India is our number three market: Huibert Vigeveno
Huibert Vigeveno, executive vice-president, global commercial, Shell International, and Mansi Madan Tripathy, managing director, Shell India Markets, discuss in an interview with Jyoti Mukul the prospects for the lubricants, aviation and speciality businesses and how the global takeover of British Gas has panned out in India. Edited excerpts:
In 2015, the global market for lubricants saw a marginal decline. Has the market improved?
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Vigeveno: We are the leader with a 12 per cent global market share. We are number one in the US, which is the largest market worldwide. The second largest market is China, where we are the strongest international company with close to 10 per cent market share. We have 43,000 retail sites worldwide. That is more than McDonald’s or Starbucks. India is the number three market. We share the ambition of the same type of presence here. In India, we are close to 5 per cent on an average.
We have a blending plant in Mumbai. We have strong cooperation with Suzuki. Also, with my colleagues in retail we are looking at how we can provide more products and services in India. We operate in lubricants in more than 100 countries worldwide but three primary growth markets are India, Indonesia and China.
Tripathy: In India, the industry segment has been more or less stagnant at less than 1 per cent growth. In the industrial segment, the efficiency of engines being used and the oil drain interval are improving. Within industry, demand from agriculture and construction is increasing; in mining and power it is declining. In commercial vehicles, there is a decline because trucks are more efficient. In bikes, it is growing 5-6 per cent and in cars less than 1.8 per cent. But overall at 2.3 per cent, it is one of the fastest growing markets in the world at 2.6 billion litres. That is the competitive advantage of the Indian market.
How does India’s growth compare with that in China and the US?
Vigeveno: The consumer importance is for the trust of the brand and the expectation around the service and technology. Consumer demand is growing in India, particularly in sectors where people want a better product. We should look at the overall growth market, but also the value market. In the US, there is no huge increase in the total market but in the premium market. It is the same in China and India.
Did demonetisation affect demand?
Tripathy: At the industry level, we saw that during November-December, demand dropped by 22 per cent. We recovered 70 per cent by the end of February. By March, we should be able to get back to 95 per cent. We have been able to mitigate the risk by working with our distributors. We helped them with credit cycles and margins. All the lost sales wherever we could track them, we are trying to get them back. The industry has not seen complete recovery.
How is aviation fuel demand in India?
Vigeveno: The global aviation market continues to grow. India is one of the key drivers of the growth. We provide an interesting network for airlines at most locations in the world. We look forward to opportunities not only in India but also among carriers in India for elsewhere in the world.
How are Shell’s products helping to lower emissions?
Vigeveno: We provide much more synthetic lubricants, which give much more kilometres.
Tripathy: We have co-partnered with Tata for Shell Rimula that offers 6-10 per cent fuel saving. If you accumulate for a year, it is equivalent to planting 81 trees. Helix Ultra and Advance Ultra offer close to 2-3 per cent efficiency, equivalent to planting 41 and 51 trees.
You have spearheaded the integration with BG. What is the status now and what advantage does it bring to Shell in India?
Vigeveno: The integration has gone very well. It was a large acquisition when the deal was announced in April 2015, being $70 billion. We finalised everything by end-2016. McKinsey, our external consultant, mentioned that this was a world-class integration. We are proud not so much of what we did but how we did it.