Lubes em Foco Magazine – issue 96
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By: Sérgio Rebêlo
An oasis in the desert of growth opportunities of the Global Lubricants Market
Executive Summary
In a global scenario where traditional lubricant markets face stagnation and decline, Brazil stands out as a remarkable exception and an oasis of sustained growth. While developed economies grapple with rapid electrification and slower vehicle fleet growth, Brazil presents a unique situation, driven by its own energy transition solution – the flex-fuel hybrid – a robust internal combustion ecosystem, and a diverse socioeconomic demographic.
This article reveals how Brazil, with its socioeconomic diversity that can be understood as eight distinct “countries,” offers strategic avenues for growth for companies of different sizes to achieve sustainable positions in an expanding market. Success, however, will require strategic focus and sophisticated navigation of Brazil’s internal complexities, and, for independent companies, generally family-owned, an unavoidable commitment to professionalization and corporate governance.
The Global Landscape: Headwinds and the Pursuit of Growth
The global lubricants market is undergoing a structural transformation, marked by four main headwinds that limit growth opportunities in mature markets:
Reducing Growth of Light Vehicle Fleets: Markets such as Europe, the US, and Japan are seeing a structural decline in vehicle sales and use, driven by urbanization—urban concentration in megacities with developed public transport infrastructure, regulatory restrictions on the use of private vehicles in large urban centers, changes in consumer behavior—an aging population (less likely to purchase high-value durable goods) and a preference for shared mobility among younger generations, and a disproportionate increase in the costs of ownership and maintenance of passenger vehicles versus purchasing power.
Accelerated Electrification: With electric vehicles (EVs) representing approximately 20% of global sales in 2024, the demand for traditional engine lubricants is directly impacted, a trend that will intensify with the bans on sales of internal combustion engine vehicles (ICEs) from 2030-2035 in several jurisdictions.
Technological Advances in Lubricants: The evolution of base oils, additives, and lubricants has significantly increased oil change intervals, reducing per capita consumption.
Industrial Slowdown: Lower global industrial GDP growth and the transition to service economies structurally reduce the demand for industrial lubricants.
The result is a global market that grew by only 10% in volume between 2014 and 2024, while world GDP expanded by approximately 27% in the same period. Future prospects indicate growth of no more than 0.5% per year over the next ten years.
Brazil: The Engine of Lasting Growth
In stark contrast to the global scenario of stagnation, Brazil stands as an extraordinary exception. The fifth largest market in the world, and the largest in Latin America, Brazil does not face, or at least not with the same intensity, the growth constraints experienced by developed countries. Here, the light vehicle fleet continues to grow, and electrification has a limited constraining effect due to the prevalence of “hybrid” engine alternatives, which have significantly lower impacts on future lubricant consumption than battery-powered vehicles.
Brazil’s Competitive Advantage: A Strategic Divide
Brazil’s resilience and potential are underpinned by three pillars that create a true competitive advantage, protecting the lubricants market from the restrictive factors faced by markets in developed countries.
The Flex-Fuel Hybrid Solution
Brazil has developed a unique and sustainable response to decarbonization: the flex-fuel hybrid vehicle. This technology not only reduces CO2 emissions by up to 80% compared to gasoline, but it does so by leveraging existing fuel production and distribution infrastructure as well as OEM plants. More importantly, it maintains the internal combustion engine as the central component of the automobile, ensuring the continued demand for high-performance lubricants.
The Supremacy of the Internal Combustion Ecosystem
Brazilian infrastructure is overwhelmingly favorable to combustion technology. Compare the ecosystems:
Internal Combustion (many “actors”/decentralized power): 26 automakers, +400 auto parts factories, 45,000 fuel stations (>98% coverage of Brazilian municipalities) and 120,000 repair shops. Nationalization level above 70%.
Electric (few “actors”/concentrated power): 3 automakers (with still incipient local production), mostly hybrid fleet and only 12,000 public charging stations. Nationalization level still unknown and uncertain..
This disparity ensures that the transition to pure electrification will be gradual, cementing the relevance of lubricants for many years.
The Motorcycle Market Explosion
An additional and significant growth driver is the motorcycle market, which has exploded as a solution for urban mobility and delivery logistics. With sales growth projected at 18.6% in 2024, totaling nearly 1.9 million units, this segment represents a robust and growing source of demand for specific lubricants.
Decoding Brazil: The “8 Countries” Strategy”
Brazil’s greatest complexity — and opportunity — lies in its vast socioeconomic diversity. To make these differences tangible, we classified and grouped the 5,571 municipalities according to their per capita income and population density. Then, we associated these “clusters” with countries with similar characteristics (income and population density). The results are surprising, and show that Brazil can be understood as a federation of eight distinct “countries,” each with specific characteristics of per capita income, population density, consumption patterns, and particular needs. This segmentation is not merely academic, but reflects real and substantial differences that directly impact business strategies, distribution, and product development.
Understanding this segmentation is key to unlocking granular growth.
This diversity allows companies to adopt multiple strategies simultaneously, from volume leadership in lower-income clusters to premium differentiation in wealthier segments.
Strategic Implications of Diversity
Multiple Markets in One Country: Brazilian diversity allows a single company to operate simultaneously in different market segments, from basic to premium products, maximizing revenue opportunities and mitigating risks through diversification.
Natural Product Scaling: As consumers progress economically, they naturally migrate between clusters, creating opportunities for upgrades and long-term loyalty.
Cross-Learning: Successful strategies in one cluster can be adapted and applied to others, creating synergies and accelerating the organizational learning curve.
Natural Barrier to Entry: The complexity of simultaneously serving eight distinct profiles creates natural barriers to entry for international competitors.
Desafios da Complexidade
Complexidade Operacional: Gerenciar portfólios, canais de distribuição e estratégias de marketing para oito segmentos distintos demanda capacidades organizacionais sofisticadas e recursos consideráveis.
Investimento em Conhecimento Local: Cada cluster possui particularidades culturais, econômicas e geográficas que exigem conhecimento específico e presença local.
Gestão de Marca Multissegmento: Desenvolver e manter proposições de valor relevantes para segmentos com necessidades tão distintas representa um desafio significativo.
Eficiência vs. Customização: Equilibrar eficiência operacional com customização necessária para atender adequadamente cada cluster requer capacidades organizacionais avançadas.
Five Strategic Alternatives for Navigating Complexity
Understanding Brazilian diversity as a strategic opportunity, we identified five distinct approaches for companies to achieve sustainable positions in the lubricants market:
“Continental” Strategy: Comprehensive Performance
Concept: Simultaneous presence in all clusters (1-8) and segments, leveraging Brazilian diversity as a unique competitive advantage.
Value Proposition: Complete solution for all lubrication needs, adapted to the specificities of each Brazilian “country”.
Critical Success Factors:
– Robust organizational structure capable of managing multiple segments simultaneously
– Advanced complexity management with integrated information systems
– Multiple organizational competencies ranging from operational efficiency to premium innovation
– Comprehensive portfolio covering everything from basic products to exclusive solutions
– Hybrid distribution network combining mass and specialized channels
– Strong umbrella brand with segmented sub-brands
– Significant investment capacity to sustain presence in all segments
– Deep knowledge of Brazilian socioeconomic dynamics
– Strategic flexibility for rapid adaptation to market changes
Focused Strategy: Volume Dominance
Concept: Concentration on clusters 1-3 (Madagascar, Haiti, Kenya) through highly competitively priced core products.
Value Proposition: Essential functionality at the lowest possible cost, with universal availability.
Critical Success Factors:
– Massive production scale to dilute fixed costs
– Advanced automation to reduce operational costs
– Efficient capillary distribution
– Rigorous cost management throughout the value chain
– Strong relationships with large distribution networks
– Ability to compete in public and private tenders
Segmented Strategy: Diversified Portfolio
Concept: Simultaneous service to clusters 2-6 (Haiti, Kenya, Jamaica, Ecuador, Bulgaria) with a differentiated portfolio.
Value Proposition: Products tailored to the specific needs of each segment, with a strong intermediate brand.
Critical Success Factors:
– Diversified portfolio covering multiple price and performance ranges
– Established mid-range brand with national recognition
– Deep understanding of regional and segmented needs
– Operational flexibility to meet varied demands
– Hybrid distribution network combining direct and indirect channels
– Capacity for incremental innovation for continuous portfolio evolution
Premium Strategy: Differentiation by Value
Concept: Focus on clusters 5-8 (Ecuador, Bulgaria, Germany, Monaco) with high-performance products and advanced technology.
Value Proposition: Superior performance, cutting-edge technology, and exclusivity for sophisticated consumers.
Critical Success Factors:
– Continuous investment in R&D to maintain technological leadership
– Strategic partnerships with assemblers and equipment manufacturers
– Premium branding with sophisticated and segmented communication
– Selective distribution network through specialized channels
– Specialized technical team for support and consulting
– International certifications and quality recognition
Niche Strategy: Extreme Specialization
Concept: Mastery of specific segments (agricultural, industrial, maritime) with highly specialized products.
Value Proposition: Exclusive expertise and customized solutions for specific applications.
Critical Success Factors:
– Exclusive technical expertise in specific applications
– Close relationships with key clients in the segment
– Customization capability for specific needs
– Concierge-style service with dedicated technical support
– Collaborative innovation developed in partnership with clients
– Technical entry barriers through specialized knowledge
Governance and Professionalization: The Decisive Competitive Advantage
With the Brazilian market projected to reach nearly 2 billion liters annually in the next decade, competition will intensify. For independent and family-owned companies, professionalizing management and implementing robust corporate governance are no longer an option, but an imperative for survival and growth. Solid governance allows for:
Strategic Decision Making: Reduces risks and optimizes capital allocation.
Access to Financing: Increases the confidence of investors and financial institutions.
Attracting and Retaining Talent: Creates a high-performance culture.
Operational Efficiency: Implements advanced management systems that are crucial for managing market complexity.
Conclusion: A Call to Strategic Action
The Brazilian lubricants market represents a unique opportunity in a global scenario of transformation and uncertainty. The convergence of favorable factors – growth of light, heavy and motorcycle fleets, environmentally responsible solutions through flex-fuel hybrids, a consolidated internal combustion ecosystem and socioeconomic diversity that creates multiple market opportunities – establishes Brazil as an oasis of growth in the global desert of limited opportunities.
Understanding Brazil as a “continent” of eight distinct “countries” is not just a sociological curiosity, but a fundamental strategic tool for companies that want to maximize their potential in the Brazilian market. This diversity, properly navigated, offers opportunities for growth, differentiation and value creation that will be difficult to replicate.
FactorK has developed, over nearly three decades of experience in emerging Latin American markets, a proprietary methodology called the “Oasis Strategy Framework” (OSF). This approach recognizes that high-growth markets in challenging global environments present unique characteristics that require strategies different from those applied in mature or generally growing markets. OSF is based on the fundamental premise that each growth oasis has its specific mirages – apparent opportunities that can turn into costly traps if not properly understood and navigated. Our experience demonstrates that success in oasis markets requires a sophisticated combination of strategic ambition, operational pragmatism, and the ability to continuously adapt.
Companies that embrace this complexity, developing strategies that are aligned with their resources and capabilities, will be positioned to capture value in one of the most dynamic and promising markets in the world. Brazilian heterogeneity is not an obstacle to be overcome, but a competitive advantage to be exploited by those with strategic vision and multicultural execution capabilities.
The 10- to 15-year window of opportunity offers sufficient time for strategic investments, capability development, and building lasting competitive positions. However, this window will not remain open indefinitely. Companies that recognize and act on these opportunities today will be positioned to reap the benefits of one of the world’s most dynamic and promising markets. Competition will be even fiercer, and independent and family-owned lubricant companies face an unavoidable challenge with professionalization. Strategic focus and governance are, more than critical success factors, fundamental requirements for those who aspire to be long-term winners in this market.
Sérgio Rebêlo is Managing Partner of FactorK, graduated in Business Administration from EAESP-FGV, with an MBA from EAESP/FGV and OneMba -Kenan-Flagler Business School (Univ. of North Carolina), EGADE, Erasmus School of Business and The Chinese University of Hong Kong.
