IndiaFuture Trend in Paints.

The Paint Industry in India

Section I

Growth in Paint Industry.

Growth in Disposable Income % 80

Rank 12 5

Discretionary Spends %

52 70

Paint Ratio to HH % 6.45.4 9.4 17 -19

9

5750

12340

675

16896

987

24060

1510

69504

5415

2000 2005 2010 2025Consumption Household

In Billion INR

2000 2005 2010 2025

2000 2005 2010 2025

Paint Industry size from 13,500 crs to 1,00,000 crs by 2025

Implies the CAGR of 14% to 15%

Per capita from 1.5 kg to 7-8 kg

Rs. 115/- Rs. 700/-

Following can further increase the growth

Increasing awareness of paint category

Taking pain out of painting process

Alternative to Alternatives

Increase in number of players

Sources of Growth

Overall Growth % 10

Paint Growth % 15 13

Paint Salience % 85 90 15 10

8

Population Salience %

27 37

7208

43120

424

2871

9688

26383

563

2544

Urban Total Urban P&HHS Rural Total Rural P&HHS

2005

2025

73 63

Urban will continue to dominate

Urban in Rural and rural in Urban

Creating rural brand is ???

Rural consumer aspiring for urban

Extending urban brand is more acceptable

Consumer Segments

No. of times growth 10

Paint Potential 700 2000

9 8 1

7000 2000

2300

22000

8500

69000

Super Premium Premium Popular Economy

In Crores INR

Super premium category is under leveraged

Higher potential of growth in popular

Super Premium and Premium

Today – 20%

Future – 30%

Up-trading will happen across all the categories

Expensive labour may create DIY at lower end

India: Consumer trends today and future

Section II

Age (in yrs)

Pop

ula

tion

(in

‘0

00

s)

Source: Euromonitor Report, How India eats, drinks and shops, October 2010

20202010

Median Age:

29 yrs

Median Age:

26 yrs

India - The youngest country.But Average age likely to shift upwards

Despite average age increasing, India will still remain youngest country

Source: Economic times, Central Intelligence Agency World Factbook

Young India means, people have started investing in a house much earlier

1999 2010

Source: Financial Express, LiveMint

--Average age of the home loan buyer--

43 years 33 years

2004

36 years

Given the size of the investment, it is unlikely that the age of the home buyer will drop beyond 30 years

No wonder, the average age of the paint buyer has gone down vis-à-vis 2005

--Age-wise split of paint bought in last 5 years--

25-34 yrs segment is the largest currently

41 yrs

Avg Age in 2005

Avg Age in 2010

38 yrs

Gap between average age of new home buyer and the paint buyer is 5 years. It is still likely to be in the mid-30’s going forward

Source: Indian Readership Survey 2005, 2010 (sample – 2.4 Lacs), Age 25+

PaintsFeeling 1 – Youngness

CONSUMER TRENDS

Entertainment / Mood Enhancement

Performance enhancement

Impatient and Intolerant

Treatment to solutions

Cross Cultural

Modern designs & textures

Robust product features

Faster application process 5 days

End to End Solutions 15%

PAINT TRENDS

Example - Lift

Customization of products

Customization of credit cards (more likely in the

institutional segment)

Demand for more evolved products

Automobile companies offering top end features like keyless entry, Bluetooth connectivity

Increasing affluence leading to lifestyle upgradation

Rising income levels, has lead to a trend towards consumer up-trading and demanding better and premium products

Automobile market shows a distinct shift towards more premium cars

Consumer upgrading his choice of cars. Today 3 among the 5 top selling cars fall above the Rs. 4 lacs price bracket

20052005 20092009

AC, PS model assumed as best selling model, Ex-showroom Prices: Autocar, in Rs. lakhsS = Avg. Sales volume per month

Price range of top selling models:Rs 2.5L – 3.75L

Price range of top selling models:Rs 2.5L – 3.75L

Price range of top selling models:Rs 3.0L – 4.4L

Price range of top selling models:Rs 3.0L – 4.4L

Alto2.91

S = 12,700 units

Santro Xing3.72

S = 8,900 units

Indica3.28

S = 8,800 units

WagonR3.77

S = 7,100 units

Maruti 8002.55

S = 7,600 units

Alto2.97

S = 20,000 units

WagonR3.81

S = 12,500 units

i104.07

S = 11,400 units

Indica4.04

S = 9,700 units

Maruti Swift4.39

S = 8,900 units

Uptrading seen at both - the top as well as bottom of the pyramid

TV category CAGR of 12.1%

TV category CAGR of 12.1%

Source: Nielsen market monitor

Premium market

Source: Euromonitor, 2004, 2009

Mass marketLCD TV

96%5yr CAGR

Vs.

Premium Cosmetics

93.5%5yr growth

Vs.

Regular CosmeticsGrowth of 76%

Regular CosmeticsGrowth of 76%

Who would have imagined Indian customers paying 5 times more for a cup of coffee?

Source: Economic Times

Rs. 50Rs. 50Rs. 10Rs. 10

20072007 20102010

400

937

Not only is the consumer ready to pay so much, but also demand for premium service is evident by the number of outlets zooming

Number of CCD outlets in IndiaNumber of CCD outlets in India

Café Coffee Day is India’s largest organized retail café chain

PaintsFeeling 2 – Aesthetics

CONSUMER TRENDS

Premium with advance features

Distemper ….. Emulsion 1…. Emulsion2

More new products

Exciting & appealing packaging

Market Insight / Supply Chain

PAINT TRENDS

Example - 70% users of smart phones does not use more than two/ three featuresStill ready to pay premium for other features

Technology

Feel Good features

Premium Look & feel

Willingness to pay premium

Emergence of the eco-conscious consumer

Concern for the environment has changed the purchasing behavior of consumers

Source: Greendex 2010

India toped the

Consumer Greendex,

compiled by National

Geographic which

studied 17,000

consumers in 17

countries

This phenomenon is evident across varied categories

Source: Deccan Herald

PaintsFeeling 3 – Guilt free

CONSUMER TRENDS

Contributing to society

CSR to ISR

Doing Well, Doing Good

Future of Luxury

Environment Friendly Products

Contribution to society through paints

Shopping for Cause

PAINT IMPLICATIONS

Example - Global Warming

‘Health-consciousness’ the latest mantra

Source: Euromonitor, Health and Wellness

The health and wellness category expected to double by 2014

Evident through sudden increase of fitness centers in the last few years

Source: Economic Times, IIFL Report

20102010

100

Number of Talwalkar Fitness centers in IndiaNumber of Talwalkar Fitness centers in India

20062006

35

19391939

1

35 outlets in 67 years

65 outlets in 4 years

Also, the sudden boom of ‘being healthy’ across categories drives the point

Even India’s largest english daily – The Times of India

launched an entire bi-monthly supplement and a website dedicated to health

called ‘Times Wellness’

Sugar-free Icecream

Low Fat Milk

Health with absence of negatives

Multi-grain SnackingProbiotic

Curd

Health with nutrition enhancers

PaintsFeeling 4 – Absence of negatives

CONSUMER TRENDS

Safety

Healthy

Non Polluting

Hygienic

Lead free

Low VOC

No Smell

Low Formaldehyde

No hassles

PAINT TRENDS

Example - Sound from Refrigerators

New Age Marketing

Section III

1621 mn 3421 mn

42% 43%2X

While digital seems to witness 3-fold growth

SOURCE: Advertising spends, Magna Report

2009 2015

Predictions reveal, TV and print will continue to contribute the most even in the future

44%44%

1700 mn 3508 mn

2X

111 mn 369 mn

3% 5%3X

% contribution to total Ad spends, Ad spends USD mn

The ‘digital wave’ currently restricted only to a few categories

Source: ComScore, Nov 2010

Paints category still has a long way to go….

3G spectrum and reduction of prices of internet enabled handsets likely to spur mobile internet growth

Internet mobile user base to multiply 25 times by 2014

25X

Source: Internet & Mobile Association of India Report, Dec 2009

Eyes v/s Ear

The Ear can process 125 words per minute

The Eye can process 5000 words per minute

Visual media will be more effective than verbal

M-Marketing may do better than E-Marketing

Modern trade is growing in India…

Big retail chains increasing their

presence by reaching out to the smaller town

The economic slowdown dented the growth of organized retail during 2008-09, however the trend has picked up and the

industry is expected to boom

Source: IBEF, Booz & Co. Analysis

Source: Technopak, Booz & Co. Analysis

Renowned brands have often opted the ‘Exclusive stores’ route and have seen consistent growth over years

Source: Forbes, Tata Strategic Management Group Report, Economic Times

150

222303

2003 2007 2010Number of ‘World of Titan’ outlets in

India

World of Titan: An exclusive retail store of India’s leading watch-maker

450

723

1608

2001 2005 2010Number of Zara outlets around the

world

Zara, which exclusively retails through its own stores, has been

doubling every 4 years!

303 Titan exclusive stores account for almost

half of the watch sales

Over 10,000 multi-brand outlets account for the

remaining 50%

PaintsTouch and Feel

Smaller within reach format more successful than large formats

Exclusive retail outlets to grow

While with increasing affluence, one expects the population of working women to increase…

The actual proportion of working women in India is decliningA decline led by rural working women, due to urbanisation and

decreasing dependence on agricultural activities.

Source: National Readership Survey 2001, 2006 (Sample:2.8 lakhs), Indian Readership Survey 2010 (sample: 2.41 Lacs), Hindu Business Line, Department of Demography

But today’s Indian woman, increasingly, sees herself as a equal partner in the marriage

I do something for his family, he does

something for mine… it balances out

Equal to her husband

I suggested to him that we need to take a loan to

invest in a new house when our kids were small!

Bigger role in financial decisions

Source: DraftFCB Ulka WomanMood, Findings of 35 workshops and Expert interviews carried across 6 metros and mini-metros across India, SEC A,B

I don’t have to ask my husband for buying every small thing in

the house. I can decide!

Empowered to take

decisions on smaller aspects

Role of woman increasing in house hold categories

But in paints it is still indicative of continuing with Man

Colors, Designs and retail experience efforts need to be

uplifted to get women into paint decision making

To Conclude…

Indian Paint Industry

Robust

Growing

Stable

Versatile (Consumer / Dealer / Influencer)

Technology

It has the power to become a case study to follow.

Thank You.

Glossary• Household: Part of Personal & Household Services as per McKinsey report• Growth in disposable income as per McKinsey report• Discretionary spends as McKinsey report• 2010 discretionary spends estimated• Paint ratio to Personal & Household Services category is calculated based on estimated industry size in

years 2000, 2005 & 2010.• Per Capita Consumption based on CAGR growth of paints and Population growth• Urban & Rural growth calculated based on McKinsey report• Population salience based on McKinsey report• Paint potential calculated based on current year’s (2010) category wise salience