been greatly restricted.
He was referring to exclusive dealer agreements that Caltex has signed with many of the service stations thereby prohibiting the sale of other brands. "We can't pitch for these. They can always go one better with the kind of profits they have amassed over the years," he said. He added further that this prevents the consumer from choosing at service stations and would have been a breach of anti-trust standards if it happened in a country like the USA.
He also emphasised the need to aim for large-scale contracts to be competitive. Mobil is also involved in some of the more bigger industrial markets like aviation, power generation and marine equipment. However, all is not lost according to Reckerman. He observed that there are still related resources like the tank farms that might make Mobil pay more attention to the Sri Lankan market.
A strong force to reckon with - BP
Associated Motorways Ltd, the distributors of the new heavyweight British Petroleum (BP) with its global acquisition of Castrol, said that they would be a force to reckon with once the market picks up. Though both brands are now under one umbrella, they continue to compete as separate teams. In Colombo, AMW also markets Castrol and has a separate section for this.
BP's target market is more industrial power generators, railways, marine equipment, textile manufacturers and rubber processors. Castrol that has an 80-year heritage in Sri Lanka targets the automotive industry and racing enthusiasts as a premium brand.
Responding to questions on how effectively the twin team marketing works, Ifham M. Azwer, Business Development Manager of Lubricants at AMW said that they are effective as Maruti and Nissan, the two brands of cars marketed by AMW.
As part of its distribution BP and Castrol utilises the Nissan/Goodyear dealer network of AMW. However, Azwer who has been working with BP internationally for over 20 years, pointed out that there aren't many avenues in Sri Lanka and that some of the major networks are closed to them. Despite these obstacles Castrol like Mobil has ventured into non-traditional channels such as the LAUGFS, Arpico and Cargills supermarket chains. Questioned on the success of this channel, Irshard Carder, Marketing Manager for Lubricants said: "It's not as fast as we thought, but it's catching up". He further added that BP is especially a strong product at the LAUGFS express lube outlets. BP also works with CGR (railways) and the SAGT Terminal in Galle as its industrial clients among others. Both brands' pricing is on par with other manufacturers such as Shell and Mobil. "We are discouraged by the duty structure. We feel sorry for the general public who are deprived of value for money. As far as we are concerned it is still a monopoly," Azwer added. As for its advertising Castrol also relies on the Indian television channels that are telecast locally. According to Carder, Castrol is well known in India and is the biggest player among foreign brands. As part of its local efforts Castrol recently sponsored the Southern Rally, a premier motoring event in the South in September. Having operated as a separate company for a short while, Castrol expects its volumes to double with the combined strength of BP and AMW.
Vehicles will be given a maximum of four years optional grace period with a cap of three months. Consultancy services and consumer durables are given a one-year (inclusive) grace period of three months and food items one year, which will not carry a grace period.
The state-owned Bank of Ceylon (BoC) has been appointed the apex bank towards disbursing a US $ 100 million credit line from India to the Sri Lankan government with strict conditions for use.
The first tranche of this facility - US $ 45 million – must be disbursed before the end of 2001 or risk being cancelled, BoC officials told reporters last week.
The credit facility will be provided in three tranches: US $ 45 million this year; US $ 30 million in 2002 and US $ 25 million in 2003 which is to be used to import capital goods of Indian origin.
"We have a deadline for this year. If we do not import before December 31, 2001 we will lose the first tranche of the facility. A special department has been created at the BoC to handle the loans as we expect the loans to spread for at least 12 years where the government of Sri Lanka will bear the losses incurred from foreign currency fluctuations," BoC General Manager Sarath de Silva said.
The BoC, as the apex bank, will coordinate the loan with participating credit institutions. The People's Bank, Commercial Bank, HNB, Sampath Bank, Seylan, NDB, DFCC, Indian Overseas Bank and State Bank of India have already been selected as participating credit institutions with more banks expected to join. The Indian Steel Company, which has an office in Sri Lanka, has said it planned to use this facility to import Indian origin goods.
He said Sri Lankans are welcome to import goods of Indian origin through participating credit institutions via LC's and subject to Sri Lankan and Indian commercial laws.
"The Sri Lankan rupee equivalent for 90 % of FOB value in US $ will be given to the approved items while the rest will have to be borne by the importer which includes freight, insurance, clearing charges, bank commissions, duties and taxes," Silva said.
A cap of Rs. 20 million will be placed on the value of the imports which is negotiable and considered on an individual basis. Repayment period for the imports will be a maximum of 4 years with a grace period of 12 months.
Vehicles will be given a maximum of four years optional grace period with a cap of three months. Consultancy services and consumer durables are given a one-year (inclusive) grace period of three months and food items one year, which will not carry a grace period.
The interest rates applied on the imports will be linked to the Average Weighted Deposit Rate announced by the Central Bank of Sri Lanka, which is presently 16.19 % per annum and subject to revision in March 1 and September 1 of each year. The importers are expected to sign a loan agreement, mortgaging the assets financed and to provide other securities such as guarantors and fixed deposits.
The capital goods list contains consumer durables, consultancy services, spare parts and accessories, machinery and parts, vehicles and spares including the engine and the chassis, sugar, wheat flour, rice, red split lentils and wheat grain.
"Through this facility the government is encouraging the business community to resort to more imports. There can be adverse effects also. The best example is rice. Some will say that local farmers will be affected. But liberalising rice imports may be good for a healthy market. I think there should be sanctions for the import of rice, which is so far not decided, " Silva said.
Union Assurance Ltd (UAL) has clinched a four-year sponsorship package for the prestigious Sri Lankan Entrepreneur of the Year annual awards, the company said.
The Sri Lankan Entrepreneur of the Year is the country's highest national honour, unparalleled in grandeur and prestige by any other national award and established by the Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) to recognise and reward the efforts of all categories of entrepreneurs islandwide, the statement said.
UAL's commitment as the main sponsor starts from this year's awards ceremony to be held at the BMICH on November 28. "We are very excited about being associated with the awards. The single most important reason that UAL has come in as grand sponsor is that the Sri Lankan Entrepreneur of the Year Awards promotes excellence and that is what Union Assurance is all about," noted Mr. Sarath Wickramanayake, CEO, UAL.
By Hiran Senewiratne
National Savings Bank (NSB) has tied up with the Standard Chartered Bank (SCB) to launch the first-ever co-branded credit card between two banks.
This co-branded credit card would enable NSB customers to enjoy up to 55 days interest free credit and easy payment facilities, NSB Chairman Cyril Herat said at last week's launch ceremony.
The NSB is a fully-owned government bank specialising in saving products and non- personal lending for non-commercial purposes. It decided to offer value added products for customers to suit present day needs on par with other competitive banks, he said.
The co-branded card can be used locally as well as internationally covering more than 6,000 outlets in Sri Lanka and more than 13 million outlets in over 170 countries.
Customers can also obtain cash from more than 370,000 Standard Chartered branches and over 550,000 ATMs around the world.
Herat said NDB has a 12-million customer base from which customers are entitled to apply for this card. The two banks have a target of 4,000 credit cards per year.
Standard Chartered Grindlays Bank CEO, Wasim Saifi said this move would enhance the credit card business since Standard Chartered Bank is one of the key players in this sector.
He said Grindlays Bank has been operating in Sri Lanka since 1892 but Standard's recent purchase of Grindlays network in the Middle-East and some South Asian countries has provided the banking group a leading edge in the global banking arena.
By Ashwin Hemmathagama
While other markets have been performing poorly, Sri Lanka's stockmarket appeared to be the best performing bourse in the world last month with the Colombo Stock Exchange's (CSE) All Share Index (ASI) up 10 percent and the index hitting the 500 point level for the first time in a year.
The Colombo bourse, buoyed by the impending election and improved retail sentiment, has been gaining ever since October 11 when elections were announced. CSE officials said the number of shares soared to an average five million a day this month from one million a day during the January to September 2000.
Trades rose to an average 1,800 per day last month against 350 a day for first nine months of the year while daily turnover also rose sharply to 122 million rupees from 29 million rupees a day earlier. The ASI closed at 505.6 on October 31 after hitting the psychological 500 barrier in the previous week. The Milanka closed at 835.9 on the last day of trading in October, up 13 percent from October 11.
Last week on Monday the market moved up by 14.8 and 38 in the ASI and Milanka Index respectively due to Rs. 10.3 mln worth of JKH changing hands amongst foreign investors. The turnover touched three digits recording a turnover of Rs. 141 mln.
On Tuesday the markets fell due to declines in DFCC, JKH, Commercial Bank and Haycarb Ltd. Thursday's market continued to falter with NDB's quarterly results being published. NDB has seen an increase of 19 % in turnover to Rs. 4.38 bln while profits have declined 51 % to Rs. 124.66 mln. Brokers said the fall was due to an economic slowdown and the expenses going up due to high inflation.
"With the onset of elections, inevitably speculative trading will take the market further up," one stockbroker said. "We feel that the selling pressure seen recently will trigger seesaw-trading pattern in the short run. The anticipated weak corporate results for the quarter ending September would, however, dampen investor enthusiasm," he said.
Sri Lanka's annual inflation in October rose marginally to 13.6 percent from 13.1 percent in the previous month – in a small way due to rising newspaper prices, the Census and Statistics Department said.
It said the Colombo Consumers' Price Index (CCPI) for the month of October was 2935.7, slightly up by 1.8 index points or 0.1 per cent from the September index of 2933.9. "This is an increase of Rs. 3.61 in the expenditure value of the 'market basket' when compared to September 2001. This increase in the CCPI for October 2001 is mainly due to an increase in prices of rice, bread, bread and curry, condensed milk, milk tea, limes, red onions, coconut oil, some varieties of fresh fish, coconuts, betel and newspapers." These price increases in food items could be mainly attributed to a short supply of consumer goods to the main markets in Colombo city."
However, the prices of dried chillies, potatoes, some varieties of fresh and dried fish and some varieties of vegetables decreased during this month, it said.
The Ceylon Chamber of Commerce has urged the Finance Ministry to facilitate a high-level team of government and private sector specialists for the crucial WTO trade round in Qatar this week. In a letter to Finance Secretary, Dr. P.B. Jayasundara, the chamber said the team should consider all aspects of international agreements affecting Sri Lanka's future trade and commerce.
Mobitel launched a special promotion for their loyal customers recently. This promotion will be conducted every month.
This is an exciting new promotion where customers stand to win up to Rs. 100,000 every month at no additional expense to them. "You get your airtime to the value of the "More" card you activate plus a chance to win cash prizes as well," says a company spokesperson.
This is the first time that a cellular company has come forward to offer its phone card customers a value added promotion of this nature a press release said.
Drawn in the form of a lottery, the prizes differ depending on the value of the card.
Following the positive performance posted by Lanka Bell during the recently concluded Financial Year, the Company has invested in an upgrade of the Oracle Financial System with the latest innovative Internet based II i Version IBM RS 6000 Server a press release said.
Lanka Bell who incidentally were the pioneers in using Oracle Financial in Sri Lanka, have always endeavoured to invest in modern state of the art technologies in order to continue to support and service its growing Corporate and Business clientele the press release further said. This package is used by leading global telephone companies including giants like Lucent Technologies. According to a company spokesman, the implementation of this package will be greatly advantageous to its customers, as it will integrate Customer Care and the Billing System in order to provide a speedier and more efficient service.
"This system will also directly link all major banks to Lanka Bell's billing system, thereby ensuring instant up-dating of customer payments. In addition to managing our inventory more efficiently, it adds to our ability to attend to customer requirements faster," said the spokesman. The spokesman stated that " This is the first in a series of investments earmarked by the Management of Lanka Bell, with many others to follow shortly in terms of our service extension plans".
LG Electronics of Korea has successfully developed three types of next generation MP3 players and will introduce them to the international markets from this year.
The new products support USB (Universal Serial Bus) connection for easy download of MP3 files from PCs and can use both a conventional memory card, MMC (Multi Media Card) and a SD card as well as built-in memory card.
In particular, the MF-PE500 model can convert conventional audio CD and other music sources into MP3 files without a PC connection. It can convert a variety of audio sources into MP3 files.
People's Leasing Company Ltd. (PLC), a fully owned subsidiary of the People's Bank in the recently released annual report has recorded Rs. 109 million profit on its ordinary activities for year ended 31 March 2001.
This is a 33% increase compared to the previous year's profit of Rs. 82 Million. However, owing to the exchange loss of Rs. 40 million incurred, PLC's net profit was reduced to Rs. 68.8 million during the year achieving a net growth of 21% over the previous year. During the year under review, the finance income from leasing increased by 11% with a value addition of Rs. 99 million to the economy.
PLC is a specialized and innovative company which commenced its operations in May 1996, with a clear vision of revolutionising the leasing market in the country.
Today, PLC has become a leading player in the leasing market in terms of growth, profitability, stability and a high performing lease portfolio.
Moreover, it has established a solid loyal customer base which they consider as one of the greatest achievements for a relatively young company.
LTU International Airways recently tied up with the Asian-German Sports Exchange Programme to promote "sports tourism" into Sri Lanka. As the only airline that offers a direct air link between Germany and Sri Lanka, LTU is well poised to promote Sri Lanka as a sports tourism destination.
The first group consisting of 28 participants for the 3rd International Budo Camp arrived from Germany on Monday 1 October 2001.
The Asian German Sports Exchange Programme at Marawila Indoor Stadium will conduct the Budo camp with 50 additional participants from Sri Lanka. At the same time a group of 9 Table Tennis players from the German Club, Arminia Vohrum also arrived aboard.
The Asian German sports exchange programme has been organizing sports exchange programmes between Sri Lanka and Germany for the past 12 years.
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