The Hindu Business Line : Fuelled by brands

Branded cars, stereo systems, security alarms ... what’s next? The fuel. Automobile owners are increasingly shifting to the high-octane options available.

Branded is the way to go

Richa Mishra
Bindu D. Menon

Delhi couple Diya and Vijay are complete roadies. An extended weekend means a long drive out of the city. And one thing that their lean, mean machine must have in its tank is branded fuel. “I have a branded music system and upholstery in my car , so why not branded fuel? The mileage it offers is better than that of unbranded fuel. It is also an extension of an individual’s brand identity,” says Diya, a software professional.

Branded fuel, hitherto an uninvolved category, is enjoying tremendous popularity despite being priced higher than its unbranded counterpart. The everyday oil-price shocks also do not seem to have dented its popularity. Among the petrol brands that have caught the consumer’s attention are XtraPremium from Indian Oil Corporation (IOC), Speed from Bharat Petroleum Corporation (BPCL), and Power from Hindustan Petroleum Corporation (HPCL). The popular diesel brands include IOC’s XtraMile, HPCL’s TurboJet and BPCL’s Hi Speed.

Important revenue earners

For the public sector oil marketing companies (OMCs) these branded products are proving to be important revenue earners. The revenue earned from sale of premium fuels has also helped them cut down on the revenue loss suffered on account of the sale of petroleum products at a subsidised rate.

Not surprising then that in volume terms, branded fuels now account for as much as 35 per cent of the total fuel sales compared with about 25 per cent a year ago.

Said G. C. Daga, Director (Marketing), IOC, “People are moving from the generic to the branded fuel category. Everything from economic growth to increased aspiration levels has contributed to the growth of the branded fuel category.”

Drawing customers

IOC has itself seen 28.5 per cent of its existing costumers turning to branded petrol and 17.3 per cent to premium diesel. Despite being a late entrant in the category, the company has notched up a 48 per cent market share for branded petrol and 58 per cent for diesel. “While 38 per cent of our 17,700 retail outlets across the country sell branded petrol, 58 per cent sell branded diesel. There is a tremendous accent on using quality fuel for all new-age vehicles. It is our effort to turn the two-wheeler user also to branded fuel,” he said.

BPCL, which was the first to enter the category, prices its branded products 10 paise higher than its competitors. Almost 30 per cent of its regular petrol customers have also shifted to premium petrol and about 15 per cent to premium diesel.

BPCL’s Speed saw a growth of 30 per cent in 2007-08 compared to 2006-07 while Hi Speed Diesel recorded a growth of 38 per cent. BPCL sells its branded products from its ‘Pure for Sure’ retail outlets, which comprise 70 per cent of its total retail outlets of over 8,000 across the country.

The perception of a premium brand has changed. Besides, BPCL has also enjoyed the first-mover advantage, industry experts say.

For HPCL also, the branded category has seen good growth. The company’s petrol brand, Power, saw a 47 per cent growth in sales in 2007-08 over 2006-07. Similarly, Turbojet, the branded diesel from the HPCL stable, saw 33 per cent growth in sales during 2007-08 over the previous year. While Power is sold from 36 per cent of its 8,349 retail outlets, Turbojet is sold from 54 per cent of its outlets.

According to industry analysts, there are many sticklers for branded fuel, which has even improved the drivability of old vehicles. More and more people are demanding branded fuel. This trend is not just limited to the SEC A cities but has spread to semi-urban and rural areas.

Fanning out

So if IOC is taking its brands, particularly diesel, to rural outlets called Kisan Seva Kendras (KSK), HPCL has taken them through Humara Pump, and BPCL under its existing brand name. The retailers are looking at large town-spreads, highways and agricultural markets.

KSKs are low-cost rural fuel stations. The prime objective of a KSK is to make diesel as well as other products and services available to the farmer at least cost and assured quality and quantity. As on April 1, 2008, IOC had set up about 2,050 KSKs across the country.

The high-octane fuel is also generating a fair amount of eyeballs through its endorsement by sportspersons and outdoor campaigns. “The marketing and branding promotions will increase with ever more entrants in the category. Concurrently, it will become like any other FMCG product vying for its share of attention,” industry watchers note.

The automobile industry too seems to favour the use of branded fuel. “High-octane fuel is reported to have multi-functional additives that remove harmful deposits from the engine and components. This improves mileage, reduces emission levels and assures a smooth drive and low-maintenance costs. Therefore, we recommend it to our users though it is not mandatory,” say experts.

Oil companies on their part are offering dealers higher commissions for sales of branded fuel. Loyalty programmes are also making their appearance in a big way. IOC has Xtrarewards, a loyalty programme for the retail customers.

This apart, companies have also engaged market agencies to track their brands and understand consumers’ expectations.