1

Year Long Project

Indian Paint Industry

Group 10

Nivas R (29034)

2

Industry scenario-Paint Industry

The Indian Paint industry, estimated to be a Rs.21,000 Cr. industry, 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 unorganized 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.

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 the monsoons.

3

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 acquiring Nerolac, Akzo Nobel, the world‟s largest Paint company, entered the Indian market

by acquiring ICI Paints (now Akzo Nobel India.)

How does the Industry Work?

The tabulation below gives us a clear idea about the various factors involved:

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.

4

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 OEM‟s.

DEMAND DRIVERS OF THE INDUSTRY:

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 brand 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 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.

5

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

favor 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. 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.

CHALLENGES

1. Cost of raw materials: The Cost of Raw materials are an important factor as the industry is

raw material intensive. Fluctuation in the prices of Titanium dioxide and Petroleum directly

affect the production cost. 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

6

paints. Also, a large portion of raw materials are imported, leaving the cost factor vulnerable to

exchange rate fluctuation.

2. MNC’s 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.

ASIAN PAINTS:

Overview:

Asian Paints, established in 1942 is India's largest paint company and Asia's third largest paint

company, with a turnover of Rs 96.32 billion. The group has an enviable reputation in the

corporate world for professionalism, fast track growth, and building shareholder equity. Asian

Paints operates in 17 countries and has 24 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 Limited, Apco Coatings, SCIB Paints and

Taubmans.

Forbes Global magazine USA ranked Asian Paints among the 200 Best Small Companies in the

World for 2002 and 2003 and presented the 'Best under a Billion' award, to the company. Asian

Paints is the only paint company in the world to receive this recognition. Forbes has also ranked

Asian Paints among the Best under a Billion companies in Asia In 2005, 06 and 07,.

International Presence

Today the Asian Paints group operates in 17 countries across the world. It has manufacturing

facilities in each of these countries and is the largest paint company in eleven countries. The

group operates in five regions across the world viz. South Asia, South East Asia, South Pacific,

Middle East and Caribbean region through the five corporate brands viz. Asian Paints, Berger

International, SCIB Paints, Apco Coatings and Taubmans. The Group operates as:

Asian Paints in South Asia (India, Bangladesh, Nepal and Sri Lanka)

7

SCIB Paints in Egypt

Berger in South East Asia (Singapore), Middle East (UAE, Bahrain and Oman),

Caribbean (Jamaica, Barbados, Trinidad & Tobago)

Apco Coatings in South Pacific (Fiji, Tonga, Solomon Islands and Vanuatu)

Taubmans in South Pacific (Fiji and Samoa)

Financial Performance of Asian Paints:

Capital History

Type of issue Year of

issue Ratio

No. of

shares

Total

cumulative

shares (No.)

Paid up Capital (Pre-IPO) 1982 – – 35,00,000

IPO 1982 – 16,85,185 51,85,185

Bonus issue 1985 3:5 31,11,111 82,96,296

Bonus issue 1987 1:2 41,48,148 1,24,44,444

Bonus issue 1992 3:5 74,66,666 1,99,11,110

Bonus issue 1996 1:1 1,99,11,110 3,98,22,220

Issue of shares pursuant to merger

with Pentasia Chemicals Limited 1996 1:25 2,94,000 4,01,16,220

Bonus issue 2000 3:5 2,40,69,732 6,41,85,952

Bonus issue 2003 1:2 3,20,92,976 9,62,78,928

Cancellation of shares pursuant to

merger of Pentasia Investments

Limited with the Company

2003 – 3,59,149 9,59,19,779

Total paid up capital as on 31st March, 2007 9,59,19,779

Highlights

Standalone

Net Revenue from Operations

Increased by 25.7% to ` 7964.2 crores

EBITDA

8

Increased by 21.2% to ` 1493.2 crores

Capacity Expansion

Expansion of Rohtak plant in Haryana by 50,000 KL per annum to 2,00,000 KL per annum

Dividend

The Board of Directors have recommended a final dividend of ` 30.5 per share

(Total Dividend for the Year will be ` 40 per share)

Consolidated Gross Revenue crosses ` 10,000 crores

Standalone Financials

Net Revenue from Operations for the standalone entity increased to ` 7964.16 crores from `

6336.08 crores in the previous year – a growth of 25.7%. The operating profit (EBITDA)

increased by 21.2%, from ` 1,232.16 crores to ` 1493.24 crores. The profit after tax for the

current year is ` 958.39 crores as against ` 775.15 crores in the previous year – a growth of

23.6%.

Consolidated Financials

The Consolidated Net Revenue from Operations increased to ` 9,632.24 crores from `

7722.30crores – growth of 24.7 %. Net profit after minority interest for the group for the current

year is ` 988.73 as against ` 843.24 crores in the previous year – a growth of 17.3%

Dividend

During the financial year 2011-12, the Company declared an interim dividend of ` 9.50 (Rupees

Nine and Paise Fifty only) per equity share in the month of October, 2011 and paid it in the

month of November, 2011. In addition, the Directors recommend payment of ` 30.50 (Rupees

Thirty and Paise Fifty only) per equity share as the final dividend for the financial year ended

31st March, 2012. If approved, the total dividend (interim and final dividend) for the financial

year 2011-12 will be ` 40 (Rupees Forty only) per equity share; ` 32 (Rupees Thirty Two only)

per equity share was paid as dividend for the previous year.

9

Transfer to Reserves:The Company proposes to transfer ` 412.46 crores to the general reserve.

An amount of ` 700.00 crores is proposed to be retained in the statement of profit and loss.

Company’s performance with respect to its competitors

Company Last

Price

Market

Cap.

Sales Net

Profit

Total

Assets

(Rs. cr.) Turnover

Asian Paints 4,493.50 43,101.55 7,964.16 958.39 2,656.00

Berger Paints 193.8 6,711.10 2,662.10 177.4 1,015.30

Kansai

Nerolac 1,180.00 6,359.25 2,600.60 215.9 1,132.15

Akzo Nobel 993.3 4,634.77 1,987.85 201.78 1,441.00

Shalimar

Paints 108.25 204.9 486.45 14.46 132.56

Jenson

Nicholso 2.8 10.48 53.24 0.69 -228.4

Asian Paints

Berger Paints

Kansai Nerolac

Akzo Nobel

Shalimar Paints

Jenson Nicholso

Series3 7,964.1 2,662.1 2,600.6 1,987.8 486.45 53.24

0.001,000.002,000.003,000.004,000.005,000.006,000.007,000.008,000.009,000.00

Sale

s tu

rno

ver

Sales turnover with respect to competitors

10

11

12

13

.

Information Technology

Information technology (IT) plays a key role in enabling the company to grow and generate

profits. Asian Paints is the only company in India to have integrated Supply Chain Management

(SCM) Solution from i2 Technologies, and Enterprise Resource Planning (ERP) solution from

SAP. With these IT tools firmly in place and with the backing of an extensive communication

platform, they are an internally enabled enterprise. The challenge is to integrate all our

stakeholders including suppliers, employees and customers and create an extended enterprise.

Asian Paints has launched a supplier portal that includes an automated digital document

exchange facility that will improve the efficiency and effectiveness of interaction with suppliers.

An employee portal has also been set up. Customer Relations Management (CRM) tools are

being used in Asian Paints Helpline and Home Solutions initiatives.

The successful deployment of ERP, CRM, Business Intelligence and Portal software from

leading solution providers and integrated SCM systems has helped improve efficiency in the

business as well as increase the transparency and accuracy of information across the company. In

order to affect 24x7 availability of our IT infrastructure, they are setting up a disaster recovery

14

site in South India. Installation of tinting machine is the important initiative in increasing the

penetration and helping the dealers to serve the consumers better, while decreasing the inventory

costs which inturn increase decorative sale.

To match the pace of growth of international business, asian paints are focusing on improving

transaction systems and messaging platforms. Implementing of a portal platform for improved

collaboration and sharing of information across all geographies is already underway.

IT Challenges:

Primary focus is to cut down working capital. Application of IT helps to get better ROC.

Demand forecasting helped to develop relevant manufacturing plan which helped to augment

markets. IT also helped to analyse the inventory levels to forecast market demands and reorient

production and to achieve greater customer satisfaction.

Future IT Developments:

Extend SCM to sales force.

Equip territory sales- in –charge with mobile communication devices such as PDA‟s.

To automate and web enable product requests and invoices for better supply chain

management.

Use of “Single SAP ERP Platform”

I2 Technology in Asian Paints:

Asian paints are using I2 technologies which helped them to improve greater customer

satisfaction. It helped in distribution planning, material resourcing, factory scheduling, and

industrial business solutions. I2 technologies integrate with SAP helped in cut inventory.

15

Human resource:

A talent pool of over 4700 employees employed across 23 countries brings in a unique blend of

mindsets and skills. An open and interactive work culture. A sense of ownership and freedom to

experiment at their workplace brings out creativity and innovation in every individual. Excellent

training is provided to develop leaders and re-strengthen competencies from within the

organisation. Besides encouraging achievers from within the organisation, they absorb the best

talent from some of the best management and technology institutes in the country. Thus, the task

is cut out for every individual within the framework of result-orientation, market insight,

customer perspective, trust, respect and problem solving.

FY 2011-12 has been a year of consolidation for Human Resource function of the Company.

Several initiatives. Learns cape, People Review process and Employee,Engagement are few such

initiatives where noticeable consolidation over last year‟s work were seen „Inclusive

participation and Inclusive growth‟ is the core of any peaceful Industrial Relation. Building and

working on comprehensive employee relations agenda has been an area of continued focus in the

Company. Accordingly, initiatives around Employee Relations and Engagement were taken up

across all major manufacturing units. The formation of a new JV in the industrial business

involved HR integration which included developing organization structure and policies to

support the independent entity. A repertoire of courses available through „e-learning‟ is

gaining momentum in Company which includes partnerships with reputed global organizations

like Harvard Business Publishing and Skillsoft. These have received encouraging feedback from

employees of the Company.

CSR Initiatives:

Company has always been in the forefront of conducting various CSR initiatives for the benefit

of the communities wherever it operates. These initiatives primarily revolve around Water

Conservation, Healthcare, Education and Elderly Care. They believes that growth in isolation is

not enough; it believes in the concept of sustainable growth taking into consideration the society

and environment at large.

Water Conservation has been one of the key focus areas Of the Company for a long time now.

Management of Water through Recycling and Reuse has helped in the conservation of this

16

depleting natural resource. The Total Water Management (TWM) Centre located in the premises

of Company‟s manufacturing facility at Bhandup, Mumbai has been championing the issue of

water conservation. It plays the role of Information and Demonstration centre on water

harvesting for the public at large. Various representatives from housing societies, corporates,

government bodies and even school and college students have visited the centre to gain a holistic

view on water management. Education is the foundation of progress and realizing this, most of y

Company‟s plants are working towards improving health and infrastructure facilities of schools

in their vicinity. The Penta Plant located at Cuddalore (Tamil Nadu) has adopted a government

higher secondary school in the village of Karaikadu in the nearby area. When the cyclone

„Thane‟ struck Cuddalore and its neighboring areas, essential provisions were distributed by

the Penta plant to the cyclone affected villagers.

Value Chain:

Operational Analysis:

1. Capacity Utilization

Decorative Paints:

Decorative Paints business contributes around 94% in the total paint business. The company

ranks no. 1, in the country in this segment with around 8500 colours to offer to its customers. It

has 5 manufacturing plants operating all over the country, which is strategically located in-order

to cater to the widely spread, market:

Suppliers PlantsRegional

Distribution Centres

Depots Retailers

17

Plant Capacity (Kilo litres per annum)

Bhandup, Mumbai 30000 KL pa

Ankleshwar, Gujarat 100000 KL pa

Patancheru, Hyderabad 80000 KL pa

Kasna, Noida 80000 KL pa

Sriperumbudur,Tamil Nadu 50000 KL pa

Rohtak, Harayana 150000 KL pa

TOTAL CAPACITY 490000 KL pa

Table: Manufacturing Plants and Capacity

In Decorative paint segment, the Company operates in 4 main segments i.e. Interior wall finish,

Exterior wall finish, Enamels and Wood Finishes. Besides, the company outsources around 25-

30% of its total production.

Industrial Paints:

In this business, the company caters to automotive, powder, protective coatings, road markings

segment, floor coatings and General Industrial Paints. Most of the industrial paints business is

operated by two companies‟ viz. Asian PPG Ltd. and Asian Paints Industrial Coating Ltd. The

company ranks first in the automotive paints business in domestic market. The company ranks

second in protective segment and first in the road-marking segment. Recently it has entered in

floor coating segment. The total capacity available for automotive coatings is 14,000 KL.The

company operates through following plants:

Powder Coating Plant Capacity (metric tons per annum)

Baddi, Himachal Pradesh 1800 MT pa

Sarigan, Gujarat 3600 MT pa

TOTAL CAPACITY 5400 MT pa

Table: Powder Coatings Capacity

Chemicals:

Chemical business includes manufacturing of Phthalic Anhydride (PAN) and Pentaerythritol

(PENTA). Asian Paints Ltd.,has its PAN manufacturing plant at Gujarat (capacity – 25,200 MT)

18

and PENTA manufacturing facility at Tamil Nadu (capacity – 3000 MT).The company

consumes nearly 50% of its production as captive consumption and sells the remaining in the

open market. This business contributes around 3% to company‟s consolidated revenues. Of the

above mention total capacity of Asian Paint Plants the total utilization of all the plants is 75 -

80% of the total capacity. The plants do not utilize the total capacity of the plants and the other

excess paint is being outsourced from other companies.

2. SUPPLIER BASE

➢ Mostly the Alkyd resin used in the manufacturing of paints is manufactured by Asian

Paints itself, but as the quantity manufactured by it is not enough, the company outsources from

many other companies one of it is Piyanshu Resins Pvt. Ltd., Hyderabad.

➢ Baba Containers is one of the suppliers of 20lit tins to the company.

➢ Asian Metal Containers is one of the suppliers of the printed tins to the company.

➢ Titanium Dioxide is the largest consumed raw material for manufacture of paints. It

constitutes around 30% of the total manufacturing cost. It

is available in two grade i.e. rutile (imported and mainly used by the Indian paint industry) and

anatese (manufactured domestically). Travancore Titanium Products, Kerala & Kerala Minerals

and Metal Ltd., are some of the suppliers of major suppliers.

➢ There are other petroleum based raw materials which constitute around 40-50% of total

raw material consumed. Hence any movement in crude oil prices will impact the profitability of

the company. These products are mostly supplied by HPCL and BPCL.

➢ Sudarshan Chemicals is major suppliers of pigments to the industry.

➢ Alpha Chem are the suppliers of driers to the company.

➢ 20microns ltd., Vimal Minerals, Himalaya minerals are the suppliers of Extenders to the

Company.

19

➢ Indofil chemicals, Pidilite Industries, Fine Organics ltd., are the few suppliers of additives

to the company. But of all the above the majority of Raw Materials for Asian Paints is being

imported from other countries.

3. INVENTORY MANAGEMENT

Asian Paints have been always on an upper hand when compared to others in terms of inventory

management. The inventory cost for Asian Paints is lowest in the industry. Asian Paints average

inventory level equals only 28 days sales, while the industry average is 51 days sales. This right

away provided a 45 per cent edge in inventory costs to Asian Paints compared to its competitors.

Asian Paints stock of finished goods was just 7 per cent of its net sales while for the others in the

industry it was nearly twice that level. What is particularly striking in this achievement is that

Asian Paint offered customers and dealers a high level of service in product delivery compared

to its competitors and yet kept the inventory costs down by 45 per cent compared to the

competitors. But large credit outstanding, running beyond two months or more, was a natural

concomitant of the distribution strategy chosen by Asian Paint. The dealers are required to

maintain stocks of all the SKUs that are on demand in the territory. It pushes up inventory levels

at the outlets. They need credit. Asian Paints allowed15-21 days credit for dealers located in the

major towns and 22-30 days credit for dealers in upcountry regions. Asian Paints had to pull off

a smart credit control strategy for survival. It resolved the thorny problem through an innovative

dealer incentive scheme. Asian Paints stipulated that each of its dealers should pay for the

supplies within a specified time norm and offered them as attractive incentive scheme for doing

so. It consisted of two components:

➢ A special discount of 3.5 per cent. This was referred to as the discount for perfection in

payments. It was passed on at the end of the year, provided each and every payment throughout

the year was made within the stipulated time norms.

➢ A cash discount of 5 per cent. This was paid for all outright cash purchases. It was given

whenever payments were received within 24 hours of the supply/invoice. In respect of outstation

accounts, the payments have been made in advance by draft in order to be eligible for the cash

20

discount. The scheme was a grand success. Asian Paints credit outstanding always stood below

25 days, while the outstanding of the other major companies were in the range of 40 days and

above. Systematic computerization also helped Asian Paints maintain the credit outstanding

within limits. Asian Paints „Apcolite‟, the largest selling brand of paint in the country, is

available in 151 different shades and in eight different packs sizes. Being in the business

of „colours‟,Asian Paints utilized colour to achieve differentiation, and none of its competitors

could match Asian Paints in this aspect. Simultaneously, AP also achieved the lowest cost

position in the industry. Normally, when a firm consciously opts for the differentiation route with

a wide product line, it automatically points towards higher inventory levels and consequently

higher inventory and other costs. But Asian Paints, through its effective distribution

management, inventory management and control of credit outstanding, in particular, managed to

retain its inventory size and inventory costs at the lowest possible level. Asian Paints actually

saved so much on inventory carrying costs that it almost earned its promotion budget through

these savings. This is again praiseworthy because Asian Paints spends as much as 10 per cent of

its sales on promotion, the highest in the industry. It has to spend so much in order to maintain its

differentiation advantage. But strikingly, it has kept its total marketing costs the lowest in the

industry. The two factors together i.e., the lowest cost position as well as the highest

differentiation position has conferred a significant competitive advantage on Asian Paints. This

are few of the techniques used by the Asian Paints to manage the inventory in a better way and to

decrease the cost of the products manufactured so as to reduce the price of the goods supplied to

the consumers.

4. LOGISTICS MANAGEMENT

➢ The warehousing facilities are well maintained.

➢ The Company specially looks after the environmental aspects and tries to avoid pollution

and pollutants by adapting eco-friendly production methods.

➢ The Company keeps low inventories in off seasons, and high inventory in festival

seasons.

21

➢ The Company has huge base of raw material suppliers, giving company bargaining power

resulting in higher profit margins than competitors.

➢ The company has succeeded in establishing themselves in rural parts of India by large

distribution network, retail outlets etc.

➢ Asian Paints has around 1,600 stock-keeping units (SKU; one SKU would mean a

product of a particular pack and shade), of which around 300-350are fast moving with extremely

high liquidity at the counter. This puts great pressure on the demand forecasting and inventory

management functions of the company.

Veritical integration

Vertical integration has seen it diversify into products such as Phthalic Anhydride and

Pentaerythritol, which are used in the paint manufacturing process. Asian Paints along with PPG

Inc, USA, one of the largest automotive coatings manufacturer in the world has begun a 50:50

joint venture, Asian PPG Industries to service the increasing requirements of the Indian

automotive coatings market. Another wholly owned subsidiary, Asian Paints Industrial Coatings

Limited has been set up to cater to the powder coatings market which is one of the fastest

growing segments in the industrial coatings market. This wholly owned subsidiary of Asian

Paints has entered into a tie-up with Canada-based Protech Chemicals which is one of the top ten

powder coatings companies in the world for technological know-how in the area of powder

coatings.

Product Portfolio

A brand Portfolio is the set of all brands and brand lines a particular firm offers for sale in

a particular category or market segment.At present it is having of over 2500sku‟s .In Decorative

paints, Asian Paints is present in all the four segments v.i.z Interior Wall Finishes, Exterior Wall

Finishes, Enamels and Wood Finishes. It also introduced many innovative concepts in the Indian

paint industry like Colour Worlds (Dealer Tinting Systems), Home Solutions (painting solutions

Service), Kids World (painting solutions for kid's room), Colour Next (Prediction of Colour

Trends through in-depth research) and Royale Play Special Effect Paints, just to name a few.

22

Asian Paints has always been ahead when it comes to providing consumer experience. It

has set up a Signature Store in Mumbai & Delhi in India, where consumers are educated on

colours and how it can change their homes.

Paint

AncillariesIndustrial

paintsDecorative

PaintsAutomotive

23

Portfolio Analysis

Decorative paints

Product Width Product line Cost Range

Interior Wall

Distemper

Tractor acrylic Mid Range

Tractor synthetic Mid Range

Utsav Acrylic Economy

Utsav synthetic Economy

Emulsions

Royale Play Premium

Tractor Emulsion Economy

Enamels Apcolite

Premium satin Premium

Apcolite Premium Gloss Premium

Utsav Economy

Exterior wall Emulsions

Apex Ultima Premium

Apex Duracast Rough

tex Premium

Apex Duracast Fine tex Premium

Apex Mid Range

Aprex stretch Mid Range

Ace Economy

Wood Surfaces

PU Exterior Matt Premium

PU Inerior Glossy Premium

PU Inerior Matt Premium

Melamyne Glossy Mid Range

Melamyne Matt Mid Range

Utsav Economy

24

Consumer Behavior and Preferences

In order to identify the consuming Behaviour of paints and how the paint industry operates, a

Marketing research was done. Interviews were made with dealers.Mr. Wilfred from

Tiruverumbur and R.S Subbiah from Trichy -colour world dealers gave the following insights

regarding the paint Industry.

Approx 256 paint shops are present in Trichy and its suburbs, out of which 300 shops sell

Asian Paints.

Margin of profit for the dealers was about 3% (very low compared to Berger).

But bulk deals and long term relationships makes Asian Paints more lucrative. Cash

rebates are more prevalent in the suburbs than in the cities as it is slow moving.

Dealers were classified based on the turnover, Critical Retail Shop if the turnover is 50

lakhs and Privilege club (Asian pillars) if the turnover is more than a crore. These

dealers will be given better margins close to 4%.

Peak Season is usually between December to January and during non –peak seasons

,dealers are encouraged to sell more by giving exciting offers like LCD Tv‟s and Foreign

tours.

50% of the sales happens through the Engineer‟s and Contractors and newly paint houses

contribute to 25% and Repaint takes around 10-15%.

Royale Play seems to the revenue garner and usage of emulsions has become a norm.

On the basis of this exploratory research, a survey was conducted to identify the consumer

behaviour pattern and what makes them to buy the product.

A sample of 37 was taken from BHEL Township and Tiruverumbur and BIM students.

Tools used : SPSS and Excel

Questionnaire is attached at the end for reference. Correlation and Partial Co-relation and

Descriptive Statistics was to analyze the relationship between different factors while buying a

paint product.

Some of the results obtained from the research are as follows

25

Decor

Influencing Decision in buying a paint product

The relationship between the factors are calculated by correlation by pearson‟s Co-effiecient and

by partial Co-relation.

3%

17%

30%

50%

Frequency Of Painting

1 Less than Once a year 2 1 -3 years 3 >3years 3 Total

# Answer

Responses %

1.00 Painter's Decision

19.00 51.35%

2.00 Suggestion of my Kith and Kin

15.00 40.54%

3.00 Suggestion by friends 20.00 54.05%

4.00 Suggestion by shopkeeper 11.00 29.73%

5.00 Advertisements

20.00 54.05%

6.00 Price of the Paint

16.00 43.24%

Total 101.00 100%

26

Correlations

Price Quality Brand Colours Service

Price Pearson Correlation 1 0.608 0.522 0.418 -0.046

Sig. (2-tailed) 0.000 0.001 0.010 0.785

N 37 37 37 37 37

Quality Pearson Correlation 0.608 1 0.450 0.643 0.322

Sig. (2-tailed) 0.000 0.005 0.000 0.052

N 37 37 37 37 37

Brand Pearson Correlation 0.522 0.450 1 0.441 0.267

Sig. (2-tailed) 0.001 0.005 0.006 0.110

N 37 37 37 37 37

Colours Pearson Correlation 0.418 0.643 0.441 1 0.235

Sig. (2-tailed) 0.010 0.000 0.006 0.162

N 37 37 37 37 37

Service Pearson Correlation -0.046 0.322 0.267 0.235 1

Sig. (2-tailed) 0.785 0.052 0.110 0.162

N 37 37 37 37 37

From the table, It can be inferred that there is a strong relationship between Price and Quality

and between price and Brand. There is also relationship between choice of colours and Quality.

By using partial Co-relation, one of the variable is controlled and the relationship between

remaining variable is calculated.

Correlations (Price as control variable)

27

Control Variables Quality Brand Colours Service

Price Quality Correlation 1.000 0.195 0.539 0.441

Significance (2-tailed) . 0.254 0.001 0.007

df 0 34 34 34

Brand Correlation 0.195 1.000 0.287 0.342

Significance (2-tailed) 0.254 . 0.089 0.041

df 34 0 34 34

Colours Correlation 0.539 0.287 1.000 0.280

Significance (2-tailed) 0.001 0.089 . 0.098

df 34 34 0 34

Service Correlation 0.441 0.342 0.280 1.000

Significance (2-tailed) 0.007 0.041 0.098 .

df 34 34 34 0

Correlations(Brand as the Control Variable)

Control Variables Quality Colours Service Price

Brand Quality Correlation 1.000 0.555 0.234 0.490

Significance (2-tailed) . 0.000 0.169 0.002

df 0 34 34 34

Colours Correlation 0.555 1.000 0.135 0.245

Significance (2-tailed) 0.000 . 0.431 0.149

df 34 0 34 34

28

Service Correlation 0.234 0.135 1.000 -0.226

Significance (2-tailed) 0.169 0.431 . 0.185

df 34 34 0 34

Price Correlation 0.490 0.245 -0.226 1.000

Significance (2-tailed) 0.002 0.149 0.185 .

df 34 34 34 0

Correlations(Quality as the control Variable)

Control

Variables

Colours Service Price Brand

Quality Colours Correlation 1.000 0.038 0.044 0.222

Significance (2-

tailed)

. 0.824 0.797 0.193

df 0 34 34 34

Service Correlation 0.038 1.000 -0.322 0.144

Significance (2-

tailed)

0.824 . 0.055 0.401

df 34 0 34 34

Price Correlation 0.044 -0.322 1.000 0.351

Significance (2-

tailed)

0.797 0.055 . 0.036

df 34 34 0 34

Brand Correlation 0.222 0.144 0.351 1.000

Significance (2-

tailed)

0.193 0.401 0.036 .

29

df 34 34 34 0

From the above variable it can be inferred that while Quality is kept as a control variable , the

relationship between other variables cannot be established. Hence Quality plays an important

role in the selection of paint.

While Interior walls painting (Mean score of 4.11/5) is more preferred to spend compared to

others followed by Exterior walls.

Asian paints is most preferred Paint brand(Mean Score of 4.41/5), followed by Berger and

Nerolac.

Positioning Over the years –a brief study

In the decorative segment, it is interesting to see how Asian Paints have changed the buying

process of the product like paints.Paints are usually considered to be a low involvement product.

In earlier times, the decision of the brand was taken by the builder/contractor and the home

owners does not involve much in the process may be the decision of color rest with the house

owners.

Asian Paints realized the need for brand building even during sixties. But at that point of time,

the company had a wide range of brands/subbrands. The focus of the company was on product

innovation and service network and managing quality proposition.The brand focused on mass

and rural market. Asian Paints had a mascot called Gattu who was created by the celebrated

cartoonist R K Laskhman.These efforts made the brand a leader during the late sixties.

Then the company realised that although volume justified the leadership position, share of mind

for the brand was very low. That was the result of the mass segmentation adopted by the brand.

Rightly so because the industry was driven by channel driven promotions, building a brand at

that time was" uncommon sense". During 1983, the company tried to reposition the brand as a

premium brand. Asian Paints initiated the corporate campaign aimed to position the company as

the number one player in the industry. The objective was to upgrade to a more margin premium

product marketer .The corporate campaign "Spectrum of Excellence" was aimed to increase the

Salience of the brand in a quiet market which didn‟t work for what it was intended.

30

But this campaign failed to inspire any interest in the consumers and the company felt that the

market is moving towards a commodity market where price is the most important differential.

Asian Paints undertook a consumer research aimed at understanding the perception of consumers

about the product category. The research revealed lot of interesting insights. Consumers felt that

paints could change the mood of the space and it was a sign of festival and plenitude. It could

make a gloomy place bright and pleasant. From this insight came the campaign of Asian Paints

associating itself with festivals. Research also confirmed that customers tend to repaint their

houses on the occasion of festivities. Thus born the campaign "Celebrate with Asian Paints". The

campaigns were carefully crafted and there were different campaign for different regions. These

campaigns effectively enhanced the brand equity of Asian Paints and established itelf as a

premium brand. More than that , these campaign ensured an emotional connect with a brand in a

low involvement category. The brand also phased out many subbrands and rest of the subbrands

was brought under Asian Paint's umbrella brand which it maintains till date.

During the late nineties the brand had to be reinvented. Because no longer festivities formed an

important part in ones life. Since many brands went after festival seasons, the positioning

platform has become cluttered. More over the consumer buying behavior has changed. The

category was becoming less seasonal. People started associating more importance to home decor

and interiors. The choice of color became a high involvement decision. From a low involvement

category, paint was increasingly becoming a high involvement category.

The brand also went in a brand overhaul. The logo was changed to a contemporary upmarket one

designed by Entreprise IG based in Singapore.The logo/design was to convey self expression,

sophistication

Thus came the birth of a wonderful positioning strategy created by O&M. The insight was

that the brand is about people and homes and homes reflect the people living in it. Hence " Har

Ghar Kuch Kehta Hai" translated to " Every Home has a story to tell". This campaign is a perfect

example of a brand laddering up and connecting to a higher level in the mind of the customer.

The campaigns reinforced the brand as a premium emotional brand.

Along with the campaign Asian Paints also ran parallel ads for its subbrands. Saif Ali Khan

31

endorsed the premium brand Royale .For Apex Ultima, the campaign was highly localized and

was different in different market conditions and localities

Taking a cue from the success of Ghar campaign , the brand took ownership of the COLOR. The

insight is that each color has a story to tell. The latest campaign reflects on the color and uses the

campaign " Har Rang Kuch Kehta hai" translated to "Every color has a story to tell". The brand

is so serious about the color that it has tied up with IIT to explore new colors and conduct

research on colors.Asian Paints is a classic branding story and the brand is still exploring and

growing

Points of Parity Points of difference

Quality Dealer Network

Colour variety Brand Identity

Availability of the stocks Service feature

Covering all price ranges Technology

Positioning map

Major players (nerolac, berger,D

ulux

Asian Paints

Contractor based

Local Players

-6

-4

-2

0

2

4

6

-6 -4 -2 0 2 4 6Qu

alit

y

Service

32

A perceptual map is drawn with quality along y-axis and service along the x-axis.The

map clearly shows how it has differentiated from its competitors by service has a feature.

Product life Cycle

Product life cycle is the stages through which a product or it‟s category bypass. From its

introduction to the marketing, growth, maturity to its decline or reduce in demand in the market.

Not all products reach this final stage, some continues to grow and some rise and fall.

Stages in Product life cycle

Introduction

This is the stage of low growth rate of sales as the product in newly launched in the market.

Monopoly can be create depending upon the efficiency and need of the product to the customers.

Profits are nonexistence as the expenditure is high at this stage. If the product is the new product

class, the users may not know the true potential, so in order to achieve that place in the market

extra information about the product should be transfer to its user through various medium. The

products involved may include highly customized products under Asian paints like the Royale

Play, Kids World,Asian Paints Premium Semi Gloss Enamel, Asian Paints Apcolite

Premium Satin Enamel and Phthalic Anhydride

Growth

Growth comes with the acceptance of the innovation in the market and profit starts to flow. As

the monopoly still exists manufacturer can experiment with its new ideas and innovation in order

to maintain the sales growth. It is the best time to introduce new effective product in the market

thus creating an image in the product class in the presence of its competitors who tries to copy or

improve the product and present it as a substitute me. The products like Emulsions falls under

this category which may include products likeAsian Paints Apex Ultima, Asian Paints Royale

luxury Emulsion,Paints Apcolite Premium Gloss Enamel.

Maturity

33

In this the end stage of the growth rate, sales slowdown as the product have already achieved it

acceptance in the market. So new firms starts experimenting in order to compete by innovating

new models of the product. With many companies in the market, competition for customers

becomes fierce, even though the increase in the growth rate of sales at the initial part of this

stage. Aggressive competition in the market results the profit to acme at the end of the growth

stage thus beginning the maturity stage. Asian Paints Tractor Acrylic Distemper,Asian Paints

Tractor Synthetic Distemper, Asian Paints Utsav Acrylic Distemper may fall under this

category.

Decline

This is the stage where most of the product class usually dies due to the low growth rate in sales.

As number of companies starts dominating the market, makes it difficult for the existing

company to maintain its sale. Not only the efficiency of the company play an important factor in

the decline, but also the product category itself becomes a factor, as market may perceive the

product as 'OLD' and may not be in demand. Lime powder(choona) and stainer which has been a

long time tradition in India is slowly weeding out from the urban tier 1&2 cities though it may be

Cashcows for regional players in the rural areas

Points of Parity Points of difference

Quality Dealer Network

Colour variety Brand Identity

Availability of the stocks Service feature

Covering all price ranges Technology

34

Positioning map

A perceptual map is drawn with quality along y-axis and service along the x-axis.The

map clearly shows how it has differentiated from its competitors by service has a feature.

Why Do Consumers buy the product:

Asian paints with its natural competitive advantage of size, strong brand equity and largest

distribution network has acquired the number one position in decorative segment in India. There

are few reasons due to which the customers in the decorative segment has been choosing Asian

Paint as their brand

1. As we know brand name has its own value & Asian paint is the number one in decorative

segment, so a purchaser automatically leans in purchasing it. For example, we have two

different types of paints, namely Apolite glass enamel & Apolite care Emulsion, which are

from Asian Paints, Nerolac paints, Berger paints & ICI paints. Again due to the competitive

Major players (nerolac, berger,D

ulux

Asian Paints

Contractor based

Local Players

-6

-4

-2

0

2

4

6

-6 -4 -2 0 2 4 6Qu

alit

y

Service

35

market the price is very closed for all the companies. But due to the Branch awareness of

common people they mostly tend to purchase the products from Asian paints.

2. Company have provided with different varieties of product for different income groups. For

e.g. UTSAV´ which is a low value paint, is growing at a faster rates & penetrating with high

speed at the lower income group. This policy is helping the company to move from metros

to small towns for branded products.

3. In India frequency of painting has still not increased, which is once is 5 years only. So

consumers are normally changing over to the better quantity & branded paints.

4. Asian Paint launched a new product Tractor Emulsion, which pulled the customer who used

distemper to move to emulation paints

5. The purchase decision like price, quality, advertising promotional schemes, packaging, the

finish of the product etc. and the distribution policy followed by asian paints vis-à-vis its

competitors are also the reasons why consumers prefer asian paints to others.

How do consumers buy Asian Paints:

Asian Paints‟ ability to innovate product offering has been well complimented by its marketing

strategies and desire to establish deeper consumer connect. Asian Paints is credited for

introducing many innovative concepts in the Indian Paints industry. Some examples are as

follows:

a) Colour World (Tinting Machines)

b) Signature Stores

c) Small Packs

d) Home Solutions (painting solution service)

e) Colour Next (prediction of Colour Trends)

f) Colour Ideas Stores

36

„Colour World‟ outlets today stand at 14,600. Essentially, a Colour World outlet has a tinting

machine which costs Rs2.5 lakhs and is paid for by the distributor. It requires a dealer to stock

base paint and provides shades by mixing the base paint with various pigments. It reduces the

inventory investment by distributor as it doesn‟t need to carry host of sku‟s. Also, it reduces

space cost incurred by the distributor.

As for customer, it provides various shades on the screen; thus, expanding the range of

offerings. It also eases the complexity in the entire supply chain as the distributor now has to

carry fewer sku‟s. Colour World and other such initiatives have helped in increasing the

customer participation in the buying process and also strengthens the customer connect of Asian

Paints, while enhancing the brand equity.

Asian paints have started a 24 hours customer help centre at Hyderabad. It is information

to consumers to answer their needs for any query related, to their products. Through this

company is also getting a lot of data related to the customers need & appreciations of the

products.

In order to provide better consumer service, company has connected all colour world

installations with Asian Paints main system through software & providing computes to dealers.

This is speeding up order execution, electronic banking will speed up recovery & money

transfer.

Conclusion

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 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.

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

70:50 is expected to move towards the global average of 50:50.Thus the Indian paint industry is

37

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.

Asian Paints is India‟s largest paint company having a Strong Brand & Huge Distribution

network. It has a sound financial past & is expected to have robust growth, both in the short-term

and long-term