Soon to enter Australia with LPG vehicle conversions

Big time for LAUGFS, as it wins lubricant licence

Senior Management- W.H. Shamal Boteju – LAUGFS Gas Auto Lanka Ltd, LAUGFS Petroleum, LAUGFS Lubricants (Pvt) Ltd. Mohan Perera – LAUGFS Gas (Pvt) Ltd. Ravi Dahanayake – LAUGFS SunUp Supermarkets, LAUGFS Restaurants (Pvt) Ltd. U.U. Navaratne – LAUGFS Engineering (Pvt) Ltd. K.R. Wasantha Ranasingha – LAUGFS Aqua Systems (Pvt) Ltd., LAUGFS Corporation (Coir) Ltd. L.H.Sarath De Silva – LAUGFS Corporation (Rubber) Ltd. Kirthi Goonesekera – LAUGFS Property Developmers (Pvt) Ltd. B.Aruna Jyalath- LAUGFS Leisure Ltd. Hector Perera – Guneral Manager HRD.

The LAUGFS group this week won a hard-fought licence to market lubricants in a battle that nearly ended in courts owing to what is said was unfair criteria. The organization also announced plans to enter the Australian market this month to provide vehicle conversions from petrol to LPG – joining the ranks of Dilmah, MAS, Virtusa or Damro as a Sri Lankan multinational.

A jubilant W.K.H Wegapitiya, founder and chairman of the group which takes its acronym from ‘Lanka Auto Gas and Fuel Systems (LAUGFS)’, told reporters that the company would be competing with the likes of once-monopoly holder Caltex, Mobil, BP/Castrol and Volvoline in addition to four new entrants in the lubricants.

“We finally did it,” he said adding that they were considering going to courts over the criteria where applicants for lubricant licenses had to have an American Petroleum Institution (API) license and five years experience locally or internationally. “None of the products marketed before this further liberalization took place has this certification. Thus by bringing this into the criteria, the authorities were virtually shutting out local firms. Also why have such criteria when the currently available products didn’t need this?” he asked. However LAUGFS obtained the certification and more accolades like being the first local brand to get API certification and also being approved as the only local brand recognized by Daimler-Chrysler (Mercedes-Benz -- and there ended the conflict and a series of articles in newspapers complaining about the unfair criteria.

Wegapitiya, who has been beating the drum on the lack of a level playing field when competing with multinationals, said LAUGFS has become a specialist in the energy sector in Sri Lanka and now is the second largest LPG supplier to domestic, vehicle and industrial use while also being, unofficially, the third largest petroleum player after the CPC and LIOC.

The company is targetting a market share of anything between 10 to 20 percent in lubricants in the next few years from a zero position and is confident of making it. “We can do it. No one believed we would reach this position today (a 5 billion-rupee group and a 1 billion-rupee energy business). It all depends on distribution and marketing – and we have it,” he said.

LAUGFS has entered an agreement with Italsing of Singapore to provide lubricants in bulk for packing in Sri Lanka under the local firm’s brand name. The company says it plans to set up a blending plant in Sri Lanka in two years depending on whether the market expands and on a need-based strategy.

The size of Sri Lanka’s lubricants market – automotive and industrial – is 46 million litres of which Caltex, once in absolute control, has a 70 percent stake in 2006 followed by LIOC at 22 percent and the others sharing the balance. “LIOC went from zero market share in 2003 to 22 percent last year because of its distribution network through its 100 fuel sheds. We can do the same and reach for similar targets through our 21 fuel stations and the network of service centres where we provide a complete range of services,” Wegapitiya said.

Disclosing that millions of rupees is being spent on new investments, Wegapitiya deftly tackled a question on whether the group is spreading itself too large and in different areas without sticking to its core business of energy, skills in which the founder had himself acquired by studying energy management at the University of Oxford.

“Our business philosophy is looking for opportunities and making an investment when needed,” he said relating how the company pitched into boat building, sensing an opportunity after the tsunami triggered a demand Sri Lankan manufacturers couldn’t cope with.
The same, he says, applies to restaurants and supermarkets because “people have to eat and consume all the time.” Wegapitiya’s other philosophy of providing the consumer what he or she wants – irrespective whether the company loses or not – is commendable.

“We will market the new LAUGFS under our brand but will not remove the Mobil brand (which we market) off our shelves. We will sell both and provide the consumer a choice. If they feel Mobil is better than ours, then it means we have to pull up our socks,” he said, explaining that this philosophy of “live and let live’ also applies to the supermarket business where all products are sold along with LAUGFS products.

The company is planning a new “Be Sri Lankan; Buy Sri Lankan” styled campaign to promote its lubricants but Wegapitiya is reluctant to talk about it except to say “it won’t be focused on our product but refer to general issues.” Wegapitiya’s interaction with the media this week intended to announce the company entering the lubricants business saw discussion on a range of issues including the company’s foray into Australia, expanding into hotels and coming up with a boutique hotel with rooms selling at US$1000 and over and why it’s into businesses like mattresses or bottled water.

One thing was however clear – the Sri Lankan entrepreneur is passionate in promoting Sri Lankan products (not necessarily his own) giving consumers their right to a choice of products.