TO EXPLORE THE POTENTIAL OF PAINTS IN PROJECTS AND MAINTENANCE IN MUMBAI AND TO SHARE PLAN FOR INCREASING THE MARKET SHARE IN KANSAI NEROLAC PAINTS LIMITED

7/29/2019 TO EXPLORE THE POTENTIAL OF PAINTS IN PROJECTS AND MAINTENANCE IN MUMBAI AND TO SHARE PLAN FOR IN

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CHAPTER I

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INTRODUCTION

Marketing deals with identifying and meeting human and social needs. One of

the shortest definitions of marketing is Meeting needs profitably. Marketing is an

organizational function and a set of processes for creating communicating and

delivering value to customers and managing customer relationships in ways that

benefits the organizations and its stake holders. Much of brands strength depends on

developing a superior product and packaging, ensuring its availability, and backing it

with engaging communications and reliable service.

The Indian paint industry has come a long way from the days when paints

were considered a luxury item. Today the awareness level on preventing corrosion

through paints is relatively high, a development that should be a huge boost to the

paint industry. The paint industry in India has flourished into a full-fledged

manufacturing and sale market catering to the international standards being demanded

for the painting jobs. The Indian Paint Association is the apex body of the Indian

Paint Industry, which represents both the organized sector and the small scale sector

in the paint industry. It is a voluntary non-political and non-profit organization which

promotes the interest of the paint industry and the society. The IPA is a unique forum

in which even the very small scale manufacturers are members besides all the major

paint producers in India. The representative character of the association is amply

demonstrated by the fact that more than 80% of the total paint production in the

country is accounted for by members of the IPA.

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The types of paints:

Acoustic Paint: It is specially designed for acoustic tiles.

Alkyd Resin Paint: Best suitable for trim, doors, faux finishes and other maximized

use areas.

Drip less Paint: This paint is thicker and is most suitable for application on ceilings.

Latex Paint: The applicability of this paint is easier than most other and it dries much

quickly. It is also easier to be washed.

One-Coat Paint: It is the more expensive version of the latex and alkyd paints and is

mostly chosen for surfaces that require flawlessness in colour.

Primers: This paint is the initiation for all interior paint works.

Rubber-Base Paint: This is best for concrete and bricks.

Textured Paint: If need is to cover any flawed surface in your house get this paint. It

works well on ceilings.

Besides these home decorating and improvement paints and office paint we

can also get industrial paints, aircraft paint, airplane paint, aviation paint and many

other paint products with the paint shops in India. The paint companies in India house

a wide range of paint products that cater to all your needs. A whole spectrum of

colours with our own textured options and application patterns are available with thepaint companies. Each company has its own specialized product and some also offer

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home paint services. The cost of a painting job may vary with the paint chosen -

acrylic, emulsion, primer etc., the paint tools being used and the painting company

hired.

Investment Opportunities: Over the next few years, the ratio of industrial

paints to decorative paints is expected to be 50:50, more in line with the global trend.

Currently it is 30:70. With the decorative segment bottoming out, companies are

increasingly focusing on industrial paints Demand for paints from new housing is

expected to constitute approximately 30 percent of total demand; the rest comes in

from repainting, mainly after the monsoon rains and before the festive season. This is

a function of disposable income, so improvement in rural incomes will boost the

growth in the paint sector. Lending institutions continue to make it easier for a

consumer to gather up the finances needed to buy homes within the decorative

coatings segment, considerable growth is being observed in the exterior coatings

segment. Paint manufacturers have launched premium products in this category which

are doing well due to superior quality and durability.

Raw Materials: On an average, raw materials constitute ~56% of the total

expenditure in paint companies. Titanium dioxide is one of the major raw materials

and price fluctuations in its cost have direct and substantial impact on the cost of

production. Crude oil derivatives are the other major raw materials and have similar

impact. Apart from these a large number of other raw materials are used for

adding/giving specific properties to the wide product range offered by the industry.

End-User: The decorative paints segment products find use in households and

construction whereas the industrial segment products find use in automotive industry,

consumer durables industry and other OEMs.

Growth of the paint industry has been consistent with the growth of Indian GDP.

Paint industry has been growing at a rate of 1.5 to 2 times of Indian GDP growth. The

Decorative segment shows a seasonal trend with sales peaking during the festive

seasons in the months of September to November, whereas the demand is low in themonsoons.

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INDUSTRY SIZE:

The top 5 companies make up more than 80% sales of the organized

market. The market share of the organized sector is continuously improving as

consumer preference is shifting towards better products offered by the leading brands.

Established Foreign companies have entered the Indian market by acquiring existing

Indian companies. Kansai Paints, Japan entered the Indian Market by acquiringNerolac, Akzo Nobel, the worlds largest Paint Company, entered the Indian market

by acquiring ICI Paints (now Akzo Nobel India.)

Asian Paints is the market leader in the Indian Paint Industry and gets the major

portion of its revenue from the Decorative segment. Over the years, it has

outperformed its peers in every aspect by wide margins. This is mainly due to its

strong moat (competitive advantage) which lies in its strong Brand Equity and an

extensive Distribution Network. The companys Net sales, Net Profit and Book Value

have grown with a 5 year CAGR of 22%, 27% and 28% respectively. Also the

companys debt is very low and its ROIC has been 40% on an average over the last

six years.

Kansai Nerolac holds the second position in the Indian Paint market, and is the

market leader in the Industrial Paint Segment, owing to its leadership position in the

Automobile Paint segment. It is the subsidiary of Kansai Paints Ltd., the leading

Japanese paint company. Berger paints has the third position and derives its major

revenue from the Decorative segment. Akzo Nobel (former ICI Paints) is the

subsidiary of the worlds largest Paint Company and is at the fourth position.

Shalimar Paints is at the fifth position.

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UNDERSTANDING THE ENVIRONMENT

Bargaining power of buyers -The end users can be segregated into household

and industrial users. For the housing requirements the buyers can be customers

(contractors who buy in bulk) and end consumers (people who paint/repaint theirhouse). Customers have higher bargaining power as they buy in bulk and are more

prices sensitive. For the end consumers a number of options are available and

decisions are made based on quality, price, differentiating factors like weather

protection, environment friendly paints etc. The unorganized market also has a large

chunk of the market share providing many options to lower income segments.

The industrial segment is a low margin high revenue business and the buyers if these

segments are knowledgeable about their needs. Price comparison is done effectively

by the consumer, as this is a regular as this is a regular expenditure of this segment.

However, the leading industrial paint suppliers have their expertise in their favour,

which limits the bargaining power of the buyers. Thus the bargaining power is

Medium.

Bargaining Power of Suppliers - The paints industry is a raw material

intensive industry with more than 300 products going into the manufacture of the final

product. The raw materials can be divided into different categories like pigments,

additives, solvents, binders etc. Of these, pigments constitute one third of the total

raw material cost. Titanium Dioxide is one of the key pigments used in the production

of paint and is facing a global supply shortage. Thus suppliers of Titanium Dioxide

have higher bargaining power. The other raw materials used are crude derivatives and

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hence their prices are subject to fluctuations, which affect the industrys profits. Thus

the bargaining power of suppliers is Medium to High.

Competitive Rivalry - About 80% of the organized market is catered to by the

top 4 players of the industry. The current market growth rate may provide ample room

for all the players of the industry to flourish. However, competition may increase as

the market gets saturated, albeit this will take some time to happen. Also, the presence

of the unorganized market does provide room for competition. Thus, on the whole,

competitive rivalry of the Indian paint industry is Low to Medium.

Availability of Substitutes - The availability of substitutes for paint is very

minimal. In the rural areas, lime wash is a conventionally used substitute for paint. In

the decorative paint segment, an alternative option available for decorating walls

today is wallpaper. Wallpapers tend to be a more convenient option and also prove to

be visually more attractive for certain setups like small commercial establishments.

Thus the availability of substitutes in the Indian paint industry is Low to Medium.

Threat of New Entrants - The paint market in India is dominated by a few

players, making it difficult for anyone new entering the industry to compete.

However, established foreign players may pose a threat by virtue of the knowledge

and expertise of their established business in another country. Thus the threat of new

entrants in the Indian paint industry is Medium.

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CHAPTER II

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OBJECTIVES

1. To find the needs, requirements, problems faced by builders, contractors and

dealers and get suggestions from them.

2. Understand the potential of the decorative paint industry in Navi Mumbai.

3. Find the leads for the company to increase in their sales.

4. Give recommendations to improve the market share.

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CHAPTER III

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INDUSTRY OVERVIEW

PAST SCENARIO

Even till the early nineties, paints were considered a luxury item. Only people

with high incomes were expected to decorate their houses with the use of paints.

Paints, as a protective element, were totally unheard of. The industrial segment, which

was traditionally a low user of paints, vis--vis its counterparts in the decorative

segment too contributed to this notion. In line with this misconceived notion, the

government drastically increased duties on paints in the early nineties with an aim to

bolster exchequer revenues

The result was obvious. This inevitably brought about a downturn in the

fortunes of the industry. The products, which are highly price elastic, saw a negative

growth rate of 20 % in 1991-92. The next year was also not good, registering a growth

on only 2%, bringing it back to the 1990-91 level, thus corroborating he fact that the

industry needed lower excise levels o grow. The industrial slowdown during that

period also didnt help matters.

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In line with the liberalised policies and the realisation that paints is not

necessarily a luxury items, duties were progressively reduced from 1993-94. This

squared growth as most companies passed on duty reductions. Further, the entry of

world majors in the automobile and while goods market in India since 1993 helped

the market to expand Demand for auto paints shot up suddenly. Form a modest 8%

growth rate in 1993-94, paint demand touched 12% in 1995-96. The duty cuts helped

the decorative market to pick up, while the entry of the car and white goods

manufacturers spurred consumption of industrial paints, which is still pathetically low

at 30% of the total paints consumed in India.

Of late, the Indian paints industry has been splashed by a riot of colours, both

bright and pale. With demand patterns indicating a steady growth, the future for paint

majors appears colourful. In the past, consumers gained the impression that paints

serve more of a decorative medium than their surface protective nature. Various

companies have more or less portrayed paints as luxury products in their

communication features. But, thanks to the changing profile of paint majors and their

product positioning strategies, perception of paints is fast metamorphosing from

luxury products to necessities. After a long period of constrained growth, the duty

cuts over the last five years provided the much need relief to the industry. Post-

liberalization, the industry entered a new growth phase as demand from user

industries picked up. The gradual reduction in excise duties began blunting the pricecompetitiveness of the unorganized segment.

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CURRENT SCENARIO

The Indian Paint industry, estimated to be an Rs.21, 000 Cr. industries, has

been growing at a rate of above 15% for the past few years. The organized players of

the industry cater to about 65% of the overall demand, whereas the unorganized

players take care of the remaining 35%, in value terms. The unorganised players

mainly dominate the distemper segment.

The industry consists of two segments, namely

Decorative segment caters to the housing sector and

Industrial segment - consists of powder coatings, floor coatings and other

protective coatings catering to the automobile, marine and other industries.

In the domestic market, Decorative segment accounts for 70% of the total demand

for paints whereas the industrial segment accounts for the remaining 30%. Globally,

the demand for paints is almost equally distributed, where both the segments account

for close to 50% of demand.

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INDIAN COATINGS INDUSTRY

Education: There are various educational institutes offering degree, diploma and

vocational course in paint technology. Exposure to industry for students is low.

Applicator skill levels are low, with no thrust on formal training.

R&D: Due to pricing pressures, the dependence on overseas partners for technology

and due to economies of scale, the R&D spend in the Indian coatings industry is very

low, and far lesser than even 1% of the turnover.

Manpower: The lack of quality manpower is something that is plaguing the

industry. The explosive growth of the industry is not being accompanied by the

injection of new human resources into the industry. This is leading to a lot of intra

industry attrition. The loss of resources outside the industry is also a worry.

Luxury v/s Necessity Paradigm: In India, paints are still considered to be a luxury,

and not a necessity. This is reflected not only in the purchasing mentality of the

common man, but also in the government policies towards the industry. Extensive

consumer education is needed.

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Rise in consumption:

1. Increasing level of income and education The increasing proportion of young

population along with increasing disposable incomes is leading to a change in

consumer habits. The Indian economy is shifting from a savings economy to a

spending economy. With more income at their disposal, people are now ready to pay

for better products and paint is no exception.

Educated consumers are more brands conscious and seek value in what they consume.

Thus, paint companies offering value-added features like non-toxicity, weather

protection, texture, eco-friendly production, etc. will attract more demand. These

value-added products enable the manufacturers to earn a better premium as compared

to the regular paints, thus offering higher margins.

2. Increasing Urbanization: Urbanization is leading to a shift from temporary houses

to permanent houses. Urban houses are well-designed in its interior as well as exterior

aspect. This calls for more houses being painted using medium and premium paints.

For urban houses, interior design is becoming a fashion statement and a lot of paint is

used to decorate the interiors. This will lead to an increase in the per capita

consumption of paint which will increase the overall demand of paint. Urbanization

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also brings more nuclear families. More nuclear families mean more number of

houses even for the existing population thus further driving the demand.

3. Increasing share of organized sector: Decrease in taxes on key raw materials will

improve the position of the organized players. The Organized sector is expanding its

distribution network and adopting the installation of tinting machines at retail outlets.

These tinting machines offer a wide variety of colour shade options to choose from.

The unorganized players are not in a position to offer such facility as it is

comparatively capital intensive. Shift in use, from distemper segment towards premier

segment is also shifting market share from the unorganized sector to the organized

sector.

4. Development of the Realty, Automobile and Infrastructure Sector: The growth

of the paint industry is largely dependent on the development of the realty and

housing sector, as decorative segment generates about 70% of the total paint demand

from this sector. The Automobile segment generates more than two-third of the

demand for Industrial paints, and hence is the growth driver for Industrial Paints. The

Infrastructure segment creates direct demand for paints as well as creates indirect

demand through supporting the growth of the realty, automobile, FMCG and other

industries where paint is used.

The growth potential in the above 3 sectors is immense, the paint industry being

dependent on these 3 sectors is expected to grow along with them.

5. Availability of financing options: Easier housing finance and auto finance is

expected to favour more people to buy houses and travel in personal vehicles. This

will drive the growth of housing and automobile sector, of which the Paint industry

will get its share.

6. Increasing Penetration in the Rural Markets: Paint usage in rural areas is

generally in the distemper segment, hence dominated by the unorganized players.

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Demand in rural areas is dependent on agriculture, which is dependent on the

monsoons. With the development of irrigation facility, the dependence of agricultural

output on monsoons will be on a decreasing trend. Also, with the modernization of

agriculture and accompanying development of rural India, consumer preferences are

expected to improve. Paint companies are expanding their distribution network in

rural parts of India, which is a relatively untapped market for the organized players.

These factors supported by the increasing penetration of the paint companies will help

drive the demand for paints.

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INDUSTRY SWOT ANALYSIS:

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A pictorial representation of the Paint industry in India:

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WORKING OF THE INDUSTRY

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From Past Experience

Growth of the paint industry has been consistent with the growth of Indian GDP.

Paint industry has been growing at a rate of 1.5 to 2 times of Indian GDP growth.

World-wide, the paints industry is cyclical with peaks, troughs and depressions.

However, cyclically does not appear to be so strong in the domestic industry.

Decorative paints are characterized by seasonally of demand. The Decorative

segment shows a seasonal trend with sales peaking during the festive seasons in

the months of September to November, whereas the demand is low in the

monsoons. Thus my suggestion would be to focus more on the industrial segment

during monsoons and also to communicate weather protection from rains if possible.

The lower sales volume during the monsoon period is on account of sluggish

construction activity. As this cannot be helped, a focus on re-painting with weather

protection products combined with offers for the monsoon season may help in

boosting sales.

Future Outlook for the Paint Industry

The Indian paint Industry has a wide potential for growth which is demonstrated by

the fact that the per capita consumption of paint in India is merely around 1.25 kg as

compared to about 20 kg in the developed countries or a global average of about 15

kg. So, the absolute consumption of paint in India is definitely expected to rise. Thus

the Indian paint industry is in its growth phase and is expected to grow at a rate faster

than that of GDP. The future prospects of the industry are strong.

The market share of the organized sector is on an increasing trend. Globally,

industrial paints from a major portion of the paints market while decorative paints are

accorded secondary importance. In contrast, decorative paints dominate the Indian

paint market. In tune with global partners, there is a paradigm shift taking place in the

domestic paints industry with paint majors realigning their product mix in favour of

industrial paints. The contribution of industrial segment will increase with the

continuing economic development of the country. With India moving towards

becoming a developed economy, the decorative to industrial paint ratio of 70:30 is

expected to move towards the global average of 50:50.

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Capacity creation is an inexpensive proposition as paint manufacturing is typically

marked by low fixed costs and high operating expenses, especially on raw material.

The industry is largely dependent on economic and industrial activity and growth in

user industries like construction, automobiles, consumer durables etc. augurs well for

the domestic players. With intensity of rivalry increasing, success is going to be

determined by supply of raw material, access to technology, ability to innovate, brand

poisoning, price competitiveness and a strong marketing network

Looking at the above points, we can say that the long term future prospects of the

Indian Paint Industry appear to be very good.

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GLOBAL GIANTS IN INDIA

Akzo Nobel: Established presence in India in Refinish, Protective and Powder

markets. ICI acquisition will give them a huge advantage in the premium

decorative segment.

Asian Paints: No. 1 Indian player.

BASF Coatings: Manufacturing in Mangalore. Focus on Auto OEM, Refinish

and Coil.

Becker Coatings: JV with Berger for coil coatings in Goa.

Behr Process Paints: Have just set up a R&D lab in Pune Further plans not

revealed as yet.

Dai Nippon Toryu (DNT): Speculation suggests that they are looking for an

Indian partner to tap the Auto OEM segment.

DuPont: Have a R&D set-up in Baroda. Could soon start rolling out Refinish and

Powder paints. Have a technology transfer arrangement with Berger for Auto

OEM primers.

Hempel: After many past alliances, have set up their own manufacturing in Pune

mainly protective coatings targeted.

Jotun: Earlier had a small powder manufacturing operation in Gujarat. Have

now set up a green-field site near Pune for making decorative paints, powders

and protective coatings.

Kansai Paints: Majority stake-holders in KNP, who are the leaders in industrial

coatings in India.

KCC: Looking to tap Auto OEM sector through globally preferred business with

Hyundai Motors and also use their proposed Chennai base for Coil Coatings.

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Nippon Paints: Have set up operations in India with plans to manufacture

decorative coatings, Auto OEM, protective coatings and coil coatings. Already

established presence in the market, were looking at JV with Berger for plastic

coatings in North India.

PPG Industries: JV with Asian in Auto OEM coatings. Have extended it to a

second JV for other industrial coatings.

Sherwin Williams: Entered India in 2007 through the acquisition route

acquired Nitco Paints. Currently in a consolidation phase which might entail

more acquisitions.

Valspar: Servicing some global packaging coatings and general industrial

coatings through imports. Have licensed agreements with Orbit Coatings for HR

powders

Weilburger Coatings: In the process of setting up operations near Kolkata

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Indian Paint Market

In India, Indian Paint industrys total market size is US$1400 million. The

organized sector of the industry is 55%. The 45% unorganized sector

has about 2500 units. The big players and their market share-value of

the organized sector are

Sr.

No

Paint Industry Market Share

1 Asian Paints 37 %

2 Kansai Nerolac Paints 16 %

3 Berger Paints 14 %

4 ICI 11 %

5 Jenson & Nicholson 6 %

6 Shalimar 4 %

7 Others 12

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Market Share Scenario:

Areas of Concern

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Raw material Constraints- Titanium dioxide, pthalic anhydride (PAN),

pentacrythritol, paraxylene, turpentine, white spirit, glyccrine, butanol and cobalt

pigment are the major raw material components Being raw material intensive, its

supply position impacts profitability to a large extent. Over the last few years, the

share of raw materials in the cost pie has been decreasing and presently forms

approximately 54 per cent of the total cost. Due to local shortages, domestic players

are forced to import raw materials requirements in bulk. Added to this, long lead

times compel players to maintain high inventory levels, thereby increasing their

holding costs. This is more of a concern for the Industrial segment as compared to the

Decorative Segment, as it is comparatively easier to pass on the costs in case of

decorative paints. Also, a large portion of raw materials are imported, leaving the cost

factor vulnerable to exchange rate fluctuation.

Titanium dioxide, the most important raw material is available in two grades - rutile

and anastase. Rutile grade titanium dioxide, the more expensive of two finds

application in high value decorative paints and industrial paints. This raw material is

always in short supply, both locally and globally. Kerala Minerals and Metals Ltd.

(KMML) is the sole producer of rutile grade titanium dioxide in India. For a couple of

years prior to 1996-97 supply levels in the domestic industry were adversely affected

as production at KMML was lower due to power shortage in Kerala. However, there

was some respite in 1996-97 as production increased easing the supply position to a

certain extent. Even now, the country imports close to 50 per cent of its titanium

dioxide requirements.

Locally, pthalicanhudride (PAN), the other major raw material is abundantly available

with Thirumalai Chemicals being its largest producer in the country. Presently, this

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company has a capacity of 55,000 tons per annum (tpa) of PAN and plans to expand

capacity to 100,000 tpa by the turn of the century. Considering high import duties,

PAN is not imported because landed costs do not offer much incentive over domestic

prices. However, the prices of this raw material softened in 1996-97 after ruling high

during the previous year. For the paints industry, margins stand exposed to fluctuation

in raw material prices till the supply position stabilizes. A majority of the pigments,

solvent resins are from petrochemical products which are produced through crude oil

refining. Hence, prices of crude oil in the global market have an indirect and

significant impact on the industrys operations and profit earning capacity.

High working capital requirements - Working capital intensity is reflected by the

fact that this forms 14 to 16 per cent of sales each year. Usually, it is the small players

who are badly hit for funds because - one, they are not in a position to demand credit

from suppliers and two, because of cutthroat competition, they have to supply

products on credit. Paints are produced in batches and companies need to maintain a

wide range of shades throughout the year even though sales are concentrated in the

second half of the year due to seasonality of demand, this naturally translates intoholding large inventory levels. Also, given the wide distribution network for most

large companies, finished stocks at the dealer level are also substantial.

MNCs entering the Indian Paint Market - The entry of Established foreign players

in the Indian market may increase the competition among the players of the industry.

This may lead to price competition which may impact the profit margin of the

companies. As a result, the increase in volume growth may not equally reflect in the

profit growth for the companies.

Demand scenario - Over the last few years, the spurt in demand for paints was due to

the rationalization of duty structures coupled with revival of growth in user industries.

In the early 90s high excise levels made the products of organized players price

uncompetitive against paints manufactured by small scale units which paid no such

taxes. However, in 1996-97, the growth surge of the previous year was not sustained

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by the paints industry due to the industrial slowdown and a cash crunch. Slowdown in

decorative paints, the biggest chunk of the paints market resulted in industry sales

turning sluggish. As compared to a growth of 12 to 14 per cent posted last year, the

decorative paint segment registered a lower growth of 8 to 10 per cent.

On the other hand, industrial paints posted a growth rate of nearly 15 per cent

compared to over 20 per cent in the previous year. With competition heating up, paint

majors were forced into discount wars in order to protect their market shares.

Since the early 90s, the production of paints has been fluctuating. In fact, the

production trend turned negative during 1990-91, for the next two years, the demand

growth was marginal and only picked up from 1993-94. This was the time whenexcise duties were lowered and import duties slashed. Over the last three years, the

domestic paints industry has been booming with growth rates moving into double

digits. In expectation of an upsurge in demand, all major players are putting up fresh

capacities apart from expanding existing ones.

Over the next few years, growth in the decorative segment is expected to stabilize in

the 10 to 12 per cent region while industrial paints are expected to register a higher

growth rate of 15 to 17 per cent. Within decorative paints, the market for enamels and

distempers is expanding faster than emulsions. There are two reasons for this - one,

demand for distempers is increasing due to widening of the user base, two, due to

merely used distempers are moving on to enamels, leading to higher growth for this

segment.

Companies which have high revenues, efficient operations and distribution network,

comfortable debt levels and robust capacity expansion plans will be best suited tocapitalize on the growth prospects

THE FUTURE

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Increased thrust on water-based technologies.

Major consolidation expected in the next few years.

Point-of-sale tinting will become a force in architectural coatings

Organized retail will directly boost architectural & indirectly boost some segments

in industrial coatings

Aggressive marketing in architectural coatings

With many OEMs setting up shop in India, a lot of institutional sales will be

generated in industrial coatings (Auto/GI/Powders)

The paint manufacturing and application segment could be bound together more

closely with possible integration as well

Shortage of skilled manpower

Difficulties due to sudden mandatory introduction of legislations

Continued growth in architectural and industrial segments, with the latter likely to

grow at a faster rate. Double digit industry growth has been foreseen.

CHAPTER IV31


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COMPANY OVERVIEW

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Company Profile

Kansai Nerolac Paints Ltd. (KNPL), the Indian subsidiary of Japan based Paint Co.

Ltd, is the second largest paint company in India with presence in decorative paints as

well as industrial paints & marine paints, enamels, varnishes, coatings, resins etc. It is

the second largest coating company in India and market leader in Industrial Coatings.

Its Industrial Coatings it has a wide range of products in the Automotive, Powder,

General Industrial and High performance Coatings space. Company manufactures a

diversified range of products for every surface. The company markets its products

under the brand names Excel, Suraksha, Impressions, Beauty, Lotus touch. Kansai

Nerolac has been a cherished name in millions of households across the length and

breadth of India. It is a global leader in innovation and is known best for its product

innovation, R&D and sensitivity towards the environment, Kansai commands a

leadership position in providing state-of-the-art solutions in dcor and in industrial

applications in South East Asia, also parts of Africa, Europe and America.

Kansai Nerolac has always believed that the key to its business is:

Technology

Research & Development

Innovations

Quality

Background

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The Company was established in 1920 as Gahagan Paints and Varnish Co. Ltd. at

Lower Parel in Bombay. In 1930, three British companies merged to formulate Lead

Industries Group Ltd. In 1933, Lead Industries Group Ltd. acquired entire share

capital of Gahagan Paints in 1933 and thus, Goodlass Wall (India) Ltd. was born.

Subsequently, by 1946, Goodlass Wall (India) Ltd. was known as Goodlass Wall Pvt.

Ltd. In 1957, Goodlass Wall Pvt. Ltd. grew popular as Goodlass Nerolac Paints (Pvt.)

Ltd. Also, it went public in the same year and established itself as Goodlass Nerolac

Paints Ltd. It came into the fold of Tata Forbes Group in 1976, as its foreign holdings

were acquired by Forbes Gokak. It turned into Joint Venture Company in 1986 as the

foreign collaborator Japan based Kansai Paints picking 36% of equity capital of the

company. With the acquisition of entire stake of Forbes Gokak and its associates by

Kansai Paints it became the subsidiary of the latter in 1999. On the 11th of July, 2006,

Goodlass Paints Ltd. name has been changed to Kansai Nerolac Paints Ltd.

During the journey of continuous performance excellence, they have entered in to

much technical collaboration with other industry leaders such as E.I. Du-Pont de

Nemours &Company Inc., USA and Oshima Kogya Company Ltd., Japan

for different products. The incessant journey of successes will go on backed by their

present human asset of over 2000.

VISION, VALUES AND CULTURE

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In todays dynamic business environment, no organization can afford to survive

without a well-articulated and carefully thought vision stating the overall strategic

direction and long-term future of its business. Kansai Nerolac Paints have been at the

forefront of paint manufacturing over eight decades pioneering a wide spectrum of

quality products that change the face of economy and lifestyles of people at large.

Nerolacs vision is to leverage global technology, for serving their customers with

superior coating systems built on innovative and superior products and world class

solutions, to strengthen their leadership in Industrial coatings and propel for

leadership in Architectural coatings, all to the delight of their stakeholders.

They firmly believe that it is not only the vision of where they wish to go which willform a cornerstone of all their further growth, but also their conviction to the fact that

the values based proposition has to be ultimate foundation of their business. To this

end they consciously have internalized and been practicing these values in all their

business transactions though human beings: Innovation Entrepreneurial Responsive

Simplicity Team Orientation

Compete Through Innovation

The keystone of Kansai Nerolac's success has been its investment in technology and

the importance given to Research and Development. The company has, over the

years, set up excellent facilities for developmental research, improving its

manufacturing processes and continuously innovating on its products. The rich

cumulative experience of the organization gathered over 80 years of

experience provides a strong backbone to all kinds of decisions taken in this company.

80 years of learning in trade and market has given enough expertise to innovate and

develop products and services according to the changing needs and desires of

customers. Nerolac paint technology cuts across all barriers; without discriminating

between uses or users. The past decades have seen a meteoric rise in the fortunes of

Kansai Nerolac. Today, they are the second largest paint company and a recognized

leader in their chosen fields. The company was adjudged the fastest growing paint

company in the organized sector, not once but thrice-in consecutive years.

Work Culture

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The work culture is very friendly and accommodating. In todays dynamic business

environment, organization cannot afford to survive without a well-articulated and

carefully thought vision stating the overall strategic direction and long-term future of

its business.

KNPL have been at the forefront of paint manufacturing over eight decades

pioneering a wide spectrum of quality products that change the face of economy and

lifestyles of people at large.

The Vision is to leverage global technology, for serving customers with superior

coating systems built on innovative and superior products and world class solutions,

to strengthen the leadership in Industrial coatings and propel for leadership in

Architectural coatings, all to the delight of the stakeholders.

Not only vision but also values are important for all business transactions. The values

which are followed by company are:

Innovation

Entrepreneurial

Responsive

Simplicity

Team Orientation

Nerolac is carrying on strong since 1920. Following are its strengths that have kept

this company in good faith. Nerolac is a company with very clear and well-defined

vision and very strong values. Clarity of vision and strong foundation of culturalvalues have always kept this company in good stead. Its ethical conduct has always

guarded it against any possible traps and pit falls. They have made sure that the

distribution hurdles and the climatic vagrancies do not affect the quality of their

services. This same commitment will ensure that Kansai Nerolac will march towards

its centennial year, fully dedicated and invigorated, in step with the exciting

wave of industrialization and modernization pervading through the new India.

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CODE OF CONDUCT

The Board of Directors of Kansai Nerolac Paints Limited has adopted the following

Code of Conduct for the Board of Directors and senior management of the Company.

For the purpose of this Code, the term senior management shall mean personnel of the

Company who are members of its core management team excluding Board of

Directors. This would comprise all members of management one level below the

executive directors, including all functional heads. The Code has been adopted,

effective the 31st day of December, 2005.This code should be read in conjunction

with the Code of Conduct for managerial and executive staff, the Code of conduct for

prevention of insider trading and code of corporate disclosure practices and the Policy

on appropriate social conduct at workplace and such other policies/codes that the

Company may from time to time formulate in pursuit of its commitment to the core

values of integrity and honesty. The Company shall always strive to maintain the

highest standards of conduct in all its endeavours. The Companys Directors and

senior managers have a responsibility to lead by example, acting with truth, sincerity

and fairness in all decisions. The Code is intended to serve as a source of guiding

principles for directors and senior managers. This Code cannot be expected to address

every expectation or condition regarding proper and ethical business conduct. Each

Director and senior manager is expected to comply with the letter and spirit of this

Code using good common sense and professional ethics as the best guide.

CONFLICT OF INTEREST

Directors and senior managers must avoid any conflict of interest with the Company.

A "conflict of interest" occurs when the private interest of a Director/senior manager

interferes in any way, or appears to interfere, with the interests of the Company as a

whole.

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While this Code does not attempt to describe all possible conflicts of interest that

could develop, nevertheless, some of the more common conflicts that Directors and

senior managers must resolve or avoid, however, are set out below:

A conflict situation can arise when a Director/senior manager or a member of

his family take(s) action or has/have interests that may make it difficult for the

Director/senior manager to make decisions on behalf of the Company

objectively and effectively.

A conflict of interest can also arise when a Director/senior manager or a

member of his family receive(s) improper personal benefits as a result of the

position of the Director/senior manager in the Company.

It is a conflict of interest to serve as a Director of any company that competes with the

Company. Family can be considered to consist of the Director, his spouse, dependent

children and dependent parents. If a Director/senior manager believes that he has an

actual or potential conflict of interest with the Company, the Director/senior manager

shall notify the Company / Board of Directors as promptly as practicable and shall in

any event not participate in any decision by the Board of Directors that in any way

relates to the matter that gives rise to the conflict of interest. Directors, senior

managers and their families shall abstain from offering or accepting gifts from

persons or firms who deal with the Company where such gift is being made in order

to influence the actions of the director/senior manager, or where acceptance of the gift

could create the appearance of a conflict of interest.

CORPORATE OPPORTUNITIES

Directors and the senior managers owe a duty to the Company to advance itslegitimate interests. Directors and senior managers are prohibited from taking for

themselves opportunities or personal gain through unauthorized use of corporate

property, information and position or competing with the Company for business

opportunities

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CONFIDENTIALITY

Directors and senior managers must, during their term of office and after leaving the

Board/services of the Company, maintain the confidentiality of information entrusted

to them by the Company and any other confidential information about the Company

that comes to them from whatever source, in their capacity as Directors/ senior

managers, except to those people who have an appropriate reason to have access to

the information. For purposes of this Code, confidential information" includes all

non-public information that might be of use to competitors, or harmful to the

Company or its customers, if disclosed.

COMPLIANCE WITH LAWS, RULES AND REGULATIONS

Directors and senior managers shall comply with laws, rules and regulations

applicable to them as Directors and senior managers of the Company, including laws

on prevention of insider trading.

PROTECTION AND PROPER USE OF COMPANYS ASSETS

Directors shall protect the Companys assets and ensure their efficient use for

legitimate business purposes.

FAIR DEALING AND ETHICAL BUSINESS CONDUCT

Directors and senior managers must observe the highest ethical standards and act with

integrity and honesty to promote an environment that encourages the employees of the

Company to sustain and enhance the reputation of the Company and treat each other

as well as customers, suppliers, and competitors with fairness and respect. Directorsand senior managers shall not take unfair advantage of anyone through manipulation,

concealment, abuse of privileged information, misrepresentation of material facts, or

any other unfair dealing practice. Conduct that raises questions about the integrity,

character or impartiality of the organization, which can damage the reputation of the

Company, or creates an appearance of illegal, unethical or improper conduct, is

prohibited

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ENCOURAGING THE REPORTING OF ANY ILLEGAL OR UNETHICAL

BEHAVIOUR

Directors and senior managers of the Company shall endeavour to promote ethical

behaviour and to provide an opportunity to employees to report violations of laws,

rules, regulations or codes of conduct and policy directives adopted by the Company

to the appropriate personnel without fear of retaliation of any kind for reports made by

the employee in good faith.

HANDLING NEWS ABOUT THE COMPANY

Confidential information about the Company, including information that can be

expected to have an impact on the market for the Companys shares may be released

only in accordance with the Company guidelines and the relevant regulations of the

Stock Exchanges and the Securities Exchange Board of India

COMPLIANCE PROCEDURES

Senior managers and Executive Director(s) shall communicate any suspected

violations of this Code, including any violation of law or governmental rule or

regulation, promptly to the Managing Director. Directors, other than the Executive

Director(s) shall communicate any suspected violations of this Code, including any

violation of law or governmental rule or regulation, promptly to the Board of

Directors. Alleged violations shall be investigated by the Board or by a person or

persons designated by the Board and appropriate action shall be taken in the event of

any violations of the Code.

ANNUAL CERTIFICATION

All Board members and senior management personnel have to confirm compliance

with the Code on an annual basis. The Annual report of the Company shall contain a

declaration to this effect signed by the Managing Director who is the Chief Executive

Officer.

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Product Profile

Interior Paints

Exterior Paints

Wood Paints

Metal Paints

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MARKETING STRATEGY

Marketing is the management process that identifies, anticipates and satisfies

customer requirements profitably. Philip Kotler at Nerolac, the marketing function

has been one of the pillars behind building a successful organization. They believe

their key strength lies in understanding the consumer and communicating with him in

a language they understand and relate to best. Nerolac commercials have been well

-loved over the years and its jingle -

'Jab ghar ki raunaq badhaani ho...'

is now a familiar tune in every Indian household. Promotional activities play a greater

and important role in the entire marketing effort being carried out by Kansai Nerolac

Paints Ltd., are to generate more sales as well as to create and maintain an image of

its product. Thus Kansai Nerolac Paints Ltd. carried out its promotional activities as a

controlled and integrated program of communication and material design to present

its products to the prospective customer. It also helps in communication the need

satisfying qualities of paints, to facilitate the sales and eventually to contribute

towards the profit in long range. The tools used by Kansai Nerolac Paints Ltd. for

fulfilling the various purposes of its promotional activities are the following:-

Point of sale display

Dealers sales contest

Advertising

Sales promotion through special event market.

Sales promotion through salesman i.e. personal selling.

Incentives.

Painters Meeting.

Tokens.

Discounting Strategy

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Over the years, Nerolac has undertaken several initiatives, which have met with

unprecedented success and really made people really sit up and take notice of the

brand. Beginning with the introduction of the new Brush stroke logo, this stands for

the process of painting.

It depicts motion, dynamism and progress through change. The signal red colour,

which is the colour of Nerolac, is symbolic of eternal joy and hope

It has now become an integral part of our brand identity and now appears as a sign-off

on any kind of communication. Another one of the marketing initiative was the

unveiling of the new corporate campaign with Mr. Amitabh Bachchan as their brand

ambassador. In this campaign, Mr Amitabh Bachchan embodied Nerolac and showed

how it touches the lives and dreams of people no matter who they are and where they

come from. The essence of this thought was captured in the new baseline

Yeh Rang hain jo har kisi ko chhoota hain.

Apart from the corporate campaign, they also released a new commercial for Nerolac

Suraksha with Mr.Bachchan. Focusing on the fast growing exterior category, this

commercial playfully demonstrates Suraksha's proposition of protection. Another one

of the initiatives launched, during the festival season of Diwali was Har DinDiwali a

promotional campaign aimed at the customer. The unique feature of this campaign

was the opportunity to win daily prizes throughout the entire duration of 55 days of

the campaign. In addition to the daily prizes there was also a grand bumper prize to be

won. For sure this was one campaign that was a runaway success. Complimenting

their core business of paints last year also saw the launch of Nerolac Assured Paint

Service.

Designed to bring the Nerolac experience right to the consumers' doorstep, it met with

an excellent response. Currently available in Mumbai, consumers can now relax while

the Nerolac team takes over the entire paint job right from sourcing to execution. In

their effort to becoming consumer friendly, this year they also undertook the exercise

of redesigning their shade cards. The new look shade cards are not only eye catching

and consistent in appearance but also try to make the process of shade selection for

the consumer lot more interesting and convenient. Besides all these promotional

activities the most important was the promotional campaignRishta Rangon ke Sang.

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This was first launched in the year 2006.This was a grand success in that year.

Following the success of the Rishta Rangon ke Sang 2006 the company re-launched

this again in the year 2007.Again it proved to be a grand success. This program was to

strengthen the cherished relationship between the company and its customers. This

year also Kansai Nerolac Paints Ltd. has launched this program once again. Lets see

how well this program performs this year.

What is all about the program Rishta Rangon ke Sangh?

It is an exciting new program that aims to reward the contractors, painters and the

customers for every litre of Nerolac paint they purchase from any Nerolac CCD outlet

in some selected towns. From gift vouchers to an exotic international trip to gold-

there a number of gift options. The rules are simple too-the more Nerolac paint one

purchase the more he can gain as each litre purchased takes him closer to his dream

trip to Singapore.

Kansai Nerolac in the recent past have increased focused on safer, eco-friendly paints

using new technology to produce low VOC (Volatile Organic Compound), lead free

paints enhancing the in-home environment. Some of the new advanced products

launched by the company include Nerolac Impressions Eco-clean and Nerolac ExcelTotal with heat guard and now our entire range of water based products is Low

VOC.

Announcing this landmark development, Mr. H. M. Bharuka, Managing Director -

Kansai Nerolac Paints Ltd. said, We have significantly improved our product

offering with a new range of eco-friendly products that have been produced using

advanced technology, conforming to highest norms of health and environment safety.

At this point we felt the need of an ambassador who reflects this and who could help

us effectively communicate this to our consumers. Shahrukh Khan was a perfect

choice for us and we are extremely happy to have him.

Kansai Nerolac has effectively used film personalities in the past to endorse and

represent its brands. Some of the previous super stars include mega star Amitabh

Bachchan, and Mohanlal.

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Commenting on the marketing initiatives planned, Mr. Anuj Jain, Vice President

Marketing & Sales (Decorative), Kansai Nerolac Paints Ltd. Said, Shahrukh Khan

enjoys a mass appeal and is amongst the most popular personalities in the country.

We have planned a nationwide television campaign as well as outdoor and print in

select markets across India. He will also front a series of strategic marketing

initiatives of the company.

Nerolac is an interesting brand story. This brand which has a rich heritage of over 97

years is on an aggressive mode in the Rs 2.1 Billion Indian paint market. The

company which created this brand was born in 1920 as Gahagan Paint and Varnish Co

in Mumbai. In 1957 the company was transformed to Goodlass Wall Pvt Ltd later to

Goodlass Nerolac Paints Ltd . The company was a part of the Tata Group till 1999

when its technological partner - Japan based Kansai Paint Co Ltd took a controlling

stake in the company from the Tata Group. Now Nerolac is a subsidiary of Kansai

Paints and the company has been rechristened as Kansai Nerolac Paints Ltd.

Nerolac is a leader in the Industrial paint segment of the Indian paint market. The

Indian paint market is huge with an estimated market size of over Rs 17000 crores of

which decorative paint segment constitutes over seventy percentages. The market is

typically Indian which means that it is fragmented. According to a report by the

brokerage firm Equity Master, the unorganized sector commands around 35% of the

market. In the organized decorative paint segment, Asian Paints is the market leader

with a share of 30% followed by Nerolac with 20%, Berger Paints with 19% and ICI

with 12%.

Nerolac from the beginning of 2000 has been trying to attain leadership position in the

decorative segment and the fight makes it a really interesting brand story. Nerolac hadto fight the tremendous brand equity of Asian Paints in that segment.

Nerolac is a brand which never hesitated to invest in promotions and brand building.

The brand has a really commendable awareness which was created through heavy

brand promotions. The jingle " Jab Khar Ki Raunak Badhana ho, Deewaroan ko jab

sajana ho , Nerolac , Nerolac " still lingers in the memory of the public. Such catchy

jingles and campaigns lifted the brand to double digits market share levels but could

not bridge the gap with the market leader.

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It was in 2003 , that the brand made a huge plunge in celebrity driven promotion by

roping in Amitabh Bachchan. The endorsement from Big B was big news at that point

in time. One of the major positioning moves for Nerolac also happened at that time.

Nerolac was originally positioned on a beauty-enhancing proposition. The brand

talked about decoration and in a plain speaking style successfully associated itself

with that proposition otherwise that jingle could not have survived this long.

In 2003, the brand tried to emulate the Asian Paint's positioning based on colors. The

ads featuring Big B had the tagline "Ye Rang Jo Hain, Zindagi ko Chootha hai" ( This

color touches your life). In my personal opinion, the adoption of a positioning similar

to Asian Paints confused the consumer. Although the endorsement of Big B put the

brand on a high awareness state, the similarity of positioning had a negative effect on

the association of brand and celebrity. I remember reading a report which mentioned

that during the Big B endorsement, when consumers where asked about the brand

which Big B endorsed, rather than Nerolac, they mentioned Asian Paints.

Before that positioning change in 2003, Nerolac had many things going for it. The

brand had very powerful brand elements like the jingle and even a popular mascot - a

painting tiger named Goody. The mascot was very popular and shared a powerful

association with the brand. But the mascot was discontinued in 2003. Goody was

created in 1970 to act as a differentiator and also create an identity for the brand.

Since there were many players, the owners wanted as mascot to make the brand stand

out. The decision of dropping such a powerful popular brand element was a mistake

that Nerolac made. The brand should have made the mascot contemporary and that

could have added some additional power to the brand.

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Print ad for in 2003:

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During the late 2008, the brand still felt that it is not able to close the gap between

itself and the market leader. The association with Big B was discontinued and the

brand went for non-celebrity campaigns. This year, the brand decided to make another

high profile attempt using none other than Shah Rukh Khan to endorse the brand.

The brand is now running lot of TVCs featuring the new celebrity ambassador.

In a significant move the brand has repositioned itself. In tune with the global

positioning of its parent Kansai Paints, Nerolac also adopted the positioning based on

environment -friendly attribute. The new campaign positions Nerolac as a healthy

paint with no lead content and Eco-clean property. Shah Rukh sells this idea through

the TVCs

So far Nerolac's major marketing issue was its inability to create a meaningful

differentiation from Asian Paints. While Asian Paints established itself on the Colour

platform, Nerolac was confused about its own strength. This was reflected in most of

their campaigns. Although the campaigns were well made, these ads did not reflect

any image for Nerolac. Now the brand seems to focus on the Environment Friendly

Healthy Paint as its core positioning platform. The question is whether this

positioning is important and meaningful for the consumers. It is true that Indian

consumers are aware of the harmful effects of paint fumes. But this issue happens

only during paining and after the painting is done, the harmful effects are hardly

noticed. So will a focus on the Healthy Paint attribute be considered a powerful

differentiator? Healthy Paint is a meaningful differentiator but not a powerful or

sustainable one. Asian Paints or any other competitor can easily achieve parity with

this feature. In fact Nippon Paint is already running a campaign for its Odour

free paint product. In comparison with Asian Paint's focus on colours, Nerolac needed

a much more powerful emotional differentiator rather than a eco-friendly platform

because eco-friendly has now become a most used one rather a pass. Every brand

talks about its eco-consciousness in one way or other. So putting that as the main

positioning may not stand against a powerful competitor like Asian Paints.

Having said that, the presence of Shah Rukh Khan will give a terrific boost to the

brand. But this boost will be because of the celebrity power rather than the brand

power and will fade when the association stops.

The brand have adopted the tagline "Kuch Change Karo, Chalo Paint karo" roughly

meaning, " Change Something, Start Painting " . Frankly I did not exactly got the

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idea behind the tagline. The tagline is not at all related to the core positioning of a

Healthy Paint. So there is some confusion regarding the core brand

mantra. Theoretically the taglines are derived from Core Brand Mantras and the lack

of that core mantra is the reason for most of positioning errors.

On a branding perspective Nerolac still needs to identify meaningful positioning to

beat Asian Paints. Environment Friendly or Healthy Paint is an idea whose time has

not come to India as of now.

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Latest campaign by Kansai Nerolac Paints:

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TOP COMPETITORS OF KANSAI NEROLAC PAINTS

Kansai Nerolac Paints Ltd. is the second largest paint company in India with a marketshare of 20% and sales turnover of Rs.1226 crore.

It is the market leader in industrial / automotive segment supplying over 90% of the

OEM requirements. It is the leader in powder coatings. Kansai Nerolac Paints Ltd.

[KNPL] with its two wholly owned subsidiaries Saurashtra Paints Ltd., Ahmedabad

and GNP Madras Ltd., ranks second in the industry. It is recognised as the leader in

the industrial paints segment with a market share of 41 per cent. The company has a

tie up with Kansai Paint Company of Japan, a world leader in paints, which holds 65

per cent stake in GNPL. Having derived maximum income in industrial paints from

Maruti Udyog Ltd. (MUL) until recently, the company has now widened its client

base to include many other automobile manufacturers like Mitsubishi Lancer,

Hyundai Motors and Telco. Significantly, the company continued to fare well despite

the slowdown in the automobile segment and with the industrial paints segment likely

to witness good growth in the medium term, KNPL appears to be in a fairly

advantageous position and should be able to reap rich benefits in the future. Talking

of the competitors, there are three major competitors of Kansai Nerolac Paints

Ltd.1.Asian Paints Ltd.2.Berger Paints (India) Ltd.3.ICI Paints Ltd. Besides all the

above three companies there are few more companies which have been operating in

the market viz. Shalimar Paints, Rajdoot Paints, Jenson & Nicholson etc.

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1) ASIAN PAINTS LTD

Asian Paints is the Indias largest and the Asias third largest paint company todaywith a turnover of 44.04 billion. Asian Paints operate in 20 countries and 28 paint

manufacturing facilities in the world servicing consumers in over 65 countries.

Besides Asian paints the group operates around the world through its subsidiaries,

Berger International Ltd. Apco coatings, SCIB Paints and Taubmans. Asian Paints

India Ltd. (APIL) has the distinction of being the market leader in the paints industry

and commands a market share of 37 per cent. It commands 38% in the decorative

paints segment and 15% share in the industrial paints segment. The company's

dominance is on account of its presence in almost all types of paints segments such as

primers, wood finishes and metal paints besides wall paints while other players cater

to niche markets, APIL sources its raw material requirements of pthalic anhydride and

pentaerythritol from its own in-house plants, which provides it an edge over its

competitors by reducing its raw material costs. The company has a strong presence

abroad with joint ventures in Fiji,

Tongo, Solomon Islands, Nepal, Mauritius and Australia. What keeps it ahead of its

contemporaries is product innovation; for instance it was the first in the industry to tap

the exterior paints segment. The major products of Asian Paints are Altima, Apex,

Royale, Apcolite, Ace etc.

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2) BERGER PAINTS (INDIA) LTD

Berger Paints is the countrys third largest paint manufacturer and the second largest

decorative paint player.

Berger is headquartered in Calcutta and services the market through a distribution

network comprising of 75 stock points and 12,000+ paint retailers.

Being an ISO 9001 company, their quality product has attained instant recognition,

worldwide, and continues to meet quality requirements that are demanded today even

in the domestic market. A leading player in the industry, Berger Paints boasts of amarket share of 15 per cent. It is predominantly engaged in the decorative paints

segment, which is responsible for two-thirds of its sales, remaining earnings come

from the industrial paints segment. Berger has two plants located at Howrah and

Pondicherry for producing synthetic resins and paints respectively; besides these it

also owns wholly owned subsidiary Beepee coatings, a manufacturing unit in Gujarat.

The company enjoys the benefits of technical tie-ups with Valspar Coatings, USA and

Herberts, Germany for heavy-duty coatings and automotive coatings respectively.

Berger Paints is a company with fairly sound fundamentals and a steady financial

track record.

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3) ICI PAINTS LTD

ICI India Ltd. (ICIIL) is a part of the Imperial Chemicals Industries (ICI), UK which

is a world leader in paints. The company has diversified interests and is not purely a

paints company.ICI Paints is the countrys fourth largest paint company. ICI Paints,

headquartered in UK and manufacturing in 24 countries, has some of the worlds top

paints and decorative product brands.ICI India manufactures and markets paints,

specialty chemicals, adhesives and starch. With employee strength of about 900, ICI

Indias manufacturing sites, business and sales offices and distribution network span

the length and breadth of the country. In the decorative business, ICI's exterior paintsportfolio exhibited a strong performance. Commendable growth was registered by our

exterior emulsion brands Weather shield and Super cote. Our retail tinting package

'Colour Solutions' is emerging as the preferred choice for top quality paint retailers in

the country, backed by strong retail brands like Dulux Velvet Touch, Acrylic

Emulsion and Gloss. The company, which was a leader in the premium emulsion

paint market, has now lost out to Asian Paints in the same category

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Manufacturing Facilities

Manufacturing is a very important function for the paint industry. Nerolac has made

sure that its manufacturing facilities are world class. Nerolac has five manufacturing

units located at:

Perungudi (T.N.),

Vatva (Gujarat),

Jainpur (U.P.),

LoteParshuram (Maha.) &

Bawal (Haryana).

The total installed capacity of all the units put together is 158300 TPA. Its latest unit

is at Bawal, which was commissioned in March 2005, with a capacity of 20400 TPA

with an investment of around Rs.100 crore- all through internal accruals.

Distribution network

Nerolacs strength of wide spread distribution network is its right arm in generating

sales revenue from all parts of India. Nerolac has a wide distribution network of over

11,000 dealers. They have eight Sales Divisions and each division has depots to

take care of local needs. In all they have 66 depots. All this ensures complete reach in

India including rural and up country markets

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SWOT ANALYSIS

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CHAPTER V

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RESEARCH METHODOLGY

In order to understand what Builders & Dealers look for 2 questionnaires were made:

Designing the questionnaire

The idea was to be able to understand the standing of Nerolac in the minds of the

customer as well as the business potential that they have. Apart from this, the design

was such that it would not take more than ten minutes of a persons time. In order to

be better equipped while designing the questions, I first understood the distribution

network. Also, not making any assumptions on how Nerolac is placed amongst

competitors in the minds of the customers was important.

The questionnaire for Builders covered the following aspects:

Understanding the biggest influence while selecting a particular brand

Experience with Nerolac if applicable

Understanding of requirements/problems/suggestions given by the builder

Potential of the Builder (through completed, ongoing and future projects)

Time when painting would be starting for ongoing projects

The questionnaire for Dealers covered the following aspects

Brands sold

Retail to project ratio

Brand that sells the most

Yearly purchases

Status of Nerolac

Reason for not selling Nerolac

Suggestions/problems faced

Builder and contractor clients if applicable.

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CHAPTER VI

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Analysis

1) Business Potential: On surveying the 14 Dealers it was found that Business

Potential of 7 Dealers is Rs 8 crore approximately.

2) Dealers Engaged in: Survey result found that Retailis 61% and project is 31

% of the sale of the dealer.

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3) Dealers dealing in Interior or exterior paints: Only Exterior paints

36% Exterior & Interior Paints 64%

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4) Reason for less sale of KNP:

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5) Demand for paint by dealers:

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6) Areas with the number of projects coming up:

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CHAPTER VII

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FINDINGS

1) The potential is Navi Mumbai is high as there are many new projects coming up.

2) Asian paints led the demand requirement of dealers followed by ICI.

3) This was due to the high demand and good service provided by Asian paints.

4) Less number of demands was the biggest reason behind low sale figure of KNP.

This was followed by bad service and margin given to dealers.

5) Dealers were dealing more in both category of paints, this shows that there was

more demand by new buildings as compared to just C.H.S.

6) Project sales are a smaller part of the business of the dealers as compared to retail

sales. Still its not a very small part and has huge potential to grow.

7) There is huge potential for the company to increase its sales in Navi Mumbai if

they are able to attract the dealers as they have huge business potential.

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CHAPTER VIII

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OBSERVATIONS:

On the basis of the questionnaire, following analyses were made -

The dealer deals with different brand of paints. The ones which they generally

keep in stock are Kansai Nerolac, Asian Paints, Berger, Shalimar and ICI Dulux

paints.

The demand for paint varies in accordance to the area specified. The brand which

is generally demanded by customers is:-Asian paints, Nerolac paints, ICI paints,

Berger.

The dealers generally dont recommend anything to the customer; they give what

the customer demands. In case, the customer is a bit confused about the quality of

the product, then the dealers recommend the brand which they have.

Dealers are free to place any order. There is no minimum order as such.

Transporters behaviour, ease and flexibility of placing an order are good for

Nerolac paints.

Quality maintenance, condition of product is very good for Nerolac paints.

Nerolac give incentive on basis of volume they buy. Other incentives being given

are local trips, foreign trips, and discount coupons, materialistic things like fridge,

AC.

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Asian paints performance is great while Nerolac paints performance is good in

case of promotional activities, commercial terms, and service of sales persons.

However delivery time, customers orientation is good for Nerolac paints.

The problem which we found out is the efficient service, end customer reach and

availability of shades and colours. This problem has to solve as soon as possible.

Company provide assistance to dealers in promotional activities. For eg:

Contractors meet, painters meet, texture trainings, flexes etc.

If dealers face any kind of problem from customers side, the sales executive takes

care of it.

Company provide training to painters whenever new product, new finish isintroduced and skilful work is required.

If the product is defective, company takes back the goods. In this case a return

goods voucher (RGV) is issued which contains the DOP and the batch number. If

the goods are returned within 3 months, dealer gets sales tax refund.

According to most of the dealers and contractors Kansai Nerolac is a good brand

but if the improvements can be done with respect to its service, end customer

reach and marketing it can be better than most of the other brands that are

available in the market

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CHAPTER IX

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RECOMMENDATION

1. Dealers keep the brand which sells the most and Nerolac has very low

demand. This means that even if Nerolac increases the margins and credit

period very few dealers will be ready to switch as they feel they will not be

able to sell.

2. Asian paints very low margins and credit period. If we can convince builders

and contractors to use our products by way of regular communication and

relation building, dealers will switch to Nerolac as it offers better rates and

credit periods. Many dealers mentioned that they do not want to stick to Asian

paints because of low profits, but are compelled to do so because of demand.

3. A large number of fakes of Asian Paints have come into the market. Nerolac

could send the message that they take a lot of care to ensure that products

being sold in the market are genuine.

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4. Competitive Offers.

5. Communication has to be regular and there needs to be an interaction at

various stages.

6. When called for sampling Representative coming to give suggestions for

shades/ textures.

7. Inspecting the site and giving feedback.

8. Monitoring the work being done by the contractors.

9. Taking back material if it does not match expected quality standards. The

biggest player in the market Asian Paints has representative meeting the top

management regularly.

10. Most builders these days base their choice of brand on sampling done. Their

expectation today is not of one square foot but an entire room or flat.

11.Targeting the architects: Most builders mentioned architects as the biggest

influence while making paint decisions. However, the architect, almost never

mentions a specific brand, but a specific shade. These clients have Asian

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Paints fan-decks at their disposal and thus invariably end up choosing from

them. Thus Nerolac should start distributing fan-decks to contractors, builders

and architects, The Asian paint strategy is to distribute multiple fan decks to

contractors and they further distribute these to Architects, thereby marketing

themselves for free.

12. I would also suggest sending our company profile, product list with rates to

Builders. This is the quickest and cheapest way to become part of their

consideration set.

13.Technical aspects: There were various aspects mentioned by the Builders

including wash ability, durability, resistance against dirt, alkali, moisture, eco

friendliness, coverage, guarantee, passing the peel off test. Also paint has to be

easily applicable on any surface. Innovation is required in application methods

in order to improve efficiency. The equipment used to apply the paint must

also be different for different surfaces/paints.

Documents

TO EXPLORE THE POTENTIAL OF PAINTS IN PROJECTS AND MAINTENANCE IN MUMBAI AND TO SHARE PLAN FOR INCREASING THE MARKET SHARE IN KANSAI NEROLAC PAINTS LIMITED