Akzo Nobel India, one of the leading paint manufacturers in India, has cut the prices of its Dulux Gloss Premium enamel range by 2-3%. The company had effected the price cuts last week itself. According to the company sources, price cuts were effected to pass on the benefits of lower crude oil prices to the consumers. The cost of production of enamel is closely linked to the crude oil price.
Akzo Nobel’s decision on price front is in-line with price cuts on enamels announced by Asian Paints and Berger Paints as well. However, in case of Akzo Nobel, enamels do not constitute major revenue source for the company. It may also be recalled here that Akzo Nobel was the only company that had hiked the prices of its products in February this year. The company had hiked the prices by 1-1.5% then.
Interestingly, the company has decided not to focus on lower end products like putty, distemper and economy paints and in due course plans to discontinue low-value, low-margin products to improve its overall margins. This strategy of the company is in contrast to what other players are following. Most of the paint companies, excluding Akzo Nobel witnessed faster-than-industry growth in the bottom-of-the-pyramid products in FY19 driven mainly by accelerated shift from unorganised sector post GST rate cut. On the other hand, Akzo Nobel is targeting growth at 1.5x GDP for its premium products and aims to recoup its market share in the mid-category product portfolio.