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IPL is not just about cricket, it is also about running business, at least paint makers have realised it so of late. It is especially so in case of South Indian paint market which is nowadays seeing intense competition among the leading paint makers in the decorative segment. Fight is to gain and retain the existing market share.
Perhaps it all started with Nippon Paint, Asia’s leading paint manufacturer, tying up as associate sponsor with IPL franchise, Chennai Super Kings. Since then Nippon has been aggressively spending on advertisements and promotions which has provoked its competitors to act upon. Dealers in South India admit that aggressive marketing by Nippon has increased consumer awareness and driven inbound queries for its products.
It is not just TV commercials by Nippon but other marketing strategies by the Paint maker like pro-active efforts in adding new dealers have alerted its competitors. It seems Nippon has gone one step ahead and is offering tinting machines without any upfront costs, if the dealers agree to a minimum offtake commitment. Further, Nippon is reportedly offering higher dealer margin of 10-12% while the margins offered by the market leader is in lower single digits for regular products.
However, trade discounts have become a talk of the town in paint industry all over the country. When industry’s growth prospects are hampered (temporarily) by various legislative adventures, paint makers are using other techniques to retain their market share. For example, Kansai Nerolac Paints has become aggressive in providing trade discounts at 12-13% to retailers and 14-15% to projects in order to drive sales. It is heard that even Berger Paints too has become aggressive in offering trade discounts though we don’t have the exact figures. On the other hand, despite having one of the best products in decorative paints, particularly water-based paints, Akzo Nobel, the fourth largest player, has been a laggard in servicing trade channel. Market reports say that Akzo Nobel’s loss is Berger Paints’ gain who has gained market share in East India at the expense of former. Incidentally, East India is the fastest growing market for paint industry, thanks to robust growth in real estate activities in the region.
Asian Paints, the market leader in decorative segment, has not yet lost any market share thanks mainly to its strong connect with architects and contractors. Asian Paints was hit harder than its peers due to cash crunch, post demonetisation and GST, as unlike its peers some part of its distribution is still indirect, that is, dependent on large dealers selling to smaller town dealers.
Rise in the raw material price in recent months has not done any good to paint manufacturers who are struggling to retain their market share at a time when the market growth is slowing down. However, Asian Paints has announced price hike of 2% from 1st May. This announcement in advance has encouraged the dealers to stock their products before the price hike. It is expected that others too may follow the leader in hiking the price.
However, Asian Paints still enjoys stronger brand equity as compared to other paint manufacturers and have wider dealer network and superior connect with contractors and architects. Alarmed by the actions of its competitors, Asian Paints has become active in expanding its dealer networks. It seems Asian paints has been pro-active in tapping even the smaller multi-paint dealers to widen its distribution network unlike other players who have been largely focused on adding large dealers. Additionally, Asian Paints maintains a better connect with the architects and contractors through various engagement activities.
According to experts, going forward, aided by GST implementation and recently introduced E-Way Bill System (leading to free movement of products across geographies) and increasing urbanization, paint companies will have to tap tier II, III and IV cities to drive demand growth in decorative paints.