It is necessity and more than that adversity which is driving Indian decorative paint manufacturers to become innovative in rearranging their product portfolio and rewriting their marketing strategy. Brand equity and wide distribution networks act as strong moats for the existing players but they are leaving nothing to chance as they believe the sector has entered a crucial phase which is going to chart new growth path in the coming years.
Despite several odds leading decorative paint manufacturers are seeing silver lining and are confident of achieving double-digit volume growth in the foreseeable future. The industry expects nearly 50% growth in revenue by 2022 from the 2018 level. (Also read: https://sawdust.online/2020/news/decorative-paints-see-good-growth-in-q3/) In other words, revenue to grow from Rs 50,000 crore in FY 2018 to Rs 75,000 crore in FY 2022. This will be accompanied by double digit volume growth which in turn can be attributed to increase in paintable area which again is due to conversion of kuchha houses to pucca houses and strong repainting demand.
GST reduction on paints has given a big push to the industry that too when the industry was facing multiple challenges in the form of rising raw material cost and subdued realty sector. Fortunately for the industry, the government announced a 10% reduction in GST on paints in July last year from the earlier 28%, and all the paint companies immediately passed on the benefit to end-consumers in the form of price cuts. Our interaction with the cross section of the paint industry indicates that the GST rate reduction has resulted in improving demand trends among the leading paint manufacturers. Also, paint manufacturers in the organised sector hope that GST reduction will eventually lead to further premiumisation and acceleration of the shift from unorganised to organised sector.
Repainting cycle shrinking
In recent years Indian decorative paint industry has seen repainting cycle shrinking but still remains long when compared to some other markets. Thus, paint manufacturers believe that there is scope for further improvement for which they are taking some proactive steps like end-to-end painting services encompassing consultation services, engagement of automatic machines by trained applicators, site supervision, onsite delivery of paints and other services. The paint industry believes that longer repainting cycle in India is mainly due to various inconveniences faced by the end users and by removing these inconveniences, the industry believes, repainting cycle can be shortened.
Focus on skill development
When you expect rapid growth both in volume and value in the coming years, there will be increased demand for painting skills too as India largely remains a painter/applicator dependent market as against the DIY market globally. Unless the industry and the government takes some steps immediately, industry’s growth forecasts may go haywire thanks to non-availability for painters. The requirement for painters and applicators is expected to reach 3.0mn by FY24 from 1.7mn currently. No wonder then the Indian Paints Association (IPA) has tied up with National Skills Development Corporation (NSDC) for imparting skill training. (See: https://sawdust.online/2020/brand-updates/berger-paints-associates-with-skill-competition-in-painting/)
Limited online threat
Indian paint manufacturers do not foresee much threat from online sales or e-commerce for their business. In fact, online purchase of paints has seen limited success in developed markets and the scenario in India is no different. Bulkiness of paints, difficulty in shade selection, need for tinting and non-existence of the DIY market are the factors that are restricting the e-commerce in paint business.
One of the recent trends found in paint industry is the increasing premiumisation toward texture-finish and designer paints. Interestingly, premiumisation trend is also observed in low-value products as well. For example, there is gradual upgrade from chuna to paints, to waterproof cement paint, etc. There is also shift taking place from solvent-based paints to water-based and environment-friendly paints. Emulsion paint is the fastest growing category with over 20% growth.
Paint companies are slowly turning into solution providers than just remaining as paint sellers. For example, Berger Paints and Asian Paints have started concepts like “Express Painting” and “On-time” painting, respectively, which use automated tools such as sanding machines for dust extraction and autorollers. In order to gain customer confidence and loyalty, paint companies also provide expert consultation for timely and superior painting services.
Strong entry barriers
Decorative paints is one of the few home decor products where brand matters. Most of the leading paint makers spend heavily on advertisements to create brand equity among the potential customers which virtually block the new entrants into the field. Even if the new entrants have financial muscle to counter the existing giants in advertisement spends, they may not be able to match the wide distribution network of the leading paint manufacturers which acts as another barrier for the new entrants. Tinting machines and wide product portfolios are other moats acting as barriers for the potential entrants into the industry. In recent times, only Nippon Paints has been able to breach these barriers successfully but such instances are very rare in the paint industry.
But it may not be a smooth sailing all through and the industry is likely to face intermittent hiccups like raw material price volatility. Also, poor health of realty industry is a matter of concern for the paint makers. But the industry has the wherewithal to tackle these issues as and when they erupt.