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PAINT INDUSTRY

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

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% ICI Paints- 14% Berger Paints- 15% Other- 29%

Asian Paints dominates decorative segment Berger dominates industrial segment

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

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

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 heterogeneous markets Computerization and ERP Less seasonality

Market Practices
Discounting is the norm Dealers operate with the company on credit 5% 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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Porters Five Forces Analysis


Buyers power: High

Threat of entry
Low

Industrial rivalry : High

Threat of substitutes
Low

Suppliers power: High

Thus, overall the industry is profitable


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

Depot

Dealer

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

Customer

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Decorative Paint(Consumer Behavior)


Factors affecting purchase are price, finish, durability, range of colors/ 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

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Industrial Paints(Consumer Behaviour)


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

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Players in the Industry


The organized sector;

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MARKET SHARE
Sales

24 42 ASIAN ICI BERGER OTHERS 14

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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 Color 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 color availability shade combinations

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Asian Paints
Focus on all variety & population heterogeneous. Lead free guarantee. National presence, International vendors. Less focus on diversified Business. 3rd in Automotive paints. As whole industry is focusing towards environment safety, they have come up with water base paints(no harmful chemicals).
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Asian Paints
HR POLICIES:
Focus towards more on hiring through consultants/campus. Constant/Rigid pattern of motivation i.e.2 years duration, Scaling/Measurement. Less parameter of proper upliftment or promotion of employee. Less emphasis on enablers performance parameter. enablers when sales doesnt happen there are certain parameters through which ones performance/worthiness can be justified. Promotion Criteria: More emphasis on educational background instead of performance/results. Not much focus on employee safety. Increment/Incentives on the basis of MARGIN.
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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
Focused on key leading SKU(Stock Keeping Unit) and population therefore more of a industrial purpose. No lead & No chrome. International presence. Focus on all diversified Business. 1st for Aerospace & Automotive Paints.

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ICI Paints
HR POLICIES Recommendation/Reference/Campus. Priority keen focused on employee safety. Dealers Safety. Painters program/schemes. Feedback. Product trial. Increment/Incentives on the basis of PERFORMANCE.

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BERGER PAINTS
Post independence, towards the end of 1947, British Paints (Holdings) Limited, U.K acquired Hadfield's (India) Limited and thus British Paints (India) Limited was incorporated. From a production capacity of 150 tonnes and sales turnover of around Rs. 25 lakhs in 1947, The company has come a long way to become at one point of time; a part of the worldwide BERGER group in 1983 and thereby acquiring its present name Berger Paints India Limited to having subsequently gone through further ups & downs as well as ownership changes to gain its present status wherein the majority stake is with Delhi based Dhingra brothers and business revenue more than Rs 2400 crs. 27

BERGER PAINTS
Chemically formulated paints first appeared in the 18th century in Europe. The first to manufacture chemical paint was a German color chemist, Lewis Berger in 1970. To endure an environmentally safe and secure future with a commitment from the company and all its employee to practice and implement methods that help reduce the harmful effects on our environment

BERGER PAINTS A TOUCH OF GREEN IN OUR LIVES


Reducing waste and conserving natural resources in manufacturing facilities Launching green and energy efficient products. Installing energy efficient systems at all new plant facilities. Using renewable and sustainable raw materials in our formulations.

BERGER(Quality Policy)
Establishing a Quality Management System conforming to International Standards. Institutionalizing a culture of "Getting it Right, First Time." Upgrading our Technology continuously to meet expectations of customers. Planned and structured Training and Development Programmers for all employees. Creating an environment which encourages team effort and where each individual's contribution is recognized and valued.

BERGER PAINTS
Focused more on industrial products instead of retail market for brand awareness. Going GREEN. International presence but brand differentiation(different name). No presence in diversified Business.

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BERGER PAINTS
HR POLICIES
Through consultants or from competitors company. Less focus on employee safety. Increment/Incentives on the basis of SALES.

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RECOMMENDATION & SUGGESTIONS.


Asian Paints need to modify their HR policies, they should try to adopt western HR policies where people are not only being justified on the basis of sales but also be considered on the basis of enablers. ICI Paints should prioritize dealership appointment. Berger Paints should focus on retail market, they should increase their product range, price range and Quality.

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