Lubricant Technology Origin Segments Brand Perception

Q: What business strategies have enabled Raloy to gain a bigger market presence in Mexico?

A: Our client base is focused on OEMs and big transportation companies and fleet owners such as Grupo ADO, rather than the aftermarket. We supply OEMs not only with original equipment but also with products for assembly lines. Our logistics systems allow us to provide on-time deliveries, enabling OEMs to be permanently supplied with our products, and as a result we contribute to the reduction of standstill delays. We recently identified a new trend in the industry for synthetic, high performance products, and in response we decided to introduce a new brand with a particular focus on German technology, leading to the establishment of a new company called Kronen.

Q: Why did you establish an entirely separate entity for Kronen, rather than incorporating it into the Raloy brand?

A: Focusing on German expertise opened the doors to German OEMs like VW and BMW, as well as to other European manufacturers. European technology and especially German technology, is very advanced and high quality. We decided not to merge Raloy and Kronen in order to create a separate brand perception. Raloy products are of high quality, and we supply many OEMs like Volvo, Mercedes Benz, GM, and Honda, but in order to supply the consumer market, we have to adopt another strategy as consumer perceptions differ. Consumers prefer to see a German name because they associate it with high quality. We invited representatives of Kronen to Mexico and established a joint venture. We are currently in the start-up phase of creating the brand. We have established a new network of sales points and dealers for Kronen since it is an entirely new product and brand. Our target client base for this brand is European OEMs. Our intention is for Kronen to supply small volumes at a good price, which will give us a solid turnover.

Q: How much energy and time are you investing in R&D for lubricants, and how closely do you interact with OEMs and suppliers in this respect?

A: Raloy’s traditional operations center around oils for diesel and gasoline engines. These two operate in different markets and they have different technology requirements. While we endorse the use of German technology, we must also incorporate Mexican technology, due to the differences in infrastructure, quality of diesel, and even the driving culture of the two countries. We must tropicalize the products to enable customers to take full advantage of them. We are investing all the time in R&D and we look for new technologies to bring to Mexico. Our R&D always looks at what OEMs are developing and from there we begin to identify the trends that will shape our product portfolio. It is important that our additives and base oil suppliers also carry out R&D and maintain high standards.

Q: Due to higher quality oil and the resulting extended replacement intervals, what measures do lubricant companies take to compensate for lower volumes?

A: It is true that high quality oil extends the replacement time, which can impact our operations. Since longer lifespans have led to a reduction in volume demand from our present client base, we are looking for new clients to compensate. This is not easy since our competitors are doing the same. However, we will always promote products of the highest quality, no matter if the replacement time is longer. We naturally look for profit but we must also give our clients the best option available. To further compensate we work on improving the efficiency of our manufacturing processes to reduce costs, to improve the formula of our products, and to optimize our supply chain.

Q: What areas of opportunity have you identified in sourcing raw materials for your products?

A: Our supply base is international and we source from Finland, France, Germany, US, and even Singapore. The majority of our raw materials comes from abroad. In Mexico, PEMEX is a supplier of base oil but its quality is not great. In order for our products to receive OEM approval, we must use materials of the highest quality. All of our products go through an infrared tool that allows us to see the quality clearly before it is passed on to the OEM. In Mexico, most SMEs focus on Group 1 base oils and it is important that the government incentivizes them so they can begin producing Group 2 oils. For Raloy, we receive Group 2 and 4 oils from the US and Group 3 oils from Europe. It would be good if PEMEX could begin supplying more complex and refined oils, but at the moment this is too difficult.