Home Industry Trends Decorative paints industry hopes recovery to continue in Q2

Decorative paints industry hopes recovery to continue in Q2

Decorative paints are discretionary items of expenditure for homeowners and spending on it or lack of it gives important signals not only about the industry but also is indicative of the health of the economy and spending habits of the people in general. Therefore, economists, analysts and experts are all watching the performance of the industry to identify any greenshoots in the economy. However, performance of the sector in the first quarter was anything but inspiring.

Paint shops remained closed in lockdown

Paint shops across the country were closed since 24th March, the day country went in for complete lockdown. In some Green zones dealers were allowed to open shops from 24th April subject to observation of social distancing norms. Most of the shops in the Orange zone were allowed to operate from 17th May while the shops in the Red zone were allowed to open from 8thJune onwards. Meanwhile, shops in the containment areas continue to remain shut. Thus, most of the areas, except those in containment areas are now operating since 8th June. However, it should also be noted that major paint markets like Mumbai, Delhi, Pune, Chennai and Ahmedabad had to remain closed for major part of the quarter which had an impact on the paint demand.

Sales poor as pent-up demand wanes

Initially, paint shops, especially in smaller towns and villages saw pent up demand as the lockdown was imposed at a very short notice and though this did not become a trend later on. However, enquiries with some dealers reveal that demand in June was better than in May. According to dealers, wit the commencement of construction activities in some parts of the country, demand for paint for new projects has seen an uptick, though its too early to call it a trend. On the other hand, repainting (mainly by the individual home owners) has remained weak. Many cities still face shortage of painters due to reverse migration of migrant workers. Though some of the migrant workers who had gone back to their native villages have returned to cities now, homeowners are apprehensive in getting their house repainted due to prevailing COVID threat. Also, uncertainty about jobs and source of revenue also forcing many to withhold/postpone their decision to repaint their houses for some more time.

Problem of migrant workers

Most of the migrant workers usually work in the major cities while tier-2 and tier-3 cities have migrant workers to the extent of about 30%. Most of the migrant workers are expected to return only after the Monsoon now.

On time arrival Monsoon is bad for industry

According to the dealers, on time arrival Monsoon also bad news for the industry. Last year Monsoon had arrived late, in some regions as late as one month, which had allowed the painting work to go on for extended period. Now the dealers expect any meaningful recovery in demand can happen only after Monsoon which also coincides with the festive season.

Incidentally, paint companies have offered higher discounts and attractive schemes to the dealers thereby making it very attractive for them to place orders.

Demand composition varies from region to region

Survey has also revealed that in South and West demand is more skewed towards mid-premium range products. On the other hand, in East and North the demand is noticed more for economy ranged products. Entry level products are growing much faster than the premium products and this trend has emerged much before the country went into lockdown. This has forced the leading paint makers to introduce new brands in this segment.

Asian Paints’ Q1 performance encouraging

However, Asian Paints’ first quarter performance gives rays of hope for faster recovery in the demand. Asian Paints, the largest decorative paints supplier in the country, has seen 14% volume growth in June which was not expected by many experts in the industry.  The company reported 35-40% decline which is also better than the analysts had anticipated. However, some experts point out that sharp recovery in volume in June is mainly due to pent up demand in areas and cities where lockdown restrictions were relaxed in June. They warn that it would be improper to extrapolate the demand for rest of the year based on June volume.

One only hopes that pessimists are proved grossly wrong in the coming months.

Subscribe to our newsletter

To be updated with all the latest news from Sawdust




latest news