Waterproofing business is no longer dominated by the unorganised sector nor is a happy hunting ground for any single company in the organised sector. Over the years many companies have entered the field of waterproofing thus questioning the supremacy enjoyed by Pidilite. Noted among them is the leading paints company, Asian Paints followed by another paint maker, Berger Paints.
These paint manufacturers have already established wide distribution network and also have established brand names in the paint industry which they are aiming to capitalise by expanding the product portfolio. For example, Asian Paints has a network of nearly 50,000 distributors and dealers while Berger Paints has a network of around 18,000 dealers and distributors.
Dr Fixit still a dominant force
Although paint companies are relatively smaller market share and Pidilite’s Dr. Fixit waterproofing product continues to dominate a quick survey shows that leader’s growth rate is slowing down. At the same time, paint companies have grown faster in waterproofing business and revenues from these products now account for almost one-third of Pidilite’s sales in this segment.
High margin business
It should be noted that waterproofing business is high margin business and branding adds further to the margins. Due to higher margins in this segment, paint companies have increased discounting activity/trade margins, thereby driving higher growth. No wonder then this high margin business with huge growth potential has attracted another paint maker, Kansai Nerolac who has recently entered the business through the acquisition of Perma.
Asian Paints eyes top slot
Asian Paints’ foray into waterproofing business is part of its strategy to be present in the entire value chain (painting cycle) so that it can fully leverage its distribution network. Despite the presence of Pidilite, Asian Paints has made rapid strides in waterproofing based on increased warranty period, creating awareness among painters about the application of waterproofing material, high dealer margins, and increased A&P spends. Asian Paints being the top paint maker also aims for top slot in waterproofing business. For this, the company has reportedly chalked out season and territory based strategy.
Paint makers eye internal waterproofing
In waterproofing business one should know that there are basically there are two types of waterproofing – one is for external walls and the other is for internal walls. While the waterproofing for external walls ensures that water does not enter the house through external cracks, internal waterproofing is used so that no dampness or moisture is not visible on internal wall. According to experienced contractors, if done properly only one form of waterproofing is enough (either external or internal). The paint companies who entered the waterproofing business recently like Asian Paints, focused mainly on internal waterproofing and through their strong distribution network and substantial discount were able to capture sizeable market share. However, these companies are little slow to make much impact on external waterproofing where Pidilite is still much ahead of its competitors.
Competitive pricing makes the difference
But the paints major, Asian Paints is trying to break the barrier in external paints too. Here again, the paint company is selling the chemicals at much cheaper rate while keeping the quality at the highest level. As a result, the product has started finding favour with civil contractors. Since most of the contractors work on lower margins, product pricing plays a major role in their decision making process.
Innovative warranty offer
Apart from competitive pricing, Asian Paints has started offering warranty of 7 years vs. the 5-year warranty that it offered earlier. This has forced Pidilite who wasn’t offering any warranty too to change its marketing strategy. According to market reports, Pidilite too has started matching Asian Paints revised warranty. However, paint companies have started gaining upper hand as the customers have started bundling waterproofing with their painting jobs.
Further, Asian Paints is at the forefront creating awareness about waterproofing and its significance in construction. Asian Paints has started training centres across India for construction workers / painters about how to apply waterproofing products and construction chemicals. This is likely to benefit the company in gaining market share in the long run.
In the coming days, fight to gain market share in waterproofing business is likely to intensify with Pidilite doing everything to retain its leadership position while the relatively newcomers trying to increase their market share. It’s believed that players are now focusing on tier 2 & 3 cities and also rural India to expand their market. This will eventually result in expansion of market for the waterproofing business as a whole.