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Submitted By: Sandesh Mokal PGDBM – Marketing
“Analysis of the Paint Industry”
Project Report On
TABLE OF CONTENTS
SR. NO 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. CONTENTS EXECUTIVE SUMMARY PAINT INDUSTRY AT A GLANCE PAINT INDUSTRY INDUSTRY STRUCTURE SECTOR SPECIFICS EMERGING TRENDS AND OPPORTUNITIES COMPETITOR ANALYSIS COMPANY ANALYSIS SWOT ANALYSIS PRIMARY RESEARCH RESEARCH PROBLEM RESEARCH OBJECTIVE RESEARCH DESIGN CONSUMER SURVEY CONCLUSIONS RECOMMENDATIONS APPENDIX PAGE NO. 6 7 10 13 15 19 23 29 36 37 37 37 37 39 47 48 51
Goodlass Nerolac is one of India’s largest paints company second only to Asian Paints in the decorative segment. Paints sector can be segmented application wise, as decorative paints and industrial paints. Both the sectors are characterized by low capital costs and high working capital. The intense working capital requires special technology. Capacities are normally set up close to markets, so as to be able to offer a multitude of shades and colors to customers. Brand building and dealer network act as effective entry barriers. Demand is seasonal in nature - low during monsoon, high during festivals. Domestic paints sector, dominated by decorative paints (70%), is expected to undergo a structural shift towards industrial paints, as cross-border tieups in industrial paints are becoming order of the day. Most organized sector players are established with well-entrenched distribution network and established brands. Threat of global competition is minimal. The underdeveloped industrial paints market holds maximum growth potential, albeit on a lower base. In future the industry will witness brand competition, product innovations and a fight for superior distribution network. Focused on decorative paints segment, GNPL is set to gain the maximum amongst the peer members from the up trend in the housing sector. The company is restructuring its operations into three SBUs and has set target to be amongst the top ten decorative manufacturers in the world. GNPL is investing heavily in dealer tinting machine and IT technologies to keep ahead of competition. GNPL has set a target of earnings growth of above 20% per annum. It also has set a vision to be among the top five paint
companies worldwide by 2005. On export front, the company is looking out for alliances/ takeover in the emerging markets of Asia.
PAINT INDUSTRY AT A GLANCE
The Indian paint industry is worth Rs49bn and can be divided into two
main sectors namely the organized sector and the unorganized sector. The Organised sector comprises of 60% of the total paints market while the Unorganised sector comprises of the remaining 40%.
Organized Sector can be divided into 2 distinct segments:
Industrial Segment growing at 15% (US$ 230 million). Decorative Segment growing at 8% (US$ 500 million). The Overall growth of the paint industry is 10 to 12%. Basis of competition in decorative segment are: 1. Distribution Brand Image 2. Range of Products
Basis of competition in Industrial Segment are:
1. Access to technology 2. Technical Servicing 3. Brand equity of present players 4. Distribution network 5. Cost of modification of products • The unorganized sector has historically been dominant due to the high
excise structure. Over the last five years, the excise rates have come
the working capital cycle is very high. Also. the major investment is in setting up distribution channels and building up a brand. • Working Capital intensive: The number of shades is very large and a sufficient stock of every shade has to be maintained at all levels of the distribution channel. the number of raw materials required can stretch upto 300.down drastically from 40% to 18% resulting in erosion of the unorganized sector's share. • In India the organised sector controls 70 percent of the total market with the remaining 30 percent being in the hands of nearly 2000 smallscale units. a large stockpile needs to be maintained. However. The global average per capita consumption is 15 kg. • The demand for paints is relatively price-elastic but is linked to the industrial and economical growth. • The per capita consumption of paints in India is very low at 0. 6 . The extent can be gauged from the fact that Asian Paints has a 12000 strong dealer network selling more than 150 shades. As majority of these raw materials are either imported or sourced from small chemical manufacturers.5 kg per annum if compared with 4 kgs in the South East Asian nations and 22 kgs in developed countries. • Low Fixed asset requirement: A plant for the manufacture of decorative paint can be set up with a small capital investment.
Introduction of tinting machines at the dealer/ retailer level will bring down working capital costs. • All the industry majors have a vast dealership network and are required to maintain high inventory levels. a major part of the sales are achieved in the second half of the fiscal year. Indian industry will have to keep pace with global technological changes to maintain their competitiveness.• In India the industrial paint segment accounts for 30 percent of the paint market while the decorative paint segment accounts for 70 per cent of paints sold in India. • The paint market is expected to grow at 8-10% p. over the next few years. Thus.a. Also new technology is being used for increasing the utility and lifespan of paints. The growth could be higher if industrial activity picks up as the industrial paint segment is gaining more importance. • New trends are emerging in technology and marketing. a few alliances have been entered into and the number is likely to increase in the future. 7 . • Seasonal nature of demand: The demand peaks during festival season while is very lean during monsoons. • Most of the paint leaders have technical tie-ups with global paint leaders. Already.
PAINT INDUSTRY Decorative Industrial Exteriors Coatings Paints Interiors Automotive High performance Powder coatings Emulsions Enamels Industrial coatings Distempers Wood finish Others 8 .
(Table 2) Industrial Sector Composition Automotive Paints High Performance Coating Powder Coating Coil Coating Marine Paints 50% 30% 10% 5% 5% (Table.3) (source: isspa) 9 . High growth area Distemper High growth in low priced low quality distempers s Exteriors as consumers are upgrading from lime wash Exterior emulsion is the fastest growing segment in the Indian Paint market.Decorative Sector Composition Enamels Distemper Emulsions Exterior Coatings Wood Finishes (Table 1) 50% 19% 17% 12% 2% (source: isspa) Decorative Sector Features Enamels Emulsions Steady growth Shift from distemper and enamels to emulsions.
10 . recently there is some slackness in Auto demands. However. Powder Coatings: This segment is showing increasing growth due to increase in sale of white goods and auto ancillaries. Honda. particularly Thermal and Nuclear. Daewoo. Fiat. Mitsubishi. High Performance Coatings: This segment is registering steady growth due to the increase in investments in refinery segment and power sectors. Two wheeler markets are booming due to demand from large Indian middle class. General Motors and Ford. Hyundai.Industrial sector features Automotive Sector: This segment is a high growth sector with a number of new entrants like Mercedes Benz.
9% 5. Asian Paints is the leader with a share of 41% in the organized segment followed by Goodlass Nerolac. and ICI respectively. Asian Paints and ICI are mainly decorative paint producers.7% 4% 12% 4) 11 .INDUSTRY STRUCTURE Organized sector The organized sector has a market share of 60% valued at Rs26bn. Goodlass has major share in the industrial paints segment whereas Snowcem is almost a generic name for cement paints.9% 11% 15. The share has increased from 55% three years back as the excise on paints was reduced. Organized Sector Market Shares – Value Company Market Share Asian Paints Goodlass Nerolac ICI Berger Paints J&N Shalimar Others (Table: (source:isspa) 37% 15.
low price paints. Over the long run.Unorganized Sector There are estimated 2500 small-scale producers accounting for 40% of the market. The unorganized sector proliferated due to low capital investment required and fiscal concession by the government. Moreover. the share of the small scale is likely to come down further and would be restricted to low quality. The steady decrease in excise to the present 18% has taken away the advantage. The high excise duty of over 40% before 1992 created a large price differential. 12 . the introduction of MODVAT has further reduced the incidence of excise.
The housing industry is likely to grow at around 8% in the next five years considering the shortage of housing and Government’s thrust to encourage housing activity. Premium decorative paints are acrylic emulsions used mostly in the metros. While the former caters to the housing sector. This is likely to favorably impact the demand for the decorative paints. medium and distemper segments. The company has more than 15. Nearly 20 per cent of all decorative paints sold in India are distempers and it is here that the unorganised sector has dominance. architectural and other display purposes. Distempers are economy products demanded in the suburban and rural markets. Demand for decorative paints arises from household painting. it is the distribution network that counts. In the decorative segment. popular in smaller cities and towns. has now increased its distribution network to 10. Utsav.700 outlets to compete with 13 . Monsoon is a slack season while the peak business period is Diwali festival time. GNPL.SECTOR SPECIFICS Decorative segment On product lines. The medium range consists of enamels. when most people repaint their houses. Apcolite. the automotive segment is a major consumer of the latter. Apex and Ace are entrenched in the market. APIL dominates the decorative segment with a 41 percent market share. the number-two in the decorative segment. as compared to other periods. paints can be differentiated into decorative and industrial paints. Decorative paints can further be classified into premium. Demand in the festive season (SeptemberDecember) is significant. This segment is price sensitive.000 retail outlets and its brands Tractor. with a 14 percent market share too. The demand for decorative paints is highly price-sensitive and also cyclical.
is a high volume-low margin business. engineering. Mahindra & Mahindra. It supplies 70 per cent of the paint requirement of Maruti. The future for industrial paints is bright. on the other hand. In the industrial segment the deciding factor are technological superiority and tieup with automobile manufacturers for assured business. Hero Honda. in line with the global trend. TVS-Suzuki. etc. With the decorative segment bottoming out. Toyota. But two-thirds of the industrial paints produced in the country are automotive paints. It has a lion’s share of 70 per cent in the OEM passenger car segment.APIL effectively. In the next few years. India’s largest passenger car manufacturer. its share would go up to 50 per cent. 40 per cent share of two wheeler OEM market and 20 per cent of commercial vehicle OEM market. GNPL dominates the industrial paints segment with 41 per cent market share. Hindustan Motors. The demand for industrial paints comes from industries like automobiles. Industrial paints include powder coatings. The industrial paints segment. PAL 14 . Berger and ICI have 9 per cent and 8 per cent shares respectively in this segment followed by J&N and Shalimar with 1 and 6 per cent shares. consumer durable. companies are increasingly focussing on industrial paints. It accounts for 30 per cent of the paint market with 70 per cent of paints sold in India for decorative purposes. high performance coating and automotive and marine paints. Ford India. Ashok Leyland. Industrial segment The share of industrial paints in the total paint consumption of the nation is very low compared to global standards. besides supplying to other customers like Telco. shipping.
But with its joint venture Asian-PPG Industries. Overseas expansion 15 . this. • The major raw materials Titanium Dioxide. Price sensitivity factors Various factors that have influenced the pricing of paints are summarised below: • The industry is raw-material intensive. has an 8 per cent share. Besides. APIL. turpentine. linseed and soybean oils.Peugeot and Bajaj Auto. • Most of the paint majors have to import nearly 30 per cent of their raw material requirements thus changes in import policies can affect the industry. Of the 300 odd raw materials. Phthalic Anhydride and Peutarithrithol constitute 50 per cent of the total cost. GNPL also controls 20 per cent of the consumer durables segment with clients like Whirlpool and Godrej GE. . Shalimar too. nearly half of them are imported petroleum products. Thus. there are other raw materials such as castor. the company is aggressively targeting the automobile sector. the leader in decorative paints. Berger and ICI are the other players in the sector with 10 per cent and 9 per cent shares respectively. The raw materials cost sums up to a whopping 70 per cent. The company is also venturing into new areas like painting of plastic. any deficit in global oil reserves affects the bottomline of the players. ranks a poor second after Goodlass Nerolac in the industrial segment with a 15 per cent market share. Any increase in the prices of these raw materials could adversely affect paint prices. It has now emerged as a 100 per cent OEM supplier to Daewoo. Hyundai. coil coatings and cans. Ford and General Motors and is all set to ride on the automobile boom.
Incidentally. It has a technical tie-up with Herbets Gmbh of Germany in addition to its joint venture with Becker Industrifag. Berger has a series of tie-ups for various purposes. Asian Paints has formed a JV with PPG Industries Inc to service the automotive OEMs. which has been recently acquired by by E I Du Pont de Nemours of the US. The company also has tie-ups with Valspar Corp and Teodur BV for manufacturing heavy duty and powder coatings.If the global Goliaths are foraying into the Indian paints market aggressively. Asian Paint exports its paints to over 15 countries. It also has joint ventures in Fiji. With the agreement with Herbets coming to an end in 2001. to produce new generation protective coatings. Oman and Mauritius. Interestingly. the second largest paint company in Sri Lanka with a 12 per cent market share in Sri Lanka’s Paint Industry. Tonga. which is a leader in automotive coatings in the US. ICI makes paints with the technical support of Herbets. Solomon Islands. the Indian paint companies are also spreading their wings. It also has an agreement with Orica Australia Pvt. Vanuatu. Within a short span of just five years. Australia. the company has emerged as the number one player in these markets. has a technical tie-up with Goodlass Nerolac for the manufacture of sophisticated coatings for the automotive sector. Du Pont. Ltd. In October 1999 it acquired 76 per cent equity stake in Delmege Gorsyth & Co (Paints) Ltd. Berger has now allied with the Japanese major Nippon Paints to boost its OEM turnover since the Indian roads are being flooded with Japanese automobiles. Technology collaboration All the paint majors have tie-ups with global paint leaders for technical know-how. Goodlass also has 16 . Nepal.
Asian Paints offered almost 150 shades in its synthetic enamel range. 17 . For instance. a major competitive advantage of a company was the range of colors it offered. USA. These machines each costing approximately Rs 60mn are installed at dealer outlets and enable the customer to choose between any of several hundred shades. unmatched in the industry. and delivered almost instantly.technical collaborations with Ashland Chemcials Inc. Japan. a leader in the petrochemical industry. EMERGING TRENDS AND OPPORTUNITIES Technology: The introduction of tinting machine has significantly changed marketing technology. This now stands changed as almost 2000 shades can be created in seven minutes through these machines. Nihon Tokushu Toryo Co and Oshima Kogyo Co Ltd. These are then generated by mixing dyes with the base paint. The two major implications of this machine are: • Differentiation on color range is reduced: Prior to this technology.
Also. 18 . strong brands are emerging as the most important entry barrier.• Simplified logistics management: With the machines generating shades instantly. Expansion of Product Profile: The lowering of excise has opened the high volume but low value market in the semi urban and rural areas. which is currently dominated by the unorganized sector. dealers can now stock only the base material and thus save almost 20-25% in the working capital cycle. Increased Thrust on Brand Creation And Distribution: The increased share of organized sector implies that brand awareness will be a thrust area. The opening up of rural markets has also necessitated the expansion of distribution reach.
Outlook: The industry is expected to grow at 10% CAGR for the next five years driven by increasing industrialization and increasing disposable incomes. outsourcing requirements are likely to be reduced as new capacities go on stream in the organized sector. Also. 14500 7000 5500 4500 Industry Consolidation: The small-scale industry is expected to witness a shake out as the share of organized sector increases. According to Indian Paints Association. demand will rise from the current 0. New Segments Opening Up: With increased industrialization. Demand for decorative paints will be led by the household construction industry which is expected to grow at almost 8% over the next five years considering the extreme shortage of housing and the government’s thrust on encouraging housing activity.6mn tonnes per annum to almost 1mn tpa by 2003. Already companies like ICI have launched specialized brands for this segment. new segments like auto refinishing market are likely to expand rapidly. The 19 .Dealer Network Asian Paints Goodlass Berger ICI (Table – 5) (source: indiainfoline) Nos.
critical success factors will shift from manufacturing to marketing and distribution. Thus joint ventures and strategic alliances will be the order of the day. Large international players are likely to either enter India or enhance their presence in India in view of the growing market. The emerging trends in technology and marketing imply that the industry is likely to consolidate over the next few years with the marginal players being wiped out and industry leaders gaining market share. Thus.centers of housing activity are also likely to shift more towards rural areas. The industrial segment will grow faster due to the lower base and fast growth in major user industries like consumer durables and automobiles. Growth Areas for the Indian Paint Industry: ♦ Automatic Tinting System ♦ Indian Rural Market ♦ Auto OEM Finish ♦ Auto Refinish ♦ Exterior Coatings 20 . Indian companies will also need to tie up with international majors to have access to the latest technology.
On export front. Focussed on decorative paints segment. It commands 38% in the decorative paints segment and 15% share in the industrial paints segment It has remained focussed on core business and has consistently improved operating efficiencies. Asian Paints India Ltd. It also has set a vision to be among the top five paint companies worldwide by 2005. The company has registered a net profit of Rs 1064mn in FY01 as compared to Rs 973mn in the previous year. the company is looking out for alliances/ takeover in the emerging markets of Asia. APIL has set a target of Gross sales of Rs21bn by 2003 and earnings growth of above 20%. "Utsav" brand enamel was launched in FY01 to provide a complete painting solution for rural customers at moderate prices. (APIL) has the distinction of being the market leader in the paints industry and commands a market share of 37 per cent.COMPETITOR ANALYSIS ASIAN PAINTS APIL. APIL is set to gain the maximum amongst the peer members from the uptrend in the housing sector. India’s largest Paints Company. is the market leader in decorative paints. APIL is investing heavily in dealer tinting machine "Colour World" and IT technologies to keep ahead of competition. The company is restructuring its operations into three SBUs and has set target to be amongst the top ten decorative manufacturers in the world by 2003. The company has launched 21 .
The debt equity ratio stood at 0. The operating profit rose by 10% to Rs 2096mn.6:1 while Return on Net Worth was 26%. The company 22 . Staff cost increased by 25% to Rs 730mn while raw material expenditure rose by 10% to Rs 6958mn. The operating margin declined to 16% from 17% last year. Asian Paints has installed around 2000 dealer tinting systems under the "Colourworld" programmes. Net sales grew by 12% to Rs 11965mn while other income rose by 36% to Rs 185mn. Interest cost rose by 9% while depreciation charges grew by 14%. It is proposed to further install around 500 to 600 tinting systems in FY02. Financial Analysis The net profit of the company increased by 9% to Rs 1064mn in FY01 as compared to Rs 973mn in the previous year. Distribution channel The critical success factors in the decorative paints business are availability of wide range of shades and extensive distribution network. Total expenditure of the company increased by 13% to Rs 10054mn. The debt of the company rose by 30% to Rs 2268mn. The company has acquired the powder coatings business of Mumbai based Hawcoplast Chemicals Ltd for a consideration of Rs 160mn. The lower growth in profits is due to depressed market conditions for paints and increase in operating expenditure.a number of wood finishes in recent years.
Merger of Rajdoot Paints with BPIL will benefit the later in terms of increasing the market share in highly competitive decorative paints segment.500 big and small cities all over the country. which cater to 55 depots. It is predominantly engaged in the decorative paints segment. Each depot has a branch manager for supervision of several salespersons who cater to more than 14. Moreover. BPIL is aggressively expanding the market reach in the decorative paints market through Colourbanks (Colour tinting machine). APIL has consistently improved its IT systems over the years. The company enjoys the benefits of The company is increasing its presence in the industrial paints segment through technical tie-ups and joint venture with 23 . In overseas market BPIL is contemplating plans to setup green field projects in African countries.500 dealers in the more than 3. which in turn has given benefits in streamlining the distribution channel. It has already linked all of its factories and 55 depots through V –SAT terminals. expanding the product portfolio and reduction in the overheads. which is responsible for two-thirds of its sales. remaining earnings come from the industrial paints segment. These are supported by 6 regional distribution centers.has 4 manufacturing facilities and more than 2800 stock keeping units (SKUs). In automotive paints segment BPIL has tied up technical alliance with Nippon Paints Co to cater to OEM segment. multinational companies. BERGER BPIL has become third largest paints company with 16% market share in the decorative paints market after merging Rajdoot Paints in itself.
Return on networth has declined consistently from 24% in FY96 to 20% in FY99 mainly due to lower asset utilization and squeeze on the margins.technical tie-ups with Valspar Coatings. The real benefits of the amalgamation are expected to come in the next two years. Selling expenses as % of net sales as also increased in the past 4 years. Return on capital employed has also followed the similar trends. net sales jumped by 22% yoy primarily on account of the incremental sales from the amalgamation of Rajdoot Paints wef 1st Oct 98. Germany for heavy-duty coatings and automotive coatings respectively. Operating profit margin has declined below 10% in the past 4 years primarily due to intense competition at the market place.3% and 33. Financial Analysis Net sales and profit has registered a CAGR of 15. In the past 4 years the fixed assets have registered a CAGR of 46. The company has expanded its own manufacturing besides acquiring Rajdoot Paints in the past 4 years. USA and Herberts. However growth in net profit was not proportionate with sales growth primarily due to decline at the operating level. In FY99. 24 .9% both on account of organic and inorganic growth. Effective tax rate has declined substantially in FY99 as the company has enjoyed tax benefit from the amalgamation of Rajdoot Paints.9% in the past 4 years. In FY99 working capital requirement increased by more than Rs490mn mainly due to amalgamation of two companies.
ICIIL is recognised as the fourth largest paints manufacturing company. polyurethane. (ICIIL) is a part of the Imperial Chemicals Industries (ICI). surfactants. The company. pharmaceuticals. speciality products. has now lost out to Asian Paints in the same category. Backed by a market share of 13 per cent.ICI ICI India Ltd. which was a leader in the premium emulsion paint market. ICI’s restructured operations consist of paints. The decision of the parent to invest more funds in the company could prove extremely beneficial. rubber chemicals. The company has diversified interests and is not purely a paints company. acrylics. UK which is a world leader in paints. catalysts and nitrocellulose Financial Analysis 25 .
23bn. While the decline in power & fuel costs was due to transfer of explosive business to a joint venture. Material consumes increased by 10. Other expenses increased by 2.1% percentage points.5mn for FY 00 as compared to Rs282.45bn.3mn as compared to Rs264.86% to Rs2. raw material cost decreased by 0. the sales grew by 16% to Rs8.51bn as compared to Rs2. Overall net profit has grown at a CAGR of 14% in last five years. Interest received was to the tune of Rs10.5%.3% to 53. employee costs decline due to implementation of a VRS scheme. Overall sales of non explosive business have grown at a CAGR of 16% in last five years.9mn. Provision for bad debts was Rs118. The interest paid is expected to decline further this year as the company repays more 26 .Comparing the growth on non explosive business.3mn while purchase of finished goods increased by a steep 53% to Rs1.29 (Rs845mn).5%. The total material consumes as percentage of sales increased from 51. The decrease was on account decline in power & fuel costs by 14.8% to Rs238.7% of sales from 29.4mn (Rs89. miscellaneous receipts.6mn as compared to Rs6.6mn as compared to Rs393.5% to Rs642mn for FY 00 as compared to Rs614mn for FY 99.4mn for FY 99 as it repaid loans to the tune of Rs1bn. As a proportion of sales other expenses were down by a 0.8mn of exceptional income in FY 99.7mn from Rs461. packaging material costs decreased by 9% to Rs343. Other income for the year was at Rs290.1% to Rs4.1mn for FY 99.6mn and salaries by 10.2mn as compared to Rs274.8% percentage points to 28.3mn.2mn as compared to Rs59.13bn from Rs7bn. an increase of 2. In terms of break up.6% to Rs424.57mn) from write of provisions of excise with a court ruling in the company favor. income from investments etc.8mn. This includes Rs75. The current year profit includes a one time write off of Rs120mn & exceptional income of Rs170.66bn from Rs4. Other components include commission. The company has paid interest of Rs171. Net profit was higher by 4.02bn.5% to Rs3.
27 .2 Paint company in India and the market leader in the industrial paints segment. COMPANY ANALYSIS Goodlass Nerolac Paints Ltd. varnishes. Goodlass Nerolac Paints Ltd (GNPL) is a 65% subsidiary of Japan based Kansai Paints. Goodlass Nerolac Paints (GNPL) is the No.loans as also due to the increase in interest received as the company has invested surplus cash into deposits. GNPL reduced the prices of its products including its major brand Nerolac synthetic enamel due to the reduction in raw material costs in FY02. enamels etc. coatings. It has its presence in decorative paints as well as industrial paints. in a bid to enhance it share in the household sector.
Water Treatment Chemicals Background GNPL was established in 1920. USA . Japan . which was commissioned in August 93.For all automotive coatings Nihon Parkerizing Co Ltd. It has 21 subsidiaries in 12 countries. In 1971 another plant was established at Thane. for part funding its new Kanpur plant.Sealants and Underbody Compounds.5% holding of the equity capital in GNPL. The Thane plant also has facilities to manufacture pigments. Japan. USA / UK . It has 64. In 1983... the Company entered into a technical cum financial collaboration with Kansai Paints. Kansai Paint Company is the largest paint company in Japan & among the top 10 in the world. Kansai who currently has a stake of 40% is the other major shareholder. Valspar Corporation. It has a global strategic partnership with Dupont Herberts Automotive Coatings. by Tata stable in collaboration with Goodlass of UK. Japan . thus making GNPL its subsidiary.For all automotive coatings DuPont Automotive Coatings.High Performance Coatings Drew Chemicals. Japan . USA . through group company Forbes Gokak Ltd.GNPL has several collaborations with different companies to cater to different segments: • • • • • • • Kansai Paint Co Ltd. Last year Kansai bought over the stake of Tata’s.For Pretreatment chemicals Nihon Tokushu Toryo.Powder coating Ameron Coatings Inc. Manufacturing activities began with the establishment of a paints unit at Parel in 1920. one of the major ingredients in paint manufacture. USA .. The Tata’s had a 40% stake in the Company. In FY92. the Company made a rights issue. a part of the Cooksons group. Industrial paints 28 .
as 24Carat Emulsion paint for the interior use in the premium segment. The company supplies to all major two-wheeler and car manufacturers. GNPL currently has 14% market share in the decorative segment. Goodlass offers a wide range of liquid and Powder coatings to service spectrum of industry. all multinational companies except Hyundai are using GNPL paints as the company provides the entire painting system right from pre-treatment to final coating. in late-2001. GNPL relaunched Nerolac Allscapes. and also High Performance Coatings to meet the corrosion protection needs of chemical industries. enamels. ranging from automotive. the premium interior paint. The relaunch of Allscapes is likely to improve the sales and profitability of the company. White goods etc. Decorative Paints Decorative paints accounts for 70% of the total market and includes acrylic & oil-bound distempers. In the Industrial segment. 29 . and plastic emulsions. The industrial paints segment is far more technology intensive than the decorative segment.GNPL is the market leader in industrial paints segment with a 43% share. In the automotive segment. The company also roped in film stars like Malayalam superstar. Maruti is the biggest customer of GNPL Other user industries for industrial paints include engineering and consumer durables. power plants etc. Marine.
The company has also introduced products like anti-bacterial paints for use in places where hygiene is paramount and others like anti-carbonation paints for buildings facing highways or heat insulating paints. GNPL has introduced just. minimum surface preparation. for the southern markets starting in April 2002. increasing the utility and life span of paints. GNPL has introduced a new technologically advanced exterior premium paint . It has a network of 11000 dealers. all weather application. GNPL management has been focussed on paints business in the last three decades.500 Colourscapes (computerised color dispensing machines) that Nerolac has installed across the country.Mohanlal. reducing energy consumption and manufacturing environment friendly paints.Nerolac Excel Everlast in Kerala. unique aging characteristics and protection from fungal attack. The company has introduced 15 spectrophotometers (a hand-held device that scans any color that needs to be replicated) branded 'Magic Eye'. This paint has outstanding durability due to various features such as excellent lasting adhesion on most surfaces. to endorse brands like the acrylic exterior paint.in. Paint in India. GNPL is the first company to introduce latest environment friendly lead free electro deposition distributors. excel. The two subsidiary companies primarily manufacture paints & enamels for parent company on contract basis. It is available in over 21 readyto-use decorative shades in value package sizes. This is apart from the 1. With changing business and industrial environment. GNPL has been constantly creating value for its customers by continuous upgradation of technology resulting in reduction in paint consumption per vehicle. GNPL’s prospects are inextricably linked to those of the user sectors in automobiles and other industrial sectors.time (JIT) delivery system with its 30 . The unique selling proposition of the product is that it can be immediately applied on newly built surfaces immediately after construction.
5 12 03/02 6.7bn in Q1 2001 to Rs5. After registering a 14% rise in Sales and a 67% rise in net profit for the quarter ended December 2002.933.9 12 03/01 6.6 67.211. Sales breakup No.448. enamels 55.0 76. of months 12 Period ended 03/99 Sales value(Rs mn) Paints. Other income increased by 31% yoy from Rs115mn to Rs151mn in 2002. varnishes. enamels 5. Interest expenses declined sharply from Rs64mn to Rs37mn. varnishes.002.744.4 91.0 73.765.961.4 Sales volume(unit) Paints.7 64.186 & oils (Ton) ( source: indiainfoline) 12 03/00 6.659 91. Operating profit increased by 10% from Rs595mn to Rs658mn in Q1.8bn.0 95. from Rs5.6) Financial Analysis Goodlass Nerolac Paints (GNPL) has continued to report attractive numbers.0 & oils (Ton) Unit realisation (Rs/unit) Paints. enamels 95.4 80. it has bettered the same in the quarter ended March 2003. varnishes.4 & oils Others 222. company’s sales grew marginally by 3%.687 (Table. Net profit increased by 21% yoy to Rs274mn in Q1 2002 from Rs226mn in Q1 2001. 31 .235.825 90.In Q1 2002.
4% to 11. up by 70% to Rs 15.14 crore).2% to 14.12 crore for the quarter ended March 2003.4% to 9. 32 . However. For the FY ended March 2003.9%) increased its OPM from 6. PBT rose 50% to Rs 56. Interest cost fell 7% to Rs 40 lakh and depreciation rose 29% to Rs 8.24 crore against the reported standalone PBT of Rs 37.84 crore. net of stock down from 24.36 crore. it has lined up new plans for the general industrial segment.6%.39 crore and deferred tax write back fell by 22% to Rs 2. it is compared and discussed the same. Thus OP was up 32% to Rs 73.27 crore.37 crore and OPM increased from 9. Also.GNPL has registered a 15% rise in its net sales to Rs 159. The increase in OPM was despite rise in staff cost from 9. Thus PBT rose 97% to Rs 10.70 crore. thus. Cost reduction in its other expenditure (as a % to sales. Other income rose 25% to Rs 4. The consolidated PBT for the FY ended March 2002 was Rs 37.85 crore and interest cost was down by 56% to Rs 1. Other income fell 14% to Rs 8.14 crore.22 crore. Finally PAT rose 46% to Rs 39.6%. The company has now decided to concentrate on the decorative segment that forms 70% of the Indian paint market.65 crore. Finally PAT spurted 96% to Rs 8. Provision for current tax rose 44% to Rs 18. The results for the quarter and the year ended March 2003 are inclusive of results of entire year of both the subsidiaries and hence not strictly comparable.59 crore while that of deferred tax fell 47% to Rs 54 lakh. its sales rose 11% to Rs 653.39 crore. As a % to PBT other income stands at about 40% against 62%.0% to 15.65 crore.09 crore.2%. After providing for depreciation (down 2% to Rs 24. Provision for taxation rose 27% to Rs 2.03 crore. since the impact of the merger is negligible on the company's sales and net profit. OP was.
protects the structure from carbon monoxide and other gases. Distribution network Factory 33 . Anti-carbonation products. The company's network constitutes 12. The company believes that this will give it an edge in the market. It has launched Pliolite-based products and had entered an exclusive tie-up with Goodyear Chemicals. This product gives the company an edge over other products. Last year it increased it by 10% and it hopes to increase this number this year too. The company has launched host of new products in the recent past.It has introduced specialty products in the decorative segment and it hopes to grow better than the industry.where the original look of the surface is protected. The other pliolite-based product it introduced was 'Clear' . used on flyovers.400 dealers. The company has extended this same concept to its exterior paint as there are no products in the premium-finish segment that have this property.
Regional Distribution Centre Depot Dealer Customer SWOT ANALYSIS Strengths No. 1 in industrial paints • Highest growth in 4 years 34 .
1 Paint Company in India Threats • • Competition Low profitability 35 .Vast dealer base • Considered the best in whites Weaknesses • • Advertising salience not enough Is not able to create and sustain a brand pull Opportunities • Can be no.
RESEARCH OBJECTIVE 1. decision making process and consumer preference of plastic paints. To determine the importance of various factors while purchasing paints. RESEARCH DESIGN The research was exploratory in nature. 3. 2.PRIMARY RESEARCH RESEARCH PROBLEM To study the consumption pattern. 36 . To understand the decision making process during the purchase of paints. consumer preferences and brand awareness of plastic paints a consumer survey was done. To study the brand awareness of Nerolac paints in the plastic paint category. Consumer survey To study the consumption pattern.
Sampling Plan The sampling plan is as follows: The universe of study consisted of the households of Mumbai. From each household one member was selected judgmentally. Due to constraints with respect to time and other resources a sample of 100 was taken. 37 . The sampling pattern used was convenience sampling . From each zone. Primary data was collected through questionnaire and personal interviews. It was found out during exploratory research that 70 to 80 percent of plastic paint users belong to SEC A and SEC B. two posh localities were judgmentally selected to include people from SEC A and SEC B.
♦ When did you last paint your house? 38 .100 ♦ Which company’s brand you use? Majority of the people is not aware of the brand they use.CONSUMER SURVEY Sample size .
What is the time of your purchase? Festivals are peak time for painting house followed by post rainy season. ♦ Who decides which brand to buy? 39 .Most of the people paint their house once a year.
♦ Source of information influencing purchase decision Column1 TV Newspaper Magazines Radio Painters Shopkeeper s Friends High Influence 63 18 36 11 83 76 31 (Table 11) Moderate influence 37 82 64 89 17 24 69 Total 100 100 100 100 100 100 100 40 .In most if the cases painters or dealers decides which brand to use.
As can be seen from the above table and graph. painters and shopkeepers play a major role in decision making process. 41 . ♦ How far you agree with the following statements? Statement A – price is an important factor in your purchase decision.
♦ Have you seen advertisements of the following companies? 42 . In most of the cases price is an important factor. Statement D – you feel that some brands have better quality than others.Statement B – you are particular about the brands of paints you buy Statement C – you have full knowledge of the different aspects of paints you buy. Most of the people are not brand conscious and they don’t have much knowledge about paints.
Most popular brand is of Asian paints followed by Nerolac. ♦ Have you heard about the following brands? Suraksha is the most popular brand followed by Excel among the four brands. 43 .
How do you rate the quality of the following brands? Colum Excelle Good Okay Bad Cant Total n1 nt say NAE 14 21 19 5 4 63 Allscap 13 16 18 2 6 59 es Suraksh 24 34 14 1 73 a Excel 12 27 26 2 1 68 (Table 12) Suraksha is perceived to be of good quality but NAE and Allscapes lags behind. 44 .
45 . Monthly household income Majority of the people are in the 15001-20000 and above 25000 category CONCLUSIONS ♦ Most of the consumers’ are not aware of the brands of paints they use.
RECOMMENDATIONS RECOMMENDATION 1 46 . ♦ Majority of the consumer paints their house once a year during Diwali. ♦ The quality of NAE and Allscapes are not perceived to be good when compared to Suraksha. ♦ Painters and dealers play a major role in decision making process. ♦ Awareness level of Nerolac brands like Suraksha is very good followed by Excel and Allscapes. ♦ Awareness about CCD machines is low. ♦ Price plays a major role in purchase of paints. ♦ Awareness level of Nerolac as a brand is quite high second only to the market leader namely Asian Paints.♦ Most of the consumers’ do not have much knowledge about paints.
Also the use of the tinting m/c is not known to them due to which often the customer does not get what he sees on the screen of the tinting machine. as dealers are the hubs between the company and the customers. Leap Frogging into next generation technologies Technologies are not too competitive in this segment as there is less competition. GNPL needs to tie-up with Interior designers & Architects who can get them bulk orders for a long time. Company Sales persons need to be posted at these outlets to help the dealers for some time say 1 month. RECOMMENDATION 3 Tie-ups Now the market is getting saturated. This will lead to the customer being dissatisfied which is a big threat to GNPL. What GNPL needs to do is tap the bulk users of paints. Hence the overall dealer awareness has to improve. This will help GNPL to reduce variable cost over a period of time. What GNPL can do is get technology tie up with a foreign player specializing in this area. In order to maintain its position it has to go about making new products and innovations. 47 . • RECOMMENDATION 2 Dealer awareness level GNPL has around 120 shades out of which there are many dealers who are not aware of this wide a range of shades.GNPL needs to increase and defend its share in the industrial segment: It needs to take the following steps: • Introduce new products/innovations NEROLAC already has a market position. which is very established.
RECOMMENDATION 7 Company should carry on its effort of brand building. hoardings and print ads in the local newspaper. Most of the times they are involve in decision making process. RECOMMENDATION 6 Painters play a very important role in paint market. 48 .e. Some sort of recognition should be given to the painters like identity card etc that they are recognized by the company. Suraksha is doing well in market so it should concentrate on it. A lot is spent in the urban areas when GNPL also has lower end brands available. Majority of the painters is not satisfied with the company. Awareness for Allscapes is still low and more advertising is needed. also shades shown there should be of more liking to the rural population. RECOMMENDATION 8 Nerolac should quickly launch some product in the 2nd quality category as Tractor Acrylic Emulsion is doing well. RECOMMENDATION 9 The concept of CCD’s should be made clearer to the consumers. It could make use of other media such as pamphlets. when they purchase materials. painters meet etc. Advertisements for rural need to be specially designed after getting the pulse of the customer.RECOMMENDATION 4 Also the ad spends need to be evenly spread out. RECOMMENDATION 5 The company should increase activities in market such as sales promotion schemes. as Dulux VT is very strong in this category. More advertisements should be given showing CCD and its use. Painters meet should be organized frequently and any schemes provided to them should be given on spot i.
1 in all the segments not only in India but the whole world. APPENDIX QUESTIONNAIRE 49 .With implementation of such strategies hopefully APIL will become No.
Write 2 for high influence TV Newspaper Write 1 for moderate influence Magazines Friends Radio others.1) Which company's paint you use? a) ICI b) Nerolac c) Asian paints d) Berger e) Any other. Please specify 2) When did you last paint your house? a) 1 year ago years b) 1 –3 years a c) 3 – 5 years ago d) above 5 3) What is the time of your purchase? a) During festivals please specify b) after the rainy season c) any other. please specify Painters/shopkeepers 5) Who decides which brand to buy? a) Father/Husband Dealers b) Housewife c) Painters d) 6) Please indicate how far you agree or disagree with the following statements. Write 1 for "strongly agree”. 2 for "agree”. 3 for "neither agree nor disagree”. 4) The following source of information influences your purchase decision. 50 . 4 for "disagree" . 5 for "strongly disagree" a) price is an important factor in your purchase decision b) you are particular about the brand of paints you buy c) You have full knowledge of the different aspects of paints you want to buy.
d) You feel that some brands have better quality than others. (9) 9) how do you rate the above brands on the following a) Quality Excellent b) Price High good okay bad low bad very bad very bad No No reasonable c) Availability in the market Excellent good okay What is your monthly income? b) 15001 – 20000 10) a) 10000 – 1500 25000 c) 20001 – 25000 d) above 51 . 7) Have you seen advertisements of following companies? Yes Asian paints Nerolac paints Berger paints ICI paints 8) Have you heard about these brands? Yes NAE Allscapes Suraksha Excel If the answer is "no" skip question no.
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