Analysis of Paint Industry with respect to Godlass Nerolac

Submitted By:Submitted By:Sandesh MokalSandesh Mokal

PGDBM – MarketingPGDBM – Marketing

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Project Report On

“Analysis of the Paint Industry”

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TABLE OF CONTENTS

SR. NO CONTENTS PAGE NO.

1. EXECUTIVE SUMMARY 6

2. PAINT INDUSTRY AT A GLANCE 7

3. PAINT INDUSTRY 10

4. INDUSTRY STRUCTURE 13

5. SECTOR SPECIFICS 15

6. EMERGING TRENDS AND OPPORTUNITIES 19

7. COMPETITOR ANALYSIS 23

8. COMPANY ANALYSIS 29

9. SWOT ANALYSIS 36

10. PRIMARY RESEARCH 37

11. RESEARCH PROBLEM 37

12. RESEARCH OBJECTIVE 37

13. RESEARCH DESIGN 37

14. CONSUMER SURVEY 39

15. CONCLUSIONS 47

16. RECOMMENDATIONS 48

17. APPENDIX 51

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EXECUTIVE SUMMARY

Goodlass Nerolac is one of India’s largest paints company second only to Asian Paints in the

decorative segment. Paints sector can be segmented application wise, as decorative paints

and industrial paints. Both the sectors are characterized by low capital costs and high

working capital. The intense working capital requires special technology. Capacities are

normally set up close to markets, so as to be able to offer a multitude of shades and colors

to customers. Brand building and dealer network act as effective entry barriers. Demand is

seasonal in nature - low during monsoon, high during festivals.

Domestic paints sector, dominated by decorative paints (70%), is expected to undergo a

structural shift towards industrial paints, as cross-border tie-ups in industrial paints are

becoming order of the day. Most organized sector players are established with well-

entrenched distribution network and established brands. Threat of global competition is

minimal. The underdeveloped industrial paints market holds maximum growth potential,

albeit on a lower base. In future the industry will witness brand competition, product

innovations and a fight for superior distribution network.

Focused on decorative paints segment, GNPL is set to gain the maximum amongst the peer

members from the up trend in the housing sector. The company is restructuring its

operations into three SBUs and has set target to be amongst the top ten decorative

manufacturers in the world. GNPL is investing heavily in dealer tinting machine and IT

technologies to keep ahead of competition. GNPL has set a target of earnings growth of

above 20% per annum. It also has set a vision to be among the top five paint companies

worldwide by 2005. On export front, the company is looking out for alliances/ takeover in

the emerging markets of Asia.

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PAINT INDUSTRY AT A GLANCE

The Indian paint industry is worth Rs49bn and can be divided into two main sectors

namely the organized sector and the unorganized sector. The Organised sector

comprises of 55% of the total paints market while the Unorganised sector comprises of

the remaining 45%.

Organized Sector can be divided into 2 distinct segments:

Industrial Segment growing at 15% (US$ 230 million).

Decorative Segment growing at 8% (US$ 500 million).

The Overall growth of the paint industry is 10 to 12%.

Basis of competition in decorative segment are:

1. Distribution

2. Brand Image

3. Range of Products

Basis of competition in Industrial Segment are:

1. Access to technology

2. Technical Servicing

3. Brand equity of present players

4. Distribution network

5. Cost of modification of products

The unorganized sector has historically been dominant due to the high excise structure.

Over the last five years, the excise rates have come down drastically from 40% to 18%

resulting in erosion of the unorganized sector's share.

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Working Capital intensive:

The number of shades is very large and a sufficient stock of every shade has to be

maintained at all levels of the distribution channel, the working capital cycle is very high.

The extent can be gauged from the fact that Asian Paints has a 12000 strong dealer

network selling more than 150 shades. Also, the number of raw materials required can

stretch upto 300. As majority of these raw materials are either imported or sourced from

small chemical manufacturers, a large stockpile needs to be maintained.

Low Fixed asset requirement:

A plant for the manufacture of decorative paint can be set up with a small capital

investment. However, the major investment is in setting up distribution channels and

building up a brand.

The demand for paints is relatively price-elastic but is linked to the industrial and

economical growth.

The per capita consumption of paints in India is very low at 0.5 kg per annum if

compared with 4 kgs in the South East Asian nations and 22 kgs in developed countries.

The global average per capita consumption is 15 kg.

In India the organised sector controls 70 percent of the total market with the remaining

30 percent being in the hands of nearly 2000 small-scale units.

In India the industrial paint segment accounts for 30 percent of the paint market while

the decorative paint segment accounts for 70 per cent of paints sold in India.

All the industry majors have a vast dealership network and are required to maintain high

inventory levels.

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Most of the paint leaders have technical tie-ups with global paint leaders.

Seasonal nature of demand:

The demand peaks during festival season while is very lean during monsoons. Thus, a

major part of the sales are achieved in the second half of the fiscal year.

The paint market is expected to grow at 8-10% p.a. over the next few years. The growth

could be higher if industrial activity picks up as the industrial paint segment is gaining

more importance.

New trends are emerging in technology and marketing. Introduction of tinting machines

at the dealer/ retailer level will bring down working capital costs. Also new technology is

being used for increasing the utility and lifespan of paints. Indian industry will have to

keep pace with global technological changes to maintain their competitiveness. Already,

a few alliances have been entered into and the number is likely to increase in the future.

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Industrial sector features

Automotive Sector:

This segment is a high growth sector with a number of new entrants like Mercedes Benz,

Mitsubishi, Daewoo, Hyundai, Honda, Fiat, General Motors and Ford. However, recently

there is some slackness in Auto demands. Two wheeler markets are booming due to demand

from large Indian middle class.

Powder Coatings:

This segment is showing increasing growth due to increase in sale of white goods and auto

ancillaries.

High Performance Coatings:

This segment is registering steady growth due to the increase in investments in refinery

segment and power sectors, particularly Thermal and Nuclear.

INDUSTRY STRUCTURE

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Organized sector

In India, Indian Paint industry’s total market size is US$1400 million. The organized sector of the industry is

55%. The 45% unorganized sector has about 2500 units.

The big players and their market share-value of the organized sector are:

Asian Paints 37% Goodlass Nerolac 15.9% Berger Paints 13.8% ICI 11% Jenson & Nicholson 5.7% Shalimar

4% Others 12% ( Including Jotun).

The overall organized sector market share is shown in the following graph. Asian Paints leads with a market share of 37 per cent; Goodlass Nerolac has 16 per cent while Berger Paints has 14 per cent share.

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Unorganized Sector

There are estimated 2500 small-scale producers accounting for 45% of the market. The

unorganized sector proliferated due to low capital investment required and fiscal concession

by the government. The high excise duty of over 40% before 1992 created a large price

differential. The steady decrease in excise to the present 18% has taken away the advantage.

Moreover, the introduction of MODVAT has further reduced the incidence of excise. Over

the long run, the share of the small scale is likely to come down further and would be

restricted to low quality, low price paints.

SECTOR SPECIFICS

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Decorative segment

On product lines, paints can be differentiated into decorative and industrial paints. While the

former caters to the housing sector, the automotive segment is a major consumer of the

latter. Decorative paints can further be classified into premium, medium and distemper

segments. Premium decorative paints are acrylic emulsions used mostly in the metros. The

medium range consists of enamels, popular in smaller cities and towns. Distempers are

economy products demanded in the suburban and rural markets. Nearly 20 per cent of all

decorative paints sold in India are distempers and it is here that the unorganised sector has

dominance. The demand for decorative paints is highly price-sensitive and also cyclical.

Monsoon is a slack season while the peak business period is Diwali festival time, when most

people repaint their houses. In the decorative segment, it is the distribution network that

counts.

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. This segment is price sensitive. The housing industry is likely to

grow at around 8% in the next five years considering the shortage of housing and

Government’s thrust to encourage housing activity. This is likely to favorably impact the

demand for the decorative paints.

APIL dominates the decorative segment with a 41 percent market share. The company has

more than 15,000 retail outlets and its brands Tractor, Apcolite, Utsav, Apex and Ace are

entrenched in the market. GNPL, the number-two in the decorative segment, with a 14

percent market share too, has now increased its distribution network to 10,700 outlets to

compete with APIL effectively. Berger and ICI have 9 per cent and 8 per cent shares

respectively in this segment followed by J&N and Shalimar with 1 and 6 per cent shares.

Industrial segment

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The share of industrial paints in the total paint consumption of the nation is very low

compared to global standards. It accounts for 30 per cent of the paint market with 70 per

cent of paints sold in India for decorative purposes. With the decorative segment bottoming

out, companies are increasingly focussing on industrial paints. The future for industrial

paints is bright. In the next few years, its share would go up to 50 per cent, in line with the

global trend.

The demand for industrial paints comes from industries like automobiles, consumer durable,

shipping, engineering, etc.

Industrial paints include powder coatings, high performance coating and automotive and

marine paints. But two-thirds of the industrial paints produced in the country are

automotive paints. The industrial paints segment, on the other hand, is a high volume-low

margin business. In the industrial segment the deciding factor are technological superiority

and tie-up with automobile manufacturers for assured business.

GNPL dominates the industrial paints segment with 41 per cent market share. It has a lion’s

share of 70 per cent in the OEM passenger car segment, 40 per cent share of two wheeler

OEM market and 20 per cent of commercial vehicle OEM market. It supplies 70 per cent of

the paint requirement of Maruti, India’s largest passenger car manufacturer, besides

supplying to other customers like Telco, Toyota, Hindustan Motors, Hero Honda, TVS-Suzuki,

Mahindra & Mahindra, Ashok Leyland, Ford India, PAL Peugeot and Bajaj Auto. GNPL also

controls 20 per cent of the consumer durables segment with clients like Whirlpool and

Godrej GE. The company is also venturing into new areas like painting of plastic, coil coatings

and cans. APIL, the leader in decorative paints, ranks a poor second after Goodlass Nerolac in

the industrial segment with a 15 per cent market share. But with its joint venture Asian-PPG

Industries, the company is aggressively targeting the automobile sector. It has now emerged

as a 100 per cent OEM supplier to Daewoo, Hyundai, Ford and General Motors and is all set

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to ride on the automobile boom. Berger and ICI are the other players in the sector with 10

per cent and 9 per cent shares respectively. Shalimar too, has an 8 per cent share.

Price sensitivity factors

Various factors that have influenced the pricing of paints are summarised below:

The industry is raw-material intensive. Of the 300 odd raw materials, nearly half of

them are imported petroleum products. Thus, any deficit in global oil reserves affects

the bottomline of the players.

The major raw materials Titanium Dioxide, Phthalic Anhydride and Peutarithrithol

constitute 50 per cent of the total cost. Besides, this, there are other raw materials

such as castor, linseed and soybean oils, turpentine. The raw materials cost sums up

to a whopping 70 per cent. Any increase in the prices of these raw materials could

adversely affect paint prices.

Most of the paint majors have to import nearly 30 per cent of their raw material

requirements thus changes in import policies can affect the industry.

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Overseas expansion

If the global Goliaths are foraying into the Indian paints market aggressively, the Indian paint

companies are also spreading their wings. Asian Paint exports its paints to over 15 countries.

It also has joint ventures in Fiji, Tonga, Nepal, Vanuatu, Solomon Islands, Australia, Oman

and Mauritius. In October 1999 it acquired 76 per cent equity stake in Delmege Gorsyth & Co

(Paints) Ltd, the second largest paint company in Sri Lanka with a 12 per cent market share in

Sri Lanka’s Paint Industry. Within a short span of just five years, the company has emerged

as the number one player in these markets.

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Technology collaboration

All the paint majors have tie-ups with global paint leaders for technical know-how. Asian

Paints has formed a JV with PPG Industries Inc to service the automotive OEMs.

Berger has a series of tie-ups for various purposes. It has a technical tie-up with Herbets

Gmbh of Germany in addition to its joint venture with Becker Industrifag. With the

agreement with Herbets coming to an end in 2001, Berger has now allied with the Japanese

major Nippon Paints to boost its OEM turnover since the Indian roads are being flooded with

Japanese automobiles. It also has an agreement with Orica Australia Pvt. Ltd. to produce

new generation protective coatings. The company also has tie-ups with Valspar Corp and

Teodur BV for manufacturing heavy duty and powder coatings.

Incidentally, ICI makes paints with the technical support of Herbets, which has been recently

acquired by by E I Du Pont de Nemours of the US. Interestingly, Du Pont, which is a leader in

automotive coatings in the US, has a technical tie-up with Goodlass Nerolac for the

manufacture of sophisticated coatings for the automotive sector. Goodlass also has technical

collaborations with Ashland Chemcials Inc, USA, a leader in the petrochemical industry,

Nihon Tokushu Toryo Co and Oshima Kogyo Co Ltd, Japan.

EMERGING TRENDS AND OPPORTUNITIES

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Technology:

The introduction of tinting machine has significantly changed marketing technology. These

machines each costing approximately Rs 60mn are installed at dealer outlets and enable the

customer to choose between any of several hundred shades. These are then generated by

mixing dyes with the base paint, and delivered almost instantly.

The two major implications of this machine are:

Differentiation on color range is reduced: Prior to this technology, a major

competitive advantage of a company was the range of colors it offered. For instance,

Asian Paints offered almost 150 shades in its synthetic enamel range, unmatched in

the industry. This now stands changed as almost 2000 shades can be created in seven

minutes through these machines.

Simplified logistics management: With the machines generating shades instantly,

dealers can now stock only the base material and thus save almost 20-25% in the

working capital cycle.

Expansion of Product Profile:

The lowering of excise has opened the high volume but low value market in the semi urban

and rural areas, which is currently dominated by the unorganized sector.

Increased Thrust on Brand Creation And Distribution:

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The increased share of organized sector implies that brand awareness will be a thrust area.

Also, strong brands are emerging as the most important entry barrier. The opening up of

rural markets has also necessitated the expansion of distribution reach.

Dealer Network Nos.

Asian Paints 14500

Goodlass 7000

Berger 5500

ICI 4500

(Table – 5)

(source: indiainfoline)

Industry Consolidation:

The small-scale industry is expected to witness a shake out as the share of organized sector

increases. Also, outsourcing requirements are likely to be reduced as new capacities go on

stream in the organized sector.

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New Segments Opening Up:

With increased industrialization, new segments like auto refinishing market are likely to

expand rapidly. Already companies like ICI have launched specialized brands for this

segment.

Outlook:

The industry is expected to grow at 10% CAGR for the next five years driven by increasing

industrialization and increasing disposable incomes. According to Indian Paints Association,

demand will rise from the current 0.6mn tonnes per annum to almost 1mn tpa by 2003.

Demand for decorative paints will be led by the household construction industry which is

expected to grow at almost 8% over the next five years considering the extreme shortage of

housing and the government’s thrust on encouraging housing activity. The centers of

housing activity are also likely to shift more towards rural areas. The industrial segment will

grow faster due to the lower base and fast growth in major user industries like consumer

durables and automobiles.

The emerging trends in technology and marketing imply that the industry is likely to

consolidate over the next few years with the marginal players being wiped out and industry

leaders gaining market share. Thus, critical success factors will shift from manufacturing to

marketing and distribution.

Large international players are likely to either enter India or enhance their presence in India

in view of the growing market. Thus joint ventures and strategic alliances will be the order of

the day. Indian companies will also need to tie up with international majors to have access to

the latest technology.

Growth Areas for the Indian Paint Industry:

Automatic Tinting System

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Indian Rural Market

Auto OEM Finish

Auto Refinish

Exterior Coatings

Growth Drivers of Indian paint Industry Per capita consumption at 1.5kg is way below the developed (20kgs) aswell as the developing market

standards. Usage of lime extracts (chuna)in ruraland semi

urban markets as well as lesser awareness of theprotective attributes of paints can be one of the reasons for

lower consumption levels.With growing income levels, both in urban as well as rural India on theback of various

government initiatives like NREGS, Farm loan waivers,pay commission led salary hikes etc, we expect the per

capitaconsumption to improve in the medium as well as long term.

Rising income levels: According to McKinsey, proportion of low income groups is expected todecline

from 24% in FY05 to 10% in FY10e. This will act as a significant catalystfor demand growth in decorative

paints.

Increasing media exposure: With better awareness levels, we expect a gradual shift from unbranded to

branded segment as well as improvement in product mix for players like

Asian Paints as demand for emulsions continues to outpace enamels and distempers.

Indian housing sectors boom, increasing urbanization had made easy availability of housing loans

and a shift from semi-permanent to permanent housing structures have been driving growth in the decorative

paints segment accounting for nearly 65-70% of the Indian paint industry.

Seasons: are also involved in the demand for decorative paints, where consumption peaks around festive

time.

Increase in nuclear families: This is a consequence of younger demographics (60% of India’s

population is below 30 years of age), with proportion of working population expected to increase from 40% in

FY05 to 48% in FY15e.

COMPETITOR ANALYSIS

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I. ASIAN PAINTS:-

Asian Paints is India's largest paint company and the third largest paint company in Asia today, with a turnover

of Rs 30.2 billion (around USD 680 million). The company has an enviable reputation in the corporate world for

professionalism, fast track growth, and building shareholder equity. Asian Paints operates in 21 countries and

has 29 paint manufacturing facilities in the world servicing consumers in over 65 countries.

Asian Paints is a great marketing success in a branded consumer product business. The company

Succeeded where others failed in three areas:

First, it understood the requirements of the Indian paints market better than the MNCs which did not

bother to respond to local consumer needs. It was the first to introduce small pack sizes, a variety of shades and a

wide range of paint types (enamels, distempers, emulsions) to suit different pockets.

Thus, in the sixties, the company came out with plaster distemper, Tractor, to suit the needs of

the mass market for a product that was much cheaper than costly emulsions but much better

than the widely used whitewash and crude powder distempers. This opened up a huge market

and today distemper accounts for 25% of the decoratives market in volumes and 15% in

value. And as recently as in 1992, the company introduced a synthetic distemper, branded

Utsav, aimed at the same rural and low income urban markets.

Secondly, in the highly competitive market emulsions segment, the company introduced

as many as 151 shades in its Apcolite range when the competition was offering a maximum of

40 odd shades. The strategy paid off and Asian Paints today commands a 40% share in this

segment. It set up an extensive national distribution network to tap demand in smaller towns.

Today it has direct dealers in 3,200 towns and 10,000 stockiest. Investments were also made

in computer technology to ensure up-to-date information interface between the marketing and

production sides of the business .And finally, the company has displayed considerable savvy

in its advertising campaigns, dealer relations, point of sale publicity and product

demonstrations to consolidate and expand markets. In fact, the company has played a

pioneering role in expanding the Indian paints market by identifying high demand potential

areas and then tapping them to maximum effect.This ratio is defined as profit after tax divided

by the shareholders fund. It measures the profitability of the funds invested in the firm. It is

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regarded as a very important measure because it reflects the productivity of the risk capital

employed in the firm.

2. BERGER PAINTS:-

Berger Paints is the culmination of over seven-decade process of evolution and growth that began in 1923. Its

growth has been closely linked with the business and industrial development of modern India.

The performance of this company is anchored today in a wide variety of Decorative and Industrial paints which

continue to gain an increasing share of the highly competitive Indian paint market. Being an ISO 9001 company

its quality products have attained instant and worldwide recognition, and continues to meet quality requirements

that are demanded today even in the domestic market. The Country's third largest paint manufacturer,with its

Headquarters in Calcutta, Berger controls a distribution network comprising of 66 stock points and

approximately10,000dealers, spread across the country.

BPIL has technical tie-ups with Herberts, a subsidiary of the German pharmaceutical major

Hoechst for automotive paints, Tendor NV of Holland for powder coatings and Valspar

Corporation, USA for heavy duty coatings.

The company is particularly active in the powder coating segment and is a supplier to most

OEMs in the white good segment. With its thrust shifting to industrial coatings, the company

is expandingitspowdercoatingcapacityfrom840metrictonsto 1,840 metric tons at its existing

plant.

Recently, it introduced Color Bank, a computerized mixer tinting machine in technical

collaboration with Ital Tinto of Italy. Special software, Tintovision installed in the Color Bank

gives the customers a choice of more than 5,000 shades and can even produce the colors

offered by the company’s competitors. Another achievement of Berger is the setting up of

Berger Prolinks. Prolinks is Berger Paints' response to a market environment that is

increasingly driven by technology and calibrated by expertise. Prolinks is aimed at placing the

initiative in the hands of builders, architects and designers to enable them to directly source

innovative products and services. The team is entrusted with maintaining a seamless interface

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between paint specifiers and products and processes - databases, technical services, color

consultancy, site inspection, etc. Prolinks experts ensure specific solutions to specific

problems, whether it is a particular shade that needs development, special climatic factors to

be provided for, or application factors that have to be maintained.

3. ICI INDIA

ICI India was the subsidiary of the $15bn British multinational company ICI Plc. Brunner Mond & Co., one of

the four Companies that combined to form ICI in UK in 1926, opened a trading office to sell alkalis and dyes in

Calcutta. In 1923, Brunner Mond & Co. (India) was incorporated and the company's name was subsequently

changed to Imperial Chemical Industries (India) Ltd., in 1929.

ICI (India) is ranked fourth in the paint business, after Asian Paints, Goodlass Nerolac -17-Paints and Berger

Paints. Unlike the other paint companies, ICI (India) was a diversified unit and paint constituted 43% of its net

sales. It identified paints as a thrust area and was aggressively moving to improve its position.

The company invested $11 million in a new decorative paints plant near Bombay and constructed a $16.7

million plant for industrial paints near Chandigarh in North India. In order to increase its presence in the paints

market, ICI’s growth plan is to beef up its distribution network, widen the purview of specialty products, access

newer technologies through joint ventures and of course, targetting the urban and semi-urban markets by

introducing more products in the lower and middle segment of the paints market. ICI launched Color Solutions

which can be used for both exteriors and interiors.

This comprises a menu driven, user friendly touch color screen on a computer that helps consumers visualize as

many as 6,000 shades on house structures resembling their homes.

4. JENSON AND NICHOLSON:-

Jenson & Nicholson, a leading paint company in the country today was established in the year 1922. It has a

country wide presence with 33 branches and stock points across the country and manufacturing plants at Naihati

(near Kolkata), Sikandrabad (near Delhi) and Panvel (near Mumbai). In 1955, it launched India’s first Plastic

Emulsion paint, under the brand name of Robbialac.

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It ventured into the Powder coatings market in 1986, thus becoming the first company in the organized sector to

offer this extremely environment friendly coating technology. Subsequently, it introduced Instacolor, in technical

collaboration with M/s Tikkurilla OY of Finland. It is the first company in the country to introduce computerized

dispensing system.Jenson and Nicholson launched the Standox brand of products in 1996 which offers over

45,000 colours to the Indian car owner. In the very next year, he company in order to cater to highly specialized

Marine paints sector, entered into a 50:50 joint venture project with M/s Chugoku Marine paints of

Japan.Chugoku is the second largest supplier of marine paints in the world with 30% market share. The new

company also handles heavy duty coatings.

COMPANY ANALYSIS

KANSAI NEROLAC (GOODLASS NEROLAC)

It was established in 1920 as Gahagan Paints and Varnish Co. Ltd. at Bombay. In 1930,

three British companies merged to formulate Lead Industries Group Ltd. In 1933, Lead Industries Group Ltd.

acquired entire share capital of Gahagan Paints in 1933 and thus, Goodlass Wall (India) Ltd. was

born.Subsequently, by 1946, Goodlass Wall (India) Ltd. was known as Goodlass Wall Pvt. Ltd. In 1957,

Goodlass Wall Pvt. Ltd. grew popular as Goodlass Nerolac Paints (Pvt.) Ltd. Also, it went public in the same

year and established itself as Goodlass Nerolac Paints Ltd.

It is among the oldest paint companies of the country and the undisputed market leader in industrial paints, with

a 43% share of this segment. It is a dominant player in the auto paints market which accounts for around one-

third of the industrial paints segment. Goodlass Nerolac paints’ strength comes from the higher end of the auto

paints market - passenger cars and light commercial vehicles (LCVs) account for 60% of the company’s auto

paint sales. The rest comes from heavy trucks and two wheelers auto paints, the market share of Goodlass is now

estimated to be around 50% with a 90% share in passenger cars, 60% in LCVs, 40% in two wheelers and heavy

trucks. Right now, the company is the only significant producer of CED (cathodic electro-deposition) primer,

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with technical know-how from its Japanese promoters, Kansai Paints. Goodlass is the only company offering a

complete automotive paint system comprising pre-treatment chemicals, primers, anti-rust coatings,intermediate

and top coatings as well as auto refinishes. GNPL supplies 90% of the requirements of Maruti Udyog Ltd.,

which produces 300 cars a day.

The company has a tie-up with Nihon Toshuku Tokyo of Japan for sophisticated coatings for

automotive and industrial sectors. Having lost Daewoo’s Cielo contract to Asian Paints,

GNPL is pursuing business opportunities with car majors planning to enter the country. It

recently tied-up with Dupont, USA for supplying automotive paints to DuPont’s clients in

India.

Goodlass Nerolac Paints Ltd. Changed its name to Kansai Nerolac Paints Ltd. in 2006. The present human asset

consists of over 2000 professionals and a sales turnover of 1226 crores. It is the second largest coating company

in India with a market share of over 20% and also the leader in powder coatings.

Background

GNPL was established in 1920, by Tata stable in collaboration with Goodlass of UK, a part of

the Cooksons group. The Tata’s had a 40% stake in the Company, through group company

Forbes Gokak Ltd. In 1983, the Company entered into a technical cum financial collaboration

with Kansai Paints, Japan. Kansai who currently has a stake of 40% is the other major

shareholder. Manufacturing activities began with the establishment of a paints unit at Parel

in 1920. In 1971 another plant was established at Thane. The Thane plant also has facilities

to manufacture pigments, one of the major ingredients in paint manufacture. In FY92, the

Company made a rights issue, for part funding its new Kanpur plant, which was

commissioned in August 93. Last year Kansai bought over the stake of Tata’s, thus making

GNPL its subsidiary.

Kansai Paint Company is the largest paint company in Japan & among the top 10 in the

world. It has 21 subsidiaries in 12 countries. It has a global strategic partnership with Dupont

Herberts Automotive Coatings. It has 64.5% holding of the equity capital in GNPL.

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Industrial paints

GNPL is the market leader in industrial paints segment with a 43% share. The industrial

paints segment is far more technology intensive than the decorative segment. In the

Industrial segment, Goodlass offers a wide range of liquid and Powder coatings to service

spectrum of industry, ranging from automotive, Marine, White goods etc. and also High

Performance Coatings to meet the corrosion protection needs of chemical industries, power

plants etc. In the automotive segment, all multinational companies except Hyundai are using

GNPL paints as the company provides the entire painting system right from pre-treatment to

final coating. The company supplies to all major two-wheeler and car manufacturers. Maruti

is the biggest customer of GNPL Other user industries for industrial paints include

engineering and consumer durables.

Decorative Paints

Decorative paints accounts for 70% of the total market and includes acrylic & oil-bound

distempers, enamels, and plastic emulsions.

GNPL currently has 14% market share in the decorative segment. GNPL re-launched Nerolac

Allscapes, the premium interior paint, in late-2001, as 24-Carat Emulsion paint for the

interior use in the premium segment. The re-launch of Allscapes is likely to improve the sales

and profitability of the company. The company also roped in film stars like Malayalam

superstar, Mohanlal, to endorse brands like the acrylic exterior paint, excel, for the southern

markets starting in April 2002.

GNPL has introduced a new technologically advanced exterior premium paint - Nerolac Excel

Everlast in Kerala. This paint has outstanding durability due to various features such as

excellent lasting adhesion on most surfaces, all weather application, minimum surface

preparation, unique aging characteristics and protection from fungal attack. The unique

selling proposition of the product is that it can be immediately applied on newly built

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surfaces immediately after construction. It is available in over 21 ready-to-use decorative

shades in value package sizes.

The company has introduced 15 spectrophotometers (a hand-held device that scans any

color that needs to be replicated) branded 'Magic Eye'. This is apart from the 1,500

Colourscapes (computerised color dispensing machines) that Nerolac has installed across the

country. The company has also introduced products like anti-bacterial paints for use in

places where hygiene is paramount and others like anti-carbonation paints for buildings

facing highways or heat insulating paints.

GNPL has been constantly creating value for its customers by continuous upgradation of

technology resulting in reduction in paint consumption per vehicle, increasing the utility and

life span of paints, reducing energy consumption and manufacturing environment friendly

paints. GNPL is the first company to introduce latest environment friendly lead free electro

deposition Paint in India. With changing business and industrial environment, GNPL has

introduced just- in- time (JIT) delivery system with its distributors.

GNPL management has been focussed on paints business in the last three decades. It has a

network of 11000 dealers. GNPL’s prospects are inextricably linked to those of the user

sectors in automobiles and other industrial sectors. The two subsidiary companies primarily

manufacture paints & enamels for parent company on contract basis.

In Q1 2002, company’s sales grew marginally by 3%, from Rs5.7bn in Q1 2001 to Rs5.8bn.

Other income increased by 31% yoy from Rs115mn to Rs151mn in 2002. Operating profit

increased by 10% from Rs595mn to Rs658mn in Q1. Interest expenses declined sharply from

Rs64mn to Rs37mn. Net profit increased by 21% yoy to Rs274mn in Q1 2002 from Rs226mn

in Q1 2001.

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Distribution network

Factory

Regional Distribution Centre

Depot

Dealer

Customer

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SWOT ANALYSIS

Strengths No. 1 in industrial paints Highest growth in 4 years Vast dealer base Considered the best in whites

Weaknesses

Advertising salience not enough Is not able to create and sustain a brand pull

Opportunities

Can be no. 1 Paint Company in India

Threats

Competition Low profitability

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PRIMARY RESEARCH

RESEARCH PROBLEM

To study the consumption pattern, decision making process and consumer preference of

plastic paints.

RESEARCH OBJECTIVE

1. To study the brand awareness of Nerolac paints in the plastic paint category.

2. To understand the decision making process during the purchase of paints.

3. To determine the importance of various factors while purchasing paints.

RESEARCH DESIGN

The research was exploratory in nature.

Consumer survey

To study the consumption pattern, consumer preferences and brand awareness of plastic

paints a consumer survey was done.

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Sampling Plan

The sampling plan is as follows:

The universe of study consisted of the households of Mumbai. Due to constraints with

respect to time and other resources a sample of 30 was taken. It was found out during

exploratory research that 70 to 80 percent of plastic paint users belong to SEC A and SEC B.

The sampling pattern used was convenience sampling . From each zone, two posh localities

were judgmentally selected to include people from SEC A and SEC B.

Primary data was collected through questionnaire and personal interviews. From each

household one member was selected judgmentally.

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CONSUMER SURVEY

Sample size - 30

Which company’s brand you use?

Majority of the people is not aware of the brand they use.

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When did you last paint your house?

Most of the people paint their house once a year.

What is the time of your purchase?

Festivals are peak time for painting house followed by post rainy season.

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Who decides which brand to buy?

In most if the cases painters or dealers decides which brand to use.

How far you agree with the following statements?

Statement A – price is an important factor in your purchase decision.

Statement B – you are particular about the brands of paints you buy

Statement C – you have full knowledge of the different aspects of paints you buy. Statement D – you feel that some brands have better quality than others.

In most of the cases price is an important factor.

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Most of the people are not brand conscious and they don’t have much knowledge about paints.

Have you seen advertisements of the following companies?

Most popular brand is of Asian paints followed by Nerolac.

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Have you heard about the following brands?

Suraksha is the most popular brand followed by Excel among the four brands.

Monthly household income

Majority of the people are in the 15001-20000 and above 25000 category

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CONCLUSIONS

Most of the consumers’ are not aware of the brands of paints they use.

Most of the consumers’ do not have much knowledge about paints.

Painters and dealers play a major role in decision making process.

Awareness level of Nerolac as a brand is quite high second only to the market leader

namely Asian Paints.

Awareness level of Nerolac brands like Suraksha is very good followed by Excel and

Allscapes.

Majority of the consumer paints their house once a year during Diwali.

Price plays a major role in purchase of paints.

RECOMMENDATIONS

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RECOMMENDATION 1

GNPL needs to increase and defend its share in the industrial segment:

It needs to take the following steps:

Introduce new products/innovationsNEROLAC already has a market position, which is very established. In order to maintain its position it has to go about making new products and innovations.

Leap Frogging into next generation technologiesTechnologies are not too competitive in this segment as there is less competition. What GNPL can do is get technology tie up with a foreign player specializing in this area. This will help GNPL to reduce variable cost over a period of time.

RECOMMENDATION 2

Dealer awareness level

GNPL has around 120 shades out of which there are many dealers who are not aware of this wide a range of shades. Also the use of the tinting m/c is not known to them due to which often the customer does not get what he sees on the screen of the tinting machine. This will lead to the customer being dissatisfied which is a big threat to GNPL. Hence the overall dealer awareness has to improve, as dealers are the hubs between the company and the customers. Company Sales persons need to be posted at these outlets to help the dealers for some time say 1 month.

RECOMMENDATION 3

Tie-ups

Now the market is getting saturated. What GNPL needs to do is tap the bulk users of paints.GNPL needs to tie-up with Interior designers & Architects who can get them bulk orders for a long time.

RECOMMENDATION 4

Also the ad spends need to be evenly spread out. A lot is spent in the urban areas when GNPL also has lower end brands available.

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Advertisements for rural need to be specially designed after getting the pulse of the customer, also shades shown there should be of more liking to the rural population. It could make use of other media such as pamphlets, hoardings and print ads in the local newspaper.

RECOMMENDATION 5

The company should increase activities in market such as sales promotion schemes, painters meet etc.

RECOMMENDATION 6

Painters play a very important role in paint market. Most of the times they are involve in decision making process. Majority of the painters is not satisfied with the company. Painters meet should be organized frequently and any schemes provided to them should be given on spot i.e. when they purchase materials.Some sort of recognition should be given to the painters like identity card etc that they are recognized by the company.

RECOMMENDATION 7

Company should carry on its effort of brand building. Suraksha is doing well in market so it should concentrate on it. Awareness for Allscapes is still low and more advertising is needed, as Dulux VT is very strong in this category.

RECOMMENDATION 8

Nerolac should quickly launch some product in the 2nd quality category as Tractor Acrylic Emulsion is doing well.

RECOMMENDATION 9

The concept of CCD’s should be made clearer to the consumers. More advertisements should be given showing CCD and its use.

With implementation of such strategies hopefully APIL will become No. 1 in all the segments not only in India but the whole world.

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APPENDIX

QUESTIONNAIRE

1) Which company's paint you use?

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a) ICI b) Nerolac c) Asian paints d) Berger

e) Any other, Please specify

2) When did you last paint your house?

a) 1 year ago b) 1 –3 years ago c) 3 – 5 years ago d) above 5 years

3) What is the time of your purchase?

a) During festivals b) after the rainy season c) any other, please specify

4) Who decides which brand to buy?

a) Father/Husband b) Housewife c) Painters d) Dealers

5) Please indicate how far you agree or disagree with the following statements.

Write 1 for "strongly agree”, 2 for "agree”, 3 for "neither agree nor disagree”, 4 for "disagree" , 5 for "strongly disagree"

a) price is an important factor in your purchase decision

b) you are particular about the brand of paints you buy

c) You have full knowledge of the different aspects of paints you want to buy.

d) You feel that some brands have better quality than others.

6) Have you seen advertisements of following companies?

Yes No

Asian paints

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Nerolac paints

Berger paints

ICI paints 7) Have you heard about these brands?

Yes No NAE Allscapes

Suraksha Excel

8) What is your monthly income? a) 10000 – 1500 b) 15001 – 20000 c) 20001 – 25000 d) above 25000

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