Branded fuels sprint ahead

Three years after launch, branded petrol grabs 11% of market, diesel 5.5%.

Three years since debuting in the Indian market, branded fuel now accounts for around 11 per cent of the petrol sales and 5.5 per cent of the diesel sales.

Oil marketing executives predict the share to rise further with consumer appetite for branded fuel increasing. Branded petrol sales rose 47 per cent to 120,409 kilo litre during 2004-05, while the market for branded diesel at 192,941 kilo litre was 1.4 times the size in 2003-04. The year saw the sales of branded diesel overtake that of branded petrol.

Though priced marginally higher than ordinary petrol or diesel, consumers opt for branded fuel as it offers them better mileage.

"There is about 7 to 9 per cent saving in terms of better miles per litre bench tested on normal engine efficiency," said Bharat Petroleum Corporation Ltd (BPCL) director (marketing) S Radhakrishnan.

Companies push branded fuel as it offers them better margins (lower under recoveries in the present scenario).

Indian Oil Corporation Director Finance P Sugavanam estimated the margins to be 10-15 paise more for every litre of branded fuel sold.

At the same time companies are also conscious about price sensitivity. 'We have the freedom to fix price for these brands but we cannot keep it too high compared to the normal fuel since it has to justify the gain in mileage,' said a senior executive.

With success in branded fuels, oil marketing companies were increasingly finding that investment in production of better quality fuel and charging a premium of around Rs 1.70 a litre on it made better commercial sense than selling normal fuel at regulated prices.

In the coming days, oil companies intend to develop variants of branded fuel and improve the quality further through initiatives like the launch of 91 Octane. Indian Oil more than doubled the number of retail outlets selling branded petrol to 1,521 during 2004-05.

Oil marketing companies carefully chose the retail outlets that dispense branded fuel since the target customers is quality and mileage conscious consumers who do not mind paying a premium. This is the reason why BPCL has so far restricted the sale of its Speed brand of petrol to 1,300 outlets and the Hi-Speed Diesel to 300 'Pure for Sure' outlets.

The branded segment has its own sweepstakes. BPCL introduced branding in the oil marketing business when it launched Speed in July 2002 when it launched Speed, that now 39 per cent marketshare.

Though IOC accounts for half the petrol sales in the country, it has 35.2 per cent share in the branded petrol business. Its subsidiary IBP Ltd accounts for another 1.8 per cent of the pie.

IOC took the cue was the first to launch branded diesel in 2003 and accounts for a third of the branded diesel sales, followed by Hindustan Petroleum Corporation with 25.7 per cent. Recent entrants to the oil marketing business have also taken the hint. Essar Oil's entire petrol sales are under the brand Punch.

There are three brands in petrol and diesel each. IOC and IBP Ltd have Xtrapremium and Xtramile, BPCL has Speed and Hi-Speed Diesel while Hindustan Petroleum sells the premium fuels as Power and Turbojet.