Indian Paint Industry Mrp-1 Raj 92

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INTRODUCTION OF THE INDIAN PAINT INDUSTRY

PAINT INDUSTRY: YESTERDAY – TODAY – TOMORROW

Just imagine the world without color; like life without air. Paint a well known subject to mankind for coloring, decorating, identification and signaling from thousand of years. Man knows about colors since 200 B.C. during the same  period world famous AJANTA AJANTA CAVES were were painted.

In In Indi dia, a, wa way y back back in 19 1902 02 th thee fi firs rstt Indi Indian an Pa Pain intt indu indust stry ry star starte ted d manufacturing paints near Calcutta, namely SHALIMAR PAINTS. In last 100 years paint industry is equally dominant by more than 20-25 organized sector and over 2500 small scale units scattered all over India.

Presently, Rs.6000 crores Indian Paint Industry producing at 6.50 lac tones of paint & other allied coating material per/annum. Approx. 40% of total output is contributed by SMALL SCALE SECTOR to PROTECT AND DECORATE the national assets.

The Indian Paint Market is widely perceived as one of huge potential and  partly owes its continued growth to rising personal wealth and innovation on the  part of its leading paint companies. companies. While the Organized sector is responsible responsible for a majority of the market, the contribution from the small scale remains appreciable at about 40% of the market. Recent growth estimated from the paint industry have  been placed at 8 to 10% per/annum.

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Industry is planning to launch a major awareness campaign in a bid to enhance the per capita consumption of paint in the country. The paint industry is growing growi ng at a rate of 12% per annum: the per cap capita ita consu consumpti mption on is measly 650700 gms as against 8.8 kgs in Malaysia, 2.9 kgs in Thailand, 1.55 kgs in China, 26.8 kgs in Singapore and 19 kgs in Germany and 31 kg in USA. India has measly 0.6 % share in the world paint market; this is because of non-level playing field for  Indian companies in the areas of high cost of credit, high power cost, poor labor  laws, high freight cost and red tapism.

PAINTS

Paint consumption in India is highest is highest for decorative paints, which account for 70% of paint sales in India. The Rs.30,000 million organized sector   paint industry has a relatively small numbers of players. The top five players [Asian [As ian Pai Paints nts,, Ber Berger ger Pa Paint ints, s, Goo Goodla dlass ss Ner Nerola olac, c, Jenson Jenson & Ni Nicho cholso lson n (J& (J&N)] N)] account for close to 80% of total sales. The Indian Paint Industry has come a long way wa y fr from om th thee da days ys wh when en pa pain ints ts we were re co cons nsid ider ered ed a luxu luxury ry it item em.. To Toda day y the the awaren awa reness ess lev level el on pre preven ventin ting g cor corros rosion ion thr throug ough h pai paints nts is rel relati ativel vely y hig high, h, a development that should be a huge boost to the paint industry.

US$ 925.0 million (2000-01) worth Indian Paint Industry, offers profitable scope for revenue streams to manufacturers of both decorative & industrial paints. Factors that have been given emphasis include the low per capita consumption of   paints (1.0 kilogram), growth in construction sector (It is being offered industry status) & growth in the auto/white goods market respectively spurring demand for  decorative & industrial paints. The industry has also witnessed increased activity in the industrial variety of plants with the entry of MNC’s in auto, consumer  durables etc. which has been gaining steadily over decorative paints in the last one decade.

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Following are the major players in the Indian Paint Industry: • • • • • •

ASIAN PAINTS INDIA LTD (APIL) BERGER PAINTS ICI PAINTS GOODLASS NEROLAC PAINTS LIMITED (GNPL) SNOWCEM INDIA LTD JENSON & NICHOLSON

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TYPES OF PAINTS THE INDIAN PAINT INDUSTRY AT A CROSSROAD

This industry has traditionally been divided into two separate segments: The Organized sector and the Unorganized sector. The former consists of the major manufacturers numbering around 12 to 14, while the unorganized sector is said to consist of nearly 2500 small-scale units (SSU).

Paints can be of the following types: 1) Po Powd wder er Pa Pain intt

E.g. Dry distempers, cement paints, industrial powder coatings. 2) Pa Past stee Pa Pain ints ts

E.g. Stiff white paints or Safeda, Oil Paints, Oil bound washable distempers, Acrylic distempers. 3) Liqu Liquid id Pa Pain ints ts 1. Water Based Paints: e.g. Plastic emulsion paints. Solven ventt Bas Based ed Pai Paints nts: e.g 2. Sol e.g.. Ai Air-d r-dryi rying ng syn synthe thetic tic ename enamels, ls,

stowing synthetic enamels, lacquers, and varnishes. 3. High Solid Paints: mostly for industrial applications. 4. Sol Solven ventt Les Lesss Coatin Coating g for Indu Industr strial ial App Applic licati ation on: e.g. .g. Unsaturated Polyesters, Solvent less Epoxy systems.

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APPLICATIONS OF PAINTS IN DIFFERENT FIELDS 1. ARCHITECTURAL & DECORATIVE PAINT SEGMENT:

Also call lled ed ba bazzaa aarr pa paiint nts, s, and and ign gnor oraantl ntly cal alle led d by som someon onee as “DECORATIVE” paints perhaps because they are used for decorative purpose, are “DECORATIVE” generally sold through paint dealer for common house hold application, building, steel structures, bridges, factories etc for use in non corrosive environments.

Unlike Unl ike in the dev develo eloped ped cou countr ntries ies wh where ere Ind Indust ustria riall Pai Paints nts con contri tribut butee a major share in their total paint market, it is the Architectural or Decorative Paint that contributes between 65 and 70 % of the total Indian Paint Market. The 1  billion populations will require housing and the Government’s Policy towards hous ho usin ing g deve develo lopm pmen entt to pr prov ovid idee th thee Indi Indian an De Deco cora rati tive ve Pa Pain intt se segm gmen entt opportunities for growth. Demand for decorative paints will be pushed not only by new construction but also by refurbishment of existing buildings. Residential and commercial construction is expected to record growth rates of around 8% over the next few years. Building maintenance and concrete restoration industry will also get a boost as more and more owners realize the need for better maintenance. ⇒

Decorative Paints

Within the decorative paints segment, there exists considerable scope for new  products and for enhancing performance of several of the existing products. From the generalized applications of today’s products, The Indian

Paint Industry could move to products for specialized applications and cr crea eate te al alto toge geth ther er ne new w ma mark rket ets. s. In th thee em emer ergi ging ng bu busi sine ness ss er eraa wi with th im impo port rtss  becoming easier and large international companies willing to dump goods at

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cheaper prices, creating niche markets will act as insurance. Product development and investing in technology should become priority Areas.



Interior Decorative Paints:

Paints for interior use holds close to 50% of the market for Decorative Paints. Traditionally water based emulsion paints have found use on interior walls and ceilings. There exists scope for product innovations in paints for interior use. Multi-colored decorative paints for walls are one of the many new products that can enhance the general aesthetics and create new markets. Low odor and anti bacterial paints is another product with immense promise. promise. Water based transparent and pigmented wood coatings for domestic and commercial furniture, doors & windows, etc is anoth windows, another er use. We could also have medium duty commerci commercial al floor  coatings competing with marble, granite and other types of floor coverings. Floor  coatings can be formulated to provide designs, textures, etc unlike other types of  floor materials.



The Exterior Paint

It is the exterior of buildings and civil structures that is undergoing farreachi rea ching ng cha change nges. s. The tra tradit dition ional al cemen cementt pai paint nt has com compet petiti ition on fro from m oth other  er   products, perhaps for the first time in India. Possibility of a rapid expansion in the  paints for Exterior cannot be ruled out. It is also likely that the current five-year  life guarantees will increase to 10 year and even 15 year and more life guarantees. Emulsion-based paints for exteriors with 10 or 15 years plus performance with guar gu aran ante tees es are are no norm rmss in ma many ny coun countr trie ies. s. Wa Wate terr and and So Solv lven entt ba base sed d Anti Anti-carbonation coating is another product that has the ability to become a sought-after   product for exterior concrete surfaces. Anti-carbonati Anti-carbonation on coatings provide stain,

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fungus and mold free surfaces and have low dirt pick up characteristics to ensure high levels of aesthetics. Anti-carbonation coatings are specifically designed to stop or slow down the ingress of atmospheric carbon dioxide thereby protecting the reinforcements from early corrosion.

Cement paints itself could undergo modification to improve its performance attributes, and still remain as a single-pack dry powder that requires only on-site mixing with water prior to application. The modified cement paint would not only make it more durable than its present form but also give it a competitive edge against emulsion-based exterior paints. A new niche could become available in  between the existing existing type of cement pa paint int and emulsion paints fo forr exterior.

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2. INDUSTRIAL PAINTS: The industrial paint segment will also grow at a faster rate, especially due to it itss lo low w ba base se and and th thee fa fast st gr grow owth th ra rate tess in the the ma majo jorr user user indu indust stri ries es li like ke automotive and consumer durables. The major users of industrial paints are the tr tran anspo sport rt se segm gmen entt cons consis isti ting ng of Ra Rail ilwa ways ys – pa pass ssen enge gerr and and go good odss ca carr rrie iers rs,, Commercial vehicles, Passenger Cars and Two-wheelers and the several Off-The Road Ro ad Ve Vehi hicl cles es used used in const constru ruct ctio ion. n. In Indi dian an Ra Rail ilwa ways ys ha have ve on onee the the la larg rges estt consum con sumers ers of pai paints nts and wou would ld con contin tinue ue to dom domina inate te be becau cause se of the their ir she sheer  er  volumes. The Passenger cars, two-wheelers and the Commercial Vehicle segments where the Indian Paint Industry has been witness to technology changes can be compared to the best in the world.

The common man in India is more aware of the aesthetic part of paints rather than its protective properties, and so far it is the decorative segment that has  been aware of. But with the industrial and infrastructural development taking shape, things are changing. The use of industrial paints especially for maintenance is extremely low in the country. The developments of roads, bridges, power plants, development of ports, refineries and natural gas installations etc would enhance the use of protective paints. And it is here that the future of the Indian Paint Industry.

A principle concern for the Indian Paint Manufacturer is a lack of the value of coat coatings ings by exec executive utivess and managers responsib responsible le for prote protectin cting g corpo corporate rate and government assets. With many such agencies, coatings and corrosion controls do not have a high level influential internal advocate. Coatings are perceived as nonglamorous and non technology. The Indian Paint Industry therefore must increase the awareness of the criticality of protective coatings.

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3. Powder and Coil Coatings: The use of powder coatings is most often directly dependent on the fortunes of the consumer durable appliance and the white goods sectors. Conversion in these the se ind indust ustrie riess fro from m liq liquid uid paint paintss to pow powder der has been slo slow, w, whi which ch has not  provided the impetus to the growth of the Indian Powder Coatings. The automobiles ancillary industry is another prospective area for Powder Coatings, which in turn is dependent on the performance of the automotive industry.

4. Infrastructure & Industrial Maintenance Coatings: It is solid directly to the industrial manufactures of various equipments, appliances, cycles etc. these are generally stoving type but fast air drying paints may also be used in the cases, where stoving facility is not available.

This is one area of immense potential for the Indian Paint Industry, not only to carve out a niche business area but also for technology inputs. The vast countryside and its varying climate, urban and industrial centers provide one of the  biggest challenges for the use of paints and coatings for protective purposes with a  primary objective to enhance the service life of the structures from reinforced concrete are the targets for high-performance protective coatings. The India Indian n Paint Industry could collectively collectively revie review w exist existing ing pract practices ices,, which although may serve many situations but is not necessarily the best available coating products, systems and practices. The Paint Industry is best suited to redraw and reset performance specifications that would guarantee surface s urface protection to the users. Each specification could provide alternatives to its expected life span to first maintenance, which would allow users to choose the system that best suits him.

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 Naturally specifications would be separate for different substrates like for steel, galvanized steel and for vertical and horizontal concrete including specifications for reinforcements used in concrete etc. Separate specifications would be required forr in fo indu dust stri rial al an and d comm commer erci cial al fl floo oors rs as we well ll as for for vehi vehicl clee pa park rkin ing g de deck cks, s,  basements etc. Heav He avy y du duty ty chem chemic ical al & corr corros osio ion n re resi sist stan antt co coat atin ings gs & Lini Lining ngss that that comp compro romi mise se th thee pr prod oduc ucts ts in th this is segm segmen entt find find appl applic icat atio ion n at offoff-sho shore re oil oil  platforms, refineries, petrochemical plants, chemical & fertilizer plants, storage tanks, tan ks, in the pap paper, er, dye dyess & dye int interm ermedi ediate ates, s, pha pharma rmaceu ceutic tical al interm intermedi ediate ate manufacturing industries, etc. They are used for structural protection as well as li lini ning ngss & me memb mbra rane ness on me meta tal, l, conc concre rete te for for vert vertic ical alss as we well ll s ho hori rizo zont ntal al structures. Altho Al though ugh thi thiss seg segmen mentt is cur curren rently tly not a sig signif nifica icant nt con contri tribut butor or to the industry’s revenues, it is a segment that cannot be overlooked. If the Indian Paint Industry is to garner a position of the huge loss due to corrosion, this segment can  become a significant revenue contributor. It is estimated that the worldwide market for Heavy-duty Chemical & Corrosion Resistant Coatings is 1.5 billion US$ annually, and despite this large expenditure the world’s assets remain under protected. Many countries are known spend 4% of their GDP in annual maintenance for corrosion and corrosion control.

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5. Industrial OEM & Automotive: Thee st Th stow owin ing g pa pain ints ts fo forr th thee or orig igin inal al pa pain inti ting ng of ca cars rs,, truc trucks ks,, li ligh ghtt commercial vehicles, scooters, and motorcycles are sold directly to the automotive manufactures. They are not sold in market since their application is only possible in the factory set up.

Increa Inc reased sed paint paint tra transf nsfer er eff effici icienc ency, y, hig high h sol solids ids,, bet bette terr fin finish ish,, imp improv roved ed curing, lower energy usage are some of the challenges faced by the manufacturers of Industrial finishes. The transport sector is another that can do with better   performing paints as well as improved applications procedures. The Indian automotive coatings can said to have standards. However within the automotive coatings segment several innovations are still possible. Paints with heat resistant  properties for ancillaries, ancillaries, interior plastic plasticss are some that could be considered. considered.

Automotive refinish coatings are still the traditional nitrocellulose types. Although Altho ugh inter internatio national nal manuf manufactu acturers rers have come in with thei theirr inte internati rnationall onally y established 2K systems, these are still in their infancy. The commercial vehicles, off-road vehicles, railways, defense vehicles all could do with technology and innovate products and it is here that The Indian Paint Industry has one of its  biggest challenges.

6. Marine Paints For the application on ships, submarines, dockyards, offshore drilling rigs/platforms etc.

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7. Aircraft Paints: Spec Sp ecia iall pain paints ts ar aree used used to me meet et the the ve very ry exac exacti ting ng an and d spec specia iali lize zed d requirement in the Aircraft.

8. Defense Paints: The defense industry has its own norms and specialized requirement like camouflage and special paint are required which can be applied under prevailing conditions.

9. Specialty Paints: A vast vast vari variet ety y of th thee spec specia iali lize zed d pa pain ints ts fo forr use use in nu nucl clea earr plan plants ts,, rockets/satellite with very heat resistance, electrode position paints.

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Paint For Railway:

INDIAN RAILWAYS-THE LARGEST SINGLE CONSUMER FOR  PAINTS:

The Indian Railways is one of the largest consumers of paints and coatings in the country. The Indian Railways have its own captive manufacturing, repair  and refurbishment establishments for passenger coaches, freight and tanks wagons and loc locomo omotiv tives es and also also use lar large ge qua quanti ntitie tiess of pa paint intss for the their ir bui buildi ldings ngs,, workshops and other establishments. Indian Railways have always relied on their  own specifications for paints drawn from the Indian Standards. Unfortunately,

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these specifications have remained without major updating for many years and can at bes bestt be con consid sidere ered d as out outdat dated ed and not in lin linee wi with th mod modern ern int intern ernati ationa onall standards. For the Indian Railways it is an opportunity to not only lead the paint users in the country in using the highest quality paints and coatings similar tothose used internationally but also to innovate into using coatings with Low Volatile Organi Org anicc Com Compon ponent ents. s. To the Ind Indian ian Pai Paint nt Ind Indust ustry, ry, it bec become omess a col collec lectiv tivee challenge with the Indian Railways in re-designing specifications for paints and coatings and help in modernizing national assets.

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PAINT RAW MATERIAL

Paint is a mixture of four elements: solvent, binder, pigment and additives. Solvent gives the paint a liquid flow while the binder binds it to the surfaces. Pigments impart color and opacity to the paint and the additives give it special resistance properties. Paint production involves mixing of various raw materials in a balanced proportion. Based on the predetermine formula, pigments, extenders, resins and additives are grouped together in a dispersion or grinding mill. The ground mixture is then dispersed in a medium, which could be approximately 70% of the production cost.

Thr hreee hu hund ndre red d di diff ffeere rent nt typ ypees of raw mat ater eriial ar aree use sed d in pa pain intt manufactures and about 50 to 60 % of the inputs are petroleum based. The most critical input in paint manufacture are titanium dioxide (TiO2), phthalic anhydride (PAN)) and pentarey (PAN pentareythrit thritol ol (Penta (Penta). ). There are othe otherr raw materia materiall such as cast castor, or, linseed and soyabean oils and turpentine. The Industry imports around 30% of the raw material requirement.



INPUTS

The major inputs are Titanium dioxide (rutile and anatase grade), phthallic anhydride, organic pigments, pentaerythritol and resins.

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The major manufacturers of the important raw material and the status of  their availability are below:



Titanium dioxide:

This is the most and account for the 50% of raw material cost. It is available in two grades: Rutile and Anatase. Rutile grade titanium dioxide, the more expensive of the two, is used in high value decorative paints and industrial  paints. In India, Kerala Minerals & Metals Ltd. manufactures rutile grade titanium dioxide while three producers viz Travancore Titanium Products Ltd. and Kilburn Chemicals Ltd. Manufacture anatase grade titanium dioxide while the quality of  Indian rutile grade is good. It is not the case for anatase grade. A large portion of  Titanium dioxide is met from imports.



Phthalic Anhydride:

This is available in large quantity in India. There are alkost seven producers with a total capacity of over 280000 tones. I G Petro and Thirumali Chemicals are the major players accounting for nearly 80% of the capacity.



Organic Pigments:

The pigments consist of white or colored particles, usually in the form of   powder, which gives paint its color and opacity. Though the quantities used are smal sm all, l, th thei eirr pr pric ices es ar aree ve very ry hi high gh.. Th Thee ma majo jorr ma manu nufa fact ctur urer erss ar aree Su Suda dars rsha han n Chemicals, Color Chem and Clariant.

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Pentaerythritol:

It is used for the manufacture of synthetic resins. Availability of the Penta is not a problem as there are quite a few players including Asian Paint, which manufacture the product.

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TRENDS

Thee tr Th tren end d is seen seen in th thee In Indi dia. a. Th Thee shar sharee of sm smal alll-sc scal alee indu indust stry ry is continuously coming down with reduction of excise duty. Earlier, the excise duty used to be more than 40 %. Now, this has come down to 16%. Now we are able to effect eff ective ively ly com compet petee wi with th sma smallll-sca scale le uni units. ts. So, the ind indust ustry ry is con consol solida idatin ting g continuously since liberalizati liberalization. on.

TINTING MACHINE CONCEPT IN INDIAN PAINT INDUSTRY

The tinting machine concept in India has picked up in the last three to four  years yea rs and and the ma machi chine ne num number berss at the deale dealer’s r’s cou counte nterr has bee been n inc increa reasin sing g continuously. This in fact has revolutionized the paint selling. Under this concept the tinting machine, which can be manual or computerized operated, are kept at the deale dealer’s r’s cou counte nters. rs. The com comput puter er attac attached hed to the mac machin hinee is loade loaded d wit with h visualizing package, though which the customer can see various color schemes and select the shades liked and same tinted instantly. From the company’s point of  view it has reduced the product launch time, as you are now offering economy of  scale, and develop shades by using various proportions of colorants, Which can be tinted with the machines. Handling of stock has become easier and so is the forecast with the reduction in number of SKUs. There are about 5400 machine already placed and the trend will further pick up.

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While Jenson and Nicholson was the first company to go for this concept, others have overtaken. Like Asian has over 2000 machine, Goodless over 1400 and Jenson is having around 375. Goodless has gone one step ahead by launching a new concept known as ‘Magic Eye’ whereby a spectrometer is attached to the computer and it can pick up shade from a sample of any substrate like fabric,  panel, shade chip, or old paint chip. With this any shade of customers choice can  be made at the shops having having this facility.

Pain Pa intt comp compan anie iess ha have ve star starte ted d th thee conc concep eptt of prov provid idin ing g he help lp to the the consumers through help lines. The concept was test launched by Goodlass at Ludhiana in Punjab and subsequently promoted aggressively by Asian Paint. We now have Help Line/Home solutions from Asian, paint Line from Goodlass and Home décor from Berger. The consumer gets the benefit of right applicator: advisory service of the company and work to his satisfaction. This will further  culminate as full-fledged supply &Apply concept at a later stage.

Mega Mills offering a complete range of building material, including paints have started coming in India now with first such store started at Gurgoan, in an ar area ea me meas asur urin ing g 33 3300 000 0 sq.f sq.ft. t. Wh Whic ich h a re rest stau aura rant nt as we well ll the the na name me Ar Arcu cus. s. Understandably they are in process of setting up a similar store in Mulund at Mumbai measuring 55000 sq.ft.

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GLOBAL SCENARIO

The total output of the world paints and coating-manufacturing industry was valued at $54 billion in 1996. The industry supported some 12,250 active firms. This industry is forecast to expand 4 per cent annually to nearly 26 million tones by the year 2005. The valued would be $77 billion.

Tonnage gains in the industrial coatings segment will be constrained by a shift in trend towards higher solid coatings ( such as powder coatings), which often weigh less per kilo than solvent-borne coatings, and generally require fewer, thinner coats. On the other hand, the architectural segment is seeing a continuing shift towards water-based stronger tonnage gains. These trends are evident around the world but have had the most impact in more nature markets.

Most of the development world has already affected such a switch to water based formulations for most architectural applications. The development world is also experiencing this trend- India included.

The world paints and coatings industry is becoming increasingly dominated  by a small group of highly focused, globally positioned firms. For many of these companies (e.g. Sherwin Williams, Kansai Paint, Nippon Paint, and Asian Paints) coatings represent the primary line of business. In other cases (e.g. Akzo Nobel, ICI, BASF, Hoechst, Dupont & Courtalds), the firm’s strong position has arisen from from in invo volv lvem emen entt in vari variou ouss up upst stre ream am pe petr troc oche hemi mica call ac acti tivi viti ties es,, incl includ udin ing g  production of many of basic raw raw material uses in ccoatings oatings production.

The most rapid gains in paints and coatings production will be registered in the development regions of Latin America and Asia-Pacific. Although the Asia-

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Pacifi Pac ificc rej rejoin oin hol holds ds exc excell ellent ent lon long-t g-term erm pro prospe spects cts as a mar market ket for pai paint nt and coatings, regional Production has been lower, primarily due to the financial crisis that has hit this region. However, India was not severely affected by the crisis.

The wave of currency devaluations and a sharp rise in interest rates will seriously dampen spending in key paints sectors such as construction and durables in the short term. Particularly in Indonesia, South Korea and Thailand India, in an earlier budget, has announced a new housing policy, which should in a boom for  the construction sector, which will boost demand for architectural coatings.

A very interesting trend is emerging in the architectural coatings segment. We are experiencing a shift from solvent-based coatings to water-based coatings. Wate Wa terr base based d coat coatin ings gs no now w ac acco coun untt fo forr most most of ho hous useh ehol old d pa pain intt de dema mand nd in development countries and are gaining ground in developing countries too. During the 1990s, the drive has spread to the industrial coatings have necessitated intense  product reformulation efforts, efforts, leading to a number of alternative alternative technol technologies ogies

Meeting environmental regulations another challenge for paint companies in the dev develo elopme pment nt wor world. ld. Eve Even n com compan panie iess in dev develo elopme pment nt reg region ionss mus mustt be  prepared in this area, as paint products are soon adopting global standards, hence all paint companies will have to comply with environmental regulation Global trends towards free trade will have an impact on product mix, since exports goods must meet the environmental codes of the establishment of more environmental regulations for member nations.

Global production of paints and coatings can be divided into two broad sectors – architectural paints and industrial coatings. In 1996, architectural paints accounted accou nted for 58 per cent of the total output, with indust industrial rial coatin coatings gs acco accountin unting g

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for the remainder. However, the industrial coatings segment is slightly larger in value(dollar) terms because industrial coatings tend to cost significantly more than architectural products.

In 1998, the world’s top ten paint and coating suppliers accounted for nearly 42  per cent of the market. The next ten producers accounted for an additional 13 per  cent of sales, which gives the top 20 firms a collective market share of over 50 per  cent.

The most basic division in the market is between architectural coatings and the industrial coatings. Akzo Nobel, the world’s top player, has a strong presence in both segments (60:40 in favor of the industrial coatings). Sherwin Williams, ICI, Total, Asian paints, and Benjamin Moore for primarily on architectural paints whereas PPG, Kansai Paint, Courtaulds, Nippon Paint and RPM focus heavily on the industrial segment. BASF, Dupont, Lily Industrial and DAI Nippon focus entirely on industrial coatings.

Globally industrial paints are the major segment, accounting for around 70  per cent of the market. Global trade is overall sparse, due to relatively simple technology, and especially the need to maintain higher inventory at the dealer level and high transportation costs. Per capita consumptions is 26 kg. in the US, 4 kg. in the Philippines and 16 kg. in Taiwan.

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WORLD PAINT INDUSTRY PLAYERS Ranking by volume and value for top Asia-Pacific companies:

Company

Country

Coating sales Rank 

 Nippon

Japan

$ million 1900

volume 1

Kansai Asian Paints DNT

Japan India Japan

Orica Wattyl

Australia Australia

Korea Chem.

1775 774.54 600 434.79 335.63 312

Chugoku Marine

South Korea Japan 310

2 3 4 5 6 7 8

B rger DeIC Rock

IJnad piaan Japan

DPI

2 26 54 4.43 224.79 Taiwan 220.5 South Korea 190

Shinto Paint

Japan

171.89

Tophe

Japan

142.87

Yung Chi

90 1 11 12 13 14 15

 

Coatings world’s global ranking of the top manufactures of paints, coatings, adhesives and sealants

No. 1. 2. 3.

Rank Company Akzo Nobel Henkel ICI

Country Netherlands Germany UK

4.

Sherwin-Williams

USA

Coating Sales $ 6.974 billion $ 6.236 billion $ 5.817 billion $ 5.728 billion

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5. 6. 7. 8 9.

PPG Dupont BASF Valspar RPM

USA USA Germany USA USA

$ 5.566 billion $ 3.78 billion $ 2.714 billion $ 2.713 billion $ 2.556 billion

10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23.

Sigma 3M Nippon Paint Kansai Paint H.B. Fuller Sika Masco COMEX Rohm and Haas Jotun AB. Wilh. Becker Benjamin Moore DAW Hempel

Netherlands USA Japan Japan USA Switzerland USA Mexico USA Norway Sewedn USA Germany Denmark

$ 2.215 billion $ 2.00 billion $ 1.9 billion $ 1.775 billion $ 1.512 billion $ 1.29 billion $ 1.264 billion $ 1.22 billion $ 1.158 billion $ 1.042 billion $1.008 billion $ 1.00 billion $ 952.7 million $ 814.4 million

24. 25. 26. 27. 28. 29. 30. 31. 32.

Asian Paints DNT Tikkurila Brillux Forbo Orica Barloworld Arch Kelly-Moore

India Japan Finland Germany Switzerland Australia South Africa USA USA

$ 774.54 million $ 600 million $ 569.76 million $ 530 million $ 505.54 million $ 434.79 million $ 404 million $ 358 million $ 345 million

 

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33. 34. 35. 36. 37. 38.

Wattyl KCC Chugoku Marine Paint Helios Dyrup Dunn-Edwards

Australia South Korea Japan Slovenia Denmark USA

$ 335.63 million $ 312 million $ 310 million $ 285.9 million $ 280.96 million $ 280 million

39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50.

Yasar Berger Sico DIC National Paints Flugger Rock Paint CIN Yung Chi Altana Ameron Renner

Turkey India Canada Japan Jordan Denmark Japan Portugal Taiwan Germany USA Brazil

$ 275 million $ 264 million $ 257.78 million $ 254.43 million $ 234.93 million $ 228.64 million $ 224.79 million $ 221.7 million $ 220.5 million $ 218 million $ 210 million $ 209 million

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ASIAN PAINT INDUSTRY COUNCIL

Formed in 1995, The Asian Paint industry council (APIC) was organized to  provide a forum for trade associations representing the paint and coatings industry to meet and communicate on broad matters affecting industry development in asia. APIC AP IC me meet etss annu annual ally ly,, wi with th a di disc scus ussi sion on ag agen enda da cove coveri ring ng re regu gula lato tory ry and and environmental mattress, technical and scientific s cientific presentations, and business-related forecasts and economic analysis. The secretariat (provisional) for APIC is the  japan paint manufactures participate at IPPIC meetings; one representing the Indian sub-continene, and one representing southeast asia. Currently APIC has representatives form the following associations:

 

China National Coatings Industrial Association Indian Paint Association Indonesian Paint Manufactures Association Japan Paint Manufacture’s Association Korea Paint & Printing Ind Cooperative Malaysian Paint Manufactures’ Association Philippine Association of Paint Manufactures, Inc. Singapore Paint Manufactures Association Taiwan Paint Industry Association The Fderation of Thai Industries Ministry of Industry (Vietnam)

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INTERNATIONAL ISSUE

Raw material should be levied a lower duty. The united states has been dumping certain variety of paints in India and the association is planning to take up the issue with the commerce ministry soon. “Recently, a large quantity of  architectural paints was dumped in India fro the US. This has affected all local manufactures and as such the government should increase import duty on paints and the ant anti-d i-dump umping ing me mecha chanis nism m sho should uld be modifi modified ed to add addres resss suc such h iss issues ues without waiting for damage to the local industry to happen”. The IPA has been collecting data and would soon furnish it with the commerce ministry for action. Cost of many imported products did not even cover the cost of some basic raw materials.

The easy availability of raw materials, a trained and skilled wordforce, a technically qualitied managerial cadre bas and low production costs have made Indian Ind ian an att attrac ractiv tivee sour sourcin cing g des destin tinati ation on for glo global bal MN MNCs. Cs. Ma Many ny ove overse rseas as companies are also undertaking collaborative research with local companies and instutions.

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How important are exports for the Indian paint industry?

In any country where industrial development starts, paint industry is the first one to start locally. The transportation cost is high. Paint is a build item. Except for specialty industrial coating., nobody wants to import paint. Even within the country, a big company should have multiple bases to reduce transportation cost.

In house paint, globally you will always find a strong local player. He may  be a leader in that country. But he does not exist outside that country. Along with yourr abl you ablity ity to for formul mulate ate paint paint,, you yourr abi abilit lity y to distr distribu ibute te the produc productt is also also important. This is not the case in industrial coating.

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SSI paint industries will survive WTO onslaught Despite the devastating effects of liberalization, and the future threat of  WTO, the much-touted death of the decorative paint industry in the SSI sector will not happen.

In the annual VSKD nadir memorial workshop organized in Chennai under  the auspices of the Indian paint association, chairman DG Rajan (southern region) said that the small industries would have to address foreseeable problems and opportunities if they wished to live long in the next millennium.

Even though the paint industry was having a growth rate of 10 percent, this did not seem to rub off into southern India. While differential sales taxes in the southern southe rn state statess prove a hindran hindrance ce to growt growth h in some states, smal smalll compani companies es would have to lood at becoming contract manufacturers for larger players or enter  into strategic alliances with technology savvy companies in order to survive.

However subrmanian felt that small companies in the decorative segment had a strong brand presence in regional markets wit the advantages of lowered overhe over head adss and and bett better er pr pric ices es.. It wo woul uld d be im impo poss ssib ible le for for an any y MN MNC C or la larg rgee company to weed them out. According to statistics, SSIs contributed to per cent of  the paint industry turnover, the remaining coming from national level players. With the small- scale having good presence in primers, distempers, exterior paints, thinne thi nners, rs, all per percei ceived ved as gro growth wth ar areas eas,, the they y had goo good d fut future ure,, acc accord ording ing to Subramanian. The rural markets offered very high opportunities with 83 percent of the  population having success to only 20 percent sale. The manufacturer who cashed

28

 

in the rural markets big or small would have the competitive advantage. The future growth areas would be in distempers, emulsions, wood finishes and economy enamels.

While quality enamels will witness a growth of 8 to 9 percent, economy brands will witness higher growth. Industrial paints will have even better growth, 12 to 13  percent in volume and 15 to 16 percent in value.

POST WTO PERIOD:

Apprehension exists some that the withdrawal of restrictions will encourage large-scale imports of decorative paints into India. Such a seenatio is unlikely to take place quickly. First of all, current duty structure foes not encourage imports of finished paints and still remain competitive. Even should the current duty structure get reduced, a likely situation over the next few years, the distribution and the ope operat ration ional al log logist istics ics wou would ld con contin tinue ue to be a hin hindra drance nce for imp import orted ed  product. Add to that the the necessity of brand building especially especially for decora decorative tive paint, its cost and time requirements, and you have a situation that does not encourage large-scale imports of decorative paints, for the next few years al least.

On the other hand, international manufacturers could taste the India market  by selective introduction introduction of niche products of by selective selective introduction of the the DIYDo it yourself concept. Aerosols for instance could be one of the product groups and could include handy products for home repairs, wood finishes, zinc-aluminum spray for metal protection. Etc. aerosols could also expand the existing retail distribution set up by including convenience shops, shopping malls, and furniture and home furnishing retailers, etc. decorative protective coatings or functional coating are another set of products with potential.

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FUTURE OF PAINT INDUSTRY IN INDIA   In fact it is quite bright with the awareness level now improving and

customer now getting more, involved in purchase process. The industry, as is happen hap pening ing wor worldw ldwide ide is lik likely ely to con consol solida idate te.. Thi Thiss wil willl amo amount unt to a lim limite ited d number of players in the field. The foreign companies will wither get into joint venture with Indian companies or will takeover the existing ones to take benefit of  the established network. Today distribution network, brand image of the existing  players and the customization customization of the products are the biggest entry barri barriers. ers.

 

The industry is likely to register register year on year grow growth th of 7 to 8% in next 4

to 5 years. The growth in the industrial will be guided by the overall industrial gr grow owth th,, in incr crea ease se in auto automo mobi bile le in indu dust stry ry an and d in wh whil ilee go good odss se sect ctor or.. On the the decorative front it will be guided by the availability of funds in the hand of the consumers with rise in income, increase in agricultural income and improvements in the construction industry.

This then is the background in which we operate at the present moment. Where do we go from here? What does the future hold n store for our industry? Will, I for one is thoroughly confident that the paint industry has indeed a very  bright future ahead. We have the capability, the wherewithal and the dedication to achieve a quick take-off to a higher tangent of performance. Given the right policy framework, I have no doubts that the paint industry will be going great guns in the near future and add significantly to the overall well being of our economy. I am sure that the plan of action and the modus operandi for the coming years would throw new lights and open up new vistas of prosperity and growth for the paint industry in India.

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INDUSTRY ANALYSIS

Analysis Anal ysis of any industry will help to know the posit position ion and attr attractiv activenes enesss of any particular industry. By making industry analysis, we come to know that what is the structure of the industry, growth rate, market size, customer group, any  possibility of backward or forward integration, what are the entry and exit barrier, what is the technological aspect that it is changing or stable, product characteristic, it there any possibility of scale economy or learning and experience effect to the industry, capacity utilization position i.e. having utilized full capacity have an compet com petiti itive ve adv advant antage age to the com compet petito itorr and to kno know w the pro profit fitabi abilit lity y of the industry all this shall include the industry analysis.

INDUSTRY BACKGROUND

Paint business in India has been growing at a responsible pace of 9 to 10%, in the past five years, though there has been some down witnessed in the last two years. yea rs. Til Tilll the yea yearr 199 1999-2 9-2000 000,, pai paint nt ind indust ustry ry was the thi third rd fas fastes testt gro growin wing g industry in India, next to the Lubricant oil and automobiles. If we go back to the  period 94-95 and 95-96, the growth rates were real high at 26 and 24 % respectively, triggered by the industrial growth and rationalization of excise duty. The slow down is not very different than the overall industrial growth. Hence keep the hope that it will continue to grow as economy grows. If we compare this growth with China there CAGR for the past five years has been 7.5% to 8%. In a way our growth has been better.

The current consumption rate of 650 to 700 grams per person is low as compared to developed countries where the consumption rate is 31 kg/person in

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USA and 1300 grams in Sri Lanka. This however should be viewed in the context that over 50% of the population in India does not consume paint as it is having low income. Moreover the consumption is mostly in urban or semi-urban areas as the home in most of Indian villages are made of bricks and mud with no plaster. The situation is however changing fast with improves agricultural income in hands of  the farmers with continues good monsoon records in India.

The industry can do much better if the government correctly understands its status. The primary function of paint is to protect and the secondary one is to  provide artistic value. It is not a luxury asset of the country. As per the estimate of  the experts at corrosion institute at Karaikudi, India loses over Rs. 2000 crore annually on account of corrosion- a wealth, which can be served by increasing awareness aware ness about the prote protectiv ctivee aspe aspect ct of paint and making it more afforda affordable ble by rationalization of excise and taxes. Currently the excise on paints is on MRP at the rate 16% rationalized for cost.

CURRENT OPERATING ENVIRONMENT

For the industrial business most of the companies have foreign tie-up or  separate joint ventures. Like Birla’s, Nerolac has automated coating technology from Kansai paints of Japan and Du Pont. Asian Paint has a joint venture of PPG for the success in this segment the Asses to latest technology provides a definite edge over the others. Besides these the associations of collaborators with the OE customers parent companies also matter. In the case of decorative business the technology is generally indigenous except in the case of Goodlass Nerolac. Where they have assessed to Kansai technology for the decorative products, being their  holding companies.

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With the growth rates deeming the competition among the major players have been intense and rather cutthroat. Even though the prices have been dropped quite frequently to boost sales in the market. The market growth in the past three to four years is lead by the growth in the exterior emulsion products, which has encouraged the companies to launch new products at a different points meant for  elite top of the line customer and down the line.

Some of the products, which got launched where Apex exterior emulsion and Ace in economy by Asian Paints. This segment is likely to grow at a similar   pace in the next 3 to 4 years as well. Exterior products which include lower end cement paints as well, accounts for 12% of total paint volume.

INDUSTRY STRUCTURE

In the Indian Paint Market, one important factor is the presence of the unorganized sector as a substantial force. Paint business in India can be divided into organized and unorganized. In the organized sector there are six dominating companies who enjoy a majority of the market share and this business account for  72% of the total paint business estimated of 6000 Crores. In the organized sector  the split between decorative and industrial business is in the ratio of 76:24 %, unlike advance countries where it is other way round, which means the industrial  business dominates. While in the decorative business Asian Paints is the clear  market leader, Goodlass Nerolac leads in the industrial sites. On overall basis Asian Paints is the market leader followed by the . Other major players are Berger, ICI, Shalimar and Jenson & Nicholson. Historically Shalimar paints was the first entrants, way back in 1902. The paint industry is highly fragmented. Both the large organized sector and the small unorganized units make paint.

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The Ind Indian ian pai paint nt ind indust ustry ry is dom domina inated ted by the the org organi anized zed sec sector tor (60 (60% % market share). There are around 25 large and medium companies in the organized sector having a capacity of 36000TPA about 2200 units in the unorganized sector  having a total capacity of 24000 TPS share the balance 40%. The products of the paint industry can be classified as:

1. Deco Decorativ rative/Ar e/Archite chitectura cturall finish finishes es 2. In Indu dust stri rial al fi fini nish shes es

Decorative paints form 70% of the market and include lime stones coatings, acrylic and oil-bound distempers, enamels, cement paints, super acrylic and plastic emulsions (Apcolite). They are used in household painting, architectural and other display purpose. This segment is price sensitive, sale of  these paints is seasonal with over 50% of sales taking place during the SeptemberDecember festival seasons.

Industrial paints comprising 30% of the paint market include automotive  paints, high performance coatings, coatings, coil coatings coatings and powder coatings. T This his segment is relatively priced inelastic, but is susceptible to end user business cycles.

Industrial paints business is technologically intensive, most Indian companies have tied up or are tying up with international majors to have access to the latest technology as it is not available locally. A tier up with global paint manufacturers also enables the domestic company to supply to local customers of 

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its partners (E.g. Goodlass Nerolac is the major supplier to Maruti Suzuki because of Kansai, its Japanese collaborator and Suzuki relations). The paint industry is the raw material intensive, with over 300 inputs (50% are petro based derivative) going into the manufacturing process. Key raw materials that go into paint manufacture are pigments (Titanium dioxide), solvents (Orthoxylene), binders, additives and white cement/urea – all of which together  account for 55% of the total cost.

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There are six large companies and over a 1000 small, some of them in the tiny sector, that are players in the decorative paints market. Most decorative paints are sold through trade channels. Contractors and painters apply almost all the decorative paints sold in the country, the do it yourself market is extremely small. As there are large number of manufacturers and several 1000 retailers marketing decorative paints, reliable information on the size of this market is not available. We estimate that the market for decorative paints would have been around Rs. 46000 million in 2000-01. The total coatings market would probably have around 61000 million. The average annual growth rate has been around 8 to 10 %, the market grew at over 15% in the previous year, 1999-00. Six major companies share approx 55% of this market and over a 1000 other units share the rest.

MARKET SIZE Thee In Th Indi dian an Pa Pain intt In Indu dust stry ry is abou aboutt 10 100 0 ye year arss old old indu indust stry ry.. Th Thee firs firstt company was established in 1902 of Shalimar Paints after that the market size of  the paint industry is getting bigger and bigger. The market size of the Indian Paint Indu In dust stry ry is abou aboutt 6 lac lac to tone ness pe perr an annu num, m, wh whic ich h cons consis istt of 25 2500 0000 00 TP TPA A by unor un orga gani nize zed d sect sector or of ne near arby by 25 2500 00 sm smal alll-sc scal alee un unit itss and and 36 3600 0000 00 TP TPA A by organized sector. Market size by volume(TPA)

Unorganized sector  70%

Organized sector  30%

 

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Thee or Th orga gani nize zed d sect sector or ac acco coun untt fo forr 70% 70% of the the tota totall pa pain intt volu volume me as compared to 30% by the unorganized sector.

The market size of the Indian Paint Industry is getting bigger and bigger  year by years. The overall growth in economy lead to the more income to the midd mi ddle le cl clas asss consu consume merr ha hass re resul sulte ted d in into to high higher er de dema mand nd of de deco cora rati tive ve an and d automotive paint. The big market size will attract new competitor will lead to increase in the competition as also global players also interested in the Indian Paint Market as it shows good growth.

The org organi anize zed d ar aree acq acquir uiring ing the sma smallll-sca scale le com compan pany y to exp expand and the their  ir  market share in rural areas because the rural market has been dominated by the unorganized sector and now a day this market has good potential for further  growth. The top six company account for 80% of the organized sector production in terms of sales value. The six companies may include:

1. Asian Paint  2. Berger 3. Go Good odla lass ss N Ner erol olac ac 4. ICI 5. J & N 6. Sh Shal alim imar ar Pa Pain ints ts

The total business of Indian Paint industry is about 6000 crore out of 4000 crore is account by the organized sector. The market size is probably 1000000 TPA by 2003 which indicates the market of the paint is getting big and big.

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MARKET SHARE OF THE MAJOR PLAYERS

The paint industry was divided into two consumer segments: Industrial (such as automotive) and Decorative (such as Housing). The organized sector was divided as follows:

ESTIMATED PAINT COMPAN COMP ANY Y DE DECO CORA RAT TIVEIN VEINDU DUST STRI RIALOV ALOVER ERAL ALL L  ASIAN PAINTS 38% 14%-16% 32.50% GOODLASS NEROLAC 7.80% 40% 17.50% BERGER PAINTS *14% 14% 14% ICI INDIA LTD 8%-9% 12% 10.50%

REVENUES Rs. 6980MM Rs. 3750MM Rs. 3007MM Rs. 2254MM

JENSON & NICHOLSON GROWTH RATE TOTAL (Rs.)

Rs. 1482MM



*6.9% 8%-9% 15033MM

6.90% 18% 6442MM

6.90% 11% 21476MM

Since these companies strive to match their product sales to the market (i.e. 70%: 30%)



They maintain similar market share in each segment. OVERALL GROWTH RATE

      E       G       A 40.00%       T 30.00%       N       E 20.00%       S 10.00%       R 0.00%       E       P

   S    N   T    A    I    N    S   I    A   A    P

   C    A    A    L    D    L    S   O    O   S    O    R    E    G    N

   R   S    E   T    G   I    N    R   A    E   P    B

   A    I    D   D    N   T    I    I    L    C    I

   N    S    A    O   D   L    S   N   O   N    N   A   C   O    I    E    J    N

COMPANY  

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Market Growth Rate:

Over the years, Indian Paint Industry has good growth rate. The overall demand for the paint is getting higher and higher. The paint business in India has  been growing at a rate of 8 to 10% per annum, in the last five years; though there has been some slow down witness in the last two years till the year 1999-00, Paint Indu In dust stry ry wa wass th thee th thir ird d fa fast stes estt gr grow owin ing g in Indi India, a, next next to lubr lubric ican antt oil oil and and automobiles.

In the period, 94-95 and 95-96 the growth rate was real high at 26% & 24%respect 24%re spectivel ively, y, trigg triggered ered by the industria industriall growt growth h and rati rationali onalizatio zation n of the excise duty. Te slow down is not very different than the over all industrial growth, hence keep the hope alive that, it will continue to grow as the economy improve.

If we compare this growth with China, their CAGR for past five years has  been between 7.5 to 8% 8% in the way our growth h has as been better.

The paint sector grew at a slower rate of 6.5% in FY03 due to general slowdown in the economy and subdued demand in western region, which were affected by communal riots. While the decorative paint demand grew at 7%, industrial paint volumes increased by 6.5%. The fastest growing segments in the sector are the exteriors (20%) and powder coatings (12%). Demand in FY03 was aided by a 6% growth in farm output, which is one of the key drivers.

In the industrial paint segment, automotive paint demand was higher in FY03 on the back of a number of new model launches and overall recovery in automobile demand. Key automotive paint manufacturers like Goodlass Nerolac and Asian-PPG posted impressive performance in the same period

 .

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PER CAPITA CONSUMPTION

The per capita consumption refers to the average consumption of the paint  by one person in the country put of the total population. The current per capita consumption of paint in India is 650-700 grams as compared to the developed and not so developed countries consumption rate of 31kg per person in USA to 1300 grams in Sri Lanka.

The low per capita consumption should be viewed in the context that over  50% of the population in India dose not consume paint as it is having low income. More over the consumption is mostly in urban and semi urban area as dwelling in the most Indian village are made of bricks and mud with no plaster. The situation changes fast due to improved agriculture income in the hands of farmer with continuous good monsoon recorded in India.

The reason for low per capita consumption for paint is that govt. has imposed high excise duty on the final product as they consider the paint as a luxury item. Another reason for the low per capita consumption is “the wrong kind of promotion” by the company as it is not sufficiently stressed that more than  beautification, paint paint provides protection against against corrosion.

The current estimated of loss caused by corrosion is Rs. 3000 crore per  annum. The use of paint is more economic way of controlling the corrosion and reducing the loss. This is hardly realized by the general public, which tends to view with indifference the industry’s fiscal burdens.

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CUSTOMER 

The customer are to be classified as that most of the demand of the paint is coming from the urban and semi urban area where the customers have to spend on  paint the home. Nowadays, customers are involving their sself elf in painting process of the home. This is because that the new trend of the tinting machine which help to have perfect matching of shade to the customer requirement. The advertisement of Asian Paint “Mera wala Cream” has involved the customer in the painting  process. 

The customers are purchasing the paint on the basis of the brand and availability of different shade. In decorative segment, Asian Paint is the market leader with maximum market share.



The 83% of the consumers are in rural area, which account for the 20% of  the sales value of the paint industry.



On the basis of the different customer group, companies have product range for each income group of the customer. Asian Paint – Utsav – Economy class Asian Paint – ROYALE – Premium class



The purchasing behavior o the consumers has also affected by the “Pinter”

DEGREE OF VERTICAL INTEGRATION

The vertical integration refers to that backward ir forward integration in the industry. The backward integration refers that production of the raw material by

41

 

the company and vertical integration refers that company itself in the process of  the distribution of the final product.

As far as Paint Industry is concern the backward and forward integration is  possible. In Paint Industry most of the raw material are imported and of petroleum nature. The industry is facing the problem of theee shortage of the raw material, which resulted into backward integration for the production of raw material.

EASE OF ENTRY/EXIST

The entry into industry has certain barrier, which result into not an easy entry in to the industry. The following are: 

High working capital intensive:

Thee in Th indu dust stry ry has has be been en char charac acte teri rize zed d by high high wo work rkin ing g ca capi pita tall in the the  production of raw material and finished products. The company ahs to maintain high stock of the raw material because of that 50 to 60 % are of petroleum nature and are to be imported. So it require High working capital which is an entry barrier  for a new company.



Distribution Channel

The development of distribution channel will require extensive effort from the part of the company. Company has to build new distribution channel which require huge amount of time and management of the inter mediatories.



Brand

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Thee br Th bran and d in pa pain intt in indu dust stry ry ha hass ef effe fect ct in pain paintt indu indust stry ry.. Th Thee bran brand d development will require much more time and promotion effort to build brand. So it would not be easy for new entrance to enter into the industry, which is mostly dominated by brand of the company.



Tinting Machine

The new trend of the tinting machine has caused one more entry barrier in the paint industry. The tinting machine helps to have perfect shade of the color, which is required by the customer. To make available tinting machine thought the distribution.



Technological Factor

Tec echn hnol olo ogi giccal

fa fact ctor or

has

con onsi sid dera erati tion on

for for

the the

ind ndu ust stri rial al

pai ain nt

manufacturers. The industrial paint companies have to have advance technology for the compe competit titive ive advan advantag tage, e, whi which ch may be an ent entry ry bar barrie rierr int into o the paint industry.

TECNOLOGY AND INNOVATION

Certain industry may be that is facing problem of changing technology day  by day. As far as Paint Industry is concern, in decorative segment it is not facing th thee prob proble lem m of chan changi ging ng tech techno nolo logy gy apar apartt from from the the Tint Tintin ing g Ma Mach chin inee in di dist stri ribu buti tion on netw networ ork. k. Th Thee chan change ge in de deco cora rati tive ve seg segme ment nt is ve very ry low low in the the  production process.

In in indu dust stri rial al pa pain intt th thee tech techno nolo logy gy chan change gess fa fast st as comp compar ared ed to the the decorative segment and company need to have latest technology in the age of  compet com petiti ition on to hav havee com compet petiti itive ve adv advant antage age ove overr the com compet petito itor. r. Mo Most st of the

43

 

company is having foreign collaboration to have latest technologies, which helps for the best quality product with the minimum cost.

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COMPANY

COLLABORATIONS PPG INDUSTRIES, US NIPPON PAINTS, JAPAN BV, NETHERLAND

AREAS OF COLLABORATONS ELECTRO DEPOSITION TECHNOLOGY AUTO & POWER COATING MARINE & HIGH PERFORMANCE COATINGS

KANSAI PAINT, JAPAN

AUTO & INDUSTRIAL COATING

GOODLAS NEROLAC

E 1CO-OPERATIONS, DUPONT, US VALSPAR US AMERON COATINGS, US

AUTO COATING POWER COATING HIGH PERFORMANCE COATINGS

BERGER PAINTS

HERBERTS, GERMANY ORICA AUSTRALIA PVT LTD, AUSTRALIA DU PONT PERFOMANCE COATINGS, GERMANY NIPPON PAINTS, JAPAN BECKER INDUSTRIFARG AB. SWEDEN TENDOUR NV, NETHERLANDS

AOTU COATINGS HEAVY DUTY COATINGS AUTO COATINGS AUTO COATINGS COIL COATINGS POWDER COATINGS

JENSON & NICHOLSON

CHOGOKU MARINE PAINTS, JAPAN TIKKURILA OY, FINLAND

BIO-FRIENDLY MARINE PAINTS INSTACOLOR SCHEME

ASIAN PAINTS

SCALE ECONOMIES

In the paint industry scale economies have not competitive advantages on the competitor. The scale economies have moderate effect because all company has virtually equal manufacturing cost.

LEARNING AND EXPERIENCE EFFECT

Some of the industry has certain learning or experience effect, which may help the company to produce products with high quality and low cost. This is  because that after having having certain years years of experience in the ind industry ustry company has expertise which helps to produce at low cost.

As far as paint industry is concern, in industrial paint have certain learning and experience effect because of that it require latest technology and relation to the related industry players. In decorative segment it does not have any learning and experience effect so that it would be easy for the new players to enter into the Decorative segment of the paint industry.

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  CAPACITY UTILIZATON

The capacity utilization level in the paint industry is low, at around 55 to 60 %, as  paint capacity are generally designed to meet the peak dem demand and requirements during festival season. Besides capacity utilization is also affected by factors such as product mix variety, batch size, batch proc4ssing time and down time between  bacthes. Capacity utilization utilization will not help to produce product aatt low cost upto certain extent.

IS THE INDUSTRY WORKING TO CAPACITY?

It must break the myth to capacity in the paint industry. No body in the industry has ever been constrained by the capacity except in the rare cases. There is always capacities available in this industry. If not in your company, may be in some other  units where you can get the paint process. Constrains exceed only in the firm of  your ability to sell.

NEW PRODUCT INTRODUCTION

By the introduction of Tinting machine, the new product introduction time has reduced from 6 months to 1 month.

INDUSTRIAL PROFITABILITY

As far as industrial portability is concerned in the industry paint segment the  profitability will be be less, as company has to appr approach oach to the professional buyers buyers like Goodlas Nerolac supplying the paint of the industrial major in the automobile

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i.e. Maruti & Tata Motors. In the decorative segment, the profitability will be more as compared to the industrial paints. OPPORTUNITY:

India, the world’s fifth largest economy in term of purchasing power, is emerging as an attractive market for global investor in the paint industry. Low per  capita consumption of paint of 0.6 k.g. Against the world average of 15 k.g. Offers lucrative scope for stable revenue stream to manufactures of both decorative and industrial paints.



Improvement in cement off takes in urban area and increasing housing loan disburseme disbu rsement nt figur figures, es, both in reta retail il and insti instituti tutional, onal, segments indicate immense opportunities in paint industry.



The cou countr ntry‘s y‘s his histor torica icall GD GDP P gro growt wth h tra trajec jector tory y of 3% per ann annum um has clearly shifted to 6%. In all likelihood, the country will move to 7-8% growth path in near future. This should lead to further expansion of the market for all consumer products.



The standard of living of the rural population is gradually improving.



The advertisement in the multiple television channels has increased the  brand consciousness of this class of consumer. This has opened up opportunities for branded and m moderately oderately priced quality paints.

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The house hold construction industry is expected to grow almost at 8% in the next 5 years considering the shortage of housing and government trust on encouraging housing activities. This should favorably impact demand for decorative paints.



At present the per capita use of paint in India is less than a little while in the develop countries the per capita use is estimated to be over 20 liters. Therefore, the growth opportunity for the paint industry is immense.



In ca case se of in indu dust stri rial al pa pain ints ts,, mo more re than than 50 50% % of de dema mand nd come comess from from industrial sector followed by 15-20% from consumer durables. With the entry of MNCs in both these sector, the emphasis on paint quality has increased. Beside, the industrial business will grow faster due to the lower   base and fast growth in major use industry like consumer durable and automobiles.



Increasing influence demand of rural and semi urban consumers would ensure a reasonable demand for paint.



The changing life styles indicated an increase in demand for luxury paint in the mid price segment.

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THREATS: •

The competition in the paint industry has always been severe. The opening up of the economy, does not pose any serious threats to decorative paints trade.



Thee th Th thre reat atss asso associ ciat ated ed wi with th th thee pa pain ints ts indu indust stry ry ar aree simi simila larr to thos thosee impacting other industrial that are mature and well established. Political un certainties, social unrest, nature disasters and transport strikes etc. disrupt the business and also adversely effect the demand.



The cost of retaining the customer is increasing day by day with increased expectations regarding the availability of choice and service.



In the present competitive environment, the paint companies are spending large sums to install tinting systems retail outlets so that the customer may  be provided with the widest choice of Increase Increase demand for higher skills and knowledge is increasing employee related costs at am accelerated pace.



The recent Increase in petroleum product prices has increased the cost of  input materials, fuels and transportation.



The advertising media, especially T.V. channel are multiplying and the viewer ship is getting fragmented. This has substantially increased the cost of advertisement to reach the same viewer ship.



Environmental concerns are now very important and the paint industry and the paint industry have to address these and cope. Investments in the  pollution abatement are significant and especially especially so when facilities have to  be expanded or newly newly established.

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PEST ANALYSIS

The pest analysis refers to four main factors:



POLITICAL



ECONOMICAL



SOCIAL



TECHNOLOGICAL

The analysis will focus towards the industry that how the political stability, rules and regulation, and the legal system of the country affecting the overall overa ll indust industry. ry. The econo economic mic condi condition tion,, liber liberaliz alization ation,, polic policy y towar toward d foreign investment, and growth rate of the economy as a whole also help to analyze the overall industry attractiveness and potential for the growth. The social aspects like people are more involved in the painting process, trend of nuclear family; low interest rate of housing loan, increase of urbanization and change in thinking of the people all this is helpful for the industry co consi nside dera rati tion on,, al also so th thee chan change ge in te tech chno nolo logy gy,, prod produc ucti tion on proc process ess,, distribution channel and more use of tinting machine that help for better  shading of color.

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POLITICAL ENVIRONMENT

The analysis of the political and legal environment will consider the following aspect:



Largest Democracy.



Taxation policy i.e. reduction in excise duty and custom duty on raw material and final products.



Fair amount of political stability.



Era of coalition governments.



Political consensus on economic reforms and higher target of growth of the economy.



Sound legal system – a factor contributing large foreign direct investment.

Growth in the early nineties was constrained by high excise duties. After  the rationalization of the excise duty structure in 1992 and consequent pick up in industrial growth, the paints segment s egment began posting increasing growth.

The organized sector has grown at a CAGR of about 10% of over the last fivee years fiv years,, tho though ugh the gro growth wth for the fin financ ancial ial yea yearr und under er con consid sidera eratio tion n wa wass estimated at about 5% on account of the deceleration in the rate of growth in the  paint industry consequent to to the recession in the economy economy as a whole.

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Taxation policy:

Duty structure for Raw Materials Used in the Paint Industry

PRODUCT Titanium dioxide Phthalic anhydride Pigments Orthoxylene Paraxylene Pentaerythritol



EXCISE % 1999999-00 00 16

EXCISE % 2000 2000--01 16

EXCISE % 20 200 02-02 2-02 16

CUSTOM BASIC % 1999999-00 00 40

16 16 16 16 16

16 16 16 16 16

16 16 16 16 16

40 40 40 40 40

CUSTOM BASIC % 2000 2000--01 35

CUSTOM BASIC % 200 20022-02 02 35

35 35 15 5 35

35 35 15 5 35

Raw materials account for nearly 70% of the production cost of   paints. The industry is critically dependent on imported titanium dioxide.



Lowering of excise duty over the past few years has resulted in major gains for the organized sector in terms of market share.



The Indian Paint Market is skewed in favor of decorative paints. In developed countries, industrial paints account for the bulk of the  paint market.



Fortunes of the paint industry are directly linked to growth of enduser industries such as the automobile, construction and white goods industry.



Inflation continues to be high; the overall growth in GDP and the Government’s continued efforts to tackle economic issues provides the desired confidence to the “The Indian Market Opportunity”.

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INDUSTRY’S DEMANDS FROM THE UNION BUDGET 2003-04



The Indian Paint Associations has asked for a reduction in customs duty on raw materials from the current level of 35%.



Titanium dioxide is critical for paint manufacturing and import of  the same should be brought under fast-track clearance clearance..

BUDGET MEASURES



Interest rates for all administered interest rates have been lowered by 50 basis points.



Peak customs has been slashed from 35% to 30%.



The finance minister expects the housing industry to grow at 35% in the next fiscal. Besides, he has initiated some measures to rationalize stamp duty and modify the land ceiling act.



Corporate are now exempt from paying dividend tax.

BUDGET IMPACT

One of the big positives for the paint industry is the reduction in customs duty. Titanium dioxide prices, which account for ^0% of raw material cost for   paint companies, will fall significantly. Operating margins as a result, might increase notably thus enabling the companies to post better profits. However  lowering of customs duty will also results in higher imports in the coming years.

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Housing demand might increase in the coming fiscal as a result of  lower interest rate. This will benefit paint companies in a large way. As their   prospects are closely linked linked with housing demand demand..

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INDUSTRY RESPONSE

Presently the basic customs duty on raw materials is levied at the highest rate of 35%. This has an adverse effect on the cost structure of paint production given the fact that the import basket forms 60% of the total consumption. Further  the import duty on finished paints is also 35%. This is not justified as both finished goods and raw materials attract the same import duty. Hence the import duty on all organic and inorganic chemicals should be brought substantially below the duty of  finished products.

The construction industry generates numerous employment opportunities,  particularly labor workforce. The Finance Minister has taken steps in the last 2  budgets particularly by raising the exemption limit on interest on housing loans. The Finance Minister should further increase this limit as it will not only help the housing industry but will also help the paint industry.

WHAT CAN GOVERNMENT DO TO PROMOTE THIS INDUSTRY

Govern Gov ernmen mentt mus mustt con contin tinue ue to enc encour ourage age inv invest estmen mentt in hou housin sing g sec sector  tor  through tax concessions. The excise tariff should be brought in line with essential goods understanding the value of paint from asset protection point of view. There should be a legislation to paint the exterior of all the building once in 3 or 5 years so that the urban India wears a new modern look. Some of these measures will not only support the industry, but also have recurring losses.

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ECONOMICAL ENVIRONMENT The Economy The Indian Economy is the midst of a sea change over the last few year  when we set about to restructure it. The results are finally showing up in the way in which our policy makers intend them. GDP growth is expected to touch 7%. Foreign Exchange reserves will cross US $ 25 billion. Inflation, hope fully will be contained below 8% industry. After a long reversionary spell, is already growing at 8%. Indeed the economy is poised for a take-off.

The country experienced economic slow down during the financial year  2002 and GDP growth slipped to around 6% from the growth rate of 6.4% for the  previous year. While the monsoon was consider as normal for the thirteenth successive year, the agriculture production suffered due to unfavorable distribution of rainfall over time and regions. The food grains production is estimated to have declined to 199 mn tons from the record production of 209 mn tons in 1999-2000.

The sust sustain ained ed gro growt wth h of ser servic vicee sec sector tor,, bet better ter per perfor forman mance ce of min mining ing industry and a growth of around 20% in exports prevented the otherwise likely steep decline in GDP growth. The inflation based on wholesale price index was higher at 6.5% as compared to 3.5% in 1999-2000. The rupee depreciated by 6.9%.

A devastating earthquake struck large parts of the Gujarat in January 2002. Many villagers and towns in the district of Katch, Saurashatra region and part of  north Gujarat suffered total or partial destruction. A few thousand lives were lost and some estimates place the value of properties destroyed at over Rs. 200000 mn.

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These parts of Gujarat may take years to recover and attain normally. This tragic disaster has cause a severe setback to the economy of the state as the cost of relief  and reconstruction is enormous.

In these adverse econom economic ic condi condition tions, s, the paints market was subdued and the demand for paints is estimated to have grown at around 8% to 9%. Although th thee econ econom omic ic scor scoree bo boar ard d is qu quit itee im impr pres essi sive ve,, ther theree is no sc scop opee for for an any y complacency or the stage is not yet ripe for throwing caution to the winds. For  one, inflationary pressures can erode the competitive edge. Secondly, the export surge needs to be mainted. So that the trade balance is mainted. Thus while the  performance of the economy initially is definitely a cause for optimism, efforts must continue in the coming years to ensure that growing is sustained.

The paint Perspective:

The Question that arises at this is, what about the paint Industry? In the rapidly changing economic scenario how our own industry is fairing?

The demand for paints is dependent on the general economic conditions such as goods overall economic growth, agricultural growth, the performance of  related industries likes steel, cement and construction. In advance economics, the growth rate of Indian coating market mimics the GDP growth rate. In developing countries like India, increasing urbanizing and the increase of standard housing are major drivers of growth. Therefore the growth of the coating industry is 1.5 to 2 times the rate of growth of GDP. Nearly, 70% of paints are health of construction industry is important.

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As the market develops, customers are demanding products superior to the traditional low cost coating, branded products and greater choice. This has led to a huge increase in demand for economy finishes. At the same time, opportunities havee inc hav increa reased sed for soph sophist istica icate ted d and nic niches hes com compar parabl ablee to the bes bestt ava availa ilable ble anywhere in the world. Within all categories, customers demand greater choice in shade sha de and eff effect ect.. The rapid incre increase ase in the marke markett for good qua qualit lity y ext exteri erior  or  finished is a part of this overall trend.

Consideration of immediate past of the Indian paint industry:

Towards the late eighties and early nineties the duty rates on paints were  progressive increased, to rapid decline in the industry’s performance for four  successive years. During 1989-90 to 1992-93 the duty rate was increase in steps from fro m 26. 26.25% 25% to 40. 40.25% 25%.. Cor Corres respon pondin ding g the per percen centag tagee gro growt wth h rec record ord ove over  r  respective previous years was :(-) 6.20, 0.25, (-) 5.91and 0.67. Added to this was the ban banee of ove overr in incre creasi asing ng raw mate materia riall cos costs. ts. An ine inevit vitabl ablee dec declin linee in the demand for paint followed leading to the industry being forced to cut capacity utilization from 69% to 55% over the period. Growth was virtually stagnant and in fact there was negative growth also on some occasions.

Thiss is the pic Thi pictur turee of the imm immedi ediate ate pas past. t. Thi Things, ngs, howev however, er, sta starte rted d to change for the better about a few years ago with the introduction of the policy of  liberalization. Although the paint industry has not been yet been given the full  benefits of the Chellish committee recommendation on tax reforms, the industry has nevertheless responded admirably to the small reduction in the duty rates affecting in the last few budgets. Thus, while the effecting duty rate went down from 40.25% to 35% during 1993-94, a drop of about almost the entire reduction in revenue collection due to lower rates. Similarly, in 1994-95, when the rate has

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 been reduced from 30% to 35%, i.e. a little over 14%, we expect the industry to grow by about the same proportion. We are certain that Government will not lose duty collection because of this rate cut, rather the collection may actually be more. Firstl Fir stly, y, the paint indust industry ry has th thee pot potent ential ial to gro grow w and ele elevat vatee its itself elf to an aggressive growth path if it has the support of a reasonable duty structure. We  pointed out that the paint industry’s growth was fastest during 70s when the rate was 15%. If a similar rate is reintroduced, as was also the recommendation, as the idle capacity of about 45% would then be straightway energize. The resultant additional production would more than offset revenue losses.

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SOCIAL ENVIRONMENT Making home is the important matter for Indian common man. It has also connected the belief and value for the decoration of the home. So, socially paint is highly connected with people because time to time they decorate their home with  paints in the occasion like Diwali, Marriage. The Diwali is the most occasions when the paint is used. The most of the demand of the decorative paint is in the Diwa Di wali li and and Ma Marr rria iage ge Se Seas ason on.. So So,, soci social ally ly pain paintt is high highly ly conn connec ecte ted d to the the consumer. In the different occasion Indian uses different color. Every color has its socially acceptance. The increase in the middle class also helps to boost the demand of the paint. For different need of the different consumer for this company introducing more color in cars, bikes, e.g. LML introduce the ‘Freedom’ with 15 colors.

The following are the characteristics of the Indian social environment:



Large middle class



Increase the awareness regarding paint as the protection not luxury.



Major changes in life style.



Major increase in urbanization.



Both parent working



 Nuclear families families



Leisure activities

Environment Consideration

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Every society has responsibility to so operate that it leaves a healthy and clean environment for posterity and the Paint Industry is committed towards its obligations in this respect. Research and Development is being directed more and more towards water based and water thinnable products with lower consumption of petroleum solvent, thus serving a dual purpose of providing environment ally friendly products and also conserving scarce petroleum based solvents. There is need to encourage this and Government should consider giving substantial benefits for expenditure on this account and additional benefits by reducing levies on sales of such paints. Indian paints Association is also Co-operating effectively with the Bureau of Indian standards in the matter of Standards for Eco-friendly paints.

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TECHNOLOGICAL ENVIRONMENT Thee tech Th techno nolo logi gica call envi enviro ronm nmen entt re refe ferr to the the ho how w the the chan change ge in the the te tech chno nolo logy gy wi will ll af affe fect ct th thee wo work rkin ing g of th thee indu indust stry ry.. In the the pa pain intt indu indust stry ry technological development. In production process is not much but in distribution channel connection and making of shades is the main change in the technology.

In th thee De Deco cora rati tive ve pa pain intt segm segmen ent, t, te tech chno nolo logy gy has has no nott impa impact ct in the the  production process. But in the connection of the leader technology help to have efficient operation of the business. The development of the tinting machine is revolution in the filed of technological development. The tinting machine helps to have perfect shade as per the customer requirement. The introduction of tinting machine helps to reduce to introduction period of the new product. Before this introduction of new product will require about six months compare to one month nowadays.

Distribution reach of Paint Majors Asian Paints Goodlass Nerolac

Size Size of Dea Deale lerr Net Networ work k 14,000 11,500

No. Of Ti Tinti nting ng Machi Machine ne 2,800 2,000

Berger Paints

12,000

1,500

Distribution Distri bution Reach Reac h Of Paint Major  15000

14000

11500

12000

size of dealer  10000 network 5000 0  Asian paints paints

Goo Goodlass dlass Berger Paints Nerolac

company

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No. of Tinting Machines

3000

2800

no. of tinting 2000 machine 1000

2000

0  Asian paintsGoodla paints Goodlass ss Nerolac

1500

Berger  Paints

company

In the industrial paint segment, technological collaboration helps to have good business. In this segment technology factor comes in to the mind. The manufacturing of the industrial paint will require efficient and reliable technology that will help to produce high quality paint, which can  be used for the industrial purpose. The present company that is manufacturing industrial paint having collaboration with the foreign firm with regards to the technological aspects.

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CRITICAL SUCCESS FACTORS IN THE INDUSTRY

Brand image, market research, distribution range of products and tinting machine are critical for the success of any industry. All the companies have been vying for bringing in improvements in this area. Most of the companies have increased their advertising budgets in the last financial year and have thus spent heavily on promoting the brands. Roughly Rs. 100 crores have been spent last year  with maximum share of Asian 40% followed by Goodlass Nerolac 23%. The two companies Berger and ICI have been also active this year. Goodlass, Nerolac nad Asian paints are the two companies, which have invested heavily in building up connectivity across their their factories and branc branches hes with the imple implementation mentation of SAP R3 ERP operating system. This has brought in total transparency in system and improv imp roved ed ser servic vicee to the cus custom tomers ers rem remark arkabl ably. y. Bot Both h the com compan panie iess are al also so looking at have implemented advanced IT solution for handling distribution.

1. Cos Costt an and d Pr Pric icee Dr Driv iver erss :-

The paint industry costs and price are driven by raw material costs which consti con stitut tutee abo about ut 57% of the cost of the sales, sales, and gover governme nment nt lev levies ies whic which h constitute 38% of the cost of the paints. There are more than 300 inputs going into the manufacture of the paint and about 70% of them are based on the petroleum. The petroleum prices, therefore, are one of the important cost drivers. The price drivers include the extent of the concentration in the paint industry which is very high. This lead to very low margins at each level with the final retailers making as little as 4-5%.

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2. Wor Workin king g Ca Capit pital al M Mana anagem gement ent::-

The industry has high raw material content: the no. of products is also large with varying pack sizes. Sales in the decorative paints segment are seasonal with more than half the sales coming in the September – November festival Season. A debtor level also tends to be high in this industry.

3. Di Dist stri ribut butio ion n Chan Channe nel: l:--

Distribution Channel is one of the critical success factors for the success in the pai paint nt ind indust ustry ry.. Mar Market keting ing of the dec decora orativ tivee pai paint nt req requir uiree ext extens ensive ive dea dealer  ler  networks; especially in the urban and semi urban markets.

4. Pl Plan antt Loc Locat atio ion: n:--

The nearness the plant location to the market and raw material supply may have success factor for any industry. Plant location helps service distribution network and bulk consumers.

5. Te Tech chno nolo logy gy::-

Thiss is par Thi partic ticula ularly rly imp import ortant ant in the ind indust ustria riall pai paints nts seg segmen ment. t. For Foreig eign n collaboration is important for the players in this segment.

6. Br Bran and d IIm mag age: e: -

The brand image of the company may have success factor for the any company. Development of the brand requires extensive promotion, good quality

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 product, well service to the customer all this help to build the brand image. In the  paint industry brand image has great effect to the customer mind. mind. In the decorative segment the Asian paints is the market leader with maximum market share and their product are sold on the brand image with good quality product, service, broad  product line and innovative innovative way of marketing.

7. TI TINT NTIN ING GM MAC ACHI HINE NE

The tinting machines are becoming the critical success factor for the paint industry that is the decorative paint segment. Tinting machine help to have perfect shade as per the customer requirements. By the innovation of the tinting machine the new product introduction time has been reduced form 6 month to the 1 month.

8. PR PROD ODUC UCT TR RAN ANGE GE:: -

The availability of the different product for the different customer may be the critical success factor for the industry. Company has to offer variety of  the shade and pack sizes for the convenience to the customer. Wide range of the product may lead to selection to the customer. Company offering different product to the different customer group e.g. Asian paint offering “Uts “U tsav av”” fo forr th thee lo lowe werr in inco come me gr grou oup p and and “R “Roy oyal ale” e” for for the the prem premiu ium m customer group.

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FIVE FORCE ANALYSIS 1. THREAT OF NEW ENTRY

Barrier to entry: 1. Brand preference and customer loyalty:

Buyers are often attached to established brand. High brand loyalty means that potential entrance must omit to build a network of distribution and dealer and require spending largely on advertising and sales promotion to overcome customer  loyalty.

In paint industry, branding has crucial role for success of the company. The  paint generally, purchases on the basis of brand image of company and distribution network. Establishing brand and customer loyalty an be slow and costly process which lead to entry barrier in to the paint industry.

2. Distribution:

Potential entrants may face the barrier of gaining adequate access to the customers. Wholesalers and retailer may be redundant to take on the product that lacks buyer recognition. A network of retail dealer may have to be set up from scrat scr atch ch.. Re Reta tail iler erss ha have ve to be conv convin ince ced d by offe offere reni ning ng high higher er ma marg rgin in and and allowances for advertising and promotion.

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In paint industry, the channel of distribution that is availability and access of product is essential. For new entrance to develop channel-required time and cost which lead to barrier for new entrances.

3. Capital requirement:

The larger the requirement of capital investment in form of fixed capital and working capital need to enter market successfully, the more entry barrier for   potential entrants.

In paint industry the working capital requirement is large in form of stock  of var variou iouss pai paints nts i.e i.e.. dec decora orativ tivee and ind indust ustria riall pai paint, nt, sha shade de and col colors ors.. The company has to maintain large stock, which may require efficient maintenance of  working capital. The capital requirement in timing machine is much that also led to entry barrier.

4. Technology:

Succes Suc cessfu sfully lly entry entry may req requir uiree tec techno hnolog logic ical al cap capabi abilit lity, y, whi which ch is not readily available to new entrance. It would be difficult for new entrance to have advance technology that may cost big investment.

In paint industry technology will require in the form of production and mixing different paint. It also requires the availability of timing machine through the distribution networks.

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5. Regulatory policy:

Govt. agency can limit the entry by requiring license and permits. The effect on environment is crucial factor for paint industry because the 50% of raw material are petroleum and other chemical requires for the production of the  paints.

2. BARGAINING POWER OF SUPPLIER 

Bargaining power of the supplier has little or no power whenever the item. They provided are available on open market with ample capacity. Bargaining  power will be higher in case of row possibility for paint manufacture going for   backward Integration. Integration.

Here, bargaining power of supply will be higher because the 60 – 70% is the cost of raw material of the finish paints. The price increase constrained with the presence of the unorganized sector for the decorative segments. Sophisticated  buyers of the industrial paints also limit the bargaining power of the supplier. It is therefore that margin is better in the decorative segments.

3. BA BARGA RGAINI INING NG POW POWER ER OF CU CUSTO STOMER  MER 

Bargaining power of customers will be high when buyers are large and  purchase a sizable percentage percentage of industry's output output..

1. Switching cost:

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The switching cost refers to cost of switching to another brand. In paint industry the switching cost will be less because of the production is of stranded in nature.

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2. Purchase of large volume:

Generally, if the buyer purchases a large volume of products, then he has grater power over the seller. In paint industry, the railway is the big customer and the purchasing on the large scale, which result in to high bargaining power in the foam of specialized paint manufacture as per the requirement. In decorative paint,  paint requirement for painting the house will be large enough that will lead to higher bargaining power to the customers. In the industrial paints, e.g. Maruti and TATA buying paints on the large sale from Goodness, Narolac on the large volume at that time they have higher bargaining power.

3. Fraction of buyer’s cost or the purchase:

  The cost of purchase will be higher in decorative and industrial paint, which results into more prices sensitive.

4. Standard production:

In paint industry, a paints are more or less undifferentiated because chance chancess of change in color, quality is very less. All the organized sector company having network of tinting machine for making shades will lead to no differentiation of the  product.

In a pain paintt in indu dust stry ry,, th thee ba barg rgai aini ning ng po powe werr of cust custom omer er is high high du duee to availability of wide choice that is in decorative and industrial paint, there are many organized company that is Asian paints, Nerolac, ICI, Berger and J&N and over  2200 unorganized company.

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4. COMPETITIVE PRESSURES FROM SUBSTITUTE PRODUCTS:

Firm in an industry are quit often in close competition with firms in another  industry because their respective products are good substitute. In paint industry there is competitive pressure from substitute products especially in decorative segment. In decorative segment, the substitute of paint is “Chuno (lime stone)” which is close substitute on the basis of colour and other product like Pinditine, which is used to get any colour in Chuno. In industrial paint, it has no other  substitute product.

5. INTENSITY OF RIVALRY AMONG EXISTING COMPETITORS:

Rivalry occurs because one or more competitor feels a pressure or less the opportunity to improve position. The intensity of rivalry among competing sellers is the funct function ion of how vigor vigorousl ously y the they y emp employ loy suc such h ta tacti ctics cs as lower lower pri prices ces.. Expand Exp anded ed custo customer mer ser servic vice, e, lon longer ger war warran rantie ties. s. Spe Speci cial al pro promot motion ion and new  product introduction. The rivalry among competitors is high in Indian Paint Industry. The major players Asian Paints, Nerolac, ICI, Berger and J&N and over  2200 unorganized company will lead to rivalry among the competitors. 1) Hi High gh exit exit ba barr rrie ierr

In the Paint Industry, the exit barrier especially for organized sector will be high because of established Brand, Distribution Network and high investment in fixed and working capital lead to higher exist barrier. The higher exit barrier will lead to will to higher rivalry among the competitors for acquiring the market share.

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2.) Competitive Weapon of Price Cut: -

In Paint Industry, Demand is depend in Decorative segment is on housing sector sec tor and goo good d mon monsoo soon. n. Ind Indust ustria riall pai paint nt dem demand and dep depend endss on au autom tomobi obiles les,, Engineering and Consumer Durable. There will be high rivalry among competitors on Diwali and Marriage Season.

3.) Low Switching Cost: -

The switching cost to the customer in the paint will be very low. The  product is offered by competitor competitor may be of same qua quality lity and shade.

4.) Low Product Differentiation: -

The rivalry among the competitors will be high because of the product is standard or undifferentiated.

5.) High Fixed Cost: -

The fixed cost in paint industry is high in the form of distribution channel, Brand building, tinting machine and working capital which lead to higher rivalry among the present competitors.

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MAJOR PLAYERS ASIAN PAINT

In 1942 four partners got together to manufacturer paint in a garage in Bombay. The company was named Asian oil and Paint Company; a name picked at ran random dom fro from m a tel teleph ephone one dir direct ectory ory.. Up aga agains instt gia giant nt Int Intern ernati ationa onall pai paint nt compan com panie ies, s, Asi Asian an Pai Paint nt hit on the inn innova ovativ tivee mar market keting ing str strate ategy gy of rea reachi ching ng consumers in the remotest corners of the country with its small, conveniently size  packs. During the 1950’s the company grow from being family managed, smalltime paint manufacture to professional managed organization competing with the  best companies in the world. By 1967, through innovative R&D and ambitious grass roots marketing, forming strong relationship with thousand of paint dealer in the small town all over India, the company jolted its multinational competitors by emerging as India’s no. 1-paint companies.

Asian paint India ltd took this root to be no.1 in the paint industry in India. When 4 Gujarati friends started Asian paints way back in 1942. In tin shade at Bhandup, all major paints companies from England and Europe were already operating in Indian market. ICI, brindle, codeless Nerolac, Johnson and Nicholson and Shalimar paints, were common names for paint users. No one gave the young Asian paints. Any chance against these giants. But founder of Asian paints under  the leadership of champakbhai choksi. Undaunted by the challenges they had in front of them. Champakbhai realized that the foreign paints giants would only look  at the urban market for their paints. However, he reasoned, India leaves in a villages. Hence he decided to concentrate on the rural market with an affordably

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 price lime wash, which he name ‘sufeda’ with proper customer orientation and concentration only on decorative paint segment. Asian paint grew strategy, with a rural customer in mind; they even introduce what is perhaps the world’s smallest  paint pack. The company still sales oil paint in 250 ml.packing for a specific  purpose, to paint the horn of livestock and to paint the swastika shine on their   believes on festival occasion. By concentrating on the result and reinforcing with  proper customer orientation, the company which has late started, was the first to cross, the Rs. 500 corer turnove turnoverr in Indian paint industry industry and then marched on to  become the no 1 paint company with Rs.1200 cores plus company with godless  Nerolac in the second place with a turnover of only Rs. 650 corer. Asian paint is India’s largest paint company and ranks among the top 10 decorating coatings companies in the world today, with a turnover of Rs. 20.67 billions, (USD 435 millions)

The October 2003 issue of forber’s global magazine USA ranked Asian  paints among the 200 test small companies in the world for 2003 and presented “best under a billion” award, to the company. One of the countries lading business magazines “business today” in the Feb. 2002, ranked Asian paints as the ninth best employer emplo yer in India. A survey carr carried ied out by ‘Economi ‘Economicc Times’ in Januar January y 2000, ranked Asian paint as the Fourth most admire company across industries in India. Among its various other achievements, Asian paint is the only company in India to have won the prestigious Economic Times- Harvard business schools association of India award on to separate occasions, once in a category of “Mini- giants” and the other in “private sector giants”.

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Asia As ian n pain paintt ma manu nufa fact ctur ures es a wi wide de ra rang ngee of pa pain ints ts for for de deco cora rati tive ve an and d industrials use. Vertical integration has seen it diversified into specialty products such as ophthalmic and anhydride and penpacrythritol. Not only does Asian paints offer customers a wide range of decorative and industrial paints, it even custom creates products to meet specific s pecific requirements.

To keep abreast of world technology and to protect its competitive edge. Asian paint has from time to time entered into technology alliances with world leaders in the paint industry. It has a 50 -50 joint venture Pittsburgh paints and gl glas asss in indu dust stry ry of US USA, A, th thee wo worl rld d lede lederr in auto automo moti tive ve coat coatin ings gs,, to me meet et the the increasing demand of Indian automotive industry. It has also drawn on the world’s latest technology for its manufacturing capabilities in areas like powder coatings and high-tech resins – thus ensuring that its product quality lives up to exacting international standards, even in the most sophisticated product categories.

The company places strong emphasis on its own in-house R&D, creating new oppor opportunit tunities ies by effe effective ctively ly harne harnessing ssing indig indigenous enous crea creativit tivity. y. The Asia Asian n Paints Research & Development Center in Mumbai has acquired the reputation of   being one of the finest in South Asia. With its team of over 125 qualified scientists, it has been responsible for pioneering a number of new products and creati cre ating ng new categ categori ories es of pai paints nts.. The R&D tea team m has dev develo eloped ped the entir entiree decorative range of the company.

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The company boasts of state-of-the-art manufacturing plants at Bhandup in the state of Maharashtra; at Ankleshwar in the state of Gujarat; at patancheru in the state of Andhra Pradesh; and at kasna in the state of Uttar Pradesh. All the company’s plants have been certified for ISO 9001 – the quality accreditation. All th thee comp compan any’ y’ss pl plan ants ts have have al also so re rece ceiv ived ed the the ISO ISO 14 1400 001 1 ce cert rtif ific icat atee for  for  Enviro Env ironme nment nt Man Manage agemen mentt St Stand andard ard.. The Pht Phthal halic ic Anh Anhydr ydride ide pla plant nt has bee been n certified for ISO 9002 and ISO 14001 whereas the Penta plant has been certified for ISO 14001. The Penta plant will shortly receive its ISO 9002 certification. In June 2003, Asian Paints plant in Patancheru was conferred “The Golden Peac Pe acoc ock” k” aw awar ard d by th thee Wo Worl rld d En Envi viro ronm nmen entt Fo Foun unda dati tion on and and the the aw awar ard d for  for  ‘Excellence in Environment Management by the Government of Andhra Pradesh.

Asia As ian n Pa Pain ints ts wa wass on onee of th thee fi firs rstt comp compan anie iess in Indi Indiaa to exte extens nsiv ivel ely y computerize its operation. In addition to computerized manufacturing, computers are used widely in the areas of distribution, inventory control and sophisticated MIS to derive benefits of faster market analysis for better decision making. It is a cont contin inuo uous usly ly evol evolvi ving ng co comp mpan any y deri derivi ving ng it itss cutt cuttin ing g edge edge from from the the use use of  innovative IT solution. All the locations of the company are integrated through the ERP solution.

International Operation Asian Paints operates in 23 countries across the world. It has manufacturing facilities in each of these countries and is the largest paint company in nine overseas markets. It is also India’s largest exporter of paints, exporting to over 15 markets in the Asia-Pacific region, the Middle East and Africa. In 12 markets it

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operates through its subsidiary. Berger international Limited and in Egypt through SCIB Chemical SAE.

Asia:

Bangladesh, China, Malaysia, Myanmar, Nepal, Philippines, Singapore, Sri Lanka and Thailand. Africa:

Egypt &Mauritius Caribbean Islands

Barbados, Jamaica, Trinidad & Tobago Europe:

Malta Middle East:

Bahrain, Dubai and Oman South Pacific:

Australia, Fiji, Solomon Island, Tonga and Vanuatu

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STRATEGY For the next thirty years they maintained their position as market leader througha following pronged strategy-

1. Ex Exce cell llen entt ma mark rket etin ing g 2. In Inte tens nsiv ivee di dist stri ribu buti tion on 3. Lead Leadershi ership p in infor informati mation on te technol chnology, ogy, and 4. Recr Recruitm uitment ent of young mana manageme gement nt pr professi ofessionals onals..

Growth strategies: -

One of the fastest growing segments in the paint industry is “exteriors”. Asian Paints has become the market leader in this segment within five years of  launch. Outpacing Showcem. This segment contributed almost 10% of sales in FY02 and is growing at a healthy rate of 30% per annum. Besides, the gradual reduction in excise and customs duty has forced many unorganized players to shut shop. This would benefits organized players in the future with a greater share in the overall pie. Another positive for the company is that new products introduced in the last three years contribute around 10% to turnover. Indicating strength of its  product portfolio.

Asia As ian n Pa Pain ints ts has has be been en on an ac acqu quis isit itio ion n trai trail. l. Afte Afterr ha havi ving ng ac acqu quir ired ed capacities in the international markets like Sri Lanka and Australia. It acquired the  power coatings business of Howcoplast in the current fiscal for a consideration of  Rs. 160 mil millio lion n (ap (apart art fro from m cur curren rentt ass assets ets.) .) Ano Anothe therr pot potent ential ial hig high h gro growth wth area.G are a.Goin oing g for forwa ward, rd, ino inorga rganic nic gro growth wth wil willl play play a key rol rolee in the com compan pany’s y’s

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expansion plans. Its venture unto automotive paint segment has performed well in the last two years with customers including Hyundai, Ford and GM.

Asia As ian n Pa Pain ints ts (A (AP) P) is an ou outt-an an-o -out ut Indi Indian an firm firm in the the pa pain intt indu indust stry ry manufactures and markets a wide spectrum of decorative as well as industrial  paints.

The SWOT analysis of Asian Paints indicates :

1. St Strren engt gths hs:: -



Market leaders with 35% market share in the organized sector, the closest competitor dose not have even half of AP’s share:



Comprehensive nation wide coverage of the market – urban, semiurban and rural areas.



They have quite a number of brands, covering all segments and filling all gaps. For example, they have brands in different price slots like Utsav for rural lower-end markets and Apcolite for high endmarkets.



AP’s logo “Gattu” an impish boy with the paint tin and brush, is most popular and easily recognized.



Widest product range in terms of products, shades, pack sizes – 40 different decorative, some in 150 shades, 8 different pack sizes.



Over 90% accuracy in forecasting, 100 fastest SKUs monitored dayto-day, far superior to competitors.



Unlike its competitors who concentrate only in urban areas, AP is for everywhere, it has a countrywide distribution.

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A network of 13,000 dealers spread all over the country. The nearest company has less than 8,000. For this, they have large network of  regional offices and company depots and sales personnel to service the nationwide dealer network.



Strong in inventory control. APs average inventory level is 28 days sales again, 51 days for the industry. AP has 45% edge in inventory carrying costs.



The pricing strategy is oriented to middle/lower end consumers:



High quality MR and MIS.



AP is qui quite te str strong ong in pro produc ductio tionn- mar market keting ing coo coordi rdinat nation ion.. The Their  ir   policy of offering tailor-made products to suit customer need has



resulted in an ever-growing product range. In-house In-hou se produ productio ction n no outsou outsourcing rcing,, high reli reliabili ability ty in suppl suppliers, iers, superior in quality assurance.



Leader in profit and operating margins, ROI of AP is 40% while ROI of the rest of the industry is 22%. Net worth of Rs. 204 crores against Rs. 58 crores of Goodlass, Nerolac and Rs. 41 crores of  Berger.



High caliber human resource employs maximum number of MBAs as a proportion to total number of employees.



Corporate reputation has been a major strength for AP. The image is that of a successful and well-managed company. They have won many ma ny acco accola lade dess and and aw awar ards ds.. Fo Forr exam exampl ple, e, 19 1995 95 Co Corp rpor orat atee Excellence Award from HBSA and ET, IDBI study rated AP as one of India’s most excellent companies, another study rated AP among top 5 paint manufactures in the world. They have an enviable track  record in breaking the position of MNCs in the Indian paint industry.

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2. WE WEAK AKNE NESS SSES ES::



In industrial paints. AP has only a 14% market share. It is far behind the leader Good lass, Nerolac, which has a market share of 43%. Since this is going to be the major growth segment in the future, a lag in this segment will end up as a major weakness.



Wide Wi deni ning ng pr prod oduc uctt mix mix pu puts ts stra strain in on prod produc ucti tion on dist distri ribu buti tion on,, accoun acc ountin ting g and adm admini inistr strati ation; on; Inn Innova ovatio tion n in dev develo elopme pment nt new  products is adequate.



AP has has a maj major or we weakn akness ess on the techn technolo ology gy fro front nt in ind indust ustria riall  paints. Most paint firms have technology tie-ups with manufacturers abroad. For example, Good lass Nerolac has a tie-up with Kansai Paints Pai nts,, whi which ch has pro provid vided ed the com compan pany y wit with h Cat Cathod hodic ic Ele Electr ctro o Depo De posi siti tion on (C (CED ED)) tech techno nolo logy gy.. Si Sinc ncee Ka Kans nsai ai is the the supp suppli lier er to Suzuki, Suzuk i, Japa Japan, n, Goodl Goodlass ass with its Kansai connect connection ion finds it easy to tap Maruti in India. Ap has nor been able to make nay significant advances either with Maruti or the auto segments in general. Berger  has a technical tie up with Herbets. Germany, for automotive paints, Vals Va lspa parr Co Corp rp,, US USA A fo forr he heav avyy-du duty ty co coat atin ings gs and and Te Teod odur ur NV NV,, Holland for powder coatings:



Ever Ev er expa expand ndin ing g pr prod oduc uctt mix mix thro throws ws some some stra strain in on inve invent ntor ory y management:



Rura Ru rall bi bias as of lo logo go Ga Gatt ttu. u. Th This is is li like kely ly to co cont ntra radi dict ct the the new new  positioning for the premium brands meant for urban markets: markets:

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Seasonal demand and hence in off seasons it can lead to cash flow  problems.



Mr. Champaklal Choksey leadership all through the past over the years is getting somewhat shaky.

3. OP OPPO PORT RTUN UNIT ITIE IES: S:



Ap has always enchased on opportunities that have come its way. It ha hass ma main inta tain ined ed a pr prod oduc uctt pr prof ofil ilee ke keep epin ing g the the ma mark rket et tren trends ds in  picture. It shifted to predominance in industrial paints than industrial  paints than in decorative paints as was eve dent from the production figures of 1995-96.



The automobile industry accounted for 50% of the industrial paint market.

4. THREATS:



Domination of few foreign companies.



Since Since bot both h Goo Goodla dlass ss Ner Nerola olac(4 c(43%) 3%) and Ber Berger ger’s ’s (14 (14%) %) ha have ve a hig highe her  r  market share than AP’s (14%), it is possible that in the future, they may capture the entire industrial paint market.



Competitors have gone in for hi-tech with instant colour spot mixing. For  example, J&N’s instant colour offers 626 shades.



Automated paint blending in retail points already there. ICI’s Touch colour  and Berger’s colour Bank are indicative of this.



Competition is catching up fast, hi-tech facilities gives abundant choices.

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GOODLASS NELORAC:

September 2, 1920, the whole world was experiencing the aftermath of the World War and the destruction it left behind. In such conditions was born at Lower Parel, Bombay- the Gahagan Paint and Varnish Co. Ltd. In November  1930, three British companies. Goodlass wall, Cookson Lead and Antimony Co. and Locke Lancaster and Walkers Parker merged to form Goodlass Wall and Lead Industries Group Ltd. Which subsequently became lead industries Group Ltd. (LIG).

In April 1933, LIG acquired the entire share capital of Gahagan. With this, expertise in paint technology became available to the Indian company, which by then the n had becom becomee Goo Goodla dlass ss Wa Wall( ll(Ind India) ia) Ltd. Ltd. In 194 1946, 6, thi thiss com compan pany y bec became ame Goodlass Wall Pvt. Ltd. A decade later, in 1957, the company came to be known as Goodlass Nerolac Paints (Pvt.) Ltd. And in course of time, went public, with the  passage of time, the Tata Tata Group of companie companies, s, primarily through what iiss now the Forbes Gokak Group, acquired a part of the foreign share holdings in Goodlass  Nerolac Paints, thus making the company a part of the prestigious Tata organi org anizat zation ion.. In the ear early ly 196 1960’s 0’s the com compet petiti ition on in the pai paint nt ind indust ustry ry was growing. The urban markets had saturated and paint companies saw potential in the upcountry markets. Goodlass was a popular paint company, but there was one  problem. The five-syllable name of Goodlass Nerolac would not roll easily on the tongue of the upcountry dweller. “Interpub” the adsvertising agency used by then,

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suggested to Mr. Denis Ridley the then Sales Manager that a symbol should be associated with the company’s name.

Full 18 months were spent on discussing as to what the symbol should be like and if it was needed it in the first place. In the year 1970, GOODY the smiling tiger was born. His distinctive and colored personality was just what a paint company needed. Coincidently it was the time when the tiger replaced the lion as the national animal. Project tiger started by the worldwide fund had also increased the public interest in this animal.

Goody during his growing years kept changing. His weight fluctuated, sometimes his cars disappeared behind well fed cheeks, his chin flattened and sharpened alternatively. But looking back, perhaps these are the signs of healthy growth in any tiger cub.

Goody has matured now. While posing formally he always has a paintbrush in his paw. He keeps changing his position to keep cramped muscles away but his  basic feature are the the same.



GOODLAAS NEROLAC STRATEGY:

Your company is committed to creating value addition to customers by way of co cont ntin inuo uous us up gr grad adat atio ion n of te tech chno nolo logy gy re resul sulti ting ng in re redu duct ctio ion n in pain paintt consumption per vehicle. Increasing the utility and life span of paints, reducing energy consumption and in manufacturing of environmental friendly paints. Latest technology, application knowledge, technical sales service and knowledge on

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Entire paint systems are key factors in Auto Paint Market. With collaboration from world leaders across various continents and with wealth of experience over the years in running various auto lines, your company is well equipped to maintain and consolidate its position of strength. Your company is proud to be the first company to introduce latest environmental friendly Lead free electrode position Paint in India. MARKETING STRATEGY:

Some of the strategy adopted by Goodlass Nerolac is special and unique in the paint business in India. Following are the different marketing strategy:

1. Pro Produc ductt Port Portfol folio io and Log Logist istic icss suppor supports: ts:

Company enjoys a vast network of 50 depots and 8000 dealers spread across the length and breadth of the country. The company has followed an integrated approach toward the need of the customer in automotive sector and offers a variety of products range. It is only one in the industry that is able to supply pretreatment chemicals, the entire range of primers and coats. It is also only company in the paint’s industry with a pigment-manufacturi pigment-manufacturing ng unit.

2. In Inno nova vati tion on::

The company has launched an eco-friendly paint called All Scapes. Its USP is that it is the first water based paint that can be applied on any surface and it comes in three finishes.

3. Gr Grow owth th sstr trat ateg egy: y:

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What has helped company in the past is the fact that the company earned 50% of its sales from institutional clients. This includes sales to MUI, M&M, Baja Ba jajj and and ot othe herr auto automo mobi bile le co comp mpan anie ies. s. Be Besi side de this this,, it al also so ca cate ters rs to ma many ny consumer durable goods companies. This gives GNPL, an advantage in many ways:

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(a) (a)

Sin incce m mos ostt o off the the ssaale less ar aree aass ssur ured ed and and ccaan be p prredi edicat ateed, th thee

comp compan any y ha hass fo foun und d it self self in a comf comfor orta tabl blee po posi siti tion on to de dete term rmin inee finished goods inventory management.

(b)

The initial str strategy of Nerolac to concentrate on industr strial

 paints has paid of since a large no. Of automobiles and while goods manufactures have of late entered in India.

4. Bet Better ter Fi Finan nancia ciall Ma Manag nageme ement: nt:

The com compan pany y enjoy enjoyss str strong ong posi positio tion n wit with h reg regard ardss to wor workin king g cap capita itall management. The working capital cycle is 53 days as against the other companies, which has an average cycle of 87 days. The old saying about hastening receipts and delaying payment is being well adhered to by Good lass Nerolac. While it rece receiv ived ed it itss paym paymen ents ts in 41 days days.. It paid paid it itss cr cred edit itor orss in 10 105 5 da days ys.. Th This is  performance has been improving over the years and given the facts that working capital management is a critical success factor in this industry, this has turn out to  be a definite competitive competitive edge.

5. Ni Nich chee S Str trat ateg egy: y:

Market Mark et Deve Developme lopment nt throu through gh deri derived ved dema demand nd (ini (initiall tially y throu through gh Maru Maruti ti connection)

(a) Till the seventies the market for industrial paints had remained

sl slug uggi gish sh.. Au Auto tomo mobi bile less ma mark rker erss such such as Hi Hind ndus usta tan n Mo Moto tors rs and and Pr Prem emie ier  r  Automobiles were not willing to accept better quality. Things took turn for the

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 better with the entry of Maruti in the early Eighties. Maruti in collaboration with Suzuki set stringent standards that Indian companies were not geared to meet on their own. Goodlass Nerolac was the first to seize this opportunity. It entered into collaboration with Kansa Paints of Japan. With one masterstroke it was able to control the entire Maruti business because Kansi was the single  biggest supplier to Suzuki in in Japan.

(b) Maruti upgraded the Indian paint industry from a starving industry

to el elec ectr tro o de depo posi siti tion on (E (ED) D) pr prim imer ers. s. As Ma Maru ruti ti jump jumped ed to the the top top of the the  passenger car market Goodlass Goodlass grow with it it..

(C) As Go Good odla lass ss wa wass th thee on only ly comp compan any y that that ha had d ac acce cess ss to ED

technology, it came to be viewed as the technology leader in the industrial  paint segment. When Bajaj Auto, TELCO, etc. switched to this technology, Goodlass found it easy to seize s eize the market opportunity.

Uniqueness of its Strategy:

Goodlass emphasized on the fact that it offered a complete technological  package. It had everything from pre-treatment chemicals, primers, intermediate coat coatss and and to topc pcoa oats ts.. Th Thee comp compan any y al also so bu buil iltt up po posse ssess of te tech chni nica call supp suppor ortt executives. This way Goodlass Nerolac become the pioneer in the industrials  paints business by taking care care of all kinds of painting jobs jobs of a client.

The Difference:

Industrial Paints had never been treated as a separate activity that requires different organizational organizational focus. As a result, the busine business ss was treated as apart of the

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trade and clubbed with the same sales team. By the time Asian paints and other   players realized what was happening, the stakes had already been divided and Goodlass had taken the lead. •

Goodlass Nerolac and Asian Paints dominate the Indian automotive  paint segment. Some of the key clients of Goodlass include Maruti Suzuki Suz uki,, Tel Telco, co, Mit Mitsub subish ishii Lan Laneer eer,, Ho Honda nda,, Baj Bajaj aj Aut Auto, o, For Ford, d, He Hero ro Honda, Mahindra, Toyata, TVS Suzuki, Volvo and Whirlpool. Asian Paints, on the other hand, is the key supplier to Hyundai, Daewoo, General Motors (GM), Bajaj Auto and Hero Honda.



Nerolac signs Amitabh Bachan to endorse ‘Suraksha’ and Mohanlal to endorse ‘Excel brand

Perhaps for the first time in the history of the Indian Paint Industry, a film star is endorsing a brand. The Rs. 700- crore paint major Goodlass Nerolac has roped in the popular hero of Malayalam cinema. Mohanlal, to promote its acrylie exterior paint Excel and Mega Film Star Amitabh Bachan also for the promotion of the exterior paint “Suraksha”.

Considering its flagship brnad of Excel already enjoys a 35 per cent share in Kerala. Kerala. Gett Gettting ting the loca locall superst superstar ar to stand for the bra brand nd in the state wa wass a strategy to cash in on the popularity of the star to build further equity for the  brand.

Mohanlal will also endorse other brnads from Nerolac’s portfolio in the future. Explains Mr. Anuj Jain, Head Marketing, Goodlass Nerolac Paints. The synergy between our brand and Mohanlal is the fact that both are long lasting. Moha Mo hanl nlal al ha hass be been en aaro aaroun und d fo forr al almo most st 20 ye year arss and and so had had Ex Exce cel. l. It is an

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experiment of sorts and currently we have restricted the campaign to Kerala and Tamil Nadu where the star is better known. Consid Con sideri ering ng Moh Mohanl anlal al is also also fea featur turing ing in Ram Gopal Ve Verma rma’s ’s new flick –  Compan Com pany, y, his lau launch nch int into o ma mains instre tream am Hin Hindi di cin cinema ema should prope propell him as a national brand ambassador in the future.

Besides, Excel also enjoys the highest penetration levels of nearly 80 per  cent in Kerala where the demand for premium paints is high. Apart from its NRI client cli entele ele,, its unc uncert ertain ain we weath ather er con condit dition ionss als also o gen genera erate tess dem demand and for qua qualit lity y exterior paints, according to the company.

Allocating a marketing budget to the tune of Rs. 20 crore, the company has its advertising account resting with two agencies – Ulka Interface and Ambience D’Arey. It generally uses its mascot (the yellow and balck striped tiger, Goody) to generate goodwill for the Nerolac brand. However, now the company intends moving away from the mother brand of Nerolac and replace it by highlighting its sub brand such as Excel. Suraksha and Allscapes, today we wanr to create standalone brands in the exterior segment.

Besides, like its competitor and the industry leader. Asian Paint, Nerolac has also introduced a help line number to assist customers in choosing the right  brand co lour. In addition, it was also set up spectrophotometers spectrophotometers by the name of  ‘Magic Eye’ – a futuristic devise which creates the right shade recipe which customers demand with a memory facility to repeat the shade in demand. However  this facility is restricted to select outlets.

In 1999, the Japan- based Kansai Paints company Ltd took over the entire stake of Tata Forbes Group in the joint venture company. Thus Goodlass Nerolac

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Paints Pai nts Ltd bec became ame a who wholly lly-ow -owned ned sub subsid sidiar iary y of Ka Kansa nsaii Pa Paint ints. s. Cur Curren rently tly,,  Nerolac has a 60 per cent value share in the automotative segment and a 15 per  cent value share in the decorative segment.

BERGER PAINTS INDIA LTD

BPII BP II,, wa wass in inco corp rpor orat ated ed in 19 1923 23 as ha hadf dfie ield ldss (Ind (India ia)) Li Limi mite ted. d. Th Thee comp compan any’ y’ss na name me wa wass chan change ged d to Be Berg rger er Pain Paints ts (Ind (India ia)) Limi Limite ted d in 19 1983 83 to in inde dent ntif ify y it itse self lf wi with th th thee pa pare rent nt comp compan any y in U.K. U.K. In No Nove vemb mber er 19 1988 88,, in a management buyout deal, Mr. Vijay Malya took over the ownership of nineteen Berger, Jenson and Nocholson group of companies situated in Africa, Asia and Middle East. BPIL, then became a UB group company. The ownership of the company changed hands when Mr. Vijay Malya sold his stake in the company to Mr. K.S. Dhingra.

A leading player in the industry, Berger paints boasts of a market share of  15 per cent. It is predominately engaged in the decorative paints segment, which is responsible for two third of its sales. While Berger market spread over the east, west, and south of India. It has a strong hold in the eastern and Southern market.

BPIL has three manufacturing facilities – with capacity of 11,200 TPA at Howrah, west Bengal, 17,000 TPA at Vallabh Vidyanagar, Gujarat and 18,000 tpa capacity at Pondicherry near Madras. The company enjoys the benefits of tehnical tieups with Herberts, Germay for automotive coatings. Berger paints has already entere ent ered d int into o str strate ategic gic Par Partne tnersh rship ip wi with th Ni Nippo ppon n Pai Paint nt Com Compan pany y of Jap Japan an for  manufacturing automobile paints. It has technical tie-ups with Orica Austrlia Pvt. Ltd. For heavy duty anticorrosive industrial coatings. Berger Paints propose to expand its operation through acquisition. Both internally and strategic partnership, mostly with foreign firms.

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ICI INDIA LTD

ICI India was the subsidiary of the $ 15BN British multinational company ICII Pl IC Plc. c. [E [Exh xhib ibit it 8. 8.]] Br Brun unne nerr Mo Mond nd & Co Co.. on onee of the the four four comp compan anie iess that that combined to form ICI in UK in 1926, opened a trading office to sell alkalis and dyes in Calcutta. In 1923, Brunner Mond & Co. (India) was incorporated and the compan com pany’s y’s nam namee was sub subseq sequen uently tly chang changed ed to Imper Imperial ial Chem Chemical ical Industi Industies es (India) Ltd.. In 1929, during its 70 years in India, ICI had created six subsidiary

companies in businesses such as research, chlorine, caustic soda, paints, rubber  chemicals, explosives, polyurethane, nitrocellulose and surfactants. In the 1984, all ICI companies consolidated in one of the larget mergers in Indian Corporate history. By 1997, as a part of a restructuring exercise ICI had exited or was  planning to exit from several non-core business. The 1996 sales break up was as follows: Paints 43% explosive 28%, Rubber chemicals 17% Pharmaceuticals 8% and other products 4%.

ICI (India) ranked No. 4 in the paint business, after Asian Paints, Goodlass  Nerolac Paints and Berger Paints. Unlike the other paint companies ICI (India) was a diversified unit and paint constituted 43% of its net slaes. ICI (India)’s turnover in 1996-97 was $180 million and paint amounted to $77.4 million. ICI id ident entifi ified ed pai paints nts as a thr thrust ust are areaa and wa wass agg aggres ressiv sively ely movin moving g to improve their position. They invested $11 million in a new decorative paints plant near Bombay and were constructing a $16.7 million plant for industrial paint near  Chandigarh in North India. ICI’s chairman Mr. Charles Miller-smith said that he would like ICI to become the Indian Paint Industry leader by 2005. Later he announced that ICI (India) would go on an offensive with a target of achieving

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ten-old growth in 10 years. The 10X plan, as it was call envisaged a strategy based on acquisitions, take- over and alliances.

SNOWCEM INDIA

Snowcem is the pioneer in India, in the manufacture of cent specialties, surface coatings, concrete waterproofers and hardners used in the building and construction industries. Showcem is the larget player in cement paints with a 25% market share and has built very string brands is the segment. The company’s two main products – Showcem and sandtex Mat (Plastic-emulsions paint) dominate the  premium segment and are estimated to have market share 33% and 65% percent respectively.

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CONCLUSION

Indian paint industry looking solid in the terms of growth rate and future  prospect of the Industry. The industrial paints are slated to growth at an annual rate rate of 10 to 12 12% % per per annu annum m fo forr th thee ne next xt fe few w ye year ars. s. Th Thee indu indust stri rial al pa pain intt manufactures would benefit from the burst in the passenger car sales. The twowhee wh eele lerr in indu dust stry ry ha hass al also so re regi gist ster ered ed a go good od show show in the the curr curren entt ye year ar.. Th Thee commercial vehicles segment, a star performer last year with 33 per cent growth, is expected to average a growth of only 15 per cent this year. However, the raising titanium dioxide prices and the negligible growth in agriculture this year, will play spoilsport. Considering the past trend, the paint industry is expected to show at least twice the growth of Indian GDP in the ensuing years. The reduction of excise duties from a high of 40 percent to 16 percent in the last five years, has made the numerous small-scale units unviable, as they no longer have a price advantage over the organized sector. This has helped the organized paint industry a lot.

Thee in Th indu dust stry ry is in a cons consol olid idat atio ion n ph phas asee and and on only ly thos thosee Indi Indian an pa pain intt companies with a strong technical alliance, better distribution network and an ability to compete in the global markets would emerge victorious in the paint war.

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BIBLIOGRAPHY For the preparation of the report following source has used:



Websites:

Indiainfoline.com Asainpaint.com J&N.com



BOOKS:

Strategic Management Product Management In India •

MAGAZINES:

Business Today Saket Industrial Digest Publication •

News Paper:

The Times Of India The Economics Times

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