Marketing Management

…KYUNKI HAR GHAR KUCH KEHTA HAI…

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asian paints05/03/232

Asian Paints

Asian paints- Market leader in the Indian paint industry

It has an overall market share of around 30% and a 54% market share in

the decorative paint segment.

Company registered 27% top line growth in 2009-10

The company has presence in 21 countries.

The international business grew by 29% led by the Middle East and South

Asia operations.

New plant in Rohtak to be commissioned in April’10.

The company is also looking to acquire land for its seventh plant in

Western Maharashtra.

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Contents

The Indian paint industry The company Asian Paints Distribution Strategy The Implications of AP’s distribution strategy Distribution- AP’s showcase Function Leadership through distribution excellence

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Indian Paint Industry

The paint industry of India is 100 years old. Its beginning can be traced to the setting up of a factory by Shalimar Paints in Kolkata in 1902.

Paint industry estimated at Rs. 3600 crore or 5 lakh tonnes.

Unorganized sector accounts to 30% of paint market.Volume growth estimated at 15%.India’s share in the world paint market is 0.6%.Per capita consumption of paint in India is 1.2kg/annum.

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Indian Paint Industry

The industry comprises two main segments decorative/architectural and industrial paints.

The decorative/architectural paint segment accounts for 70 per cent of the total paint market while the industrial paint segment accounts for the remaining 30 per cent.

The industry is, however, expected to undergo a structural shift towards industrial paints in the next few years, when its share is expected to go up to 50 per cent in line with the global trend.

Industrial paints thus holds greater growth potential in the coming years.

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Introduction to Asian PaintsStarted in 1942 by four entrepreneurs: Champaklal choksey, Chimanlal choksey, Suryakant Dani and Arvind Vakil as “ASIAN OIL & PAINTS COMPANY.”

Within three years, their turnover reached 3.5 lacs.

In 1967, Asian paints became the 10th largest paint company in the world.

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Vision

“Asian Paints aims to become one of the top 5 Decorative Coatings companies

worldwide by leveraging its expertise in the higher growth emerging markets.

Simultaneously, the company intends to build long term value in the Industrial

coatings business through alliances with established global partners.”

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MISSION

TO BE THE LARGEST DECORATIVE PAINT CO. WORLDWIDE AND TO BE THE 5TH LARGEST PAINT MANUFACTURING CO.

WORLDWIDE.

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Asian Paints- Today

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Company Profile

Product Profile•INTERIOR PAINTS.

•EXTERIOR PAINTS.

•WOOD FURNISHES.

•WOOD & METAL FURNISHES.

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Competitors

Market Shares of Five Major PlayersSr. Company Market Share (%)

    Decorative Industrial Overall

1 Asian Paints 38 15 33

2 Goodlass Nerolac 14 41 18

3 Berger Paints 9 10 9

4 ICI Paints 9 9 9

5 Shalimar 6 8 7

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International OperationsCaribbean Islands

Barbados, Jamaica,

Trinidad & Tobago.

South Pacific

Fiji, Tonga, Vanuatu,

Solomon & Samoa Islands.

South Asia

Bangladesh, Nepal & Sri

Lanka.

South East Asia

China, Malaysia, Singapore &

Thailand.

Middle East

Bahrain, Egypt,Oman &

United Arab Emirates.

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Sector Composition

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Goodlass Nerolac has 70% share in OEM passenger car segment.40% share of two wheeler OEM market20% of commericial vehicle OEM market20% of white goods market

Since, Industrial Paints need technical expertise, the company with its joint venture with PPG industries is aggressively targeting automobile sector.It is now 100% OEM supplier to Hyundai, Ford, Daewoo, GM.

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‘We have been able to build strong brand equity for our products by focusing on features that are appreciated by customers, ensuring that our products are of high and consistent quality, offering a wide range of shades and packs, and ensuring that our products are available wherever and whenever required, by building a strong distribution system.’

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AP strikes a new path in distribution

When Asian Paints needed a competitive edge in the challenging Indian marketplace, the company found a clear advantage in establishing a leaner, more agile and cost-efficient supply chain.

At the time AP entered market, distribution was the most crucial task for any new entrant.

Both physical distribution and channel management posed formidable challenges.

The foreign companies and their wholesale distributors dominated the business.

Wholesalers concentrated in Urban areas only.

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Elements of AP’s Distribution Strategy

AP bypassed the bulk buyer segment and went to individual consumers of paints.

AP went slow on urban areas and concentrated on semi-urban and rural areas.

AP went retail.AP went in for an open-door dealer policy.AP voted for nationwide marketing / distribution.

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Bypass the bulk segment

It recognized that bulk segment was not a growth segment.

AP proved to the industry that consumer segment was a large bottom less segment in paint industry in India.

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Goes to Semi Urban and Rural areas

Its priority market is in Semi urban and rural areas.

Difficult to attract wholesalers in urban areas.

Not committing resources on head on collision with already existing wholesalers and foreign companies.

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Goes Retail

Going directly to retail dealers was the next major strategic decision of AP in the realm of marketing and distribution.

While AP’s competitors remained content with their linkage with a handful of wholesale distributors, AP preferred direct contact with hundreds of retail dealers.

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An open door dealer policy

Prevailing trend was to limit the number of dealers.

Dealer network swelled rapidly.By 1990, AP was having a 7,000 strong

dealer network. By the year 2000, the number had swelled to 12,000. And even now, on an average, AP is adding 200 to 250 new dealers every year.

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Nationwide Marketing/ Distribution

Another strategic step in distribution.AP voted for a nationwide

distribution/marketing. It wanted to have an active presence

throughout the country, in all the geographical zones, states and territories.

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Implications of distribution strategy

AP’s decision to turn to the individual consumers necessarily meant a wide product range and complex distribution.

AP made products according to customer choice. Smaller packs proliferated the product depth further. Wide product range implied expensive distribution- high inventory,

accounting/ sales arrangement etc.Going to semi urban and rural areas further enlarged distribution.

AP had to go in for more dealers in order to serve the scattered semi-urban and rural market.

It had to go in for a decentralized, field- focussed distribution, with a network of depots located all over the country/marketing territory. Without such extensive and intensive distribution network, it would not have been possible for AP to cover the semi-urban and rural markets.

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Implications of distribution strategy

Going retail implied deep involvement in channel management.

In the system chosen by AP, the physical distribution-cum-channel management task was far more demanding, compared to the wholesaler-oriented system practiced by the other paint companies.

Having taken the decision to go retail, AP necessarily had to create and service a vast dealer network.

It also had to create the physical distribution facilities required for servicing such a large network.National Marketing Necessitated Nationwide Organization.

The moment AP voted for nationwide marketing, it was getting into intensive as well as extensive physical distribution and channel management. AP thus had to create a nationwide distribution-cum-marketing organisation.

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Future of the Company Asian Paints is planning to increase the capacity by setting up a plant at Rohtak,

Haryana.

No other company is planning to increase its capacity in the near future, this will give Asian Paints a competitive advantage in terms of pricing.

GDP growth slowdown in the growth rate of two important activities i.e. repaint activity and construction activity will have direct impact on the volume of APL, thus effecting its profitability and margins.

Rural markets have considerable potential. Companies that can establish a dealer network in these markets are likely to get the edge in positing above par growth rates over the next few years.

As setting up distribution infrastructure is expensive, it would mean that the competition is limited to the top players.

Due to substantial hike in raw material prices, Asian Paints has raised the prices of solvent based paints, thus demand would be affected to some extent.

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PAINTERS

Manju ChandelVaibhav Raj Dixit

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References

Ramaswamy, V.S. Namakumari, S.(2009). Marketing Management. New Delhi: Macmillan

http://www.business-standard.com/pdf/asian_paints_250110_03.pdf

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