The changing dynamics of Indian Paint Sector!

India's paint sector is one of the crucial sectors in an economy, as it gives a brief understanding on the health of Real-Estate and Industrial Sector. The trajectory of the Indian paint market is closely linked to urbanization and infrastructure development initiatives in the country. Currently in India, the Paint Sector is changing dynamically with rise in competition, trend of sustainable paints and ever-evolving supply chain integration. The paint sector in India is experiencing significant changes driven by various factors such as sustainability, durability, performance, digitalization, and innovation.

Key players in the Indian Paints and Coatings Market include Akzo Nobel N.V., Asian Paints, Berger Paints India Limited, Kansai Nerolac Paints Limited, and Nippon Paint Holdings Co. Ltd.

Furthermore, the market is segmented into architectural, automotive, wood, protective coatings, general industrial, transportation, and packaging industries. The architectural segment holds the largest share of the market.

Let's check how the sector has been performing with respect to the indices.

To structurally approach these changing dynamics, we will follow this roadmap.

We will move ahead with the key questions which needs to be answered.

A1 - What dynamics are changing in the Indian Paint Sector?

India has one of the lowest per capita paint consumption rates at 1kg/annum, compared to developed countries where it ranges from 15-25kg/annum.

India is still in nascent stages for Paint Consumption, and if are aspirations are consistent of being a developed economy, then we can see a rapid rise in Per Capita Consumption. Currently 2.5 Kgs with global average of 15 Kgs.

Currently Asian Paints dominate the organized sector with 60% market share. The same can be seen through the number of distributors and its current capacity. We can also see the aggressive capex of existing players and commitments by new players. This aggressive expansion points out the rising demand for Paints in coming years.

Since 1960s, when Choksey Sir reformed the way the distribution of Paints, it is very vital to understand the value chain of Paint Sector. Currently Asian Paints distribution model is in such a way where Asian Paints get back 96-97% of the MRP price back to the company compared to 65-70% average for rest players.

When, Asian Paints for 75k dealers is providing paints 2-3 times a day, the next Berger for 32k dealers is providing 2 times a day. This massive difference in the turnover is helping Asian Paints reduce its working capital cycle.

The upcoming Grasim Industries already has an established distribution due to its cement distribution. It will be interesting to see how Grasim approaches distribution.

Porter's 5 forces Analysis - Paint Sector

Growth Drivers - Paint Sector

PPT -

A1 - Paint Sector Overview.pdf

Download PDF • 880KB

A2 & A4 - The established giant - Asian Paint and what can it do different?

Asian Paints is one of the companies in India which has been consistently growing at a 20% CAGR for past 6 decades. It is a company who has been actively upgrading technology, continuously refining manufacturing processes and innovating as per changing trends.

Vision & Mission -

• Focusing on waste minimization and water conservation at all of it's plants across India.

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Asian Paints is such a strong player in the Paint Sector and even in an interview with Grasim Industries they said their current plan is to become the 2nd best player in this sector.

Asian Paints over the decades has built a robust distribution network which is even impossible for the next best player to replicate it. They have built the distribution in such a way that now it can supply paint 3-4 times in a single day. That is 2.25 Lakh times across India in a single day. The next best player is at 64 k.

Benefits for distributors -

1. Personal Connection with distributors with prompt responses to queries raised on portal.

2. Tinting Machines to allow distributors to mix and match colors according to customer experience. Given on lease to reduce financial burden.

3. Training Programs to upskill the distributors.

4. High rotation of inventory and No channel inventory.

5. Discounts for quick cash conversion to Asian Paints.

6. Giving concessions during economic downturns.

7. Relief aids to distributors during natural calamities.

A2 - Asian Paints.pdf

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What can Asian Paint do next?

A3 - The rising star of Grasim Industries, can it execute their ambitions.

Aggressive entry of Grasim Industries shows us the potential of the Paint Sector in India and in proxy the potential of Real-Estate sector.

• Grasim Industries, a part of the Aditya Birla Group, is making a substantial foray into the paint business by building six greenfield paint plants across India with a planned capacity of 1.3 billion liters.

• Grasim plans to utilize its established distribution network of 45,000+ paint dealers from its UltraTech Cement business to strengthen its market presence in the paint sector.

• Although Grasim acknowledges the intense competition from established players like Asian Paints and Berger Paints, it sees an opportunity to become a strong Number Two player in the market.

• Grasim is beta testing its painting service 'Sparkle' in Mumbai, Pune, and Bengaluru, initially catering exclusively to the staff of the Aditya Birla group and their acquaintances.

Strategy - (refer the video, if unclear)

Concluding, paint sector will go through a dynamic change which can potentially lead companies to tweak their business models in order to remain competitive.

Grasim in itself, is an established player in cement segment and it will have a competitive advantage due to the potential cross-selling opportunities. I personally believe, Architects and Interior Designers can play a crucial role in the next leg of growth. There can be a chance of some businesses tweaking their business model Architect or Developer centric, which are the potential touchpoints to customers.