FMG23C Grp2 Paints FinalReport

FORE School of Management

Marketing Management II

Marketing Plan Project

Industry: Paints

Nerolac Kansai Paints Ltd.

Submitted to:

Prof. Bhalender Singh Nayyar

Made by:

Snehashish Chowdhary 231174

Sahil Kshetrapal 231126

Sanjay Mallik Vadrevu 231130

Shubhangi Jain 231150

Antoine Le Gal

Francois Xavier Brossard

Group 2

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Table of Contents

Acknowledgement…………………………………………………………………………………………………………………………….3

Executive Summary……………………………………………………………………………………………………………………………4

Introduction ............................................................................................................................................ 5

Company mission & Values ..................................................................................................................... 5

Market analysis ....................................................................................................................................... 6

Defining the paint industry ..................................................................................................................... 7

Competitor analysis .............................................................................................................................. 10

Analyzing rural & urban demand .......................................................................................................... 13

Market share ......................................................................................................................................... 14

Marketing strategy of competitors ....................................................................................................... 15

Analysis of performance of Kansai Nerolac .......................................................................................... 17

SWOT analysis ....................................................................................................................................... 19

Segmentation, Targeting & Positioning ................................................................................................ 20

Objectives ............................................................................................................................................. 22

Positioning Statement……………………………………………………………………………………………………………………..23

Marketing Strategy………………………………………………………………………………………………………………………….23

Action Plans…………………………………………………………………………………………………………………………………….24

Profit & Loss Statement…………………………………………………………………………………………………………………..28

Controls…………………………………………………………………………………………………………………………………………..29

References……………………………………………………………………………………………………………………………………...30

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Acknowledgement All the students of Group 2 from FMG 23 – C thank Prof. Bhalender Singh Nayyar for his

guidance and motivation to help in understanding the Indian Paint Industry with focus on key

areas of marketing.

Thank You.

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Executive Summary

Through this report we have studied the Indian Paint Industry. Asian Paints is the overall

market leader in India and has done exceptionally well to maintain its foothold by a

comprehensive margin. Other players in the market include Kansai Nerolac, Berger Paints,

Shalimar Paints and AkzoNobel. Kansai Nerolac, the third largest player, is the market leader

in the sub category of industrial coatings. A look at the vision statement of Kansai Nerolac

indicates that it aspires to capture some of the market of architectural coatings and

consolidate its overall position and compete more closely with Berger Paints. Considering the

market situation at present and the promise it holds for the future, a new interior paint would

be launched by Kansai Nerolac based on some key innovative features which offer most value

to the consumer.

We begin by understanding the present market scenario through Porter’s five forces model.

This would help us in understanding how the industry stands and whether it can

accommodate our product, also where the brand has to be positioned. We follow it up with

a deep dive into the strategies employed by the existing players in the market. This would

give an idea about the current industry trends.

Once the industry level analysis is done, the focus is switched to the new product. The new

product would be named Nerolac Picasso, with the following positioning statement:

“For every consumer who considers their home or office as an extension of their personality

and a part of their life, Nerolac brings a refreshing range of paints that combine innovation

and creativity to breathe life in to your walls in an eco-friendly manner.”

Kansai Nerolac Paints Limited (KNPL) is currently the 3rd largest paint manufacturer in India

with a market share of 12% of the total organised market. Through the launch of this new

product in interior paints segment KNPL aims to capture 15% market share.

Kansai Nerolac’s existing distribution network will be tapped into. This would work to the

advantage of Kansai Nerolac as it has a robust dealer network already in place. In addition,

builders, contractors and home owners in urban areas would be targeted. As far as price is

concerned, Picasso would be priced in the same bracket as its competitors at marginally lower

than the most premium product of its competitors.

In the final stages of the report, the Profit and Loss account is projected. This is done to

understand the amount of time required for the company to recoup its investment and start

making profits. Due to the limited availability of industry data and mostly secondary data the

statements are based on hypotheticals.

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Introduction In order to launch a new product and devise a marketing plan it is important to understand

the paint industry, the players and get an idea about the key drivers of this industry.

Company mission & Values Strategic planning consists of the four components of vision, mission, strategy, and action.

One of the most important steps in strategic planning is the formulation of mission and vision

statements.

Mission and vision statements guide all activities of organizations and businesses. Thus, these

decisions need to be made after careful consideration so that they can contribute to the

planning and implementation of other activities of the organization.

Mission and Vision of Kansai Nerolac Paints Limited:

Mission: To contribute positively to the development of the society, by acting as a good

neighbour, considerate of others, playing the role of a good corporate citizen with passion

and compassion.

Vision: To leverage global technology, for serving our customers with superior coating

systems built on innovative and superior products and world class solutions, to strengthen

our leadership in Industrial coatings and propel for leadership in Architectural coatings, all to

the delight of our stakeholders.

Core Values:

Responsiveness, Innovation, Team orientation, Execution and Simplicity

Engaging all their stakeholders

Operating in an ethical manner

Commitment to promoting the environment of Corporate Social Responsibility (CSR)

Following regulations of human rights, environmental policies, and safe working

conditions for all stakeholders

Contributing to the society under the four verticals of Environment, Health, Education

and Community Development

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Market Analysis

PORTER’S 5 FORCES ANALYSIS

Porter’s five forces analysis is a framework to analyse level of competition within an industry

and business strategy development. It draws upon industrial organization economics to

derive five forces that determine the competitive intensity and therefore attractiveness of an

industry.

Bargaining Power of Buyers - Medium

Household users -

The buyers can be customers (building contractors who buy in bulk) and end customers

(people who paint/repaint their house). Customers are more price sensitive because number

of options are available for them. The decisions by them are made based on many factors like

quality, price and factors like weather protection etc. The unorganized sector also provides a

number of low cost options.

Industrial users -

It is a low margin revenue business and buyers of this segment are knowledgeable about their

needs. The price comparison is done effectively by the consumers. However, manufacturers

due to their knowledge and expertise limit the bargaining power.

Bargaining Power of Suppliers - Medium

The paint industry is a raw material intensive company with more than 300 products required

to manufacture of the final products. The raw materials can be divided into different

categories like pigments, additives, solvents, binders etc. Pigments constitute 1/3 of the total

raw materials and Titanium dioxide is one of the key elements and often faces shortages.

Suppliers of Titanium dioxide therefore have high power. The others are crude derivatives

hence their price is subject to market fluctuations. So, here the Supplier has a medium

bargaining power.

Competitive Rivalry – Low medium

About 80% of the organized market is catered by top 3 players of the country, out of which

a major chunk is of Asian Paints alone. Kansai Nerolac is one of the top 3 players. The current

market growth rate provides ample room for all the players of the industry to flourish.

Competition may increase as the market gets saturated but at present the market is

unsaturated and there are many options in the market. Competitive rivalry for Kansai Nerolac

varies from low to medium. Also, it is market leader in Automotive Industrial Paint and

decorative paints.

Availability of Substitutes – Low

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The availability of substitutes is low. In rural areas, Lime wash is conventionally used

substitute for paints. In the decorative segment wallpaper is an alternative for decorative

interior paints. Wallpapers are a convenient option for small setups and also look more

visually appealing than paints. However, in India wallpapers are used much less than paints

and they don’t pose any threat to exterior paints.

Threat of new Entrants – Medium

The paint industry in India is dominated by few players making difficult for anyone new

entering the industry and Kansai Nerolac being a reputed company has a low level of threat

from others. Brand, distribution network, working capital efficiency and technology play a

crucial role. Vital role of technology and capital intensive nature make the industry relatively

safe from new entrants, however established foreign players pose some threat by the virtue

of their expertise and knowledge.

The Paint Industry Defining the industry

The paint industry consists of exterior paints, interior paints, wood finishes, metal finishes

and waterproofing. The industry falls under the category of industrial coating, which is a

broader term for the paint industry. An industrial coating is typically defined by its protective,

rather than its aesthetic properties, although it often provides both. Volume wise, most

industrial coatings are ‘protective’, i.e., they are used for corrosion control of steel or

concrete, for example, but this is a complex market segment with numerous different areas.

Demand for paints comes under two major categories:

Decoratives: Major segments in Decoratives include exterior wall paints, interior wall paints,

wood finishes and enamel and ancillary products such as primers, putties etc. Decorative

paints account for over 77% of the overall paint market in India. Asian Paints is the market

leader in this segment. Demand for decorative paints arises from household painting,

architectural and other display purposes. Demand in the festive season (September-

December) is significant, as compared to other periods. This segment is price sensitive and is

a higher margin business as compared to industrial segment.

Industrial: Three main segments of the industrial sector include automotive coatings, powder

coatings and protective coatings. Kansai Nerolac is the market leader in this segment. User

industries for industrial paints include automobiles engineering and consumer durables. The

industrial paints segment is far more technology intensive than the decorative segment.

The Indian paint industry has evolved from a predominant decorative paints market with

seasonal fluctuations to a more diversified market. In recent years several factors have

contributed to the fortunes of the Indian paint industry including adoption of latest

technologies, launch of innovative products, aggressive marketing strategies, comprehensive

product portfolios, and value added services offered by the companies. Currently the Indian

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paint industry is valued at US$ 5 Billion and is expected to double by 2018. The Indian paint

industry is growing at a double digit rate for several years now, unlike in the western countries

and Japan where the growth has stagnated. And it is expected to continue growing at around

15% as historically it has grown at an average of 1.8 times the GDP rate. The paint industry

can be divided into decorative (60%) and industrial (40%). Decorative demand is mainly driven

by fresh construction (40%) and repainting (60%). The industry demand is mainly from the

auto (about 75%

The paint industry is expected to grow at 12-13% annually over the next five years from Rs.

280 billion in FY13 to around Rs. 500 billion by FY18. FY14 was a challenging year for the

industry as a whole due to subdued demand across key sectors and rising inflation.

The unorganised sector controls around 35% of the paint market, with the organised sector

accounting for the balance. In the unorganised segment, there are about 2,000 units having

small and medium sized paint manufacturing plants. Top organised players include Asian

Paints, Kansai Nerolac, Shalimar Paints, Berger Paints and Akzo Nobel.

The paints sector is raw material intensive, with over 300 raw materials (50% petro-based

derivatives) involved in the manufacturing process. Since most of the raw materials are

petroleum based, the industry benefits from softening crude prices.

Industry Performance

Revenue of Indian Paint Industry

Market Cap

Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar

TTM 80,908.33 15,695.95 12,072.34 6,953.28 307.77

21000

24000

29000

40600

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

FY ‘11 FY ‘12 FY ‘13 FY ‘14

Industry Performance

Revenue (INR Crore)

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*TTM – Trailing twelve months, all figures in INR Crores

Source: valueresearchonline.com

Total Income


TTM 13,910.65 4,196.06 3,192.91 2474.6 530.3

Mar ‘14 13,548.06 3,905.67 2,883.23 2370.1 486.5

80,908.33

15,695.9512,072.34

6,953.28307.77

0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

80,000.00

90,000.00

TTM

Market Cap


13,910.65

4,196.063,192.91

2474.6

530.3

13,548.06

3,905.672,883.23

2370.1

486.5

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00


Total income

TTM Mar '14

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*TTM – Trailing twelve months, all figures in INR Crores

Source: valueresearchonline.com, equitymaster.com

Competitor Analysis Net revenue from operations, EBITDA and EBITDA margin (crores), PAT

Asian Paints

FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14

Net Revenue From Operations(Crores) 5134 6336 7964 8960 10419

EBITDA(Crores) 1154 1232 1493 1673 1951

EBITDA Margin 22 19 19 19 19

Profit After Tax(Crores) 775 775 958 1050 1169

Berger Paints

FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14


EBITDA(Crores) 200 253 308 367 420



Kansai Nerolac

FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14


EBITDA(Crores) 200 253 304 367 420

EBITDA Margin 11.5 15.5 14 12.5 13


Akzo Nobel

FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14


EBITDA(Crores) 221 243 286 327 249



Shalimar Paints

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FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14


EBITDA(Crores) 26 28 38 36 21


Profit After Tax(Crores) 10 12 14 11 -3

The net revenue from operations refer to the sales made by these organizations by the virtue

of their operations. Asian Paints undoubtedly leads the pack since it is the market leader.

EBITDA is an acronym for earnings before interest, tax, depreciation and amortization. It is an

approximate measure of a company's operating cash flow based on data from the company's

income statement.

EBITDA margin is the measurement of a company's operating profitability. It is equal to

earnings before interest, tax, depreciation and amortization (EBITDA) divided by total

revenue. Because EBITDA excludes depreciation and amortization, EBITDA margin can

provide with a cleaner view of a company's core profitability.

Profit after Tax is the profit earned by an organization after paying off the taxes to the

government. This is yet another important factor to look for the profitability of a company.

Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints

CAGR 15.21 15.44 14.94 18.36 5.65

0

2

4

6

8

10

12

14

16

18

20

Asian Paints Berger Paints Kansai Nerolac Akzo Nobel Shalimar Paints

CAGR

CAGR

Source: Company reports, Bloomberg, Moneycontrol.com, equitymaster.com, BP equities research (www.bpwealth.com)

CAGR for the paint industry in India

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Considering the sales made in the FY 09-10 and FY 14-15 are wholly contributed by the top 5 paint companies, the CAGR is: FY 09-10 paint industry valuation: 12750 crores FY 13-14 paint industry valuation: 24600 crores CAGR: 14.05%

Trends in the Industry

Perception Change from Aesthetic to Protective Coating

Focus on Research and Development

Launch of Various Innovative Product Offerings

Increased Thrust on Brand Creation and Distribution

Water Based Paints Substituting Lower End Paints

Tinting Systems a Trend Now

The Future Prospect

India’s strong economic growth has propelled the paint industry to double-digit growth over

the past few years and has made it Asia Pacific’s fastest growing paint market. Despite fast

growth, India’s per capita paint consumption is still abysmally low at around 2kg/year. Due

to increased Government funding for infrastructure, demand for paints both in industrial

and decorative segment is set to rise, thereby rendering Indian paint industry to be poised

for further growth.

Nearly 65% of the paint market is organized. The organized market is highly concentrated

and a classic example of an oligopoly, where entry barriers are high and the ‘top-5’ players

capture most of the market, while the unorganized market is highly fragmented with over

2,000 players.

Decorative paints segment is expected to witness higher growth going forward. The fiscal

incentives given by the government to the housing sector have immensely benefited the

housing sector. This will benefit key players in the long term.

Although the demand for industrial paints is lukewarm it is expected to increase going

forward. This is on account of increasing investments in infrastructure. Domestic and global

auto majors have long term plans for the Indian market, which augur well for automotive

paint manufacturers like Kansai Nerolac and Asian Paints. Increased industrial paint demand,

especially powder coatings and high performance coatings will also propel topline growth of

paint majors in the medium term.

The paints sector is raw material intensive, with over 300 raw materials (50% petro-based

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derivatives) involved in the manufacturing process. Since most of the raw materials are

petroleum based, the industry benefits from softening crude prices.

The GDP Correlation

There is a high correlation between the paint industry growth and the GDP growth rate (as

per the calculations, the correlation factor comes out to be o.76 and since it is greater than

0.7 we assume there is high correlation between the two factors. Also, we observed that the

paint industry volumes grows 1.5-2.o times the change in GDP.

We anticipate the GDP to surge to 5.4%, 6.3% and 7.5% in 2015, 2016 and 2017 resp. as

projected by the Government. This is also due to the fact that there is a new stable and

business friendly government at the center. Thus we estimate the paint industry to grow at

a pace of around 11-13% and 15% for the next three years.

Increase in GDP will increase standard of living. With rise in income level, consumers will

increase consumption which in turn will help the decorative segment.

Growth in housing sector will increase urbanization, provide cheaper loans and shift to

permanent housing structures will increase spending in the decorative segment.

New projects in roads and ports will increase revenues of paint industry and drive the

infrastructure segment.

Thus since we are assuming the industry to grow at the pace of 11-13% and 15%

respectively for the next three years,

Current valuation (FY 13-14): 24600 cr

Net forecasted sales in 2014-15: 27306 cr



Analysing Urban & Rural demand

There is no clear distinction between the rural and urban demand for paints in India based on

secondary research data available. However, we may infer that since 35% of the paint industry

is made up of the unorganised market which amounts to about INR 14200 crores, there is

substantial demand. Increase in the level of education, development of the rural market, and

increase in the income level. Industry experts point that the demand for paint in the rural

market is influenced greatly by the monsoon showers. Another factor which is key is that due

to the diversity not only in choices and beliefs but also in geographical and climatic conditions,

it is difficult for the major players to penetrate into the rural market.

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Market share

The below chart indicates the market share of KNPL and its competitors as on November

2014. This indicates the market share based on both industrial and decorative paints, hence

it is the overall market share in the paint industry as a whole.

Asian Paints is the market leader as it controls approximately 47% of the overall market share

and around 75% market share in the decorative paints. Decorative paints account for over

77% of the overall paint market in India. Berger Paints, is the second largest player with a 14%

overall market share and around 17% market share in decorative paints. Kansai Nerolac

(KNPL) is the third largest player as it has a market share of approximately 12% overall but it

is the market leader in the industrial paints with a market share of close to 45% market share.

Akzo Nobel has about 6% market share.

- Market share of top five players in the last two years

2013 (in %) Evolution 2014 (in %)

Asian Paints 38 +11 49

Berger Paints 11 +3 14

Kansai Nerolac 10 +7 17

Akzo Nobel 8 -2 6

Shalimar 5 0 5

Source:www.sannams4.com/wp-content/uploads/2012/09/Sannam-S4-Presentation-India-Paint-and-Coating-Industry-

Sector-Fast-Facts.pdf

38

1110

8

5

28

Market Shares in 2013 (in %)

Asian Paints Berger Paints Kansai nerolac

Akzo Nobel Shalimar Others

49

14

17

6

59

Market Shares in 2014 (in %)

Asian Paints Berger Paints Kansai Nerolac

Akzo Nobel Shalimar Others

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Marketing Strategy of Competitors

Asian Paints

Product

The range of products of Asian Paints included paints for interiors, exteriors, metal and

wooden surfaces.

Price

Asian paints classify its products into 2 categories- economic and premium. In both economic

and premium they have metal paints, wooden paints and cement paints (interior and

exterior). Premium quality cost between Rs. 15000 to Rs. 17000 and economic quality cost

about Rs. 9000to Rs. 10000 for 20 Liter pack of same type of paints.

Promotion

Asian paints choose to invest in Radio, TVCs, Print, Internet, OOH, POP, Retail Outlets,

Seminars, and Workshops concerning the advertising. Asian Paints use a lot of promotion‘s

techniques such as advertising Campaign, sales promotion, personal selling, direct marketing

and public relation in order to increase sales. The customers really liked the ‘Mera Walla Blue”

campaign of advertising. Asian paints use high profile brand ambassadors like Akshay Khanna,

Saif Ali khan, Soha Khan.

Place

- 4 manufacturing units

- 6 regional distribution centres

- 55 depots

- 15000 dealers

- 90 000 sub-dealers

- 3000 Asian Paints stores

- 4500 world colours stores

Berger Paints

Product

The range of products of Berger Paints included paints for interiors, exteriors, protective

coatings, undercoats, chemical coatings, metal and wooden surfaces.

Price

- The prices of different brands in the same segment are quite similar with just a

difference of INR 10-15.

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- The speciality product can be priced at a higher price.

- Pricing decisions in the paint industry largely depend on the price of the inputs like

raw materials and petrol. If one of this element increase or decrease, it will affect all

the segment in the market.

- Berger offer 5% margin to the dealer and offer numerous discounts like cash, volume,

seasonal discounts

Promotion

- Berger use different media for advertising : TV, newspaper, magazines, radio

- Demonstrations of colour on wall are provided by the company to make people aware

of the brand

- Berger use temporary price reduction to increase their sales

- They give incentives promotion scheme to maintain the dealer

- Berger paints use sampling in order to convey the word of mouth

- Organise contests and give reward between dealer to promote push strategy

- Involve key players who influence the final purchase decision

Place

- Berger has a countrywide distribution network of 15 000 dealers

- 8000 tinting machine

- Strong presence in the western and southern regions by setting up exclusive retail

outlets and distributor base

-

- lway

- Distribution : 7 manufacturing facilities in India

- 85 depots, several regional, area offices

AkzoNobel

Product

The range of products of AkzoNobel included paints for interiors, exteriors, protective

coatings, undercoats, chemical coatings, metal and wooden surfaces. Their focus is majorly

on industrial coatings as they have superior technology.

Price

Price vary a lot, depending of the product and the volume of paint. It goes from 68 to more

than 7000 rupees.

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Some prices:

1 litter 4 litres 10 litres 20 litres

Velvet touch

trends

383 1501 3677 7300

Dulux super

smooth

223 895 2137 4179

ICI Magik 68 304 (5 litres) 553 1025

Promotion

- -offers lots of promotions to dealers in order to increase loyalty toward the brand.

- -promoted sales by giving free products and discounts to distributors, occasional

painters and contractors.

- -in-shop promotion (samples, promotion stands)

Place

- -100+ franchisees points (Dulux Decorative Centres)

- -4 manufacturing points

- -1700 employees in manufacturing, selling and distributing across India

Analysis of performance of Kansai Nerolac

Kansai Nerolac Paints Limited (KNPL) (formerly known as Goodlass Nerolac Paints Ltd) is the

largest industrial paint and second largest decorative paint company of India based

in Mumbai. It is a subsidiary of Kansai Paints Ltd., Japan. It is engaged in the industrial,

automotive and powder coating business. It develops and supplies paint systems used on the

finishing lines of electrical components, cycle, and material handling equipment, bus bodies,

containers and furniture industries.

Product

Decorative Paints: Interior wall paints, Exterior wall paints, Wood surface paints and

Metals surface paints. Under decorative paints 3 basic variants are available which are

based on eco-friendliness, metallic finish and hi-gloss.

Automotive Coatings: Pre-Treatment Chemicals, Electrodepostition, Intermediate

Coats/Primer Surfacers, Topcoats, Clear Coats, Touch Up Paints, Auto Refinishing

Products, Heat Resistant Paints, and Underbody Paints & PVC Sealants & Transit

Protection Films.

Performance Coatings: Performance Coating are available for wide range of products.

For household appliances and metal fittings in factories, there is a comprehensive

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range of general industrial coating systems like P.T. chemicals, Primers, Coil Coat, Heat

Resistant Paints & Metal Decoration Coatings. Powder Coating is now increasing in

popularity because of its high quality, resistance to corrosion, the apparent ease of

application and the environmental friendliness of the technology

Place

In India the company has major presence in Assam, Goa, Gujarat, Haryana, Himachal Pradesh,

Madhya Pradesh, Orissa, West Bengal, Rajasthan, Maharashtra, Punjab, Uttaranchal, Bihar,

New Delhi, Tamil Nadu, and Uttar Pradesh. Kansai Nerolac Paints Company has manufacturing

units situated in Vatva, Lote Parshuram, Jainpur, Bawal, and Perungudi. The total production

capacity of the plants of the company is around 161,100 TPA and all the plants are

technologically advanced and comparable to most state-of-the-art plants in the world. Kansai

Nerolac Paints has a very wide network of more than 11,000 dealers spread all over the

country. KNPL also has a comprehensive and vivid website which is accessible to people all

over India and offers ‘store locator’ functionality.

Promotion

KNPL spent INR 320 crores on selling and distribution in FY ’14. The company runs advertising

campaigns on television, print media and online. KNPL appointed one of the most well-known

personalities in India, Shah Rukh Khan as their brand ambassador in the year 2010 and he has

been closely associated with them since then. KNPL has made strategic tie-ups with leading

e-tailer Flipkart during the festive season (Oct-Nov). The interactive consumer interface on

the website allows one to browse through a gallery of wall finishes, designer textures, product

benefits, videos and customer testimonials before making the purchase. Nerolac also offers

up to INR 10,000 discount throughout this festive period. KNPL 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.

Price

KNPL prices its products as per the standard pricing of the industry. Its premium products

range from INR 350-500, the mid-tier products range from INR 250-300 and economy

products range from INR 100-200 (wood and metal finishes). These are not for industrial

coatings.

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SWOT Analysis of Strategic Business Unit

Strengths

Well-known brand

Accessibility to consumers

Eco-friendly

Weaknesses

In decorative paints Industry Customer tastes and perceptions change very fast and

products may become obsolete with change in trends, hence production planning and

inventory problem.

Asian Paints is still perceived as the most trusted brand.

Opportunities

Using its Japanese R&D to gain competitive advantage

Expansion initiatives in Nepal & Sri Lanka

Threats

Competition from Berger Paints

Supply of Titanium dioxide

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SEGMENTATION, TARGETING & POSITIONING Segmentation

The following segmentation variables have been considered while segmenting for a paint

variant:-

1. GEOGRAPHIC: Tier 1 and Tier 2 cities – 74 in number. This classification is done on the

basis of HRA paid to public servants employed in various parts of the country. This

choice is done keeping two things in mind. First, the income of people in the

geographical area so that may be able to afford painting activity. Second, Tier 1 and 2

cities will have stronger distribution networks than cities in lower tiers.

2. DEMOGRAPHIC:

a) Age : Above 18 years

b) Family Size: Married and Single

c) Occupation: Working Professionals, Housewives

It tries to include anyone who has an influence in the buying decision for paints.

3. PSYCHOGRAPHIC: Achievers, Experiencers, Thinkers, Strivers are all part of the

segment.

4. BEHAVIOURAL: Based on attitude, knowledge and response for product.

a) Benefits: Quality, Economy

b) User status: Non-user, Potential user, First time user and regular user

c) Loyalty: Medium, None

d) Awareness: Low, Medium & High

SEC Classification: According to the new SEC classification, 15% of total households fall under

A1, A2, A3, B1 & B2 category. As per the report published by MRUC, these households own a

television, subscribe to newspapers and have internet connections. People in this category

are more informed and hence are more likely to try new products aimed at enhancing the

quality of life. The condition of residence is an indicator of quality of life.

Targeting

Interior paints offer a number of variants currently. There are paints available for children eg.

‘Impressions Disney’ as well as a number of options ranging from eco-friendly to economy

class. For our new variant of interior paint, we are targeting the following set of individuals:-

1. Middle and upper class home owners who undertake painting activities every 4-5

years and hence prefer to go for mid-range paints. These are consumers who are

looking for something new as they are open to changing styles. Over 65% of the

surveyed people indicated that they might also be willing to give the painting contract

to the company which manages everything end to end.

2. Distributors: Approximately 60% of the people surveyed indicated that the contractor

made the buying decision when it came to choosing the brand of the paint. These

21 P a g e | 21

contractors have close tie-ups with distributors based on commission. Having a strong

link with distributors makes penetration to the contractors easier.

3. Builders: With large number of residential apartments coming up Builders are a very

important target. Since a high quality paint job really helps in selling a house that is

why many builders turn to high quality paints. In terms of volume Builders provide

very high sales even though the margin might be a little lower.

Positioning

Through survey it was found that out of all the attributes that were most critical for

consumers while choosing a particular brand of paint following were most important (based

on cumulative frequency):

Low VOC (chemicals) – Ranked as either 1st or 2nd 15 times

Low odour – Ranked as either 1st or 2nd 14 times

For all the innovative attributes that could be provided, consumers preferred the below 2

were most important (based on cumulative frequency):

3D texture – Ranked as either 1st or 2nd 20 times

Reflective colours – Ranked as either 1st or 2nd 14 times

Low VOC (chemicals)

High VOC (chemicals)

High odour Low odour

Kansai Nerolac

AkzoNobel

Asian Paints Market share ~ 75%

Berger Paints Market share ~ 17%

http://www.business-standard.com/article/management/asian-paints-reaps-its-headstart-113082101170_1.html

Asian Paints

Shalimar Paints

Berger Paints

22 P a g e | 22

Objectives

Kansai Nerolac Paints Limited (KNPL) is currently the 3rd largest paint manufacturer in India

with a market share of 12% of the total organised market. Through the launch of this new

product in interior paints segment KNPL aims to capture 15% market share. Assuming the

CAGR to be approximately 14% (as calculated in the competitor analysis) the paint industry

would grow to about INR 46,300 crores by FY ‘16. 65% of which is in the organised sector,

which would be INR 30,100 crores approximately. KNPL’s closest competitor Berger Paints

has net sales of INR 4251 crores. Growing with a CAGR of 15.5% it would have net sales of

approximately INR 4909 crores, which would be a market share of 16%. To achieve a market

share of 15% and cut down the gap from Berger Paints from 2% to 1% KNPL would target net

sales of at least INR 4515 crores. Based on the CAGR of KNPL which is about 15% the expected

net sales would be approximately INR 4300 crores. A net sales of INR 215 crores is therefore

required from the new product to capture an overall share of 15%.

3D Texture

No 3D Texture

Non reflective colours Reflective colours

Asian Paints

Berger Paints

Shalimar Paints

Akzo Nobel

Target for Nerolac

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Note: Assuming that the market share of KNPL in the industrial paints segment does not show

any significant increase, which is a pessimistic approach.

Sources: www.bergerpaints.com/upload/investors/annual-reports/ar-13-14.pdf www.nerolac.com/low/financial/auditorsreport www.equitymaster.com/research-it/sector-info/paint/Paints-Sector-Analysis-Report.asp

Positioning Statement A positioning statement is a concise description of the target market as well as a compelling

picture of how the company want that market to perceive your brand. Though it may read

like something from your promotional materials, your positioning statement is an internal

tool.

“For every consumer who considers their home or office as an extension of their personality

and a part of their life, Nerolac brings a refreshing range of paints that combine innovation

and creativity to breathe life in to your walls in an eco-friendly manner.”

Marketing Strategy Kansai Nerolac Paints has decided to come up with a new paint for interiors. This new paint

has been formulated using a special compound that gives it 3D texture and reflective

properties. The presence of 3D texture would make the painted surfaces distinguish itself

from any objects in front or on it and reduce the effects of peeling. The reflective properties

reflect the natural or artificial light in a manner that amplifies the amount of lighting and

makes the surroundings look brighter even in low light. The main target has been decided as

the urban population above 18 years of age, who have an influence over the buying decision

of the paint. The paint would be made available in volumes of 1, 5, 10 and 20 liter packs. The

pricing decided by the company is based on the value it would provide and also target return

pricing. It would also follow our mission and vision statement of providing innovation and

superior quality of products and aim for leadership in the interior paints sector. The paints

would be available to consumers through the intensive network of dealers. Alternatively,

consumers will also have the option of selecting their paints through the website and getting

it at their nearest dealer. Utmost care has been taken by the company in following all norms

and regulations required to be followed for making industrial coatings. Some workshops will

be organized for spreading the awareness of this paint to the dealers and contractors who

would be given demos and shown the first hand product performance so they can

recommend it to their customers. A new campaign will also be started on television starring

the brand ambassador of KNPL, Shah Rukh Khan to spread more and more awareness about

this product.

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Action Plans

Product Strategy After doing a thorough survey and many analytical and logical analysis, KNPL found that the

consumers found two things most important when it comes to paint and that were 3D texture

and reflective colors. These two features are considered as the innovative features in the

interior paint segment and so far no company has launched a very definite product with these

features. The feature of eco-friendliness has become an expected value in the interior paint

segment and the paint being launches by KNPL contains almost 0% VOC contents. This is also

in line with the recent focus of the company on healthy paints which is reflected in the ad

campaigns. So, for this purpose the company wisely launched a new product using their best

concept which is best suited for the consumers in which has got a balance of 3D texture and

reflective properties and contains 0% VOC. The target market for this type of paint was -

Middle and upper class home owners who undertake painting activities every 4-5 years and

hence prefer to go for mid-range paints. These are consumers who are looking for something

new as they are open to changing styles. Distributors as quite a lot of people leave the buying

decision on the contractor who in turn deals with the distributor. These contractors have close

tie-ups with distributors based on commission. Having a strong link with distributors makes

penetration to the contractors easier. Builders, with large number of residential apartments

coming up Builders are a very important target. Since a high quality paint job really helps in

selling a house that is why many builders turn to high quality paints. In terms of volume

Builders provide very high sales even though the margin might be a little lower. The paint will

be available in pack of 1, 5, 10 & 20 liter and the packaging will ensure that paint is not

adulterated.

Pricing Strategy 1. Pricing objective

In our case we will adopt the strategy of maximizing market share through penetration. We

are targeting a market share of 3% in the initial one year. For this we have taken the approach

of target pricing and combination with perceived value. Target pricing and perceived value

will help us in balancing two things. First, it will help in the increase of market share and

secondly it will keep the prices within a competitive frame.

2. Determining Demand

Through the launch of this new product in interior paints segment KNPL aims to capture 15%

market share. Assuming the CAGR to be approximately 14% (as calculated in the competitor

analysis) the paint industry would grow to about INR 46,300 crores by FY ‘16. 65% of which is

in the organized sector, which would be INR 30,100 crores approximately. KNPL’s closest

competitor Berger Paints has net sales of INR 4251 crores. Growing with a CAGR of 15.5% it

would have net sales of approximately INR 4909 crores, which would be a market share of

16%. To achieve a market share of 15% and cut down the gap from Berger Paints from 2% to

1% KNPL would target net sales of at least INR 4515 crores. Based on the CAGR of KNPL which

25 P a g e | 25

is about 15% the expected net sales would be approximately INR 4300 crores. A net sales of

INR 215 crores is therefore required from the new product to capture an overall share of 15%.

Through the analysis of prices of mid-level paints and premium paints it is found that the

higher category products are priced at about Rs. 900 per liter by Asian Paints. Taking a

conservative approach and pricing the paint (assumption) at Rs. 600 per liter we can calculate

that a sale of 3.6 million (215 crore/Rs. 600) liters of this product alone is required.

3. Estimating costs

The variable costs aspect for the product will be the one for which the company have to make

an investment. Making the operations efficient as much as possible will give the benefit to

the company in earning more profit and also pricing the product a little low compared to the

competitors. Efficiency in operations will also help the company in penetrating the market.

We have estimated that the manufacturing cost will be 50% of the total selling price to the

customer. Industry average for Promotion is 10% of per unit price for the product. As the

competitors have already made their brand strong in the market we will have to spend a

considerable amount on sales force. We can estimate to spend around 8% of per unit price

for the product. Distribution cost will be 20-25%, to promote the product effectively KNPL will

pay handsome margins to the retailers.

4. Analyzing Competitor’s Price Mix

Company Asian Paints Berger Paints Shalimar Paints

Product Royale Sensation Silk Luxury No. 1 Silk

Packaging 4 liter 4 liter 4, 10 liter

Ranking Leader Challenger Follower

Rate per liter Rs. 925 Rs. 875 Rs. 500

All the products offer the best kind of benefits available with the company, there is not much

of a difference in their packaging. The prices of all the products are near about same range of

Rs. 500-900. It can be inferred that this is the price perceived by the customers as fair and

they are happy to spend this much for high quality paints. It can also be said that the category

is such that it targets only the upper middle class society who are willing to pay premium for

a product which caters to their special needs. Price cannot be much of a deciding factor when

it comes to special needs.

5. Pricing Strategy

The pricing decided by the company is based on the value it would provide and also target

return pricing. It would also follow our mission and vision statement of providing innovation

and superior quality of products and aim for leadership in the interior paints sector.

6. Determining the final price

We have decided to keep the price at Rs. 825 per liter. We are not keeping the price too low

so that there may not be a price war. Therefore the target is to sell appx. 26 lac liters of paint.

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Distribution Strategy Kansai Nerolac is one of the leading company in the paint industry in India. While it has grown

from a relatively small, decorative paint company to a large business that has a vast consumer

customer base, the company's methods of distribution and marketing have changed over the

years.

The basic distribution and marketing strategies are still similar to initial strategies used when

Kansai Nerolac opened its doors.

Kansai had used the strategy of offering wide range of products to push competitors to side

and become the Indian leading company in decorative paints like in this new product they

have offered different types of color, odor free paint, chemical free paint and etc.

By launching this new product the company is trying to increase its share and uproot the legs

of Asian paints from the paint market and take its place.

The companies that have a larger selection available for clients are likely to retain those clients

and customers which are limited and do not have color choices.

Technology is large part of Kansai Nerolac's distribution success. According to the latest

distribution strategy case study of Nerolac Kansai, the company provided automated

machines that mixed paint colors at the distributors to allow customers and consumers more

range in color and more options and so this is how new vibrant colors are offered in this new

launch.

Big problem with the paint companies in India was a competitive market in the large cities,

where distribution was relatively easy and the risks were low. Kansai had started its launch of

new product by working from the rural areas, where distribution was a challenge and where

the companies had overlooked.

Promotional Strategy The company sponsored many charity events by its new launched product's name. These

shows were one of the major attraction to the people and so this was a right step taken by

the company in order to come between the people.

Like for example recently the company sponsored an event on health of the people and

there promoted there product by saying that as their paint was chemical and odor free so

the people will have no allergies and side effects.

The company also started running advertising campaigns on television, print media and

online.

The interactive consumer interface on the website allows one to browse through a gallery of

wall finishes, designer textures, product benefits, videos and customer testimonials before

making the purchase. Nerolac also offers up to INR 10,000 discount throughout this festive

period.

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

Sales force Strategy Sales force of a company is very important in its distribution channel. Sales managers must

be able to locate prospects, develop them into customers and grow the business. Sales

Management which is concerned with the direction & control of sales force refers to the

management of sales personnel. Sales force management is “the planning, direction & control

of personnel selling, including recruiting, self-selection, training (equipping, assigning,

routing), supervising, paying & motivating as these tasks apply to the personal sales force

management.” In addition to other responsibilities, controlling & guiding the sale force is one

of the important activities of management. Managing the sales force involves the

implementation of personal selling strategy.

As a department of the sales force, it is important to devote great attention in designing and

managing the sales force. So the following strategies can be employed

1) Sales department objective:

Every department needs to set clear objectives for steering progress to boost the

company’s revenue and expand its market share. Like other businesses, nerolac also

has a four-phase growth cycle: the initial startup followed by growth, expansion and

finally evolution into a mature business.

2) Sales Force size :

Sales force size should be based on the analysis of the industry growth their target

customers and the profits that the company is making in a region.

3) Training sales people:

The organization provides adequate training so that the applicant really becomes suitable

for the job. Researchers have clearly indicated that the following are some of the factors

which exist in case of a good salesman, i.e. a salesman properly trained as against one who

was not so trained:

He makes a more enthusiastic presentation.

He has the ability to clinch the order.

He has greater product knowledge.

He pays closer attention to ensure that services are rendered to the customers.

He has superior territory organization.

He answers objections better.

He can obtain more customer interviews.

The objectives of training are to give the following types of information to the salesmen,

namely:

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Knowledge of the company, its background and history. This will give him a perspective

as to how he fits into the organization structure of the company.

Knowledge of the Company's products and more particularly the `selling points' or

advantages that he can emphasize with a view to close the sale.

Knowledge of customers, i.e. details about the types of customers and how they should

be handled.

4) To enhance efficiency of sales teams, a web based portal was built and

individual logins were provided to members of sales teams. This web portal

provided all the necessary information of the customer, plus the sales team

members were able to submit their reports online. Moreover, the sales team was

able to harness real time information like company circulars, making the

complete sales process almost paperless. Other than the sales portal, the web

portal for dealers was also built to streamline process like stock availability,

details of payment, etc involving dealers. A key challenge in this project was

training sales teams and dealers who are usually not so tech savvy and reluctant

to change.

Profit and Loss Statement Assumptions:

Assuming the paint industry to be around 46300cr by FY’16 and assuming Kansai

Nerolac to acquire 15% of market share, a net sales of INR 215 is required from the

new product to capture the required market share.

Profit and loss account:

All Figures in INR and crores

FIRST

YEAR

SECOND

YEAR

THIRD

YEAR

TOTAL REVENUE 10% 215 236.5 260.15

LESS:

R&D AND MARKET ANALYSIS COST 3% 15 15.45 15.9135

COST OF RAW MATERIAL &

MANUFACTURING

45% 96.75 106.425 117.067

5

INITIAL COST SETTING UP OF

MACHINES AND FACTORY

Spread out 5 5 5

MARKETING AND SALES EXPENSES 30% 64.5 70.95 78.045

ADMINISTRATION AND OTHER

EXPENSES

10% 21.5 23.65 26.015

MISCELLANEOUS 5% 10.75 11.825 13.0075

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TOTAL COST 213.5 233.3 255.048

5

TOTAL PROFIT/LOSS 1.5 3.2 5.1015

Controls Through use of Information Technology

Kansai Nerolac Portal will be setup where company will monitor demand by the key accounts.

This will give insight about market trends and also help to understand these key accounts

better.

Order placing helpline for contractors and smaller accounts who can directly connect with

central company facility, place orders and receive stock from nearest warehouses leading to

operational effectiveness.

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References https://www.equitymaster.com/research-it/sector-info/paint/Paints-Sector-Analysis-

Report.asp

http://www.sourcinghardware.net/shrd/node/871

http://www.thehindubusinessline.com/economy/macro-economy/bright-outlook-for-

indian-paint-industry-assocham/article6388228.ece

Annual Report Of Kansai Nerolac

Annual Report of Asian Paints

FMG23C Grp2 Paints FinalReport

Documents

paints nerolac kansai

market analysis

berger paints

market share

market situation

overall market leader

shalimar paints

asian paints