Battling Back to Reclaim Market Share
It is widely recognized that private label lubricants have steadily eroded the market share of major brands over the years. The impact of these losses was particularly significant during the COVID-19 pandemic, when majors faced stock shortages and had to implement buyer allocations due to supply chain disruptions. This scarcity forced many lubricant buyers, who had previously been hesitant to consider private label oils, to either try these alternatives or face the risk of running out, which was not an option. Once they made the switch, many found that their concerns about changing brands were unfounded and that the extra costs associated with major brands might not have been justified.
The pandemic saw private label brands taking a notable slice of the market from major competitors, leading to widespread speculation about how these majors would respond to recover the lost business. It seems we now have a partial answer to this question.
In the past few months, prominent independent blenders have observed that several majors are choosing to reduce their prices. One major, in particular, is reported to be the most aggressive in its pricing strategy, with sources suggesting that its prices for certain lubricants fall below the production costs faced by independent blenders. Coupled with the risk of losing market share, there is increasing apprehension among independent blenders that this trend may lead to the closure of some blending operations.
Although it is tough for independent blenders to win price wars against majors, they can find success by emphasizing differentiation, flexibility, collaboration, and strong customer relationships. By concentrating on providing value and being watchful of unfair competition, these companies can not only survive but also grow steadily over time.