Outbreak of COVID-19 and subsequent lockdown notwithstanding paint industry in the country is one of the most confident segments in the economy who see bright future for their products in the coming years. Blank sales in April has not deterred them and are planning to achieve their long term objectives. Just announced fourth quarter results too confirm this trend.
Entry level products pushing growth
Entry level products are growing much faster than the premium products and this trend has emerged much before the country went into lockdown. This has forced the leading paint makers to introduce new brands in this segment. For example, Kansai Nerolac has been gaining market share over the past 2-3 years in the decorative segment. However, it lost some market share in 3QFY20 as it decided to delay the launch of entry-level emulsion. However, the subsequent launch of the product led to double-digit growth in January and February 2020. Its Soldier brand registered sales growth of 18% yoy in FY20 and now contributes 3.5-4% of sales.
This trend is likely to continue in FY21 too. According to market leader, Asian Paints, customers are looking for value for money and as such economy products will move faster than the rest. Asian Paints too feel that luxury paints may not find favour with the customers in 2021.
Rural India comes to the rescue
The rapid increase of consumer pull from medium and small towns and rural areas augurs well for the industry. An increasing trend of conversion of mud houses to brick & mortar and concrete, offers additional opportunities for the economy and regular segment of the market. As a result, paint manufacturers can grow on dual platforms of aesthetics and protective qualities of paints to uptrade rural consumers from distempers priced at Rs 50/kg) to acrylic distempers at Rs 75/liter or the economy range of emulsions of Rs 97-110/liter.
Waterproofing segment to recover faster
On the other hand, Akzo Nobel feels that the waterproofing segment to recover the fastest among all the subsegments of paints due to its ‘problem solution’ nature. The company has introduced Dulux Aquatech waterproofing products in FY19-20. According to the company, product differentiation will allow Akzo to gain share in waterproofing segment from its peers.
Distribution network expansion
Distribution network expansion is one task almost all the manufacturers are aiming at. For example, Akzo Nobel focused on distribution network expansion in FY19-20 which helped it to add outlets in semi urban/ rural regions. As the rural and semi urban regions are expected to recover faster than metros and tier- 1 cities, the company expects investments in distribution expansion to pay rich dividends in FY21-22.
Kansai Nerolac too added 3,000 dealers on a net basis during FY 2020, the highest in any year, taking the total dealer count to 25,000. 80% of the dealers have tinting machines.
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Network expansion in rural India
Since last few years paint manufacturers have been paying more attention to rural India by expanding their network deeper interiors of the country as they are converting from distemper (65% of exterior wall paints) to emulsion. According to one estimate, 60% of total rural population resides in 20% of villages in rural India and to cover these villages paint dealership needs to grow from around today’s 70,000 to more than 1.5 lakh stores. To achieve this target, the paints industry may have to expand dealerships to hardware, cement and pipes outlets in such areas.
While shifting the focus to rural India paint manufacturers are not losing sight of opportunities in cities. According to industry experts, there is equal dealer expansion opportunities in cities too as the density of paints dealership in cities is just 10 dealers per city. Thus, there is further scope for expansion of dealership in cities especially in view of fast paced urbanisation taking place in the country and growing number of mid income group in cities majority of whom are younger population with growing income and aspiration. Thus, paints companies are into identifying untapped market and making most of the opportunities.