CRISIS AS THE WINDOW OF OPPORTUNITY

27 NOVEMBER 2017
Many companies have a taboo: they never start new business during economic turbulence. This is not surprising: the consumer demand goes down, banks introduce more stringent crediting policies, and companies decide to save their free resources for a rainy day. However, sometimes a crisis allows competitors to be overtaken, the company’s share on the market to be increased or the company to even occupy a free market niche.

This scenario appeared plausible even on such a saturated market as the market of fuel and lubricants. A total of 2.5 million tons of lubricants were produced in Russia in 2008. However, around 1 million tons could not be sold domestically, and this volume was exported. Meanwhile, import figures were colossal: up to 30% of lubricants sold on the Russian market were imported from abroad.

As paradoxical as this would seem, the problem was with quality: the segment of premium class lubricants and oils depended completely on foreign shipments, and the difference in quality between Russian and foreign products was tremendous. The market was in need of balance, and balance could be achieved only if production capacities were completely reformatted: the sector required new and young players, and considerable investments.

In November 2007, Gazpromneft created an independent lubricants business, with Gazpromneft-Lubricants becoming its operator.

In 2010, the company started production of a range of lubricants under the flagship brand of G-Energy

Alexander Trukhan, General Director of Gazpromneft-Lubricants: “As an economist by training, I was interested in the fact that the price delta on the market was so large; this meant that there was a market niche. Understanding the dynamics of this process, we decided to invest in products with high performance characteristics, and sought the approval of the equipment manufacturers. That is, we entered the free segment that existed between Russian and foreign products. And the results, especially during the crisis periods, showed us that we were working in the right direction. In 2008-2009, as the production levels went down, we invested in development. I think that a crisis is the right time to look carefully into the markets where the window of opportunities appeared; this is the place to go, this is the place to put forth an effort to obtain a new share on the market, a new portfolio of orders, and introduce new technologies.”

There were two ways of development for the company at the time. The evolutionary way was to invest in building sites and developing technologies; the revolutionary way was to purchase new technologies along with new promising projects. Gazpromneft-Lubricants selected the second option, and the purchase of a plant in the Italian city of Bari was a step that determined the fate of the company for many years ahead.

After receiving access to Western technologies, the company invested in R&D activities and built a cutting-edge, environmentally-friendly plant that produces lubricants. The plant in Omsk now provides most products of the successful Russian company, now with an international reputation.

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