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Industry Life Cycle
Industry Life Cycle
Industry Life Cycle
Concerned with basis of industry analysis, this section can be divided into four points:
Paint is made up of four basic ingredients i.e. pigment, resin, solvent and additives. The types of
paintsavailable in the market and their utility are:
Acoustic Paint: specially designed for acoustic tiles
Alkyd Resin Paint: good trim, doors, faux finishes and other maximized use areas
Drip less Paint: This paint is thicker and is most suitable for application on ceilings
Latex Paint: good for applicability and it dries much quickly & easier to wash.
One-Coat Paint: It is the more expensive version of the latex and alkyd paints and is
mostly chosen for surfaces that require flawlessness in color.
Primers: paint used in the initiation for all interior paint works.
Rubber-Base Paint: This is best for concrete and bricks.
Textured Paint: If need is to cover any flawed surface in your house get this paint. It
works well on ceilings.
Paints can be classified as Decorative Paints & Industrial Paints.
Decorative Paints:
Major segments in decorative include exterior wall paints, interior wall paints, wood finishes and
enamel and ancillary products such as primers, putties etc. Decorative paint segment comprises
70% of the $2 billion Indian Paint Industry. Asian Paints is the market leader in this segment.
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 and is a higher margin business as compared to
industrial segment.
Industrial Paints:
Three main segments of the industrial sector include automotive coatings, powder coatings and
protective coatings. Kansai Nerolac is the market leader in this segment. User industries for
industrial paints include automobiles engineering and consumer durables. The industrial paints
segment is far more technology intensive than the decorative segment. An average increase of
growth of about 10% in the automobile sector contributes to 50% of the revenues in the
industrial paints segment
The market for paints in India is expected to grow at 1.5 times to 2 times GDP in the next
five years. With GDP growth expected to be between 5-6% levels, the top three players
are likely to clock above industry growth rates in the future, considering they have a
strong brand and good reach.
The market size of the paint industry in India is estimated at around Rs 40,000cr. Industry
players expect close to 12% growth in business volume and 10-12% rise in sales in FY15.
Decorative paints segment is expected to witness higher growth going forward. The fiscal
incentives given by the government to the housing sector have immensely benefited the
housing sector. This will benefit key players in the long term.
Although the demand for industrial paints is lukewarm it is expected to increase going
forward. This is on account of increasing investments in infrastructure. Domestic and
global auto majors have long term plans for the Indian market, which augur well for
automotive paint manufacturers like Kansai Nerolac and Asian-PPG. Increased industrial
paint demand, especially powder coatings and high performance coatings will also propel
topline growth of paint majors in the medium term.
SWOT ANALYSIS:
1. Strengths
1. Indian Paint Market has very strong potential in terms of market share in the organized
sector.
2. Comprehensive nationwide coverage of the market - urban, semi-urban and rural areas.
3. Different segment required by different customer and industry has its own growth area
and market.
4. Widest product range in terms of products, shades, pack sizes - different decorative, some
in 150 shades, 20 different pack sizes; are available
5. country wide distribution network and transportation facility is available within the
industry
6. A network of 25,000 dealers spread all over the country is available.
7. The pricing strategy is oriented to middle/lower end consumers
8. High quality MR and MIS;
9. 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.
10. In-house production, no outsourcing, high reliability in suppliers, superior in quality
assurance.
11. Leader in profit and operating margins, ROI of PI is 22%.
12. High caliber human resource, employs maximum number of MBAs, as a proportion to
total number of employees;
2. Weaknesses
1. In industrial paints, AP has only a 14% market share. It is far behind the leader Goodlass
Nerolac, which has a market share of 43%. Since this is going to be the major growth
segment in the future, a lag in this segment will end up as a major weakness;
2. Widening product mix puts strain on production distribution, accounting and
administration;
3. Innovation in developing new products is inadequate;
4. AP has a major weakness on the technology front in industrial paints. Most paint firms
have technology tie-ups with manufacturers abroad. For example, Goodlass Nerolac has a
tie-up with Kansai paints, which has provided the company with Catholic Electro
Deposition (CED) technology. Since Kansai is the supplier to Suzuki, Japan, Goodlass
with its Kansai connection finds it easy to tap Maruti in India. AP has not been able to
make any significant advances either with Maruti or the auto segment in general. Berger
has a technical tie up with Herbets, Germany, for automotive paints, Valspar Corp, USA
for heavy-duty coatings and Teodur NV, Holland for powder coatings;
5. Ever expanding product mix throws some strain on inventory management;
6. Rural bias of logo Gattu. This is likely to contradict the new positioning for the premium
brands meant for urban markets;
7. Seasonal demand and hence in off seasons it can lead to cash flow problems;
3. Opportunities
1. AP has always encased on opportunities that have come its way. It has maintained a
product profile keeping the market trends in picture. It shifted to a predominance in
industrial paints than industrial paints than in decorative paints as was evident from the
production figures of 1995-96;
2. The automobile industry accounted for 50% of the industrial paint market.
4. Threats
Contrary to the sluggish trend witnessed in the production of paints and varnishes in the
preceding fiscal year, the sector recorded decent growth in output levels during April-May 2006.
Production of paints and varnishes grew by 6.2 percent during May. This is significantly higher
than the modest 0.9 percent rise registered in the year ago period. Trade data available for the
April-January 2005-06 periods also depict a healthy growth. Imports and exports of paints and
varnishes grew by 30 percent and 47 percent rise, respectively.