Paints

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Paints

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Contents Market Characteristics History of the Indian Paints Industry Industry Overview and Outlook Trends in the Industry Porters Five Forces Analysis The Business Process Consumer Purchase Behavior Player Profiles Brands

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Market Characteristics  Decorative paints

• Caters to the housing sector• Premium paints (acrylic emulsions) used mostly

in the metros. • Medium range (enamels) popular in cities and

smaller towns. • Economy paints (distempers ) demanded in the

suburban and rural markets• Distribution network is the key

Industrial paints• Include powder coatings, high performance

coating, automotive and marine paints• Two-thirds of the industrial paints produced in the

country are automotive paints• Technological superiority and tie-up with

automobile manufacturers

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Indian Paints Industry: A Brief History

1902 – Shalimar Paints, Calcutta 1920-45: Asian Paints, Nerolac started operations 1965-91: Paints looked upon as luxury item 1983: Demand for automotive paints picked up with

entry of Maruti 1991: Reduction in excise duty and many controls on

the industry removed. After 1991: Steady growth, slow disappearance of

unorganized sector units and industry fragments.

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Industry Overview

Four main players • Asian Paints- 42%

• Goodlass Nerolac-20%

• ICI Paints- 14%

• Berger Paints- 15%

Asian Paints dominates decorative segment Goodlass Nerolac dominates industrial segment

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Industry Characteristics

Demand for paints linked to the industrial and economical growth

Decorative paints market naturally price-elastic Industry majors maintain a vast dealership network High inventory levels

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Key Success Factors

Costs and price drivers – raw materials Working capital management Heavy seasonality of demand Brand building Stocking and distribution Access to latest technologies

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Trends in the Industry Reduction in excise duties and taxes – larger scale

plants Customer power ! Proliferation of industrial use Super premium decorative segment – better margins Niche marketing strategies India – an exporter Industry expected to further consolidate

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More Trends… Increased emphasis on attractive packaging, more

sturdy packaging, lighter SKUs, etc. From tin cans to plastic tubs Asian Paints introducing “sub-stockists” Focus on rural markets Computerization and ERP Less seasonality

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Market Practices Discounting is the norm Dealers operate with the company on credit – 2 to 6% Stock sometimes “undervalued” to “save” taxes and excise Bulk purchasers and “key accounts” are given additional

discounts Distinct Segmentation in the Market

• Super economy segment – cement based - <Rs 100 per litre• Economy segment - oil based – Rs 100/- per litre• Medium segment – Rs 200 per litre• Premium segment- Rs 300 per litre• Super premium segment – Rs 1200 for a four litre pack

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Industry Prospects Market slated to grow from 9000 crores to 18000

crores in the next five years ! Per capita consumption of paint is India is around 800

gram, compared to 15-25 kgs in most developed countries.

Organized sector will grow 16 to 20% per annum 30 million new homes, millions of cars and vehicles,

Infrastructure projects all will fuel huge demand !

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International Players in India International retailers had until January 2006 been

able to operate in India only through franchise arrangements with local partners

The Indian Government passed a regulation in January 2006 allowing entry of foreign single retail brands without the need for franchise arrangement

Starting February 2006, foreign single retail brands are allowed to: • open their own stores in India;• own upto 51% of local joint ventures

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Porter’s Five Forces Analysis

Buyers power: High

Supplier’s power: High

Threat of entry

Low

Threat of substitutes

Low

Thus, overall the industry is profitable

Industrial rivalry : High

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Business Process Factory - nimbleness in the supply chain, efficiency and speed

of the production very important , since inventory turnover periods are significantly high.

Depots - normally owned by company, strict quality control essential to prevent loss of inventory due to product deterioration leading to them not meeting the product specifications.

Dealers• Dedicated dealers

Terms of trade more favourable

Higher margins , exclusivity of distribution , greater variety of product lines stocked , technical support in terms of MIS

• Independent dealers Form a large part of the distribution process in paints industry

Customer

Factory

Depot

Dealer

Customer

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Factors affecting purchase are price, finish, durability, range of colours/ shades

Maximum demand from the household sector who uses paint as a decorative medium

Purchase decision influencer-regarding the above parameters - the dealer or the painter- whose view is given major importance

Consumer Behaviour –Decorative Paint

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The major factors affecting purchase decision: • Brand, price, quality, durability, timely supply, credit and

discount terms, logistics service, relationship with supplier

Access to technological parameters assist paint companies to customize their products as per needs of specific industrial sectors

Consumer Behaviour –Industrial Paints

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The organized sector Asian Paints Goodlass Nerolac ICI Paints J&N Shalimar Paints

Players in the Industry

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Asian Paints

US $ 680 million Asian Paints Group has a presence in 23 countries

Ranks among the top 10 decorative coatings companies in the world

Subsidiaries - Berger International Ltd., Apco Coatings, SCIB Paints and Taubmans

Market leader in the decorative segment

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Asian Paints Asian Paints CSF – Supply Chain Market driven strategy Colour World – Paint retailing of the future ColourNEXT 2006 , Kids World Royale Play – readymade special effects Bye Bye Gattu

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Asian Paints

Promotional campaigns Point of sales activities and dealer incentives Shift from individual branding to umbrella branding –

building the Asian Paints brand Messages of durability, excellent finish, wide range

of colour availability – shade combinations

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Asian Paints

Asian Paints Asian Paints ApexApex

Asian Paints Asian Paints Ace ExteriorAce Exterior

Asian Paints Asian Paints Premium GlossPremium Gloss

Asian Paints Asian Paints Apcolite PremiumApcolite Premium

Asian Paints Asian Paints Premium EmulsionPremium Emulsion

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Asian Paints

TouchwoodTouchwood

Utsav Acrylic Utsav Acrylic DistemperDistemper

Tractor Acrylic Tractor Acrylic DistemperDistemper

Tractor EmulsionTractor Emulsion

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ICI Paints Multi-divisional company dealing in rubber

chemicals, paints, polycarbonate, others Revenues in 2004 - $157.51 million (paints business) Mainly auto refinishes and decorative paints Present in all categories Brands - Dulux, Duco, and 2K Only Indian decorative paint manufacturer producing

paints that are totally free from toxic metals

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ICI Paints

Promotional campaigns/positioning

Premium brands advertised through television Dulux Interior - Washability, durability, fungal

resistant, smoothness and exclusiveness Weathershield (exterior wall finish) – Prevents

exterior walls from cracking and eroding due to high rutile content

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ICI Paints

Dulux Velvet Dulux Velvet TouchTouch

Dulux Supreme Dulux Supreme 3-in-13-in-1

Dulux Acrylic Dulux Acrylic EmulsionEmulsion

Maxtilite Maxtilite DistemperDistemper

Dulux Satin Dulux Satin FinishFinish

Dulux Supergloss Dulux Supergloss 5-in-15-in-1

Dulux GlossDulux Gloss

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ICI Paints

Dulux Dulux Weathershield Weathershield

MaxMax

SupercoteSupercote

Exterior Exterior Acrylic PrimerAcrylic Primer

Maxtilite Maxtilite DistemperDistemper

Dulux Dulux TileshieldTileshield

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Goodlass Nerolac Goodlass Nerolac is the second largest paint company Gross group turnover of approximately Rs 1200

crores Undisputed leader in industrial segment with a

market share of 45% in industrial paints

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Goodlass Nerolac Five strategically located manufacturing units and a

strong dealer network of over 11,500 dealers across the country

As opposed to the Asian Paints strategy of hitting the entire gamut of paint segments, GNPL - mainly concentrated on industrial paints segment, which is technology driven

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Goodlass Nerolac Industrial

• Automotive coatings

• General industrial coatings

• High performance coatings - DIMETCOTE

• Powder coating

Company Product Category Kansai Paint Co., Japan ED Primers, Automotive & Industrial

Coatings Nihon Parkerizing, Japan Pre-Treatment Chemicals Oshima Kogyo, Japan Heat Resisting paints Ameron, USA High Performance Coatings

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Goodlass Nerolac Decorative paints

• "Nerocem" which is cement paint

• "Suraksha" the value pack

• "Nerotex" which is a texturized paint

• "Excel" the premium exterior paint

• “Impressions” the premium interior paint

• “Wonderwood” can be used for wooden surfaces

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