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Toaz - Info Asian Paints Distribution Strategy PR
Toaz - Info Asian Paints Distribution Strategy PR
INDEX
1. About Company
2. Product Mix
a. Decorative Segment
b. Industrial Segment
3. Paint Industry
4. Competitors
5. Retail and Service Initiatives
a. Color World
b. Color Idea.
c. Color store
d. Kid’s World
e. Asian Paints Helpline
6. Asian Paints (AP) Distribution Strategy
a. Prevailing Market Situation
b. Bypassing Bulk Buyers Segment
c. Entry to Semi-urban and Rural Markets
d. Going Directly To Retail Dealers
e. Open-Door Dealer policy
f. Nationwide Marketing/Distribution Reach
7. Implication Of Distribution Strategy
8. Distribution Strategy Implementation Process:
a. AP Created a Large Network of Dealers
b. AP Established a Network of Company Depots
c. AP Created a Marketing Organisation that Matched its Distribution Intensity:
d. Effective Cost-Service Distribution
e. Strong Commitment to Distribution Cost Control
f. Effective Inventory Management
g. Control Of Credit Outstanding
h. Information Technology Initiative:
i. Leadership Through Distribution Excellence
9. Conversion with Jamshedpur Dealer
10. References
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Asian Paints Distribution Strategy
1. About Company: Asian Paints is India's largest paint company and now Asia’s third-
largest paint company, behind Japan’s Kansai and Nippon, and the world’s 13th largest.
This year it appears on the Forbes Asia's Fab 50 for the third time in a row. It had
revenue of INR 10,970 crore in 2013 with 13.9% increase over previous year revenue.
Revenues from paint sales of the overseas operations of the group have increased by 23%
to INR 1,400.6 crores. It was founded in 1942 by four young men Champaklal H.
Choksey, Chimanlal N. Choksi, Suryakant C. Dani and Arvind R. Vakil. in a garage in
Bombay. The name Asian Paints was picked randomly from the telephone directory.
From 1968, this brand occupies a premium position in the Indian Paint industry. Asian
Paints operates in 21 countries with 29 paint mfg. facilities with capacity of 440
mn.Lts/annum, servicing consumers in 65 countries. Asian Paints operates in five regions
across the world viz. South Asia, Southeast Asia, South Pacific, Middle East and
Caribbean region through the five corporate brands viz. Asian Paints, Berger
International, SCIB Paints, Apco Coatings and Taubmans. It is ranked among the top 10
decorative coatings companies in the world. It is a fully-integrated paints company.
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Asian Paints Distribution Strategy
a. Decorative Segment:
Wall Finishes: Powerful brands like Tractor, Royale, Royale Play, Apcolite etc.
Enamels Brands viz. Apcolite Synthetic Enamel, Utsav Enamel dominate
Exterior Finishes: Brands like Apex, Apex Ultima, Ace dominate segment in just
a few.
Wood Finishes: Powerful brands viz. Touchwood, Asian Melamine Wood Finish
b. Industrial Segment:
3. Paint Industry: Over the past few years, the Indian paint market has substantially grown
and caught the attention of many international players. The growth in the market is
driven by emergence of the middle class in India, growing infrastructure, increase in the
tendency to spend and growing young population inclined towards lavish lifestyle. On
the back of such advocacy, it is anticipated that the sector will post a CAGR of around
16.2% during 2013-14 to 2015-16. Companies with attractive marketing strategies and
comprehensive product portfolios are expected to gain greater market share.
Additionally, the increased focus on research and development of the paints will lead to
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Asian Paints Distribution Strategy
greater advancements. Annual paint consumption is 1.9 kilos a person, as opposed to 5.5
kilos for the Asia-Pacific region.
Consumption in rural areas is growing even faster, and that’s where the company has
long been the strongest—Asian Paints wooed small shopkeepers in villages and tiny
towns early on because foreign companies dominated paint sales in the cities. All the
major players in the $5.3 billion Indian paint market are expanding capacity and seeking
to boost market share. Decorative paints available in wide range of combination account
for 70% of the coatings total production. While industrial paints share the balance of
30%.This rate is diametrically opposite to the trend in the industrialized countries where
industrial paints account for 70% and Decorative paints for the balance of 30%.
4. Competitors:
a. Kansai Nerolac Paints: It is largest in industrial paint and second largest decorative
paint company based in Mumbai. It is a subsidiary of Kansai Nerolac paints, JAPAN.
It is engaged in the industrial, automotive and powder coating business. It is the
subsidiary of Kansai Paints Ltd Japan.
b. Berger Paints India: It has come a long way since its inception in the year 1923.
India’s second largest decorative paint player, Berger Paints is headquartered in
Kolkata and services the market through a distribution network of 82 stock points and
12,000+ paint retailers.
c. Akzo Nobel India: It is the fourth largest player in the domestic paint industry in
terms of revenues, and known for its premium segment product Dulux, is targeting to
emerge the No.2 in the next five years. Akzo has a market share of 9-10. It is the
Indian arm of the Amsterdam-headquartered global paints and coatings leader, Akzo
Nobel.
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Asian Paints Distribution Strategy
a) Colour World: Customers are the very core of all business activities. From the
beginning, Asian Paints has fostered a customer-centric approach to business. A
simple but unbeatable concept of "going where the customer is" drives all the retail
strategies. In the early 90s, for the first time in the paint industry Asian Paints offered
the consumer over 150 shades. The concept was extended to the dealer shops through
Colour World in the mid-90s, where Asian Paints began offering over 1000 shades.
The introduction of Colour World provided a new direction for the paint industry into
the age of retailing by providing the consumer - a service interface. With only a
limited set of bases and colourants, manufactured and transported throughout the
supply chain, Asian Paints provided a choice of innumerable shades to the customer
through a technology of tinting at the last retail store. With the introduction of Colour
World, almost all wall-finishes from Asian Paints offer a wide range and choice in
colours be it for interior or exterior application. It has been our endeavour to reach out
to the customers not only with their products but also with value-added services and
initiatives.
b) Colour Idea: Stores too have gone upmarket. In 2009 the company introduced
dealer-owned Colour Idea stores and now has 100 of them. Unlike traditional dealers
who sell through hardware stores, the new stores focus on matching customers to the
right colour. They’re outfitted with boards displaying samples of interior and exterior
finishes, and there’s a consultant who provides computer visuals showing how a room
will look when painted.
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Asian Paints Distribution Strategy
c) The Colour Store: Asian Paints also runs two high-end showcase stores, in Mumbai
and New Delhi. These don’t sell any paint, but have walls of displays showing various
shades and textures under different light settings. It is a retail experience that offers a
personalized colour solution to each customer without directly selling a single can of
paint (the paint itself is sold via a network of nearby dealer stores).Style preferences,
colour ideas, and other details are stored on RFID ―color cards‖ as consumers move
through the store. At the end of the experience, they download their card and watch as
a customized colour magazine is created. They can then take their magazine to any
Asian Paints dealer store to choose and purchase paint, or they can use the magazine
as a discussion tool with their architect or designer.
Company continued to broaden its network by installing more than 2900 Colour
Worlds, taking the tally of Colour World dealers to over 24000 across the country. At
the top of retailing hierarchy, Company increased Colour Ideas Stores to almost 100.
Hassle-free painting solutions offered through the Asian Paints Home Solutions
(APHS) service was used across 13 cities. The service experience was enhanced by
introducing mechanisation in painting. Customer satisfaction scores and customer
feedback continue to guide the APHS operations. Colour Next (annual colour trend
forecast) has become a strong brand amongst Architects and Interior Decorators
(AIDs).
d) Kid’s World: Another important area was the offer of painting solutions for children
with the launch of Kids World. A foray into Kids' World marks yet another milestone
wherein the company offers painting designs for Kids Rooms as well as Kids Corners.
For the first time, an attempt has been made to invite the customer to get into a Do-It-
Yourself mode with these designs.
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Asian Paints Distribution Strategy
e) Asian Paints Helpline: In the late 1990s it started a customer helpline, which now
gets 2,000 calls a month. It offers home-painting services in 13 cities—an employee
comes to a home, sizes up the job, brings in painters who cover up the furniture and
do the work. It sent out Happy Painting Guides to 300,000 customers last year. It
provides colour consultancies, in which an employee with interior-design training
comes to the home to suggest what can be done for the walls.
f) It trains 8,000 painters a year in two-day workshops to ensure they apply its premium
paint in the right way. Customer interaction leads to insights: It has started offering
200 ml samples of its premium paint at a nominal price, allowing a customer to paint
a swath of a wall to see how the colour will look—a significant improvement over the
shade card.Asian Paints efforts are continuously on to engage the consumer in the
painting process and fulfill all the requirements related to the world of painting.
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Asian Paints Distribution Strategy
existing business. But Asian Paints went in for a strategy that differed totally from
the existing pattern. Its strategy in fact, meant the polar opposite of the
established/existing pattern.
b) Bypassing Bulk Buyers Segment: Bulk buyer segment was the major segment of
the paint business in the earlier days and any paint company needed a share of this
major segment for sheer survival. Though, this segment was dominated totally by
foreign companies and their wholesale distributors, a company like AP would
normally have rushed to this segment and tried to garner a share of it. AP, however,
had a totally different game plan. Seeing that this segment was not a growth
segment, though it was certainly the major segment at that point of time, AP decided
to ignore this segment for the present and go to individual consumers. And that was
a crucial decision. It influenced every subsequent decision AP took in the realm of
distribution. Over time, AP proved to the paint industry that there existed a large and
bottomless segment in the paint business of India, outside the bulk buyer segment,
comprising of individual consumers.
d) Going Directly To Retail Dealers: It was the next major strategic decision of AP in
the realm of marketing and distribution. Here too, AP totally broke with the
prevailing distribution practice. It totally bypassed the well-entrenched wholesale
distributors and went directly to the retailers. While AP’s competitors remained
content with their linkage with a handful of wholesale distributors, AP preferred
direct contact with hundreds of retail dealers.
e) Open-Door Dealer policy: AP followed the policy in the matter of adding retail
dealers to its network. The prevailing trend in those days was to limit the number of
dealers to the barest minimum. AP broke this trend and chose to use practically
everyone in the trade, who was willing to function as its dealer. It was as a combined
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Asian Paints Distribution Strategy
result of the policy of going directly to retailers and the policy of open door to
dealership that AP’s dealer network swelled rapidly. Even after achieving stability
and maturity in distribution, AP continued to follow a policy of continuous
expansion of dealer network. By 1990, AP was having a 7,000 strong dealers
network. By the year 2000, the number had swelled to 12,000. And even now, on an
average, AP is adding 200 to 250 new dealers every year and now in 2014, the
number reached to 35,000.
a) Had AP concentrated on the bulk buyer segment, it could have managed with a
limited product range, at least, in the initial years. But, AP’s decision to turn to the
individual consumers necessarily meant a wide product range. In the nature of things,
the individual consumer segment involves a very wide choice in terms of products,
materials, shades and pack sizes. On top of this, AP believed in making products
based on the preferences of consumers. It gathered feedback from the consumers and
turned out products, shades and pack sizes on the basis of such feedback. This policy
resulted in a further burgeoning of the product range.
b) At the time of AP’s entry, paint companies were supplying paints in containers of 500
ml or larger. AP saw that there was a felt need in the market for paints in smaller
packs. All end uses did not require a large quantity. Moreover, it was common
practice for consumers to buy paint initially in a larger quantity and supplement it
with small size purchase to complete the job. AP decided to harness the business
opportunity and started supplying it paints in small packs- in 200 ml, 100 ml and 50
ml packs. This proliferation in pack sizes also contributed to AP’s growing product
range. AP was by now manufacturing and marketing as many as 2,000 distinct items
of paints, none of which was strictly a substitute for the other.
c) The policy of having the widest range of products, colours and pack sizes had it
implications on AP’s distribution. When 2,500 different items had to be made
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Asian Paints Distribution Strategy
d) The decision to go to the semi-urban and rural markets instead of confining to the
urban markets also meant enlargement of the distribution function. AP had to go in
for more dealers in order to serve the scattered semi-urban and rural market. The
decision also meant that AP could not opt for a simple, centralised distribution of its
products from its factory. It had to go in for a decentralised, field-focussed
distribution, with a network of depots located all over the country/marketing territory.
Without such extensive and intensive distribution network, it would not have been
possible for AP to cover the semi-urban and rural markets.
g) AP’s strategies made distribution the most important element of its marketing mix. And,
AP gave to distribution all the inputs that were demanded by it.
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Asian Paints Distribution Strategy
where the retail dealers could conveniently pick up their requirements. AP’s basic
strategies explained in the earlier sections necessitated a liberal approach in the matter
of stock points/depots. It also meant that the depots had to be company operated.
After all, AP did not have any wholesale distributors to whom the responsibility for
operating the stock points could possibly have been assigned. AP established a
network of 72 company-run depots, spread throughout the country and serviced its
retailers from them. The number of depots varied from city to city. For example,
Bangalore had just one depot while Mumbai had four depots. The depot typically
supplied to about 200-300 dealers.
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Asian Paints Distribution Strategy
General Manager
Marketing
Sales
Supervisor
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Asian Paints Distribution Strategy
g) Control Of Credit Outstanding: Large credit out standings, running beyond two
months or more, was a natural concomitant of the distribution strategy chosen by AP.
The dealers are required to maintain stocks of all the SKUs that are on demand in the
territory. It pushes up inventory levels at the outlets. They need credit. AP allowed
15-21 days credit for dealers located in the major towns and 22-30 days credit for
dealers in upcountry regions. AP had to pull off a smart credit control strategy for
survival. It resolved the thorny problem through an innovative dealer incentive
scheme. AP stipulated that each of its dealers should pay for the supplies within a
specified time norm and offered them as attractive incentive scheme for doing so. It
consisted of two components:
A special discount of 3.5 per cent. This was referred to as the discount for
perfection in payments. It was passed on at the end of the year, provided each
and every payment throughout the year was made within the stipulated time
norms.
A cash discount of 5 per cent. This was paid for all outright cash purchases. It
was given whenever payments were received within 24 hours of the
supply/invoice. In respect of outstation accounts, the payment has been made in
advance by draft in order to be eligible for the cash discount.
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Asian Paints Distribution Strategy
The scheme was a grand success. AP’s credit out standings always stood below 25
days, better than the other major companies. Systematic computerisation also helped
AP maintain the credit outstanding within limits.
The IT initiatives also ensured prompt billing, accurate customer accounting and
effective control of credit outstanding. Computerisation also enabled AP to process
recent sales data for the 100 fastest moving SKUs. This analysis was used to project
sales of specific products, which helped plan production and raw material purchases.
With computerisation, AP was able to analyse past trends to arrive at a 90 per cent
accurate sales forecast. Corrections were made every month between the sales
projections and actual sales. Production was thus evened out month-to-month. Sales
statistics were maintained, classified by product, month, salesman, branch, region and
dealer. Such computerised planning and control of production, sales and inventories
helped AP cut distribution costs without compromising on the high level of service
sought by it in physical distribution.
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Asian Paints Distribution Strategy
9. Conversation With Jamshedpur Asian Paints Dealer: We visited the dealer named
Ashoka Enterprise at Bistupur. Following are the findings that dealer informed us about:
10. References:
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Asian Paints Distribution Strategy
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