IOC to adopt FMCG model for IBP merger

Oil behemoth is against diluting the IBP brand value.

The integration of IBP with Indian Oil Corporation (IOC) will be modeled on the lines of a fast moving consumer goods (FMCG) company.

The objective is to keep the IBP brand alive which has "extremely high brand equity in the north and east". The merger of IBP with the oil behemoth was announced on April 28 with an expected timeframe of 6-12 months.

N G Kannan, managing director of IBP and IOC's director marketing said, "There is no need to dilute the IBP brand. We can follow FMCG companies such as HLL and P&G which have acquired companies with strong brand loyalty and that compete with their own brands." He, however, added that no formal decision has yet been taken on the issue.

The most famous brand in the IBP stable is IBP Red under which it markets a range of lubricants. The recently launched value-added petrol and diesel brands 'Josh' and 'Shakti' are the other brands besides IBP Gas, under which it markets its packed LPG.

Ever since IOC bought government's stake in the pure marketing company, it has been weighing options of integrating operations.

However, with competition in the retailing of transportation fuels expected to hot up from 2005 when private oil companies will have their retail network spread across the country, IOC is busy consolidating its position.

IOC has been losing market share in the retailing of transportation fuels to IBP. With the government removing restrictions on opening new retail outlets, beginning fiscal 2003, IBP aggressively expanded its network from 1,559 outlets to 2,079 as on March 31 this year.

Consequently, its market share for diesel and petrol has also gone up to 9.9 per cent and 8.1 per cent, respectively, as on December 31, 2003 compared with 9 per cent and 7.5 per cent in fiscal 2003.

A few days following merger announcement, a deliberation with senior and middle level managers of the two companies was called to chalk out a smooth transition with the buzzword at the meeting being 'consolidate don't confuse'.

A process to balance out and optimise resources, products, strategies, systems and procedures and integrating IBP's network into IOC's SAP is being given a final touch. The task spelt out to these managers is synergise the two for better results and avoid duplication.

For now, the management is worried about operational synergies and consolidating as fast as possible and issues such as human resources (HR) will have to wait, while excess manpower, if any, will be redeployed.

Private companies such as Reliance Industries has plans to unveil 400 retail outlets and are in various phases of construction.

Another private player Essar Oil has already opened up 28 outlets across the country. Multinational Shell has already received government approval to roll out its network in the country.