Decorative paints is the only segment in the building materials which has kept its growth momentum ticking in the midst of adverse economic conditions. However, if one gives a closer look at the sector, its mainly because of one manufacturer who has been able to keep the entire industry floating and even moving. Yes, decorative paints’ superlative performance in a slowed down economy is mainly due to the performance of the market leader, Asian Paints. Asian Paints has remained the market leader in its truest sense. It accounts for more than half of the market share in volume terms. In terms of value its share is even higher at nearly 60%. No wonder then it pockets nearly 2/3rd of the profits of the industry!
However, what has really surprised is the market leader’s marketing strategy in recent times. It has kept the competitors thinking about why, how and what next. By blindly following the market leader you can only follow the curve and never be ahead of it. So, the competitors are still watching the situation and awaiting the market reaction before unleashing their strategy.
Industry in transition phase
Market experts believe that the industry in transition phase. Like all other industries, paints also has substantial unorganised segment whose continuance has become difficult, if not impossible, after demonetisation followed by introduction of GST. In fact, administrative surveillance is becoming stricter day by day thus making the life of people in unorganised sector miserable. Manufacturers in organised segment seeing an opportunity – an opportunity to grab the market share of unorganised – and increase own market share. Perhaps, the market leader is making full use of this opportunity.
Tractor Sparc was surprise
Keeping this in mind Asian Paints last year launched Tractor Sparc. The company launched economy emulsion brand, Tractor Sparc, by adopting disruptive pricing tactic to snatch away market share from unorganised sector. It launched Tractor Sparc at Rs 75 per litre to gain market share from the unorganized sector whose emulsion prices are in the range of Rs 70-75/litre. It should be noted that before the launch of Tractor Sparc, prices of Asian Paints’ emulsion products started from Rs 95-100 per litre. Meanwhile distempers are sold at Rs 60/litre and as such there was a huge gap in its product portfolio. The company reduced the starting price of emulsions by 25% through this new brand. One of the objectives of the new brand was to uptrade the consumers from distempers (which is a mid-segment), and arrest downtrading in emulsions. At the same time, Asian Paints also gave clear signal to its competitors, especially the newcomers like JSW Paints, that the company will protect market shares even if it costs profitability.
New brand receives muted response
The company has not made any formal comment on the response to its new brand saying that its too early to comment on that. However, channel checks suggest that the response to the product is muted. Channel checks also suggest that the new brand has received muted response mainly due to there was not much brand promotion nor was there any scheme to support the brand. Further, media support too was weak to create awareness among the consumers about the new brand. Also, they point out that there were no additional commissions or discounts due to which dealers didn’t have enough incentives to promote the product. It should be noted that the dealer’s effective commission reduces by selling product with lower retail price which in itself is a dis-incentive to sell products of lower value.
No scope for complacency
The entire exercise goes to prove one thing – Asian Paints takes its competition, not only the existing but also the potential ones, very seriously. Reports suggest that higher margins enjoyed by the decorative paints makers have attracted new players like Indigo and JSW into the industry. Further, some existing players had turned aggressive like Kamdhenu Paints in the North and Nippon Paints in the South. Even the new comers like Indigo in the South and JSW in Tamil Nadu have started expanding their dealer network rapidly thus posing a potential threat to the market leader and also other existing paint makers. There is also competitive pressure in putty segment with cement companies raising promotions/discounts to gain market shares.
The emerging scenario is interesting to watch and consumer seems to be the ultimate winner. To remain in the reckoning, new products will have to be introduced with frequent intervals and that too at competitive rates. Recent developments in the paint industry show that there is no scope for complacency.