Embed Size (px)
Citation preview
PROFILING PAINT INDUSTRY :STUDY OF ASIAN PAINTS &
GOODLASS NEROLAC
Submitted to
U.P.Techinical University, Lucknow
Submitted By
Abhishek SrivastavMBA[2003]
Dewan Institute of Management Studies, Meerut
CONTENTS
AcknowledgementExecutive Summary
Chapter-1 Introduction OF THE INDUSTRYIntroductionOverview of The Paint IndustrySegmentationForeign CollaborationDemand and Supply ScenarioMajor Players and Their Shares
Chapters-2 STATEMENT OF THE PROBLEM Why This Study Questions Unanswered (Some recent Facts about the industry)
Chapters-3 METHODOLOGYObjectives of the Research Types of ResearchData Analysis Method (Porter’s Model)
Chapters-4 ANALYSIS AND DISCUSSIONCompany Profile – Good lass PaintMarketing Strategies- Good lass NerolacMarketing Strategies –Asian PaintEmerging Trend and OpportunitiesSWOT AnalysisQuestionnaireLimitations
Chapter-5 CONCLUSIONChapter-6 BIBLIOGRAPHY
CHAPTERS TOPICS
AKCKNOWLEDGEMENT
I am thankful to Mr. Sudhir Sharma of Dewan Institute of
Management Studies, Meerut For having shaped my
understanding towards the project thought his rich and varied
teaching , professional help and encouragement .It was only
with the help of his expert guidance that this project was duly
completed.
ABHISHEK SRIVASTAV
EXECUTIVE SUMMARY
The Indian paint industry worth Rs. 49bn has consolidated
over the past four years with the organized sector taking away
share from the unorganized segment .The paint market is
expected to grow at 8-10% p.a over the next few years .The
growth could be higher of industrial activity picks up as the
industrial paint segment is gaining more importance. Asian
paints offers the best exposure being the market leader and an
innovative marketing company.
Paints can broadly be classified as decorative and industrial
on the basis of the end use . The Indian market is dominated
by the decorative segment , which comprises almost 705 of
consumption as compared to developed countries where the
industrial segment is more dominant. The ratio in Indian is
also likely to shift more towards industrial segment ,
especially with growth in the auto and white goods industry.
The unorganized sector has historically been dominant due to
the high excise structure .Over the last five years , the excise
rates have come down drastically from40% to 18% resulting
in erosion of the unorganized sector’s share. The paint
industry is characterized by low fixed asset intensity (as
essentially it is a mixing process ) but high working capital
intensity (as the number of shades is large and there is
seasonally in demand) . The main investment s are in brand
building and distribution infrastructure. New trends are
emerging in technology and marketing Introduction of tinting
machines at the dealer/ retailer level will bring down working
capital costs .Also new technology is being used for
increasing the utility and life span of paints . Indian industry
will have to keep pace with global technological changes to
maintain their competitiveness. Already , a few alliance have
been entered into and the number is likely to increase in the
future .Asian paints is the market leader in the industry
followed by Goodlass Nerolac and ICI
respectively .However , APL is primarily present in
decorative segment .
The outlook for the industry is positive especially given the
good prospect for automotive and white goods industry .
Moreover , housing is government incentives. The supply
situations remain a cause for concern and will keep prices
under check . The Key to success will be innovative
marketing . Thus, we prefer Asian paints within the sector ,
which has a proven track , record in innovation and in
indomitable in the decorative segment.
INTODUCTION
INTRODUCTION
Paint is defined as the group of emulsions , consisting of
pigments suspended in a liquid medium , for use as decorative
or protective coatings . Today, contemporary paints and
coating consists of countless of hundred of thousands to fulfill
the varied requirements of hundreds of thousands of
applications .”Paint” ranges from the broad group of
environmentally sound latex paints that many consumers use
to decorate and protect their homes and the translucent
coating that line the interior of food homes and the translucent
coating that line the interior of food containers, to the
chemically complex , multi-component finishes that
automobile manufacturers apply on the assembly line.
Paint made its earliest appearance about 30,000 yeara ago .
Cave dwellers used crude paints to leave behind the graphic
representations of their lives that even today decorate the
walls of their ancient rock dwellings.
The utility of paints has evolved from a decorative use to a
surface protection use . Also ,know as surface caoatings ,
paints can be classified on the basis of end use, solvent system
and solid content.
End use classification :Under this heading , paints can be
classified as decorative / architectural paints and industrial
paints .As the names suggest, decorative paints are mainly
used for household and construction purposes while industrial
paints are used as coating for industrial productions . Main
types of decorative paints are enamels , acrylic emulsions,
distempers and exteriors and post a message primary types of
industrial paints are marine paints , anti corrosive metal
coatings , ect .
Solvent based classification :This includes paints , which use
petro products or water as the main solvent. Water based
paints are gaining popularity due to their environment
friendliness.
Solid content: can be classified as liquid or solid (powder)
paints .Powder coating find application mainly in the white
goods industry .
The decorative segment dominates the market in India with a
70% share with the rest accounted for by industrial paints .
This is compared to the developed countries where the share
is the reverse with the industrial segments the major one .
With increased industrialization segments the major one .
With increased industrialization the ratio in India is also likely
to change in the favour of industrials and both segments are
likely to be equal partners by the end of five years.
Decorative Paints Segment Market Size (Rs mn)
Enamels 8600
Wall Finishes 4730
Primers 2150
Wood Finishes 430
Total 15910
INDIAN PAIN INDUSTRIES SECTOR REPORT
Products
Industrial Paints Segment Market Size (Rs mn)
Auto 4386
CRP 1075
Powder 860
Coil 94.6
Others 731
Total 7147
OVERVIEW OF PAINT INDUSTRY
The Indian paint industry is a Rs 49 Billion sector
The demand for paints is relatively price – elastic but is
linked to the industrial and economical growth.
The per capita consumption of paints in India is very
low at 0.5 kg per annum if compared with 4kg in the
South East Asian nations and 22 kgs in developed
countries . The global average per capita consumption
is 15 kg.
In Indian the organized sector control 70 percent of the
total market with the remaining 30 percent being in the
hands of nearly 2000 small – scale units.
In Indian the industrial paint segment account for
30percent of the paint market while the decorative paint
segment accounts for 70 per cent of paints sold in
Indian .
In most developed countries , the ration of decorative
paints vis-à-vis industrial paints is around 50:50.
All the industry major have a vast dealership network
and are required to maintain high inventory levels.
Most of the paint leaders have technical tie-ups with
global paint leaders.
Sector comments
Paint is a mixture of four element – solvents, binders,
pigments and additives . Solvents give the paint a liquid
flow while the binder binds it to the surface. Pigments
impart colour and opacity to the paint and the additives
give it special resistance properties.
Sector trends
The recession in the construction and automobile sector
had throw in shades of gray across the Industry spectrum ,
but the revival in these sectors is cause for cheer for the
paint industry as well. The balance sheets of the industry
major are now painted with bright colors.
Sector specifics
On product lines, paints can be differentiated into
decorative or architectural paints and industrial paints.
While the former caters to the housing sector , the
automotive segment is a major consumer of the
latter .Decorative paints can future be classified into
premium, medium and distemper segments .Premium
decorative paints are acrylic emulsions used mostly in the
metros .The medium range consists of enamels , popular in
smaller cities and towns . Distempers are economy
products demanded in the suburban and rural
markets .Nearly 20perr cent of all decorative paints sold in
India are distempers and it is here that the unorganized
sector has dominance. Industrial paints include powder
coatings , high performance coating and automotive and
marine paints .But two –thirds of the industrial paints
produced in the country are automotive paints.
Market profile
The leaders in the organised paint industry are Asian
Paints (India) Ltd.(APIL) Goodlass Nerolac Paints Ltd.
(GNPL), Berger Paints , Jenson & Nicholson Ltd.(J&N)
and ICI (India )Ltd.
Asian paint is the industry leader with and overall market
share of 33 per cent in the organised paints market .It has
the largest distribution network among the players and its
aggressive marketing has earned it strong brand
equity .The Berger Group and ICI share the second slot in
the industry with market shares of 17 per cent each .GNPL
has a market share of 15 percent in the organised sector.
The market can be further spilt into decorative paints and
industrial paints .The demand for decorative paints is
highly price – sensitive and also cyclical . Monsoon is a
slack season while the peak business period is Diwali
festival time, when most people repaint their houses. The
industrial paints segment, on the other hand, is a high
volume-low margin business .In the decorative segment, it
is the distribution network that counts while in the
industrial segment the deciding factor are technological
superiority and tie-up with automobile manufactures for
assured business.
APIL dominates the decorative segment with a 33 per cent
market share. The company has more than 15,000 retail
outlets and its brands Tractor, Apcolite, Utsav, Apex and
Ace are entrenched in the marker. GNPL the number –two
in the decorative segment, with a 15 per cent market share
too, has now increased its distribution network to 10,700
outlets to compete with APIL effectively. Berger and ICI
have 9 per cent and 8per cent shares respectively in this
segment followed by J&N and Shalimar with 1 and 6 per
cent shares.
The share of industrial paints in the total paint
consumption of the nation is very low compared to global
standards .It accounts for 30 per cent of the paint market
with 70 per cent of paints sold in India for decorative
purposes. In most developed countries, the ratio of
decorative paints vis-à-vis industrial paints is around
50:50. But with the decorative segment bottoming out,
companies are increasingly focusing on industrial
paints .The future for industrial paints is bring .In the next
few yeas, Its share would go up to 50 per cent, in line with
the global trend.
GNPAL dominates the industrial paints segment with 43
per cent market share .It has a lion’s share of 70 per cent in
the OEM passenger car segment, 40 per cent share of two
wheeler OEM market and 20 per cent of commercial
vehicle OEM market .It supplies 70 per cent of the paint
requirement of Maruti, India ‘s largest passenger car
manufacturer, besides supply to other customers like
Telco, Toyota, Hindustan Motors, Hero Honda, TVS-
Suzuki, Mahindra & Mahindra, Ashok Leyland, Ford
India, Pal Peugeot and Bajaj Auto .GNPL also controls 20
per cent of the consumer durables segment with client like
whirlpool and Godrej Ge. The company is also venturing
into new area like painting of plastic, coli coating and
cans. APIL the leader in decorative paints ranks a poor
second after Goodlass Nerolac in the industrial segment
with a 15 per cent market share. But with its joint venture
Asian PPG Industries the company is aggressively
targeting the automobile sector .It has now emerged as a
100 per cent OEM supplier to Daewoo ,Hyundai , Ford
and General Motors and is all set to ride on the automobile
boom .Berger and ICI are the other players in the sector
with 10 per cent and 9 per cent shares
respectively .Shalimar too , has an 8 per cent share .
Price sensitivity factors
Various factors that have influenced the pricing of paints
are summarized below:
The industry is raw – material intensive. Of the 300 odd
raw materials, nearly half of them are imported petroleum
products. Thus, any deficit in global oil reserves affects the
bottomline of the players.
The major raw material titanium dioxide, pathalic
anhydride and peutarithrithol constitute 50 per cent of the
total cost. Besides, this there are other raw materials such
as castor, linseed and soybean oils, turpentine .The raw
materials cost sums up to a whopping 70 per cent .Any
increase in the prices of these raw materials could
adversely affect paint prices.
Most of the paint major have to import neatly 30 per cent
of their raw material requirement thus change in import
policies can affect the industry.
SEGMENTATION
Paints – Products
Products
The products of the paint industry can be classified indo
two major segments decorative (architectural) paints and
industrial paints.
Decorative paints: The decorative paints segment can be
classified into interior paints and exterior of cement
paints .80% of the decorative paints account for interior
paints, which consists of premium. Medium and economy
categories .The premium category consists of plastic
emulsions, the medium – priced category consists of
synthetic enamels and the economy category consists of
distempers.
The products under the decorative finishes can be
limestone coating, primers, distempers, cement paints,
matt/ luster finishes, enamels, emulsions (first quality),
and premium emulsions.
Consumption of paints is skewed towards decorative
paints that account for 70 % of paints sold in India.
This is in a sharp contrast to the trend in developed
countries, where the ratio is skewed towards the
industrial segment.
This segment is marked by the presence of a large
number of players from the organized as well as
unorganized sector. Competition is high and margins
tend to be low in this segment. Products of this segment
are relatively price sensitive.
Demand for decorative paints is seasonal with bulk of
sales taking place during the festival seasons from
September to December. Besides sales remains slack
during the monsoon months from June to August.
Entry barriers in term of technological and funds
requirements are relatively lower in the paints sector.
However decorative paints are marketing savvy
products and backed by large advertisement campaigns
and dealership networks. These server as high cost
entry barriers for new companies in this business .The
huge investment required in setting up a vast marketing
and dealership network to advertise and develop a
brand over a period of time can only be afforded by
companies in the organized sector .It is for this reason
that smaller companies and small scale sector units are
slowly losing market shares to the organized sector.
(See Appendix Illustration 1)
Industrial Paints:
Industrial pains comprising 30% of the market include
automotive paints , high performance coating , coil
coatings .The automotive segment is further bifurcated into
OEMs and auto refinishes .The automotive and general
industrial coating occupy top slot in terms of
production(See Appendix Illustration 2)
FOREIGN COLLABOTION
The industrial paints segment due specialized technology
and high capital expenditure attracts fewer players. Most
Indian companies have tied up with of are in the process of
tying up with international paint majors to have access to
the latest technology. A tie – up with a global paint
manufacturer also enables the domestic company to supply
to local customers of its partner. For example, Good lass
Nerolac is a major supplier to maruti Suzuki because of
Kansi, its Japanese collaborator and Suzuki rotations .It is
for the same reason that Asian Paints (tie –up with PPG
Industries, USA) is a major supplier of paints to Opel
Astra.
DEMAND AND SUPPLY SCENARIO
Paint demand is intrinsically related to economic
development .The demand for decorative paints in India
mainly arises from tow segments viz. Construction of new
building retails demand for refurbishment like
automobiles, consumer durables, shipping engineering, ect.
The demand for paints has grown at 10% for the last five
years. After a sluggish growth in late 80s and early 90s,
industry grew at a rapid pace of more than 12% from
1992-1996. High excise duties and lackluster industrial
growth resulted in low growth of 2- 4 % during 1987-92.
After 1992, the industry picked up aided by improving
economic conditions and rationalization of excise
structure. Almost the entire growth can be attributed to
volume increase as price realization has increased at less
than 5% p.a. over the last two years., demand has slowed
down due to the economic slowdown.
According to Indian Paints Association, demand will rise
from the current 0.6mn tones per annum to almost 1mn tpa
by 2003. Demand for decorative paints will be led by the
household construction industry which is expected to grow
at almost 8% over the next five years considering the
extreme shortage of housing and the government’s thrust
on encouraging housing activity. The centers of housing
activity are also likely to shift more towards rural areas.
The industrial segment will grow faster due to the lower
base and fast growth in major user industries like
consumer durables and automobiles.
The paint industry is not capital; intensive. However, it has
high entry barriers in the form of distribution network and
product branding. Thus, fresh capacity is likely to come
from existing players only. In fact, low capital costs
encourage manufacturers to increase capacity to cater to
seasonal peaks (especially in decorative paints) rather than
incur inventory-carrying costs, during lean periods.
MAJOR PLAYERS AND THEIR SHARES
The major players existing in industry are:
1. Asian paints.
2. Goodlass Nerolac paints.
3. Berger paints.
4. ICI paints.
5. Jenson and Nicholson paints.
6. Shalimar paints.
The leader in the high volume medium and mass segments of
decorative paints, Asian paints has been consolidating its
market leadership over the past few years and now has the
biggest slices of 33% of the market of decorative paints where
as Goodlass Nerolac paints has the highest market share in the
industrial paint segment.
(See Appendix Illustration 3-4)
STATEMENT OF THE
PROBLEM
WHY THIS STUDY
To get a general overview of the Indian paint industry.
To identify the major players.
To a ascertain the reasons for the industry not picking up.
Question Unanswered (Some recent Facts about the
industry).
Overall industry growth rate declined to 9%-10% in the
current year from 12%. The industry received a major
setback in the fourth quarter due to the recent earthquake
in Gujarat. Though Asian Paints, Goodlass Nerolac and
Berger combined reported a 15% growth in sales in the
first half of the current year, growth wanted in the second
half, notably in the fourth quarter.
The construction activity was subdued in the current year
due to a less than average monsoon and natural calamities
in some of the key Eastern and Southern states. As a result
the decorative paint demand also declined. The Gujarat
earthquake in the fourth quarter was more pressing for
paints companies.
Industrial paint demand in the current year dropped due to
a 7% decline in passenger car sales and a fall in
commercial vehicle volumes in the current year. One of
the key factors was the lower agricultural output, which
affected the purchasing power of the consumer, notably in
the semi-urban and the rural markets. Despite interest rates
cuts and increase in depreciation rates, automobile demand
did not show any sharp uptrend in the fourth quarter also.
Rutile titanium dioxide prices moved up from USS 1,800
per tonne last year to more than US$ 1,950 per tonne, an
increase of more than 11%. Since this account for almost
50% of the raw material costs of paint companies, margins
were strained. Apart from this, prices of other raw material
like mineral spind and tarriyl also by 20% and 18%
respectively. Paint companies resorted to an increase in
prices during the current year, though not commensurate
with the rise in input costs.
Operating margins declined in the current year due to a
rise in both raw materials was sharp for the industrial paint
segment, as these companies could not pass on the rise in
costs to their customers, primarily the auto companies (as
these companies were also witnessing declining sales).
Exterior paint segment continued to grow at a fast rate
compared with other segments. The segment is estimated
to be growing at CAGR of 15% per annum. New
productions from almost all the major paint companies in
the exterior segment performed well in the current year.
METHODOLOGY
OBJECTIVES OF THE RESEARCH
To get the general overview of the Indian paint industry.
To study emerging rends and opportunities in the paint
industry.
To study the demand- supply scenario the industry.
To identify the major players in the Indian paint industry.
To study the marketing strategies of Asian paints and
Goodlass Nerolac paints.
To ascertain the marketing segmentation criteria.
To study the foreign / technical collaborations (if any) of
major players.
To carry on the SWOT Analysis of industry after studying
the companies strategies.
To study the market shares and major players in the
industry.
TYPES OF RESEARCH
The research study under consideration is exploratory type.
The reason for selecting this type of research is the underlying
definition of exploratory research. Basically, there are two
broad kinds of researches.
Exploratory research: This seeks to discover new
relationship.
Conclusive research: It is design to help executive choose
among various possible courses of action.
As research design applicable to exploratory studies are
different from objectives firmly in mind while designing the
research. Which searching for hypotheses, exploratory
designs are appropriate; when hypotheses have been
established and are to be tested, conclusive designs are
needed. It should be noted, however, that the research process
tends to become circular over a period of time. Exploratory
research may define hypotheses, which are then tested by
conclusive research; but a by-product of the conclusive
research may be a suggestion of a new opportunity or a new
difficulty.
Other characteristics of exploratory research are flexibility
and ingenuity which characterize the investigation. As we
proceed with the investigation must be on the alert to
recognize new ideas. As they can then swing the research in
the new direction until they have exhausted it or have found a
better idea. Thus, they may be constantly changing the focus
of investigation as new possibilities come to attention.
It should be added here that formal design is the researcher is
the key factor. However, three lines of attack may aid in
finding hypotheses of value(1) study of secondary sources of
information ; (2) survey of individuals who are apt to have
ideas on the general subject ; and (3) analysis of selected
cases.
The reason for selecting this mode of research for the topic is
that its is probably the quickest and most economical way for
research to find possible hypothesis and to take advantage of
the work of to others and utilize their own earlier efforts .
Most large companies that have maintained marketing
research programs over a number of years have accumulated
signification libraries of research organizations furnishing
continuing data . Trade association and sales analysis , are
other fruitful sources . There is now a large volume of basic
research reported in professional and trade journals and in
government documents that may stimulate hypotheses . These
sources are often maintained in company libraries ; and they
are otherwise available in public libraries , as are more
general books , newspapers and government documents .In a
relatively short time researcher can scan a large volume of
published and unpublished ideas and data.
And this study aims to collect and present the happening,
reasons for these happenings, and other significant thing in
the paints industry and their interrationships with each other.
Sample Size
Inspite of many players existing in this industry I have taken
a sample of two i.e. Asian Paints and Goodlass Nerolac as
Asian Paints is the market leader in decorative paint segment
and Goodlass Nerolac paint is the market leader in the
industrial paint segment..
Sources of information/ Data
The various steps I took in colleting the elevate data on the
marketing strategies of the Two paint companies:-
Asian Paints Limited
Goodlass Nerolac Paints Limited
The data that I have collected is strictly secondary data hunted
on the internet . I searched -
www.google.com www.indiainfoline.com and various
sites . These sites could only give me an overview of the paint
industry and the company profiles.
The inability to collect data relevant to the marketing
strategies prompted me to interview some senior officers in
the different companies who personally wanted that they
should not be named because of some strategic reasons. Still
interviews were in depth and unstructured and aimed to grab
out as much from the interviewer as possible about the
strategic plans of their long-term strategies. Officials were
kind enough to help me out search the data and get hold of the
relevant data pertaining to the marketing strategies of the two
paint industries.
Information / Data Analysis method
The above discussion gives a brief introduction to the paints
industry. In order to understand it in greater depth , use is
made of Porter’s Industry structure Model .The model has
been reproduced on the next page:
PROTER’S MODEL
SUPPLIER’S POWER
Environmental factors Threat of
Substitutes
Supplier’s Power
Threat of Substituter
Customer’s Power
Barriers to Entry
The bargaining power of each of the players in the industry
relative to the suppliers is low. The reasons for this are
manifold .For instance, the most important raw material,
titanium dioxide, as already mentioned, is always in short
supply both locally and globally. For other raw materials too,
the players are forced to import in bulk due to local shortages.
High import content means that the input costs depend on
global prices, where the industry players can only be price
takes. Moreover, it also exposes the industry player to
exchange rate fluctuations .These are the factors that result in
the erosion of the industry’s bargaining power in relation to
the suppliers.
CUSTOMER’S POWER
Again, the bargaining power of the customer is high .In
decorative paints the customers are widely spread
geographically. Reach and distribution strength are of
paramount importance. Moreover, in addition to availability,
the consumer’s choice depends on several other factors such
as the range of shade, the intensity of the marketing efforts
etc. In industrial paints, the customers are generally captive,
with each customer having at the most two of three suppliers,
and quit often only one supply. But in this case, the customers
arte quit demanding . In addition to the tight specifications
regarding quality , technology is an important factor . In both
the cases, inventory holding involves a lot of cost for the
industry. In the case of decorative paints, a large inventory
has to be help to ensure timely availability of wide variety of
shades. On the other hand, in industrial paints the
manufacturer needs to hold sufficient inventories to ensured
timely supply of paints to the end user .for whom lack of
supply typical means production problems.
BARRIESTS TO ENTRY
In the decorative paints segment, the barriers to entry are low
primarily due to the fact that sophisticated technology is not
prime requisite. The segment is flooded with players in the
unorganized sector who cater mainly to the local low3er end
marker. However, it is difficult for small and new players to
achieve a significant national presence due to the requirement
of a wide distribution network. However, the cost advantage
of the smaller players is slowly being nullified by the
downward movement of excise duties on the organized sector.
In the industrial paints segment the entry barriers are
reasonably high due to the fact that this segment requires
sophisticated technology.
THREAT OF SUBSTITUTES
The paints industry does not face any real threat of substitutes,
as one cannot foresee a situation where paints will not be
required. Technologies for using polner based construction
materials (which can be imparted suitable colour during the
manufacturing process itself and hence do not need paint for
building houses have tried out, but these failed to become
popular.
ENVIIRONMENT
The external environment has a significant effect on the
industry. The chief reason for this is that the demand for the
industrial paints segment is a derived demand. It depends on
the user industries such as automobiles; white goods etc.
though with a time lag .The past yes has seen a drop in
demand for automobiles and hence the industrial paints
manufacturers expected a dip in sales this years.
Environment concerns too can have an effect on the fortunes
of this industry. For instance the concern about toxic fumes
being emitted from paints that use petroleum products as
solvents, has led to the invention of water-based paints. These
are still not very popular in India, though Goodlass Nerolac
has launched a range of water-based paints recently (the Alls
capes “range”.
Government regulations affect this industry as much as they
affect any other industry. Being import intensive, import
duties being raised of lowered can cause trends changes in the
cost structure of the players .The recent trends of import and
excise duties have been largely favorable to the industry.
COMPETITION WITHIN THE INDUSTRY
The industry is characterized by intense completion. Roughly
50 per cent of the volume comes from the unorganized sector,
mainly due t the low entry barriers and the history of high
excise duties. The number of players in the unorganized
sector is greater than 2000 making them a force to reckon
with. Within the organized sectors itself, the decorative paints
segment is with ness to intense competition due to the fact
that a large part of the customers perceives very little
differentiation between brands. The primary determinate of
success in such a scenario is the distribution strength. In the
industrial paints segment , the competition is based more on
the technology that goes into the products .Also because of
this fact, the unorganized sector is smaller in this segment .
ANALSIS & DISCUSSION
Players compete with each other to gain captive end users for
their products, as in the case with most industrial products.
GOODLASS NEROLAC PAINTS LTD.
COMPANY PROFILE
BACKGROUND
GNPL was established in 1920, by Tata stable in
collaboration with Goodlass of UK, apart of the Cooksons
group. The Tata’s had a 40% stake in the Company; through
group company Forbes Gokak Ltd. In 1983, the Company
entered into a technical cum financial collaboration with
Kansai Paints , Japan , Kansai who currently has a stake of
40% is the other major shareholder .Manufacturing activities
began with the establishment of a paints unit at Parel in 1920.
In 1971 another plant was established pigments, one of the
major ingredients ion paints manufacture pigments, one of the
major ingredients in paints manufacture pigments, one of the
major ingredients in paint manufacture. In FY92, the
company made a right issue, for par funding its new Kanpur
plant, which was commissioned in August 93 .Last year
Kansai bought over the stake of Tata’s , thus making GNPL
its subsidiary.
GNPL , The Indian arm of Jap[[an based Kansai paints , is
one of the leading players in the Indian paints market with
presence in decorative paints as well as industrial paints ,
coatings , varnishes , enamels etc. it is the domestic leader in
industrial paints and has virtually half of the auto paints
marker.
Paints sector can be segment as decorative paints and
industrial paints. While both are characterized by low capital
costs and high working capital, industrial paints require
special technology. Capacities are normally set up close to
markets, so as to be able to offer a multitude of shades and
colors to customers. Brand building and dealer network act as
effective entry barriers. Demand is seasonal in nature – low
during monsoon, high during festive seasons.
Domestic pains sector, dominated by decorative paints
(70%) , is expected to undergo a structural shift towards
industrial paints , as cross-border tie-ups in industrial are
becoming order of the day. Most organized sector players are
established with well- entrenched distribution network and
established brands. Threat of global competition is
minimal .The under developer industrial paints market holds
maximum growth potential albeit on a lower base .In future
the industry will witness brand competition, product
innovations and superior distribution networks.
GNPL management has been focused on paints business in
the lat three decades .GNP has a network of 10700 dealers
&550 computerized color-dispensing machines. With multi
location manufacturing facilities helping it to have a very
wide geographic reach, it has an enviable leadership in
Automotive OEM.
GNPL’s prospects are inextricable linked to those of the user
sectors in automobiles and other industrial sectors .The two
subsidiary companies primarily manufacture paints &
enamels for parent company on contract basis .GNPL has set
a target for to achieve a sales turnover of Rs 12bn and a
market share of 25% 2002-03
SALES BREAKUP
Period ended 03/98 03/99 03/00 03/01
No. of months 12 12 12 12
Sales value (Rs mn)
Inorganic pigments 72.5 42.6 - -
Organic pigments 141.6 104.8 - -
Paints , varnishes , enamels
& oils
4,615.2 5,235.4 6,211.4 6,744.4
Others 60.8 75.0 91.5
Sales volume (unit)
Inorganic pigments (Ton) 786.0 426.0 - -
Organic pigments (Ton) 517.0 505.0 - -
Paints, Varnishes, enamels
& oil (Ton)
52,057.0 55,002.
0
64,933.
0
73,448.
0
Unit realistion (Rs/ unit)
Inorganic pigments (Ton ) 92,239 100,000 - -
Organic pigments (Ton 273,888 207,525 - -
Paints, varnishes , enamels
& oils (Ton)
88,657 95,186 95,659 91,825
ASIAN PAINTS
COMPANY PROFILE
BACKGROUND
Champaklal H Choksey, Chimanlal Choksi, SC Dani and A
Vakil set up APIL, in 1942 as a partnership firm .In 1945, it
was converted into a private limited company, under the name
of Asian Oil and Paint Co Pvt. Ltd. In 1965, the name was
change to Asian Paints (India) Pvt. Ltd. In 1973, it was
converted into a public limited company.
APIL’s first plant came up in Bhandup in 1957 .It has three
other plants located at Ankeleshwar (1981), Patancheru
(1985) and Kasna (1990) .All the plants have captive resin
manufacturing faculties and are capable of producing the
entire range of paints. APIL also manufactures a key raw
material Phthalic Anhydride, at its Ankleshwar plant, 30 % of
which is costively consumed. Earlier APIL used to also
manufacture another raw material, vinyl pyridine latex, which
was later hived off onto a separate company, under the name
of Apcotex Lattices Ltd.
Capacity expansions have come in a phased manner.
Productivity at the Bhandup plant has been lackluster.
Through a AVS scheme introduced in 1993, APIL was able to
cut back workforce. Investment in information technology,
especially in the areas of production and distribution logistics
has helped APIL improve its operating efficiency .In FY96
APIL’s ailing subsidiary Pentasia Chemicals Ltd. was merged
with APIL.
Locations
APIL has 4paints manufacturing plants .The oldest plant is at
Bhandup in Mumabi .The other plants are at Ankleshwar in
Gujarat , Patancheru in Andhra Pradesh and Kasna in Uttar
Pradesh .The Phthalic anhydride plant is located at
Ankleshwar in Gujarat. Penta plant (result of PCL merger) is
located at Cuddalore in Tamil Nadu .The installed Capacity of
each manufacturing facilities are:
Manufacturing facilities Installed capacity (TAP)
Bhandaup, Mumbai 20,000
Ankleshwar 50,000
Patancheru Andhra Pradesh 50,000
Kasna ,Uttar Pradesh 42,700
Total 162,700
APIL ,India’s largest Paints Company , is the market leader in
decorative paints .It has remained focused on core business
and has consistently improved operating efficiencies .The
company has registered a net profile of Rs 1064mn in Fy01 as
compared to Rs 973 mn in the previous year.
Paints sector can be segmented application wise , as
decorative paints and industrial paints . While both are
characterized by low capital costs and high working capital
intensive, ht latter requires special technology. Capacities are
normally set up close to markets, so as to be able to offer
multitude of shades and colors to customers. Brand building
and dealer network act as effective entry barriers. Demand is
seasonal in nature – low during monsoon, high during
festivals.
Domestic paints sector , dominated by decorative paints
(70%) is expected to undergo a structural shift towards
industrial paints , as cross –border tie-ups in industrial paints
are becoming order of the day. Most organized sector players
are established with well-entrenched distribution network and
established brands. Threat of global competition in is
minimal. The underdeveloped industrial paints market hold
maximum growth potential, albeit competition, product
innovations and a fight for superior distribution network.
Focussed on decorative paints segment, APIL is set gain the
maximum amongst the peer members from the uptrend in the
housing sector .The company is restructuring its operations
into three SBUs and has set target to be amongst the top ten
decorative manufactures in the world by 2003. APIL is
investing heavily in dealer tinting machine “Colour World
”and IT technologies to keep ahead of competition .APIL has
set target of Gross sales of Rs21bn by 2003and earning
growth of above 20% . It also has set a vision to be among the
top five paint companies worldwide by 2005.On export front ,
the company is looking out for alliances/ takeover in the
emerging markets of Asia.
SALES BREAKUP
Period ended 03/98 03/99 03/00 03/01
No . of months 12 12 12 12
Sales values (Rs mn)
Formaldehyde 0.4 0.2 - -
Miscellaneous 165.4 125.7 121.0 145.7
Penta erythritol 280.1 251.1 22237 216.7
Phathalic anhydride 618.6 485.7 695.2 792.0
Paints , varnishes ,
enamels& oils
9,111.9 10,339.9 12,212.2 13,7396
Sodium formate 14.3 14.1 15.0 20.7
Others - 237. 79.2 21.3
Sales volume (unit)
Formaldehyde(Ton 31.0 10.0 - -
Miscellaneous(Ton) 3,146.0 2,573.0 2,518.0 2,712.0
Penta
erythritol(Ton)
2,829.0 2,831.0 2,867.0 2,839.0
Phathalic
anhydride(Ton)
17,376.0 16,688.0 19,060.0 20,195.0
Paints , varnishes ,
enamels & oils
(Ton)
116,9420 131,2840 162,110.0 181,271.0
Sodiumformate(Ton) 971.0 1,414.0 1,156.0 1,366.0
Unit realization
(Rs/unit)
Formaldehyde (Ton) 12,194 15,100 - -
Miscellaneous (Ton) 52,587 48,848 48,052 53,706
Penta erythritol
(Ton)
99,011 88,691 77,664 76,335
Phthalic anhydride
(Ton)
35,600 29,104 36,476 39,218
Paints, varnishes,
enamels&oils (Ton)
77,918 78,760 75,333 75,779
Sodium format
(Ton)
14,727 9,984 13,018 15,169
MARKETING STRATEGIES GOODLASS
NEROLAC
Goodlass Nerolac joins the instant shades band
The Rs 480 crore Goodlass Nerolac became the last of the big
pain major to jump into the instant shades market with the
launch of Nerolac colour scape, an integrated colour matching
system designed to be a one-stop colour shop.
Colour Scape were launched across India by April of year
1998 , initiated by Jenson & Nicholson’s Instacolor in the late
1996 , followed by Berger Paints’ colour Bank and ICI’s
Colour solutions , tinting machines have become the
marketing stunt for all paint majors.
Nerolac’s move foloes soon after Asian Paints launched Color
world . Asian Paints launched Colour world earlier in January
in the same year .Nerolac Colour Scape was launched by
establishing what the company calls in the Nerolac Colour
Club , an interactive platform aimed at benefiting both the
dealers and the company as soon as the dealer opts to set a
Colour Scape shop, he will become a member of the Nerolac
Colour Club.
Colour Scape costs the dealer Rs 5.95 lacs , compared with
Asian Paints ‘ Colour World which costs 6.5 lakh and Jenson
and Nicholson ‘s Rs 8 lakh.
Dealers have the benefit to avail it through several installment
schemes with a down payment of minimum of Rs 1 lakh. The
company was aware that such projects had proved expensive
for companies like J&N, and will restrain its marketing efforts
to potentially viable market. Hence, it did not set itself an
installation target. Though initial responses from the dealers
in Mumbai were encouraging, they did not offer it
indiscriminately to every dealer who opted for it, and instead
strategically placed these kind of shops in accordance with the
location and the quantam of sales of the particular dealer.
Both these aspects , in addition with some other minor aspects
like the potential of the location , even if the sales at that point
of time were not up to the mark, were given their due
importance.
Colour Scape , however , is nor just a colour dispensing
machine , it has several added features by which the company
expects to change the way paints are sold in this county.
While the customer will have access to over 1.05 shades and
can see how their rooms will look with the help of a visualiser
system , the dealer will be able to tip them on the variety of
paints , This can prove to be a major marketing strategy for
the Nerolac paints , considering the fact that Paints’ purchase
is more of purchases which comes under the category of
emotional purchases and customers are not very particular
about the color and the type . So , this kind of strategy at the
point of purchase convinces the customer to become a
consumer by enabling him to see exactly what his dram home
will look like after the painting .
The number two –paint manufacture Gooldlass Nerolac Paints
(GNPL) has not seen the semblance of a bull in the last two
years .Even when the Sensex has risen 25 per cent since May
1999 ,GNPL has emained range – bound between Rs 140 and
Rs 160 .In terms of discounting the scrip trades at a price-
earning ratio of 10.1 against Asian paints 17.1. The
bullishness for GNPL stems from the fact hat its major
presence is in industrial paints , especially automotive paints,
and it hopes the they will bring good times to it.
The growth of the paints industry is directly linked to the
GDP and the industrial paints segment is linked to the
automobile sector .The industrial paints segment account for
30 per cent of the Rs 2700 crore organized market. Industrial
paints are technologically intensive but GNPL is well –
positioned due to its Japanese technical collaborators Kansai
and Nihon Tokushu Toryo. Kansai also hold a 36 per cent
stake in stake in GNPL while Forbes Gokak, a Tata company
has a 30 Per cent stake.
The company has three manufacturing facilities at parel in
Mumbai , Kanpur in Uttar Pradesh and Lote Parshuram is
Maharashtra .GNPL manufactures paints , varnishes and
synthetic enamels and pigments .The company has been
conscious enough to maintain a strong product profile through
regular brand launches . Its brand are Nerolac, Excel,
Llscapes and Pearl .It spends nearly Rs9-10crore a year on
advertising and sales promotion and this has helped it to
expand its presence in the decorative segment also, besides
being a leader in the industrial segment.
GNPL is the number one player in industrial paints with a 43
per cent share , far ahead of Asian Paints at 15-17 per cent
and ICI with 9 per cent .It account for 90 per cent of Maruti’s
requirement which in turn contributes 8-10 per cent to the
GNPL turnover .Maruti sales have risen 17.2 per cent for
quarter April –June 1999 and in June itself .They were up 27
per cent over previous month .Apart from automobiles the
white good industrial paints . This industry is also expected to
do well with the economy.
GNPL has also signed agreements with Mitsubishi Honda and
Telco Indica .With the entry of new players , GNPL ‘s
positions will be consolidated .GNPL has also enter into a
strategic tie-up with Dupont o US for the OEM segment to
cater to the Us car manufacturers in India .This should give
GNPL an added advantage to combat Asian Paints –
PPG(50:50) in the industrial paints segment .
Despite being a late entrant in the decorative segment, GNPL:
has become the number two player in three years. Nearly 50
per cent of sales comes from decorative and the company has
been an aggressive advertiser. Paints demand from the
housing sector will also o\improve with the economy.
Though the paint industry is raw material and working capital
intensive ,GNPL is strongly positioned with neatly Rs 40
crore plus in the form of investments and cash .Besides an
expanded capacity and a strong domestic network coupled
with a recovery in demand entails a good future .GNPL was
not able to appreciate in this bull run while Asian Paints
drastically rebounded to Rs 363 from Rs 197 in may 1999!
Second rung paint stock should see a bull run led by Goodlass
Nerolac .
Goodlass Nerolac , now a subsidiary of Kansa Paint of Japan
is going for a brand consolidation strategy and reduce the
number of brand to 6-7 from its portfolio of 17 .
Senior company officials say the brands that would be
retained are Alscapes .Nerolac ,Excell , suraksha ,
Cloudscapes and Goodygold .
The company is also planning an aggressive foray into the
rural market with its brand Good- Gold .This will be a
relatively cheaper and afforded brand as compared to the
other brand . Rural market in India has a hug potential which
is yet to be tapped , company officials said.
Goodllass Nerolac is also looking also growing through the
acquisition route, but the exact plans cannot be ascertained
due to obvious reasons. “We have kept our doors open for that
possibility”, was the only reply that came from the senior
official that was visited.
Goodlass Nerolac, has, as already stated, three manufacturing
units in the Western region of the country and one each in the
North and south. And, to enhance their presence in the eastern
region, the company will be concentrating on indirect
distribution channel.
Goodlass Nerolac, Which is the leading player in industrial
paints, has decided to increase, its focus on the decorative
paints segment as well, where it trails Asian Paints.
In the decorative paints segment, it has a share of 14 per cent
and plans to increase it to percent. Currently the company
ranks second in the decorative paints.
In order to grow in the decorative market the company in
under taking other initiative like increasing its advertisement
budget from Rs 12 crores to Rs 18 crores.
MATKETING STRATEGIES ASINA PAINTS
COLOUR ME RIGHT
Colour World launched by Asian Paints is the first
initiative in supposedly meeting local colour tastes in
India!
The Rs 883 core Asian Paints finally seems to be responding
to the challenge posed by Jensen & Nicholson’s mix-n-match
instacolor aggression in decorative paints ,as it launched the
concept of Colour World .The initiative includes a wide
spectrum of an entirely new palette of 1,150 shades developed
by the company ‘s R& D and much more . Asian Paints , of
course , call this more a logical progression its “Merawale ”
initiative of almost a decade ago , which it claims accurately
gave its its customer interface, something, something Asian
Paints prides itself on . And much more include and entirely
new concept-or so the company claims –in paints retailing.
The retailing concept is the culmination of an extensive tow
year consumer research programme (see box) by the company
, with the explicit purpose of fine –tuning its customer service
orientation . Clearly the thrust of this concept is to provide the
customer with all the tools required to optimize the selection
process . Thus , the paraphernalia that this entails include an
interactive touch screen compute , specially designed display
panels ,state of the art tinter shaker equipment and
merchandising units . if a consumer wants a shade between
two defined shades , the company is willing to mix it for her
to her satisfaction at the dealer end .To consolidate this
exercise at the retailing level , the company will provide
dealer support Ex-panded , that means the company is willing
to provide software and industries .
A general manager marketing at Asian Paints ,says , “An
investment of about Rs 5-to Rs6 lakh is required per outlet in
order to ensure that dealers are sufficiently equipped to create
& consumer – friendly environment .For that lies at the crore
of this marketing concept”.
Question is , why initiative now ? The economy is in a full the
decorative paints industry is growing at the rate of a mere five
to six per cent , and an expansion of colour range is nothing
new by now . Competitors have done it already.
An official explains that this investment now is with a long-
term perspective . “We would to increase our franchise in our
existent network . with the launch of Colour World , which is
targeted at the middle and upper income segment in the paint
market , we are placing ourselves in an enviable position ,
having covered every segment in the decorative paints
market .” About talks of the new shades that have been
specifically developed , he says that these shades will be
extender to all premium brands in the company ‘s basket , at
the same prices . “We are confident that the new initiative will
result in higher sales for the company.”
Further on this , between 1991-92 and 1996-97 , Asian Paints
gained two –to- three per cent share in the decorative paints
market . Now , expected share increase is one per cent per
annum for the net few years . Again , with this initiative , the
company expects to strengthen its position on Calcutta and
Delhi which are a among its relatively weak markets; it has a
stronghold on the western region- Maharashtra, Rajasthan and
Madhy Pradesh – and most of the south .In eight moths , the
company plans to refurbish 500 outlets across the country .
Advertising spend for the next couple of years, will remain at
Rs 20 crore per annum, but the thrust will be the new concept.
The company plans to refurbish 500 outlets across the
country.
Colour World in crating an attractive shop ambience aims to
draw this very consumer in .In numbers .Eventually the
concept is aimed at making the Asian Paints outlet s” One
stop colour Shops” expanding its sway in the desorative pains
segment .
The evolution of Asian Paints consumer orientation from the
Merawala stage (over the last decade) to Colour World is a
transition from “a rational route to dream shades for your
home” .In the course and consumer preference have become
better defined .Their Merawale concept was tailored
according to consumer research findings that revealed that the
consumer was becoming more aware and was willing to pay
more for some value addition . At this point in the time , they
realised that the shade card was the most effective tool of
communication between the company and the customer.
The same concept has been refined now . At every outlet ,
next to the touch –screen will be a massive shade board with
the 1,150 shades.
Coming from Asian Paints the initiative is bound to be
notice .,What says competition? Jensen & Nicholson , says ,
“The fact that the new colorants from Asian Paints will be
produced indigineously could make for a quality that is
second best .Then , give that margins on paint are fairly low,
it could be unrealistic to expect dealers to plough sizeable
investments into refurbishing their outlets. Prices , after all ,
would remain the same.
These observations await validation .In the meantime ,Asian
Paints has already started moving on its new initiative in
Kerala and Baroda , which are substantial paint consuming
markets. S for the long term the company intends fully to ser
the ball roll.
Asian Paints has also devise new Web based marketing
strategy to commerce business to business (B2B) transactions
on the Net in one year.
And so the company is optimistic that as cyberlaws take shape
in India , the company will be able to sell paints on the Net.
“As cyberlaws emerge and customer confidence in the
security of Internet dealing improves , we expect the B2B
transaction to happen on the Net .The day is not far when
customer are drawn to our website , browse the features ,
benefits and prices of our product and place orders which are
supplied through the nearest dealer .The opportunity to cut
cost factory forward is immense,” Business Standard.
The view in the company is that e-commerce will first impact
the B2B transactions .”In a year we expect interactions with
banks , insurers and large industrial customers to be through
the Net .Customer and supplier orders, services in the nature
of information and account management will be processed
through the Net,” and official adds .
The company is tight – lipped about the cost of the new
structure .” It is very difficult to arrive at a specific number as
the expenditure will be on as ongoing basis . AT the same
time . Web-drive selling will also bring down inventors
considerably not only at our end but also with suppliers of raw
materials and vendor ,” Vice president (international and
program office ) of the company , said.
Asian Paints is already using its website for hiring talent and
dealing with vendors though in limited way , they are certain
that the Internet will make fundamental change in the way
they do business.
Asian Paints (India ) Ltd (APL) the undisputed market leader
of the Rs4,900 crore India paints industry is one of the
performing companies in the domestic manufacturing
sector .Emerging from the shadow of an economic slowdown
, Asian Paints recorded a 24 per cent volume growth in 2000 ,
double the overall industry growth rate of 12 per cent .?Apart
from its growing dominance in India , the paint major has
chalked out an aggressive strategy for the overseas marker .
Mauritius and the Middle East , and is also looking at
acquisitions in Bangladesh.
INDUSTRY DYNAMICS
With the organize sector steadily gaining market share from
unorganized players the marker has become extremely
competitive .The organized paint sector which account for
around 65 per cent of the total market is expected to grow at a
rate of about 12-14 per cent .It has been observed that the
paint industry growth rate is double that then of the Gross
Domestic Product (GDP) growth for the year.
In this picture , there are two companies , which dominate the
decorative and industrial segment respectively by some
margin over the other .Heading the decorative sector is Asian
Paints with more than a 40 per cent .In the industrial
segment , Goodlass with 19 per cent .In the industry segment,
Goodlass Nerolac is the market leader with a 40 per cent
share compared to Asian Paints ` 16 per cent.
Over the past few years, a number of policies cum structural
change have change the dynamic of the paint industry .The
primary reason is the rationalization of the excise duty
structure , which has come down to 16 per cent by end 1999
for 40 per cent in 1999 .This ginal increase in price and
continuing cost efficacies in sourcing and plant yield will
enable us maintain margin for the entire years .We are very
confident of maintaining our margin as well ad holding the
price line.” He adds.
COMPETITIVE ADVANTAGE
Asian Paints is one of the few integrated paint companies the
country .Apart from pains , it also manufactures phthalic
anhydride (PAN) the two raw key material for paints. Over
the year the company has build a strong brand equity .The
official mascot the little boy Gattu ,created by well known
artist RK Laxman , holding a drip.
This has not only helped the company significant improve
volume offtake but also to concentrate on the manufacturing
of three basic colours .With the help of these machines and
the basis colours ,dealers can offer over thousand shades with
the dealers .This in turn improves the operational efficient by
considerably reducing the inventory holding cost of the
company.
Another focus area for APL is the rural market .With per
capita paint consumption at 200 gm , which is much less than
5 kg for developed countries , there exists a huge untapped
market . The potential to upgrade the exterior segment from
cement paints to exterior emulsions.
FINANCIALS
Asian Paints continue its impressive performance in the
second quarter ended September 2000 by registering a topic
growth of 272.65 crore in the corresponding period last
year .Despite a substantial increase in the cost of raw martial
during this fiscal the company was able to maintain its
operations profile margins to well above 16 per cent .
During the quarter , net profile have also leapfrogged by over
27 per cent to RS 23.86 crore in the previous year .It has also
been able to maintain its profit margins at around 9 pre cent ,
well above the industry average of 17 per cent.
It enjoy a healthy return on capital employed (ROCE) of over
35 per cent .AT the same time . it return on net worth
(RONW) of about 29 per cent is much more than any of its
competitors .The company has been consistently notching
positive economic value added (EVA)- the difference between
the return on capital and the opportunity cost of capital.
Asian Paint after its international acquisition spree last year ,
is now focusing more on the domestic market by planning to
set up another manufacturing unit , its fifth in India .A final
decision on the project will be taken in the forthcoming
months .
They are yet to decide on the location .But .it will not be
anywhere close to their existing four units.
AT the same time , their objective will also be to drive the
existing assets to the maximum.
About funding the proposed expansion , it would bethought
internal accruals, while the company may also look at raising
debt.
At present the company has four manufacturing units :
Bhandup in Mumbai ,Kasna and Patancheru , both in up , and
at Ankalshwar in Gujarat .Its Kasna plant , which has resumed
operations last week.
Analysts point out that Asian Pains could looked at setting the
new plant in south India as is does not have presence there ,
despite the recent construction boom .In eastern India ,its
competitors – Berger Paints , Shalimar Paints and Jenses &
Nicholson – already have strong presence .In fact the
company is looking at setting up the new plant in a rural or a
backward area in order to reap the benefits of the tax sops
available , analysts added .
Asian Pains would also not why away from acquisitions , they
are planning such a move but currently cannot talk on
specifics on this topic . Acquisitions and mergers are like
marriages whereby both patties have to mutually agree on
certain terms and conditions.
It is understood that Asian Paint had been negotiation with
both Shalimar Paints and J& N for a possible acquisition.
Meanwhile ,Asian PPG ,Asian Paint `s joint venture with the
PPG Industries of US for industrial paints , is planning to set
up its own plant near pune.
Asian Paints has transferred its industrial paints unit to the
venture and the company had said it look at setting up its own
unit when operations gather momentum.
EMERGING TRENDS AND OPPORTUNITIES
Technology
The introduction of tinting machine has significantly changed
marketing technology .These machines each costing
approximately Rs60 mn are installed at dealer outlets and
enable the customer to choose between any of several hundred
shades .These are then generated by mixing dyes with the
base paint and delivered almost instantly .The two major
implications of this machine are:
Differentiation on Colour range is reduce: Prior to this
technology , a major competitive avenge of a company
was the range of colors it offered . For instance , Asian
Paints offered almost 150 shades in its synthetic enamel
range , unmatched in the industry . This now stand
change as almost 2000 shades can be created in seven
minutes through these machines.
Simplified logistics management : With the machine
generating shades instantly ,dealers can now stock only
the base material and thus save almost 20-25% in the
working capital cycle.
Expansion of Product Profile:
The lowering of excise has opened the high volume but
low value marker in the semi urban and rural area , which
is currently dominated by the unorganized sector.
Increased Thrust on Brand Creation And Distribution
The increased share of organized sector implies that brand
awareness will be a thrust area .Also strong brand are
emerging as the most important entry barrier .The opening
up of rural markets has also necessitated the expansion of
distribution reach.
Dealer Network Nos.
Asian Paints 14500
Goodlass 7000
Berger 5500
ICI 4500
Industry Consolidation
The small –scale industry is expected to witness a shake
out as the share of organized sector increases . Also
outsourcing requirements are likely to be reduced as new
capacities go onstream in the organized sector .
New Segment Opening Up
With increased industrialization , new segment like auto
refinishing market arte likely to expand rapidly .Already
companies like ICI have launched specialized brands for
this segment .
Outlook
The industry is expected to grow for the newt five years
driven by increasing industrialization and increasing
disposable incomes. The per capita consumption is low
0.55 kg. Per annum , as compared to around 4 kg in SE
Asian economies and more than n 20 kg in the developed
countries .This outlines the untapped potential .
The emerging trends in technology and marketing imply
that the industry is likely to consolidate over the next few
years with the marginal players being wipes out and
industry leaders gaining market share .Thus , critical
success factors will shift from manufacturing to marketing
and distribution.
Large international players are likely to either enter India
of enhance their presence in India in view of the growing
market. Thus joint ventures and strategic alliances will be
the order of the day .Indian companies will also need to tie
up with international major to have access to the latest
technology.
SWOT - ANALYSIS
Strengths:
1. A major change in the consumption pattern within the
decorative segment is the preference for water based
paints . In India the most widely –used paints , till
recently , were the solvent – based paint even when water
– based paints are more eco-friendly and easy to use .The
government regarded water based paints as a luxury item
and consequently taxes on input as well the finished
products were kept high thus making them unaffordable
to the middle class .While the western would was moving
away from solvent based paints for environment
reasons ,India was India was in a way primitive the use
of these paints .But with duties rationalised and cost and
price coming down the most preferred ones are for
decorative purposes.
2. Industrial paints ate growing at a much heallthiesr5 rate
then decorative segment .The main reason could be the
entry of worlds major in the Indian automobile
sector .Till recently the only foreign players on the Indian
passenger car market was the Japanese giant , Suzuki
Motors .However , today there are at least six global cat
major operating in India. Korean major , Daewoo ;
French car manufactures , Peugeot ; the German auto
giant ; Mercedes and Opel and the American Ford , are
here to stay having set up base despite some initial
wrangles over export obligation .And , this setting up of
bases necessarily implicates towards their needs for
industrial paint which they will be procuring from
domestic marker , because otherwise it will be that much
costlier for them to export it from anywhere else.
3. The way companies operation have also under gone a
drastic change – more choice for the customer .The shade
card game started by Asian Paints some eight years ago
with its slogan “Mera Wala green”, is now being played
by mostly all major players.
4. While the customer gets a wide choice and better service
the company benefits in two ways .One as stock has to be
maintained only in one colour (the base colour , white )
the company saves inventory carrying costs .Second , as
the missing is done only on orders the company does not
take the risk of stocking pre-mixed colour shads with the
dealer which might not get sold at all .All this means
financial saving .Also the tends to the most preferred
shade can be determined by the company and the
production can be carried on accordingly.
Weaknesses:
A. people would love to have colorful walls , but
definitely not dusty floors and oily odorous .Sadly
the former is not possible without the latter and it is
the paint industry which stand to suffer.
B. It may seem implausible , yet it is true .The
inconvenience of painting alone is not the cause for
a slowdown in the paints industry .But it certainly
adds on to the following socioeconomic factors :
1.Imbalanced consumption pattern- The per capita
consumption of pains in India is low 0.32 kg as against
25 kg in the US. Further , the imbalance in
consumption takes two forms. First the ratio of pains
consumed for decorative and industrial purpose in
India is 70 :30 Elsewhere the ratio is diametrically the
opposite , s it should be .Thus due to neglect of
industrial protective use of paints , India looses over
Rs. 4,000 crore on account of corrosion .(Industrial
paint are made using red oxide, aluminum , zinc
chrome ,bitumen etc. They posses properties like water
and electricity resistance and rust prevention and hence
are widely used of protection of steel concrete and
wood )
Then there is also rural –urban imbalance .Paint being
dubbed a luxury continue to be increasingly sole in the
metropolitan cities and big towns .though pain
companies have start to reach out to village a vast rural
marker still remains untapped .
2. Primitive technology- The making of paint
primarily involve the blending of 300 different item in
various proportions .In most varieties of pains the
technology level is not very high .The capital cost per
tonne is Fairly low at Rs. 12 crore for 25,000 tonnes .
This has enables 2,000 small unit to set up
manufacturing facilities and peck away at 50 % of total
Indian pains market ,the other 50% is accounted for by
24 units in the organised sector .
3. High cost structure – The paints industry is raw
material intensive .Nearly 70% of the raw materials are
perto base (white spirit, xylene, toluene , butanol etc. )
Another major raw material titanium dioxide , has to
be imported in large q2uantities .To top it all is the
nearly 36% excise levy (a 6% rise in the latest
budget ).The irony is that the government account for
nearly 40% of the total paints sold in the country .So
industry source argue that every increase in excise
means a corresponding higher government outlay on
paints. The excise structure reflects the luxury image
of paints.
4. Other factors. These include the monsoons and the
growth in the housing sector .In fact , monsoons have a
dual effect on the industry .On the one hand there is vary
little painting work done during the monsoon s. But at the
same time, a Good monsoon increases the purchasing
power of the framers paving the way for higher sales .
Opportunities:
1. Unlike the decorative paints segment which is expected to
grow at a slow rate of 3-4% the demand for industrial
paints is rising at an average rate of 10% .Industrial paints
have fairly high value addition d require a level of
technology which cannot be easily matched by the small
sector ,The market leader seem to have taken congnisance
of this fact. For instance ,.Asian paints has tie up with
Devoe Marine Coating of Us for marine painting .It has
also tie up with Nippon paints of Japan for a coil coating
and powdered coating .Like wise ,Goodlass Nerolac has
allied with Kansai Paint for Sophisticated automotive
sector paints s.
2. Stagnant demand combined with intense competition has
taken its toll on some small units .A similar shake up is
expected in the organized sector too .Hence , he rfitter
unit would be better off eyeing takeover targets for
expansion rather than going for fresh capacities .
3. India has been a continuous importer of titanium dioxide
in spits of enormous reserves of the raw material ,
ilmenite. Deposits of ilmenite found along the coasts of
Kerala ,Tamil Nadu and orissa , are estimated to be
around 160 million tones or 12 % of World
resources ,.The quality is also reported to be of a higher
grade .Thus sooner or later world leaders of titanium
dioxide technology (like Du Pont ) will find it viable to
enter into joint ventures with Indian companies .That
should reduce cost and selling price and lead to higher
sales and profits.
4. Finally , there is immense scope for product innovation
liked , in March 1991 ,MRK introduced ‘Vapocure’, an
industrial process for product abroad is paint s-cement .It
is made by adding ceramic compounds to the basic paint
material and gives a better “Finish “ to building exteriors.
Blend all this with economic stability (leading to control over
inflation ) and good monsoons over the next two year
(implying overall higher purchasing power ) and the paint
industry can rightly dream of tomorrow many shades brighter
than today.
Threats:
When it comes to technology , the paints industry presents a
strange case .The manufacturing process of the final product
is so primitive that every that every Tom ,Dick and Harry has
mastered its! And , even the technology for only Tom ,Dick
knows the major raw material Titanium dioxide(Ti02) and
harry!
In other words, manufacture of Ti02 is a closely guarded
secret of only a handful of players worldwide .The include
Du point(USA) ,British Titanium Products Ishihare (Japan)
and Kronos (Australia ).Ti01 forms the base whit , for all
paints .It comes in two varieties rutile (used for exteriors )
and antase (preferred for paints used in interiors )
In India there are two unit both in the public sector
manufacturing titanium dioxide – Kerala Minerals and metals
(KMML) and Tavancore Titanium products
(TTPL) .Domestic production however is stagnating
around16,500 tonne against capacity of 37,000 tonne ,Further
,the quality too leaves a lot to be desire .Hence , imports of
Ti02 continue at an increasing rate .
Nearly 70% of Ti02 produced /imported in India goes to the
pains industry .Major paint manufactures have tried to go in
for backward integration into some of the raw material
(phthalic anhydride , co-polymers for plastic emulsions etc.)
But all effort to make a foray of Ti02 have not met the
success. World rather than pass on technology to other i.e.
whopping 25 parties hold licensed /letter of intent for Ti02
but none have so far materialize .
So as import bill of companies remain on the upbeat , thanks
to the huge import billing for Ti02 , the margins continue to
take a beating.
LIMITATIONS
The various limitations faced during the marking of the
project
Companies official were not very co operative in
giving out information regarding the marking
strategies as well as their immediate M&A plans of
their firms.
Exact information regarding the marketing strategies
specific to past 3 year was not readily available ,
although general information was available .So even
after strong efforts , there maybe certain instances of
some missing links in the study , which is regretted.
Time and distance constraints were always there which
may have affected the report.
CONCLUSION
CONCLUSION
Investor , interested in any form of investing, should carefully
look at the structure of the paint industry. It has a large
unorganized sector , which constitute approximately 40% of
the total production of paints .The organised sector comprises
of handful of large units. The categorization is important
because of the differential in excise duties faced by these two
sectors .The differential , however , has narrowing since 1993
and the excise duties between the organized sector is now at
18% (from the highest of 40.25% ). With the narrowing of he
differential in excise duties between the organised and
unorganised sector, the market share of the organised sector is
expected to grow in the future .The small sector will probable
start contact manufacturing for the large units or may develop
niche markets based on location.
The industry can further be divided into two broad segment –
decorative (architectural ) paints and industrial paints .The
decorative segment is the dominant segment, in terms of
sheer volume ,in contrast to the developed economies where
industrial paints normally have half the market .The
decorative paints market can be further be subsumed into
emulsions , synthetic enamels , distemper and cement paints.
The essence of the small sector is in the easier to evaluate
lower-end products such as distempers and cement paints
whereas the middle range enamels and the premium range
emulsions are the terrain of the large players.
The industrial paints segment comprises of the industrial
coating the automotive coating segment .The main growth for
the industrial paints market has been the high growth in
automotive coating , with the entry of the auto majors
(multinationals) resulting in a literal boom in this sector.
There are more than 300 input going into the manufacturing
process of paints of which 70% are petroleum based .The raw
material are Pigments.
Questionnaire
Q.1 Name the paints you buy?
a) Asian Paints b) GoodlassNerolac
c) Others
Q.2 Place form you buy this paint?
a) Market b) Supermarket
c) wholesaler d) Others
Q.3 Can your name the leading brand of paints?
a) Asian paints b)Goodlass Nerolac
C) Others
Q.4 Who influence you to buy particular Paints?
a) Neighbor b) Ad
c) Newspaper & Magazine d) Others
Q.5 Please Grade the brandusyou know as per the
following characteristics ?
(1) Poor 2) Fair 3) good 4) Very Good
Brand Availabity Brand
image
Pricing Packaging Quality
Asian
Paint
Goodlass
Nerolac
Others
Q.6 Assign suitable ranking ( 0-not at all important ;5
most important ) To each of the following service you
receive from the supplier based on their importance.
Attributes Rank
Provision of credit
Delivery in small lots
Product variety
Delivery time
Delivered supply
Product quality
Margins
Pricing
Others(Please specify)
Q.7 Will you trade in paint brand in the future?
Definitely Probably Not sure Probably
not
Definitely
not
Q.8 Name:________________________
Q.9 Occupation :___________________
Q.10 Address:_____________________
______________________
______________________
_______________________
