Published on February 21, 2014
Feasibility Analysis to launch a New Paint Brand WASIM AKRAM
Introduction: India is the fastest growing paint market in Asia Pacific • India’s paint industry size is estimated to be €3.5bn. • The following paints are available in the market: Acoustic Paints Resin Paints (Alkyd) Dripless Paints Latex Paints Single Coated Paints Primary Rubber based Paints Texture oriented Paints • The decorative paints to industrial paints ratio is 70:30 both in value and volume terms. • Almost half of the revenues earned by the Indian paint industry are through enamels. • The demand in the paint industry is seasonal to some extent. While the demand dips in the monsoon season, it is the maximum in the festive season.
Growth: • Market has been growing on average 15% annually during the last five years and thus it is growing 1.5-2 times faster than GDP. • The expected CAGR is 13-15 % for the period FY13-14. • 30% 0f the main business is comprised of new construction projects. The paint industry growth drivers are: • Repainting demand fuelled by the real estate boom over the past few years • Changing consumer preferences, from pure aesthetics to value added features • Rising demand for industrial paints • The organized section of the industry is growing faster than the organized sector.
Decorative Paints: The key drivers of decorative paints are: • Robust economic growth leading to higher disposable income. • Continued growth in real state. • Change in perception towards painting. • Launch of affordable houses. • Shift in demographic profile resulting in increase in number of households. • Various innovations of market players.
Industrial Paints: The Industrial Paint Segment is dominated by organized sector. • Automotive paint form approx. 45 % of industrial paints. • Performance coating forms approx. 25 % of industrial paints. • Consumer durables and auto ancillary products use power coating. • Coil coating are used in industrial constructions, electric equipment and interiors of trains & buses.
Major Players The unorganized sector with about 2,000 units having small and medium sized manufacturing plants controls around 35 % of the paint market. Out of the rest, most is controlled by the top 5 companies and they are: • Asian Paints (Overall market leader due to leadership in decorative segment) • Kansai Nerolac (Market leader in automobile industrial paint segment, also into decorative segment) • Berger Paints (Major revenue from decorative segment, also into industrial paints) • Akzo Nobel (Major revenue from decorative segment, also into automotive paints) • Shalimar Paints (Mainly into decorative and non-automobile industrial coatings)
Opportunities: Indian GDP is expected to grow 5.5-7.0 % annually the next few years. Because of the high correlation between GDP and paint volume growth, decorative paints are expected to grow on the back of strong economic momentum. • Real estate boom in the past few years will lead to strong demand for repainting. • At the moment the per capita consumption of paint in India is merely around 1 kg (20 kg in the developed countries, global average 15 kg) so the absolute consumption of paint in India is expected to rise. • The paint demand in tier II and tier III cities is growing at a faster rate than the tier I cities. • Expected decrease in the use of distemper in future.
Key Challenges: All the manufacturers have their own manufacturing units to maintain the quality. • Paints have high volume-to-value ratio and require manufacturing near the market. • Entry barrier is very high because the top five players have maintained market share despite of entry of new foreign players. • Outsourcing is limited and only for the low-end paints. • The competition in the paint industry is becoming more intense with the entry of new foreign players like Jotun, Nippon & Sherwin Williams. • Crude prices have been in an upswing and this is raising the cost burden of the industry players.
Mechanism of Paints Major Inputs Raw Materials (56%) Selling & Administration expenses (23%) Employee Cost (12%) Major Products Decorative Products: Paint Emulsions, Enamels, Distempers, Wood Finishes, Metal Finishes etc. Industrial Products: Powder Coating, Floor Coating, Surface Coating etc. End User Households, Construction firms (70%) Automobiles Consumer Goods Marine Industry (30%)
Paint Industry Segmentation INDIAN PAINT INDUSTRY DECORATIVE SEGMENT (70%) PREMIUM RANGE (HIGH END ACRELYC EMULSION) METROS AND LARGE CITIES MEDIUM RANGE (ENAMEL PAINTS) SMALL CITIES INDUSTRIAL SEGMENT (30%) DISTEMPER RANGE (LOW END PAINTS) SUB URBAN AND RURAL AREAS AUTOMOTI VE SECTOR (2/3 rd SHARE) CONSUMER DURABLES, MARINE PAINTS, OTHER OEMs
Market Segmentation: Decorative: Major segments in decorative include exterior wall paints, interior wall paints, wood finishes and enamel and ancillary products such as primers, putties etc. Decorative paints account for over 70% of the overall paint market in India. Demand for decorative paints arises from household painting, architectural and other display purposes. Demand in the festive season (September-December) is significant, as compared to other periods.
Market Segmentation: Industrial: Three main segments of the industrial sector include automotive coatings, powder coatings and protective coatings. User industries for industrial paints include automobiles engineering and consumer durables. The industrial paints segment is far more technology intensive than the decorative segment.
Major Players in Indian Paint Industry:
Types of Decorative Paints Decorative Paints Interior Paints Wall -Emulsion -Distemper Wallpaper Metal -Enamel Metal Gloss Wood Wood Finishes Exterior Paints Emulsion Textured Cement paints Distemper Enamel
Interior Paints (Emulsion) Dulux Velvet Touch Asian Paints Royale luxury Emulsion Silk
Interior Paints (Distemper) Tractor Distemper Beauty Distemper Bison Distemper
Interior Paints Metal & Wood (Enamel) Synthetic Enamel Apcolite Premium Gloss Enamel Gloss Premium Enamel Luxol
Exterior Paints Apex Ultima Tartaruga (Textured) Weather Shield MAX Snowcem Plus (Cement)
Price of Products (Interior) Segment Walls (Emulsion) Walls (Emulsion) Walls (Emulsion) Walls (Emulsion) Walls (Emulsion) Walls (Emulsion) Walls (Distemper) Product Royal Velvet Touch Impression Silk Premium Super Smooth Tractor Walls (Distemper) Bison Metal & Woods Dulax Gloss Premium Enamel Synthetic Enamel Rs. 200-270 Luxol Rs. 200-270 Apcolite Premium Rs. 200-270 Gloss Enamel Metal & Woods Metal & Woods Metal & Woods Price (per lt.) Rs. 360-450 Rs. 360-450 Rs. 360-450 Rs. 360-450 Rs. 250-280 Rs. 250-280 Rs. 60-80 (per lt.) Rs. 65-80(per lt.) Rs. 200-230 Company Asian Paints ICI Dulux Nerolac Paints Berger Paints Asian Paints ICI Dulax Asian Paints Berger Paints ICI Dulux Nerolac Paints Berger Paints Asian Paints
Price of Products (Exterior) Segment Product Price (per lt.) Company Walls (Emulsion) Apex Ultima Rs. 350-400 Asian Paints Walls (Emulsion) Dulux weather Shield Max Rs. 350-400 ICI Dulux Walls (Emulsion) Apex Rs. 250-300 Asian Paints Walls (Emulsion) Dulux weather Shield Rs. 250-300 ICI Dulux Rs. 250-300 Berger Paints Walls (Emulsion) Weather coat All Guard
Sales of Companies Net Sales(FY2013) in Cr. 7000 6000 Quantity 5000 4000 3000 2000 1000 0 Asian Paints Net Sales(FY2013) in Cr. Kansai Nerolac Berger Paints ICI Paints Shalimar Paints 6607.2 2266.2 2096.2 1087.6 404.4
Market Shares of Companies (Contd.) 32% 35% Asian Paints Kansai Nerolac Berger Paints 5% 11% 6% 11% ICI Paints Others Unorganised
Distribution Process of Paints Paint Manufactures Regional Warehouses Company Dealer Customers
Factors affecting Paint Industry • • • • • • Increasing level of income & education Increasing urbanization Increasing share of organized sector Development of the Realty, Automobile and Infrastructure sector Availability of financing options Increasing Penetration in the Rural Markets
New concepts of Paints: • Multi colored room concept. • Lead free color.
PORTER’S 5 FORCES High raw material prices squeezing paint supplier's margins Buyers becoming stronger Threat of new entrants Large companies becoming larger Paint consumer looking to other alternatives to paint
Strengths Indian Paint Market has very strong potential in terms of market share in the organized sector Comprehensive nation wide coverage of the market - urban, semi-urban and rural areas. • Different segment required by different customer and industry has its own growth area and market. • A network of 25,000 dealers spread all over the country is available. • The pricing strategy is oriented to middle/lower end consumers • Paint Industry is quite strong in production-marketing coordination. Their policy Of offering tailor-made products to suit customer need has resulted in an ever growing product range. • In-house production, no outsourcing, high reliability in suppliers, superior in quality assurance.
Weaknesses • Widening product mix puts strain on production distribution, accounting and administration; • Innovation in developing new products is inadequate; • Ever expanding product mix throws some strain on inventory management; • positioning for the premium brands meant for urban markets; • Seasonal demand and hence in off seasons it can lead to cash flow problems;
Opportunities • The automobile industry accounted for 50% of the industrial paint market. • Indian is the fastest growing paint market in Asia Pacific. • The paint industry growth drivers are: – Repainting demand fuelled by the real estate boom over the past few years. – Changing consumer preferences, from pure aesthetics to value added features. – Raising demand for industrial paints.
Threats • Domination of few foreign companies. • Since both Goodlass Nerolac (43%) and Berger's (14%) have a higher market share than AP's (14%), it is possible that in the future, they may capture the entire industrial paint market; • Competitors have gone in for hi-tech with instacolour spot mixing. For example, J&N's instacolour offers 626 shades; • Automated paint blending in retail points already there. ICI's Touch Color and Berger's Color Bank are indicative of this; • Competition is catching up fast, hi-tech facilities gives abundant choices.
Descriptive Analysis of the Market research Survey
Strategies for Consumer
Strategies for Urban Consumer: • Providing innovative products & painting techniques. E.g.: Reflective paints, Day night shade change, 3D texture, Radiance, Multiple tints, reflective color. • Online marketing & online shopping for paints & paint related products. • Online suggestions & makeover tips. • Providing safe, odorless, low VOC, durable paints with all weather guard & high gloss attributes. • Use of existing supplier network.
Strategies for Semi Urban & Rural Consumer: • Paints with increased spreadability, more than of normal paints. • High washability & durability of paints. • Main focus on distemper & enamel paints. • Use of hub & spoke supply chain to capture semi urban & rural market.
BRANDING • Name of the Brand • Tag Line • Add Campaign • Brand USP • STP: : Roshan Paints : “Roshan Bharat Ka Roshan Paints.” : Celebrity endorsement with Hrithik Roshan. : High quality innovative ‘Desi’ Brand. Segment: Decorative Paints Target : Households of Urban, Semi-Urban & Rural Areas Positioning : Colors of India • The company would base its promotion & branding strategies on consumer ethnocentrism.
Identification of Opportunity for Branding: Brand Equity Brand Loyalty Brand Preference Brand position Brand Image Brand Personality Brand Identity Brand Attitudes Brand Familiarity Brand Associations Brand Awareness
Strategies for competitors: • Faster Service • Better quality & packaging than others. • Low cost solution to their clients. • Strong relationship with customer & suppliers. • Investmentent in R&D to create more varieties in products. • Introducing technological innovations maintaining CSR & sustainability.
Product Life Cycle: New business Ideas Ad campaign, awareness drive, Celebrity Endorsement MR, R&D, Preparation for launch, publicity Marketing Campaign Tie ups, CSR, Capacity Expansion Promo Offers, Innovation, Reposit Saturation: Conglomerate Diversification
Future Strategies • Tie up with ASI for restoration & renovation works of heritage sites. • Entry into industrial paint segment. • Manufacturing of roof solution products. • Damp proof wall care products. • Production of tiles.
Cost: Project cost Amount Land & Site Development 2.00 cr Building 6.00 cr Plant & Machinery 10.00cr Misc. Fixed Assets 50 lakhs Contingency 86.35 lkh. Pre-Operative Cost 27 lakhs Total 19.62 cr.
Sr. No. 1. 2 3 4 5 Particulars LAND & SITE DEVELOPMENT Land Cost of Development Land Development Levelling & Fencing Entry Points & Guard rooms Sub Total BUILDING Production Room Colour Bank Waste Yard Pre-Production Area Casing Chambers A/C Compressor Room / DG Set room Boiler Room Canning Facility Can Store Room Store / Tool Room / Canteen Sorting Area Packing Room Service Room (Underground) Corridor Lab Office Block Architect Fee Sub Total PLANT & MACHINERY Casing Unit Production Unit Canning& Other Equipment Sub Total MISCELLANEOUS FIXED ASSETS Canteen Furniture Communication system Sub Total PRE-OPERATIVE EXPENSES Administrative Exp. Professional Charges Interest During Construction Period Start-up Expenses Sub Total TOTAL Unit Basis Unit cost (Rs.) Qty. Acres 15,00,000 Acres Nos. 200000 15,00,000 Cost 10 10 20,00,000 2.00 1.5 cr. 30,00,000 2.00 cr. 8 1 1 1 1 Sqft. Sqft. Sqft. Sqft. Sqft. 60x18x13 40x9x12 60x40x14 40x20 12x10x10 300 300 100 50 250 0 0 0 0 0 3.46 cr. 14.4 lkh 3.01 lkh 5.33 lkh 4.00 lkh 1 Sqft. 30x18x13 200 0 14.4 lkh 1 1 1 1 1 1 1 1 3 1 Sqft. Sqft. Sqft. Sqft. Sqft. Sqft. Sqft. Sqft. Sqft. Sqft. % 15x12x13 60x18x13 30x18x13 15x12x13 18x12x13 12x12x13 12x9x8 108x15x13 18x15x12 30x18x13 200 250 250 250 200 200 200 50 450 450 0 0 0 0 0 0 0 0 0 0 2.5% 4.80 lkh 36.01lkh 18 lkh 6 lkh 5.73 lkh 3.86 lkh 2.93 lkh 10.8 lkh 48.69 lkh 32.41 lkh 15,00,000 6.00 cr 2.00 cr. 7.00 cr. 1.00 cr. 10.00 cr. 30.00 lkh. 20.00 lkh. 50.00 lkh. 1.58 lkh. 3.17 lkh. 19.05 lkh. 3.17 lkh. 27 lkh. 18.77 cr.
Particulars Total % Firm Non Firm Total Total Cost Land 1.5 cr. 0 1.5 cr. 0.00 0.00 1.5 cr. Development / Building 6.5 cr. 5 - 6.5 cr. 32.5 lkh. 6.82 cr. 10.00 cr. 5 - 10.00 cr. 50 lkh. 10.5 cr. 50 lkh. 5 - 50 lkh. 2.5 lkh. 52.5 lkh. 27.00 lkh. 5 - 27.00 lkh. 1.35 lkh. 28.35 lkh Sub Total 86.35 lkh 22. Plant & Machinery Miscellaneous Fixes Assets Pre-Operative Expenses Total 19.62 cr.
Profit Calculation: PARTICULARS Rs. Sales 30 cr. Total cost 19.62 cr. Gross Profit 10.38 Cr. Depreciation (@5% on 18.77Cr.) 9385000 Interest (@10% on 4.62 cr.) 4620000 PBT 89795000 Tax (@ 10%) 8979500 PAT 77815500 Production capacity =3000 TPA Avg. Selling Rate = Rs.100/Ltr. Loan = 4.62 Cr.
CSR Initiatives • For the CSR activities the company would tie up with “Aravind eye hospital” and provide them with financial assistance and help them in setting up eye check up camps in the remote areas. • The philosophy behind this CSR activity is that ours being a paint company which helps in decorating and bringing colors to peoples life we should also do something for those whose life just has the shades of black and white.
References • https://www.facebook.com/l.php?u=https%3A%2F%2Fwww.google.co.in%2Fsearch%3Fq %3Didentification%2Bof%2Bopportunity%2Bfor%2Bbranding%26biw%3D1517%26bih%3 D692%26source%3Dlnms%26tbm%3Disch%26sa%3DX%26ei%3DjoKwUtPLGc2Ergfn9IGY DQ%26ved%3D0CAcQ_AUoAQ&h=YAQG-l8Kd • http://www.uniassignment.com/essay-samples/marketing/strategic-analysis-of-indianpaint-industry.php • http://www.studymode.com/essays/Supply-Chain-Management-Paint-Industry198939.html • https://www.google.co.in/search?q=product+life+cycle+images&tbm=isch&tbo=u&sourc e=univ&sa=X&ei=OYOwUsXHCIi3rAfbvIDwCg&ved=0CCoQsAQ&biw=1517&bih=692&dpr =0.9#facrc=_&imgdii=_&imgrc=8Av669ZNSqeXCM%3A%3Bza8AnRtF9uv4M%3Bhttps%253A%252F%252Ffigures.boundless.com%252F11565%252Flarge %252Fproduct-lifecycle.png%3Bhttps%253A%252F%252Fwww.boundless.com%252Fmarketing%252Fintegr ated-marketing-communication%252Fselecting-the-promotion-mix-for-a-particularproduct%252Fstages-in-the-product-lifecycle%252F%3B507%3B300
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