Oritsewehinmi Emmanuel Richards, an engineer is Managing Director/CEO, Watergate Development Company Limited (WDCL), a service-driven company with interest in oil and gas and other allied businesses. In this interview with Ibrahim Apekhade Yusuf the Sapele-based entrepreneur speaks on the prospects and challenges of marketing lubricants and other accessories. Excerpts:
Your company is into the marketing and sale of branded lubricants. What is your assessment of this line of business?
Well, lubricant business is a good business if you have the right business model. The thing is that this business is not so common like that. If you take a survey around many places where they sell fuel, you will be shock to discover not many of these stations sell lubricants. If you count the number of filling stations only in Sapele, in Delta State, it will shock you to know that if you take 10, you only have two selling lubricants. And the two selling lubricants are the majors like Total and Mobil, selling their own brands. There many independent stations that are not selling lubricants. Most of them don’t even know the potential in lubricants. Even those who eventually decide to sell end up buying adulterated products. I saw this opportunity early enough and I went into the business. Looking back now nine years after, I can tell you with all certainty that the business is lucrative. When we set up shop in 2010, we were very clear on what we wanted to achieve. I use my distributorship license from Mobil Oil to get lubricant in large quantities and warehouse it. Then I warehouse it and I have stock delivery vehicles. Many people care not doing it yet. It is not common. I now go to retail outlets to market. Of course, before you start marketing you have to determine which types of lubricant you want to market because we have different types of lubricants, including industrial, and retail. The fleet lubricants fall into retail lubricant, while the industrial lubricant comes in drums. The marine lubricant also comes in drums then you have greases. The marine lubricant requires a lot of investment, a lot of money.
In terms of logistics, what is required to set up this kind of business?
First, you need to register either an enterprise or a limited liability company. Afterwards, you have to go to the Department of Petroleum Resources (DPR) to obtain license. With the DPR license, you need to open a warehouse; you need to own delivery vehicles. For a start you need to have one or two. Then, you need to go and register with a major manufacturer that is a manufacturer of lubes depending on what brand you want to market. Ensure you understand their business model because they to have their own guidelines which you must meet. They may tell you, you need a minimum deposit for them to give you products. Then, of course, since you are dabbling into a new business, you need some form of training. You need to get training from the company on how to market their goods because there are some market trends and secrets they have to give you for you to master the trade. You don’t just jump into the business; you need to know about the fundamentals of lubrication. For you to understand what your lubricant does. If you’re trained, you will now understand it. You now understand the marketing angle of it. A lot of people have jumped into lubricant business but they don’t know how to penetrate the market. If you have a spot delivery vehicle, it’s easy. In my own case, I started by recruiting NYSC.
I told them what I want you to do is to comb all independent stations go to them and share with them our business model, which is quite simple. You are selling fuel, diesel and kerosene, you need to sell lubricant. I went further to make merchandisers and branded in my company name. I give that as a customer bonding to every station so that you cannot sell any other thing on board my merchandisers except my lubricant. You pay for the lubricant but the merchandiser is an added incentive for you to sell. So you have a beautiful merchandiser in your station, you have lubricants on the top for customers to see and purchase when they come to refuel their cars. I also encourage them to ensure that their lube bay has a mechanic. If a filling station has a lube bay with a mechanic, they will sell lubricants because people will come to service their cars. So that’s an additional way and that’s why I said training is important. If you are properly trained, you will understand all these parameters.
What are the challenges in this line of business?
One of the disappointments we have is that people don’t want to commit their funds. If you go to them and approach them they say they want credit facilities. You tell them it’s not out of place. But we agree on a few things. The first thing is that you will agree that if I give you five cartoons now, every week, say Monday morning, we do check and balance. If there is any dent, you will pay for it and we put all these in writing, in black and white. We start from there and we allow the facility to run until such a time when the stations can now become self-sustaining and may have no need for our facility again.
Is there a break even period for the business?
Well, you see, it depends on a number of factors. The first thing is the location of your business. Secondly, how much ingenuity can you bring into the business? People have started this same business. They have a warehouse; they put lubricant there, but poor marketing. Lubricant is just there looking at them. The shelf life of a lubricant is five years but at a time the cartoons are damaged. The gallon is not looking neat any longer. And the thing is filled with moisture and you cannot sell it any more. But the higher your turnover, the better for you and if you are able to reach the market quickly, and your volume is high, you can make good profit. I cannot tell you it will take you a specific time to break even. Patient is the key to retail business. It’s a controlled market. Your manufacturer tells you what you are to sell. You don’t on your own sell or fix price. You have to minimise your expenses. There is a margin that is built in. for instance, Mobil has their own benchmark. They will tell you this is the landing cost. And from this landing cost, we expect you to be able to pay for warehouse a certain amount, pay staff, rent and other forms of logistics and put a little margin, all totaling five per cent. You on your own, you now see down and say, if I hire trucks, I can go into the nooks and crannies rather than get a vehicle that will only pass the expressway. So which is cheaper for me? If you can do that and you can work hard, you should be able to break even within a year, in terms of return on investment.
Are you looking at expanding your business base out of your present location?
Another thing is for major manufacturers, there are also territories. They have people in charge of other markets. However, in rare cases, if you have customers from other regions coming to approach you, you can sell but you don’t on your own go all out to scout for buyers elsewhere outside the given territory you operate because the majors would frown at it. Another thing is if there is obvious lacuna outside your area of operation, and it is obvious that those there are not abler to meet the growing demands, you can expand if you have a good opportunity there.
Which other incentives do you enjoy?
We don’t enjoy any at all. Let me share my experience with Mobil. Mobil has presently divested from logistics arm of lubricant in Nigeria. What I mean is this. Before now, Mobil had their lubricant lube manufacturing base in Apapa, Lagos, and they bring the lubes to other outlets like Port Harcourt, Delta, among others using Mobil vehicle will deliver the goods to the respective outlets. Then people could actually work to Mobil out let and request to buy lube. But they don’t do that anymore. What they have now are distributors. Mobil only does manufacturing now. From that stage, in the lube oil blending plant, it is the distributors that come in to their own warehouse. Now if you as a big company, you walk into Mobil now and request to buy their lube, they would call a distributor where your company is who will service you. That’s a form of incentive on its own. There are also sub-distributors and who sell to retail outlets. Even Mobil retail outlets have all been sub to the distributors. So you don’t see Mobil offices again as it were the case in the past. Almost everything along the value chain is now handled by the distributors. But as for the banks they are not helping us in any way. A lot of people mortgage their houses to run the business but before you know it they run into problems with the banks. There is need for the banks to assist.
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