Supply chain disruptions provide market share growth opportunities

February 18, 2022

External and supply chain factors are wreaking havoc in the engine lubricants market; various role-players are reacting differently, making it difficult to provide accurate forecasts for the sector. So says Petrocam CFO Ridwan Gany, although he argues that this uncertainty does create opportunities to put down a stake and capitalise when industry conditions turn.

Supply chain challenges are not the sole preserve of the petroleum and lubricants industry, with many sectors scrambling to try to recreate a sense of normalcy as the Covid-19 pandemic slowly shifts towards endemic status. Gany says not all environmental factors in the lubricants supply chain are a direct result of the pandemic, although they are no doubt compounded by lockdowns and restrictions. He says that across industries, challenger brands have the opportunity to make inroads today if they have the stomach for the long game that will pay off down the line.

In the lubricants industry, factors disrupting the supply chain include input costs of base oils, the availability and demand-driven pricing of containers and freight services, delays in shipping, and more. “The result has been erratic prices as various companies try to find ways to deal with the crisis,” says Gany.

“Large corporates have dealt with this by raising prices, which obviously has a knock-on effect for the industry,” he continues, explaining, “Smaller players often try to absorb the extra costs to try to capitalise on the increased prices among the incumbent dominant brands. But as margins become more erratic and tighter, this strategy places their very existence under threat, especially in a market where current geopolitical tensions and continued supply disruptions are driving a rally in oil prices.”

Gany says that Petrocam Lubricants, a division of global oil trading company Petrocam Trading – which supplies crude and a wide range of refined petroleum products and ancillary services, as well as operating a fleet of petrol stations, across Africa – has taken a different tactical approach.

“In times where the supply chain is erratic and unpredictable, chasing margin on its own is a recipe for disaster. Instead, we’ve taken the strategic approach of zoning in and focusing on particular market segments that we think provide the best possibility for future market share growth,” he expands, noting that while these may not necessarily be the most attractive options in terms of margins right now, they do allow Petrocam Lubricants to provide the right product to the right people at the right time. “The logic is built on customer acquisition in an innovative, marketable, and scalable manner, which we can leverage for growth when market conditions shift,” he explains further.

Gany says that the experience of the company’s global trading division in other regions of Africa has shown that customer acquisition based on addressing key customer pain points, as well as being reliable with a palatable price point, is a sound strategy for building market share as a challenger brand.

“If a brand does its market research and discovers the segments that are tailormade for its products – and zones in on those segments – it has the opportunity to introduce itself to a host of new customers. If the orientation is not on immediate margins but rather about planting the seeds for return business, the reward is increased market share and market retention.

“Looking at the green shoots in South Africa and abroad, there is going to be a market rebound, and the idea is that when this happens, those brave enough to pursue market share over margins will reap the rewards,” says Gany. “Is it guaranteed? No. But the alternative is being at the whim of the market and large incumbents that have the runway to do things on their own terms.”

For further information:

www.petrocamlubricants.co.za

Tel: 011 656 0466