Asian Paints (AP) is the market leader in the Indian paint industry, commanding a market share of 38% in decorative paints and 33% overall in the organized sector. Its annual sales turnover exceeds Rs. 1,300 crore, way ahead of all competitors in the industry. In profits too, AP is far ahead.
APâ€™s market leadership in the decorative paints segment can be grasped correctly when we take note of the relative position of the various players in the industry. Whereas AP has a market share of 38%, its nearest rival, Goodlass Nerolac, commands a share of just 14%. All others have only less than 10%. Such an achievement by a company that is wholly Indian in capital, management and technology and in an industry historically dominated by multinationals is certainly a commendable feat.
APâ€™s success is the combined result of its strong corporate and marketing strategies. Maximum credit should, however, go to its marketing strategy. Within marketing, it was distribution excellence that took AP to the enviable position that it holds today in the Indian paint industry. This case study explains APâ€™s distribution strategy.
A story of distribution excellence:
This case study, in fact depicts the distribution strategy adopted by AP in the early years of its operations. The interesting point is that this strategy serves AP well even today, when the context has somewhat changed. In the earlier years, in the decorative paint segment, a wide product range in terms of color and pack size was a crucial factor for success. AP literally leapfrogged and over-look all its competitors, and offered the widest range of products. It also created the distribution outfit that was necessary for reaching the wide range of products to customers in every nook and corner of the country.
In later years, technology came to rescue of the players in this regard. Customers could get the color of their choice through mixing at the retail outlet. With the help of an automated machine kept at the retail outlet, paint is given the desired color by mixing different shades and pigments in the required proportion. The paint companies need to maintain only half-a-dozen basic colorants with retailers; mixing can create the other variants. The new arrangement helps the companies to manage with a narrow range of paints. They can reduce the number of SKUs handled and cut down inventory holding costs.
The above shift has no doubt reduced somewhat the importance of the physical distribution task in the business, compared to the position in the earlier years. At the time AP entered the Indian paint business, the physical distribution and channel management task was the most crucial one in paint marketing. This context is elaborated in one of sections in this case study. We can appreciate the lessons of the case study better, if we keep in mind this contextual position. Even now, physical distribution and channel management continue to be crucial functions in the business. In the matter of product range too, companies are not able to totally dispense with the need for variety, in view of the many practical limitations of mixing at retails outlets. It is no easy task to provide mixing machines and computers.