Pakistan Paint Industry Report

PAINT INDUSTRY
ANALYSIS OF PAKISTANI INDUSTRIES-SPRING 2019

(SLOT 2)
[SIDEBAR TITLE]
GROUP MEMBERS:
FAWAD AHMED-14046
HARIS MOTEN- 14111
M. OSAMA MUSANI-
14110
ANIQUE ARIF- 14089
HUNAIN IRFAN- 14434

Analysis of Pakistani Industries
CONTENTS
Letter of Acknowledgement ..........................................................................................................................................3
Research Methodology ..................................................................................................................................................4
Introduction to The Paint Industry of Pakistan..............................................................................................................4
History and Development of the Sector ........................................................................................................................5
International Market Leader .........................................................................................................................................8
Exports ...........................................................................................................................................................................9
Significance of the Paint Industry ................................................................................................................................11
Production Process ......................................................................................................................................................12
Raw materials Required:..........................................................................................................................................12
Solvents: ..................................................................................................................................................................13
Additives: .................................................................................................................................................................14
COMMON ADDITIVES: .........................................................................................................................................14
RESIN OR PVA : ....................................................................................................................................................14
PROCESS: .................................................................................................................................................................15
Wall putty (laapi): ................................................................................................................................................17
Porter’s Diamond Model .............................................................................................................................................18
Factor Conditions .....................................................................................................................................................18
Raw Materials (Organized Sector): ......................................................................................................................18
Raw Materials (Unorganized Sector): ..................................................................................................................19
Machinery: ...........................................................................................................................................................19
Labor (Structured Firms) ......................................................................................................................................20
Unskilled Labor (Structured Firms) ......................................................................................................................20
Labor (Unstructured Firms) .................................................................................................................................21
Firm Structure and Rivalry .......................................................................................................................................22
Major Players of the Industry ..............................................................................................................................23
Structure of The Market ......................................................................................................................................24
Rivalry ..................................................................................................................................................................26
How do unstructured firms compete? ................................................................................................................27
Demand Conditions: ....................................................................................................................................................27
Token System:..........................................................................................................................................................28
Effect of current Affairs ...........................................................................................................................................29
Anti-Encroachment ..............................................................................................................................................29
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Ban on Construction of High Risers .....................................................................................................................30

Variants of Paint ..........................................................................................................................................................30
Decorative: ..............................................................................................................................................................30
Matte Paint: .........................................................................................................................................................30
Matte Enamel: .....................................................................................................................................................31
Gloss Finish: .........................................................................................................................................................31
Weather Shield: ...................................................................................................................................................32
Automotive Paints: ..................................................................................................................................................32
Solvent Borne: .....................................................................................................................................................33
Water Borne: .......................................................................................................................................................33
Berger Automotive Paints: ......................................................................................................................................33
Bargaining Power:........................................................................................................................................................34
Innovation....................................................................................................................................................................34
Related Industries: .......................................................................................................................................................35
Representative Body: ..................................................................................................................................................36
Issues: ..........................................................................................................................................................................37
Way Forward ...............................................................................................................................................................38
Questionnaire-Interview .............................................................................................................................................40
References ...................................................................................................................................................................42
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LETTER OF ACKNOWLEDGEMENT
We would like to extend our gratitude towards the people who helped us in the journey of
conducting research for this project. Without their support, the primary research section of our
report would have been deprived of any facts and figures. We couldn’t have reached the
unstructured sector of the paint industry without their support.
We would also like to extend our appreciation for Ms. Khadija Bari who induced our interest in
the research over an industry of Pakistan, and, gave us the opportunity to present our findings
and improve on our work based on the evaluation of our presentation during class.
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RESEARCH METHODOLOGY
To maintain authenticity of the facts that we presented, we put a higher emphasis on primary
research from different parties of the paint sector of Pakistan. We started the project with
secondary research, reading various articles and reports, however, the information available
regarding this industry was minimal.
We then moved on to the primary research in which we involved brand managers from Gobi’s,
Nelson, Superkote and Kosarlac. They gave us an insight into how the competition was amongst
the registered firms in the industry. We then went on to interview the contractors known as
‘thekedaars’ who linked us with the unorganized sector of the paint industry.
We also interviewed painters who told us about the token system that prevailed in this sector
of Pakistan. Lastly, we also took the perspective of end consumers into account who told us
about their preferences and the determinants of demand.
INTRODUCTION TO THE PAINT INDUSTRY OF

PAKISTAN
Currently, the industry is worth 38-41 billion Pakistani Rupees, which involves all the
investments made in the production sites, raw material purchases and finished goods
inventories. There are about 140 production sites in Pakistan at the moment and only about
25% are owned and run by registered paint manufacturers. The rest are owned and run by
unstructured firms who do not fall under the Government tax net.
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Pakistan is self-sufficient when it comes to paint production, but, given the number of firms
operating in the industry, it still does not live up to any significant portion in paint production in
the international markets as shown below:
HISTORY AND DEVELOPMENT OF THE SECTOR
1940-1960
The first global organization to settle it-self in Pakistan changed into ICI Limited. It started its
operation by using the call of SODA ASH at KHEWRA in 1944. Not a long time after Pakistan got
here into being Berger paints saw the growing market and commenced its operations in 1950.
As the Country’s economic and industrial region increased So did Berger paints it commenced
its first nearby production in 1955 as demand grew so did Berger paints and to this day it is
making extensions in its product variety.
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1960-1970
Seeing the Investments being made with the aid of Berger paints, ICI additionally determined to
increase its Market proportion, it took full control of Fuller Paints Limited In 1965. Also, in 1966
it took over complete control of its KHERWA Plant and completely hooked up its self as ICI
PAKISTAN MANUFACTURING LIMITED. And to take over the marketplace its first special
Chemical Plant in Karachi.
1970-1980
This changed into a critical decade for the Paint industry of Pakistan. As many massive names
noticed the untapped marketplace and started out making big investments. First to come in
scenes have been Master Paint in 1976 and it fast built itself to leading paint producer in
Pakistan due to its special method. HAPPILAC Paints additionally started out in 1978 via
introducing product line of Industrial paints for the primary time. Seeing such form of
competition entering the market, Berger paints also decided to growth its investments so the
sold 38% of its stocks to a Pakistani Investor at the same time as the remaining 50. About 60 to
62 percent nonetheless remain inside the palms of Jenson & Nicholson which became the
mother agency.
1980-1990
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During the 10 years Paint industry fell a lot, almost ninety% of raw material necessities have
been met through import however due to this imports Pakistani Paint industry started out
making those High first-class merchandise which ever export successful so for the very first time
in 1985 paints exports started, which were specifically to Gulf region and Afghanistan.
1990-2000
The manufacturing of paints and varnishes has been erratic in the course of 1990-ninety one to
1997-ninety eight. The dearth of raw materials, contraction in demand for certain paints
because of stoop in paint consumption sectors and occasional level of performance and many
others. The production of paints has been decreased to 1/2 in 1997-98 in comparison to
1990-91. Previously To start a paint manufacturing unit all one needs an excise license and
possibly one or mixers. The authorities tolerated this for a long time as a concession to small
enterprise, but this case became abused until 1992 So that’s when the authorities evolved a
new coverage to save you tax evasion. It was a massive success the responsibility paid by means
of the ones within the full tax device in 1995-96 became almost Rs. 500 m. It now seems that
the recorded extent of paint produced fell between 1992-97, while the wide variety of fixed tax
gadgets multiplied from 252 to above 345 these days. During this period Pakistan had a whole
lot of political instability so the investments made locally fell so all the paint that became made
turned into exported which brought on the exports touched the highest in 1997-98 at Rs.
122,907 million.
2000-2016
Musharraf's Tax policy become introduced to Increase Exports, Musharraf saw the developing
INDIAN paint enterprise and being a Pro-Pakistani, he couldn't let Pakistani enterprise fall at the
back off, so he brought some paints reforms for you to be defined in Exports. In 2007 2008 and
2016 A lot of global organizations paint factories caught fire and none of those were giving any
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aid from the authorities so that they determined to sooner or later close their operations and
left the Country. During 2000-2016 people’s self-belief grew which ended in new investments
within the Real nation quarter which accelerated the general production and income of paint
manufacturers.
INTERNATIONAL MARKET LEADER
According to the rankings set out by Paint and Coatings International, PPG has been the
international market leader in the paint and coatings industry. The ranking is based on 2017
coatings sales. Sales of other non-coating products are not included. Paint and Coating
International’s Karen Parker spends months conducting research for these rankings, using
annual reports, websites, press releases and direct contact with companies to compile the
information.
Full-year 2017 reported net sales of PPG from continuing operations were approximately $14.8
billion, or $5.87 per diluted share, up more than 3% versus the prior year. The company’s 2017
full-year reported net income from continuing operations was $1.4 billion, or $5.46 per diluted
share. Of this total, the company’s Performance Coatings segment (aerospace, architectural
coatings – Americas and Asia Pacific; architectural coatings – EMEA (Europe, Middle East and
Africa); automotive refinish, and protective and marine coatings businesses) comprised 59% of
net sales, and its Industrial Coatings segment (automotive OEM coatings, coatings services,
industrial coatings, packaging coatings, and specialty coatings and materials businesses)
comprised 41% of net sales.
To continue driving organic growth, the company invested to expand and upgrade operations in
locations such as Wuhu, China; Oak Creek, Wisconsin; Lipetsk, Russia; Dahej, India; Pilar,
Argentina; Barberton, Ohio; and Saint-Just-en-Chaussée, France.
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EXPORTS
Pakistan only exported a confined number of barrels for the first three years. The first time that
Pakistan exported paint was in 1985 when it came under the martial regulation changed into
lifted from the USA and Pakistan had opened it gates to exclusive countries. It was all through
the ones 5 years Pakistan unfold its wing in the international marketplace and exports of paints
commenced to rise, the table below displays the exports at some point of 5 years in which
there was Civil rule in Pakistan.
Table 2: Exports of paints

and varnishes
Year Quantity Value Quantity
('000 kg) Rs million
1000
1985 482 7 800
1986-87 717 11 600
1987-88 917 15 400
200
1988-89 675 13
0
1989-90 554 16 1 2 3 4 5
This trend continued until 1997 where the exports reached an all-time high of 122907 million it
was after that the authorities commenced imposing one of a kind tax on the imports of paint
enterprise which cause a boost inside the price of our merchandise and drop in nice.
Seeing a fall in Pakistani exports MUSHARAF Administration brought a policy degree referred to
as the Duty and Tax Remission (DTRE) scheme in June 2001. Using a statutory regulatory order
(SRO) to amend customs regulations, the government determined to permit the exporters to
assert tax rebates on the price of customs responsibilities and taxes paid on any imported
uncooked substances used to manufacture goods for export.
However, a right test and balance wasn’t saved on it and people used this not completed
coverage to do fraud in approaches. Firstly, the over pricing of exports to Afghanistan, humans
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used export to Afghanistan as a manner to create extra money as there wasn’t a variety of
check and balance on exports to Afghanistan they send semi completed and coffee-best
merchandise and on paper confirmed them as high first-class to say tax rebate on imported
cloth. Secondly, they listed all of their exports to be comprised of imports. Some agencies like
Sufi declare that 60% of the value of exported paint consist of titanium dioxide a very high-
priced metal ore, in truth less than 20% of the fee of excessive-stop paints includes the value of
titanium dioxide.
In 2007 a surveyed showed that Pakistan exports to Afghanistan counts up to 90% of

Afghanistan requirements. Chairman of Brighton paints informed that Pakistan has a geo-
strategic place via which it is able to capture markets of central Asia however low guide from
government and High import taxes have triggered a whole lot of hassle for the corporations and
had constrained the entire R&D that's inflicting us to produced low-fine products.
For the first time in 2016 Pakistan exported to Canada paint merchandise worth of 1.7 million,
this turned into a crucial step forward as Pakistan has in no way been able to export past of
Afghanistan and some elements of UAE.
Pakistan had loads of alternatives to export to like Tajikistan Kazakhstan but is failing miserably
due to boundaries set by means of the authorities and unavailability of raw materials being
available. With a bit guide Pakistan paint industry can develop and spread its wing to the
complete of imperative Asia and even beyond.
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SIGNIFICANCE OF THE PAINT INDUSTRY
The current size of the Pakistan’s paint industry is assessed to be approximately around Rs.35
billion which include both the organized and the unorganized sector of the paint industry. The
total operational firms are around 400-450 out of which 100-150 are from the unorganized
sector.
Unorganised firm share organised firm share

Imports - Unorganis
-
Imports0% ed firm
1% share
17%
organised
firm share
82%
There are approximately 300000litres of paint produced every year in Pakistan. In Pakistan, per
capita consumption is 0.5litres per year whereas in comparison with a few European and Asian
countries, Pakistan’s per capita consumption is way behind than most of the countries. In
countries such as India, Nepal or Bangladesh per capita consumption is approximately 3-4litres
per year.
There are more than 400+ firms yet the GDP contribution of this sector is nearly 5.7% of the
total percentage of manufacturing sector contributed towards GDP. This sector is currently
worth over Rs.4billion but no significant efforts to improvement have been seen from this
industry. However, paint industry does have a large indirect contribution towards GDP as it is
linked to both construction and the automotive industry.
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There are approximately 30000-40000 people employed in the paint industry. The paint
industry also is a major employer for the people in rural areas because the factory workers,
painters all are a part of the paint industry.
PRODUCTION PROCESS
RAW MATERIALS REQUIRED:
A paint is composed of pigments, solvents, resins, and various additives. Pigments in

manufacturing is considered as a dry colored powder which is very finely grinded. It is
composed of prime pigments and extenders. Prime pigments includes basic color powder which
is mixed with the most important pigment part that is in the form of white powder known as
titaniumdioxide. It is an expensive import based raw material which provides hiding power to
paint.
TITANIUM DIOXIDE COLORANTS
Secondly extenders are added to the pigments to lower their cost or improve their properties
which are:
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• Provide bulk
• Possess less hiding capability than titanium dioxide, but they positively impact other
properties, such as sheen, scrub resistance and exterior color retention.
• Some commonly used extenders are clay, silica and silicates, diatomaceous silica,
calcium carbonate, talc and zinc oxide.
• Clays, or aluminum silicates, are used mainly in interior paints.
• Delaminated clay enhances stain resistance.
• Calcium carbonate, also called chalk, is a general-purpose pigment used in all types of
paint.
• Talc is a soft general-purpose extender used in interior and exterior paints.
• Zinc oxide Resists uv light Resists yellowing
SOLVENTS:
The main purpose of solvents in paints is adjust its viscosity. It is also used to dissolve the
components of paint (pigments and resin. Once paint is applied, the solvent evaporates,
allowing resin and pigment to produce a film of paint (a coat) and dry rapidly. There are two
types of paints water based and oil based. In water-based paints, water is the main vehicle but
in oil-based soya bean oil or lin seed oil is used as the main solvent. Other type of paints may
include organic solvent such as petroleum distillate, glycerol ethers paint thinners.
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ADDITIVES:
Additives are added in very small amounts and yet give a very significant effect on the product
COMMON ADDITIVES:
• dispersants - to separate and stabilize pigment particles
• silicones - to improve weather resistance
• driers - to accelerate drying time
• anti-settling agents - to prevent pigment settling
• bactericides - to preserve water-based paints in the can
• fungicides and algaecides - to protect exterior paint films against disfigurement from
molds, algae and lichen
RESIN OR PVA :
The purpose of resin and PVA is the same but due to some chemical properties in based paints
resin in used and in water-based paint PVA is used. The purpose is to bind the ingredients
(additives and pigments together. It also provides durability and resistant properties.
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RESIN PVA
PROCESS:
1)Resin pigments and additives are stored in drums in the warehoueses and solvents are stored
in tanks
2)Firstly the pigments powder is wetted with resin to form a paste (mill base) and this mill base
mixture is now sent into a sand mill, a large cylinder that agitates tiny particles of sand or silica
to grind the pigment particles, making them smaller and dispersing them throughout the
mixture.
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3)Resin, additive agents and so on are added to the mill base, the dispersion of which is
completed. Also, the color phase is adjusted with color materials.
4)To produce and evenly mixed mill based the processed raw material are added to the mixing
tanks which contains solvents.
5)After mixing color toning is done by mixing the base and obtaining the desired shade, then
the paint goes in the filtration plants to remove the solid impurities.
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6)After this paint is ready to be filled and canned
WALL PUTTY (LAAPI):

Raw materials:
• WATER BASED
• CHALK
• PVA
• PETROLIUM
• BP26
Add water as a solvent in a heavier mixer and then add further raw materials to obtain a very
thick white solution known as base laapi. The base laapi is then filtered to remove any residue.
It is applied before the final paint so that the life of the paint increases, and it is also used to fill
up the un even wall surfaces.
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PORTER’S DIAMOND MODEL
FACTOR CONDITIONS
RAW MATERIALS (ORGANIZED SECTOR):
Paint is a final good that requires a huge amount of raw materials in its production. There
approximately said to be 250-300 different types of raw materials used in a single production
cycle. These raw materials can mainly be divided into four main categories of:
1. Pigments
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2. Solvents
3. Binders
4. Additives
Raw materials form up around 60% of the total cost of production of paints mainly because half
of these raw materials are usually imported from European countries such as England, Germany
and UK. Pakistani paint manufacturers never concentrated on producing these raw materials
locally as all of them easily available from imports. However, these are basic factors which any
country can easily import and make their own desired paints. Raw materials are a major reason
why Pakistan has been self-sufficient in paint production but have never gained a competitive
edge.
RAW MATERIALS (UNORGANIZED SECTOR):
The unorganized sector of the paint industry which is usually located in the remote areas of
different parts of the country. Their main production includes the low-quality distemper paint
which is comparatively way cheaper but has a very short life span of around 1 year. Its main
demand is in homes in rural areas where people cannot afford branded quality paints. The
distemper paint is mainly made up of chalk and lime and does not contain Additives which
makes it less durable. It is not weather resistant and gets off the wall very easily. The raw
materials used in distemper paint are also locally available but due to their low quality they are
never preferred by the organized firms.
MACHINERY:
In Lahore, there is a single paint machinery manufacturer named as Ahmed Machines. They
manufacture locally all types of machine that are required for paint production. However, being
the only manufacturer of machinery, they obtain a monopoly and they easily violate the paint
manufacturers by charging extremely high prices for the machinery. The organized sector
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preferred this local machinery over imported machinery in order to avoid import duties and
hassles. Moreover, machinery needs a high cost of maintenance so when the machinery is local
the engineers and repair persons are also provided by Ahmed Machines which prevent paint
manufacturers from bearing high machine maintenance costs.
LABOR (STRUCTURED FIRMS)
It is firstly important to distinguish between what skilled and unskilled means when it comes to
the paint industry. Within the skilled workforce, there are two different skillsets required for
working in the factory and the office.
Within the factory, a worker termed as skilled must have a sound knowledge of the chemicals
that go into the paint manufacturing process. The engineers working on the site must be able to
deal with any machinery breakdowns and resume the production process as quickly as possible.
In the office, like all companies, the labor is divided into various departments such as finance,
marketing and HR. The employees must have knowledge of MS Office and must be able to
communicate effectively to market their product efficiently. A semi-skilled sector in the office is
that of electricians who are in charge of the proper functioning of the elevators, lift etc. Female
participation is encouraged in structured firms when it comes to the office. This is because the
office of every company requires receptionists for which females are preferred. Likewise,
female fresh graduates are also hired for HR, marketing and finance departments.
UNSKILLED LABOR (STRUCTURED FIRMS)
In the factory, there is a lot of labor employed for operational work such as moving the
products from the factory to the warehouse. There are drivers employed in every factory
because the carriage outwards cost is borne by the company itself. There are some workers
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deputed for shelf stocking to stock the hundreds of shades accordingly in a proper manner. The
ratio of skilled labor to unskilled labor in structured firms is approximately 30:70.
LABOR (UNSTRUCTURED FIRMS)
When it comes down to the unstructured firms, the only product that they manufacture is
‘kacha’ paint. This is also known as distemper. They perform all their work manually and make
no use of any electric run machinery. The line between skilled and unskilled labor is blurred in
these production sites. The basic knowledge of distemper’s components and is also considered
as a skill. Every member of the family is involved in some manner to help out in the
manufacturing except for females. This is due to the fact that females have little or no
knowledge about chemicals due to lack of schooling in rural areas; Likewise, paint is a bulky
commodity whose handling is not suited to the strength of women.
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FIRM STRUCTURE AND RIVALRY
Structured
Firms (18)
Unstructured
Firms (125)
This figure accurately represents the distribution of ownership of production sites amongst
registered and unregistered paint manufacturers in Pakistan. The recent increase in the number
of unregistered paint manufacturers has been in Balochistan and in the outskirts of Karachi, as
per the information provided by one of our contractors (resource person).
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MAJOR PLAYERS OF THE INDUSTRY
When the structured market is concerned, the six brands mentioned above lead the market.
According to the Nielsen’s report shown to us by one of our resource people, these six brands
own 60% of the total market share. This market share corresponds to the market for registered
brands.
One of the elite brands, Jotun, is not mentioned alongside market leaders because it owns a
very small proportion of the market. Its price is considered to be very high and the public is not
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willing to pay the high price for a commodity that other brands like Gobi’s and Nelson are
offering at a much lower price.
STRUCTURE OF THE MARKET
The structure of the market can be placed somewhere in between the monopolistic and
oligopolistic structures. It cannot be classified as oligopolistic because the barriers to entry are
not sufficiently high. The investment required to start production is approximately 1.5-2 crores,
which is not very high when compared to other oligopolistic market structures such as the
beverages or the telecommunication industries.
The paint sector of Pakistan is more inclined towards the monopolistic structure because the
number of firms is large, and the firms are priced closely.
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PRICE COMPARISON
BRAND BUCKET SIZE PRICE (PKR)
GOBI’S (Enamel) Quarter 485
Nelson (Enamel) Quarter 650
Super Kote (Enamel) Quarter 520
ICI Dulux (Enamel) Quarter 800
It can be seen that apart from ICI Dulux, every brand is priced very closely which signifies that
more focus is given to non-price competition. The reason for ICI being priced very highly is that
it uses its global brand image to charge a high price from its customers.
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RIVALRY
NON-PRICE COMPETITION (MARKETING)
The paint manufacturers mainly compete on the basis of strong distribution channels. The sales
of any company are decided by how strong their reach is amongst the dealers in Pakistan.
Gobi’s by now has been the leader in doing so because it allows the dealers to operate a
floating selling price policy. This fluctuation is possible because of the large scale of operation
that Gobi’s has. Other brands often operate a fixed selling price policy which offers a lower
incentive for the dealers. Thus, offering authority to dealers often gets the brand a lot of
increased sales.
Furthermore, Nelson brought up a campaign of ‘paint-it-yourself’ in which it offered a video

tutorial to the consumers teaching them how to paint their homes themselves. However, this
campaign was not a success because this trend is not in line with the people of Pakistan who
are generally laid back and do not want to work and make extra efforts.
Paint manufacturers often sell complementary goods such as paint brushes along with their
paint buckets which allow them to realize a higher sales revenue.
PRICE COMPETITION
Various firms compete by creating a derived demand through attaching tokens along with their
paint buckets (explained in greater detail later). Gobi’s competes on the basis of being the
lowest cost manufacturer, simultaneously offering the best variants of paint available in the
market.
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Nelson was the first registered manufacturer to introduce the distemper variant to compete
with the unstructured paint manufacturers on the basis of a low cost-low quality product.
HOW DO UNSTRUCTURED FIRMS COMPETE?
The real question is regarding the unstructured manufacturers who cannot put a brand name
on their paints because they are not registered. They do not produce variants of paint, and just
produce and sell distemper (kacha paint). They don’t have the quality or the variants to market
their product.
The answer to this question is that unstructured firms do not compete amongst themselves.
They operate on the basis of a zone system. If a production site is present in an area, another
production site cannot be set up within a radius of certain kilometers. They cater to the
consumers within their own range of distance. Since the transportation facility available to
these paint manufacturers is limited, they cannot supply their product to a far-fetched area.
Paint is supplied from the same place where it is manufactured.
DEMAND CONDITIONS:
The demand for paint depends upon a number of different factors:
 Construction Industry: The paint industry is directly linked to the construction industry.
The higher the demand for construction the higher is the demand for paints from the
construction industry.
 Automotive Industry: Paint is also used in cars, bikes, rickshaws. The automobile
industry is also a major demand booster for the paint industry.
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 Dealers & Retailers: The dealers and retailers play a vital role in creating the demand for
paints because they are the channel whom the end consumers approach. The better
incentives are provided to retailers and dealers from a company the better they will
work to create demand for that company.
 Discount Offers & the Token System: The token system is a major demand influencer for
the paint manufacturers because painters when they have the knowledge about which
company offers the highest tokens they advise consumers on buying that company’s
paint.
 Changing Family Traditions: Pakistan is a nation which likes colors. People in Pakistan
tend to demand different colored paints for their homes. As per our resource person he
said, “Earlier adults made the decision about which paint would go on which wall; now
teens are actively involved in shade selection.” This showed that with the changing
traditions youth also play a major part in deriving demand for paints. Moreover, as
people are travelling abroad they demand those colors and designs here as well.
 Seasonal Demand Boost: During wedding seasons and before Ramzan many households
in Pakistan tend to renovate their homes which creates a seasonal demand boost for the
paint manufacturers.
However, as the diamond model suggests that local demand should be anticipatory of foreign
demand in order to create a competitive edge but for the paint industry achieving a
competitive edge is relatively difficult because people’s taste in Pakistan vary too much from
the consumers abroad due to which there is very less demand for Pakistani paint abroad.
TOKEN SYSTEM:
In the paint industry a token system evolves which is basically a type of discount. The token is
sealed inside the cap of the paint. These tokens can include different cash discounts or buy one
get one free offer. The token can be claimed after the paint has been opened. The main
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purpose of this token system is to attract painters who have vast knowledge about these
tokens. The painters are aware on which company offers the highest amount of tokens so they
usually try to divert buyers towards those paint companies. The tokens are a major source of
boosting demand. However, these tokens over-price the paint because the paint manufacturers
tend to cover the token’s cost through the price they offer. Higher the token a company offers,
higher will be their market share respectively.
EFFECT OF CURRENT AFFAIRS
ANTI-ENCROACHMENT
A couple of months ago, the Government passed a movement in which it planned to demolish
all illegal structures in Karachi. It announced that a rehabilitation program would be initiated
for all shop owners whose shops had been demolished. These changes should have led to an
increase in the demand for paint because the Government would require paint and coatings to
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set up a new area for trade. However, there was no follow up regarding any such program.
Moreover, the purchasing power of the general traders fell because their shops were brought
down, and they had to incur the expenditures to bring them up.
Thus, the overall demand for paint and coatings went down.
BAN ON CONSTRUCTION OF HIGH RISERS
In April 2018, the Government imposed a ban on the construction of high risers due to a
shortage of the electricity, gas and water supplies. Due to this, builders stopped purchasing
paint in bulk. The demand for paint and coatings took a sharp decline. After short span the ban
was lifted, but in December 2018 it was re-imposed when the dam fund was being marketed.
Once again, this badly affected the demand for low quality paint. This is because builders
usually purchase low quality paint for painting the interiors of apartments. They save their cost
by using this technique.
VARIANTS OF PAINT
Coming upon the variants of paints, paints can be categorized into three major types.
 Decorative
 Industrial
 Automotive
DECORATIVE:
These are the paints used for homely purposes, such as to paint your house or a customized
small office. It can further be divided into major categories:
MATTE PAINT:
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It is an interior wall paint and is ideal for roofs or ceilings or is used on walls where you don’t
need any visual distractions. The company states that one coat of this type of paint is enough
but the painter told us that it needs at least 2 coats. However, wall painted by this type of paint
needs regular touching.
MATTE ENAMEL:
It can be said as a more durable version of Matte Paint, which gives a more solid look. It is much
easier to clean and wipe. Moreover, visual effect is somewhat similar to Matte Paint. And walls
painted by this paint rarely needs touching.
GLOSS FINISH:
31
It is the most common type of interior paint after Matte Enamel. It is basically for walls but for
its shine it is also used on woodwork too. However, this type of paint shows all imperfections
on a wall and to overcome this, 3 coats of this paint are needed.
WEATHER SHIELD:
It is a type of innovation in the paint sector because this type of paint is an exterior type of
paint which is weather resistant, which means it won’t fade away quickly due to changes in
weather or due to rainfall. It provides a solid color to the wall. Moreover, it is also alkali
resistant.
AUTOMOTIVE PAINTS:
Automotive paints can be categorized into:
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 Solvent Borne
 Water Borne
SOLVENT BORNE:
This type of paint has been now considered as a traditional auto paint because of the
introduction of water-borne paints. It consists of a solvent base such as lacquer, urethane or
enamel. This has been replaced by water-borne paints because they aren’t environment
friendly because of the release of VOCs (Volatile Organic Compounds) and therefore, it creates
a toxic impact on the environment.
WATER BORNE:
It contains about 10% of solvent and 90%of water. However, this much water doesn’t make the
paint color dull or not durable but due to the mixing of high quality waterborne acrylic
emulsions, it makes the water-borne paint highly durable and limit the emission of odor to a
great extent. This type of paint has therefore taken over the solvent-borne paint.
BERGER AUTOMOTIVE PAINTS:

Usage of Japanese technology in the paint sector has made Berger a leading player in the
automotive paint industry. It manufactures special automotive paints to supply to clients such
as Honda, Toyota, Nissan etc. Moreover, it has also targeted the Truck and Tractor segment too
by manufacturing paints for names like AL-Ghazi Tractors. It has also grabbed the motorcycle
and rickshaw industry by manufacturing paints for leading manufacturers: Atlas Honda, Sazgar
Rickshaw. It has integrated its operations to the complete automotive paints which has made
Berger a leading player in this industry.
33
BARGAINING POWER:
 Of Suppliers:
Bargaining power of suppliers is comparatively low in the decorative sector because of intense
competition for catching even the small market segments and therefore, manufacturers tend to
grab this opportunity by bargaining a lot. However, suppliers of big companies tend to have
high bargaining power because of the quality standards maintained by the big firms.
 Of Customers:
The dealers who are the intermediaries have high bargaining power because of their bulk
purchases. Moreover, to some extent dealers also tend to generate demand by
recommendations. Therefore, they ask companies for compensation in return in the form of
increased discounts or increased profits on sales etc. However, the bargaining power of the end
customers, who are the consumers, is low because of the small quantity purchases.
INNOVATION
The paint industry of Pakistan should be grateful to ICI for having the proactive approach as
opposed to the reactive approach of the local manufacturers. In 2017, ICI launched a Visualizer
(Augmented Reality) application on both Play Store and Appstore. This application could show
how a shade would actually look on one of your walls. By introducing this application, ICI gave a
34
taste of its innovations abroad to the market of Pakistan. ICI has been one of the major reasons
that we do not lag behind India on the basis of variants available or quality.
Nelson took a brave step y coming up with a weather shield variant for Pakistan, considering
the dusty and sunny climate. This variant was best suited to go on the exteriors of bungalows
and high-rise buildings.
However, the international market of paint is still innovating to a large extent when it comes to
the automotive sector of the paint industry. In USA, a company has discovered a technology
where titanium dioxide nanoparticles are included in paints to prevent cars from scratches
when it suffers a slight collision with another car.
RELATED INDUSTRIES:
The paint industry is linked to many other companies such as
 Chemical Industry: As mentioned earlier, paint production requires a large number of

raw materials out of which most are chemicals such as titanium dioxide, BP26 and
35
extenders. All these chemicals are a vital part of the paint industry which makes the
paint industry highly dependent on the chemical industry.
 Transportation Industry: Finished paint is a highly bulky product which requires proper
transportation channels to carry the good from factory to dealers and then from dealers
to retailers. This transportation channel can either be company’s own transportation or
it can either be outsourced to different transportation companies. However, in any case
the paint manufacturers, dealers and retailers all need to bear a part of this
transportation costs.
 Plastic and Tin Industry: Water paint is packed in plastic buckets whereas Oil paint is
packed in tins. For every paint manufacturer, they have a direct link with both these
industries which are a main source of their packaging.
 Oil Industry: Oil is a major raw material for paint and higher the production for oil paints
the higher is their requirement for oil.
 Cotton & Paper Industry: Cotton and paper are mainly used for packaging purposes like
putting labels and barcodes etc.
REPRESENTATIVE BODY:
The Paints Association Pakistan is the sole regulatory body for this industry. It mainly deals with
the government regarding different issues that are faced by the paint manufactures. Moreover,
it regulates the activities in order to encourage a stable competition among the organized firms.
It also resolves conflicts among the dealers and the manufacturers. It discourages the growth of
the unorganized sector as they become a reason of distorting the paint quality.
36
ISSUES:
Likewise, any other manufacturing industry the paint industry is also subject to a few prevalent
issues that create hassles for the paint industry. The major issues highlighted by our resource
person are as follows:
 Imported Raw Materials: As mentioned earlier, the paint industry is highly dependent
on raw materials that come from imports. The major issue is caused by the fluctuating
exchange rates which increases the cost of raw materials. Moreover, being highly
dependent on imported raw materials also create delayed supplies of raw materials
which brings halts in the production cycle if some specific raw material is not delivered
on time or gets short.
 Resin (Soya): Resin is a major raw material for the paint industry but the paint
manufacturers face a conflict of demand with the oil industries before Ramzan when
both paint industry and the oil industry have high demand for resin. The priority is given
to the oil industries as they have a higher demand so the paint manufacturers face
shortages of resin during the time of their season.
 Low availability of chemical & petroleum engineers: Chemical and petroleum engineers
are a requirement for every paint manufacturer because they are the main source of
research and development for them. But due to low availability of such engineers the
paint manufacturers face issues regarding changing trends in demand.
 Machine Reset Costs: As mentioned earlier, the demand for paints in Pakistan is of
different colors. Due to such fluctuating demand the manufacturers need to reset the
machinery with accordance to different colors and mixtures. Each color has a different
formula so producing a variety of colors also become a huge hassle for the paint
manufacturers.
 High Storage Costs: Finished paint is a highly bulky product which require large storage
space and warehouses. With high storage spaces and warehouses come high costs of
storing which form a major proportion of the overall production costs.
37
 Smuggled raw materials: Finished paint cannot be smuggled due to its heavy weight but
the raw materials are frequently smuggled from different parts of the world and then
sold here to the local manufacturers. As these smuggled raw materials are only supplied
to a few manufacturers so they gain an edge over other firms by lower costs.
 Low or no Government Support: Since the growth of the paint industry in Pakistan the
government has not paid much attention towards it. Almost all firms are privately
owned working for their own interests and profits with few growth prospects. However,
the paint industry has a huge potential for growth if it is properly regulated and demand
for Pakistani paint is created abroad.
WAY FORWARD
The Paint Association of Pakistan (PAP) has made no efforts to create a synergy between the
unstructured and structured side of the paint industry. There ahs been no focus on the
unorganized and unregistered sector of Pakistan. PAP should invest their time and efforts in
working for a collaboration between the structured and unstructured firms of the industry.
As far as CPEC is concerned, every registered paint manufacturer is very optimistic for the
betterment of the paint industry of Pakistan. This is because CPEC will open the gates for ample
technology transfer. Titanium dioxide which highly adds to the cost of production, will be
available at a much cheaper cost after CPEC due to local production. Moreover, after CPEC all
transactions will be done in either PKR or Yuan which will reduce the monopoly of dollar.
However, if the current market structure between structured and unstructured side prevails,
the unregistered firms will be completely driven out of the market because the only point that
they compete upon is the price. As soon as technology transfer gets into the pipeline, the cost
of production will significantly go down and paints from brands will be available at cheaper
rates. This might lead to unemployment of the labor working for the unstructured side.
38
39
QUESTIONNAIRE-INTERVIEW
Raw Material Purchase
1. Which raw material contributes the highest percentage to the cost of production of paint?
2. Is this raw material available in sufficient quantity locally? Or is it imported?
3. How will you describe the bargaining power of suppliers? Can they exploit producers of paint
by forming a cartel?
4. Are there any by products in paint manufacturing? What is being done for their value
addition?
Labor
1. What level of education will label a worker as skilled?
2. Does an unskilled worker have to undergo some training to work for this industry?
3. Name some prominent jobs available in this sector (engineer, painter etc.)
4. Do you require foreign experts on your production site?
Government Policies
1. How does the increasing dollar price affect your cost of production? Which raw material
and which part of production is affected in specific?
2. What support has the Government extended specifically for this sector?
3. Are you satisfied with the policies of the Government related to your sector?
4. If not, which policies do you expect from the Government?
5. If the Government does agree on the concessions/subsidies, which area do you plan to
improve upon?
Firm Structure
1. Have the listed paint manufacturers formed an oligopolistic structure in Pakistan?

2. Do the unbranded paint manufacturers affect the sales of large companies?
40
3. Who is the volume leader of the market currently? (Maximum market share)
4. Which brand is preferred by the elite class of Pakistan?
5. Roughly what percentage of the firms are privately owned?
6. Is the industry capital or labor intensive? Does this vary from firm to firm?
7. Does this industry encourage female participation? If yes, at what levels?
8. Which firm offers the lowest price for consumers?
9. Can the current local firms compete with the prices of Indian brands such as Asian Paints
and Nerolac?
Export Focus
1. Is this industry export or import dominant?

2. Is the supply sufficient to fulfill domestic demand?
3. What are the issues with increasing export apart from the high energy costs of Pakistan?
4. Which factor has India worked upon to become better than Pakistan in this sector?
5. Why haven’t our companies worked upon this factor?
Issues
1. Since when has the issue of smuggling of paint started in Pakistan?

2. What steps has the Government of Sindh taken to stop smuggling?
3. How has smuggling affected the sales of your company?
Investment Schedule
1. Has CPEC in any way helped this sector in the form of technology transfer?
2. How frequently does the machinery have to be imported for the production process?
3. Which country do we import from?
4. How have you moved towards self-suficiency in the past few years?
41
REFERENCES
http://www.ppg.com/
https://aurora.dawn.com/news/1141720
https://www.coatingsworld.com/issues/2018-11-01/view_india_asia_pacific_reports/overview-
of-paint-coatings-industry-in-pakistan
https://www.pcimag.com/articles/104924-global-top-10-and-pci-25-top-paint-and-coatings-
companies
https://fp.brecorder.com/2018/05/20180524374021/
https://www.pcimag.com/articles/103648-global-top-10-and-pci-25-top-paint-and-coatings-
companies
https://www.pressreader.com/pakistan/enterprise/20130630/281681137454231
https://profit.pakistantoday.com.pk/2018/03/05/what-makes-akzonobel-go-bullish-on-
pakistan/
https://www.coursehero.com/file/p2ikkpj/Competitive-Analysis-The-paint-industry-in-
Pakistan-constitutes-about-33-market/
https://www.businessbook.pk/category/paints-and-varnishes-mfrs-2423
https://www.marketresearch.com/seek/Paint-Coatings-Pakistan/709/1237/1.html
http://berger.com.pk/price-list/
42

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PAINT INDUSTRY

ANALYSIS OF PAKISTANI INDUSTRIES-SPRING 2019

HARIS MOTEN- 14111

ANIQUE ARIF- 14089

HUNAIN IRFAN- 14434

Ban on Construction of High Risers .....................................................................................................................30

INTRODUCTION TO THE PAINT INDUSTRY OF

HISTORY AND DEVELOPMENT OF THE SECTOR

INTERNATIONAL MARKET LEADER

Table 2: Exports of paints

In 2007 a surveyed showed that Pakistan exports to Afghanistan counts up to 90% of

SIGNIFICANCE OF THE PAINT INDUSTRY

Unorganised firm share organised firm share

RAW MATERIALS REQUIRED:

A paint is composed of pigments, solvents, resins, and various additives. Pigments in

TITANIUM DIOXIDE COLORANTS

• Clays, or aluminum silicates, are used mainly in interior paints.

• Delaminated clay enhances stain resistance.

• Talc is a soft general-purpose extender used in interior and exterior paints.

• Zinc oxide Resists uv light Resists yellowing

• silicones - to improve weather resistance

• driers - to accelerate drying time

• anti-settling agents - to prevent pigment settling

• bactericides - to preserve water-based paints in the can

6)After this paint is ready to be filled and canned

WALL PUTTY (LAAPI):

PORTER’S DIAMOND MODEL

RAW MATERIALS (ORGANIZED SECTOR):

RAW MATERIALS (UNORGANIZED SECTOR):

LABOR (STRUCTURED FIRMS)

UNSKILLED LABOR (STRUCTURED FIRMS)

LABOR (UNSTRUCTURED FIRMS)

FIRM STRUCTURE AND RIVALRY

MAJOR PLAYERS OF THE INDUSTRY

STRUCTURE OF THE MARKET

BRAND BUCKET SIZE PRICE (PKR)

GOBI’S (Enamel) Quarter 485

Nelson (Enamel) Quarter 650

Super Kote (Enamel) Quarter 520

ICI Dulux (Enamel) Quarter 800

NON-PRICE COMPETITION (MARKETING)

Furthermore, Nelson brought up a campaign of ‘paint-it-yourself’ in which it offered a video

HOW DO UNSTRUCTURED FIRMS COMPETE?

The demand for paint depends upon a number of different factors:

EFFECT OF CURRENT AFFAIRS

BAN ON CONSTRUCTION OF HIGH RISERS

BERGER AUTOMOTIVE PAINTS:

The paint industry is linked to many other companies such as

 Chemical Industry: As mentioned earlier, paint production requires a large number of

Raw Material Purchase

1. Have the listed paint manufacturers formed an oligopolistic structure in Pakistan?

1. Is this industry export or import dominant?

1. Since when has the issue of smuggling of paint started in Pakistan?

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