Indian soldiers take great pride in the crease of their trousers, the twirl of their moustache and the shine on the metal and leather they wear. Arms, medals, epaulettes are all brought to the perfect shine before a parade. One key item of inspection is the glint on the ammunition boots. One enterprising regiment, the story goes, instead of using polish bought a box of Asian Paints paint and used it to good effect on the boots. If it’s a true story no one in Asian Paints knows. Even small purchases can make the distinction between profit and loss, survival and extinction.
Asian Paints has for long sold very small cans of paint which are used to color the horns of bulls during the Pola festival in Maharashtra and the auspicious small red and yellow stripes at the bottom of the front door of Tamil Nadu homes. This might not always be remunerative, but it has given a tremendous boost to the company’s brand recall. When the market is up, everybody makes money. But when the chips are down, only resilient brands stay afloat.
Small efforts like this have made Asian Paints the leader in the Rs 7,500-crore per annum market for decorative paints with a market share of 50 per cent. Companies make industrial and automotive paints also but those account for not more than a quarter of the overall market for paints in the country. These segments too have seen some improvement in sale of late. In the last one year, Asian Paints has improved its share by about 400 basis points. Rivals include Kansai Nerolac, Berger and ICI (Dulux and Velvet Touch).
A dominating market share helps in many ways. A top executive of a North-based paints company says that Asian Paints has a competitive ratio of two, its market share, in other words, is more than twice its nearest rival, which gives it a huge advantage over others in purchase of raw material as well as distribution. It can afford to participate in segments where the profit margins are not so good. It also uses it to leverage its position with the dealers.
Not just did it grab a larger chunk of the market, Asian Paints also outperformed the industry by a sizeable margin in the quarter ended June 2009. Taking away share from rivals, Asian Paints’ grew its sales 18 per cent, while industry revenues were up 12 per cent.
That has happened in spite of the severe bind that the real estate sector finds it self in. Developers have decided to go slow on new projects as real estate buyers, individuals as well as companies have turned cautious. Individuals too are not building homes at the same pace as before. Most paint companies have an eye on the current festival season. If people paint their homes in large numbers, there is still a slim chance that they could reach last year’s 18 per cent growth in sale revenue. Or else, they will have to settle for lesser growth. Asian Paints looks on course for 20 per cent growth. What does it have that rivals don’t?
The trick is to discover the right catchments, keep track of them and stay in close touch with the customer. What helped Asian Paints weather the slow down, which was more pronounced in cities such as Mumbai, Bangalore but less so in Delhi, was the brisk business that it did in the more resilient economies of smaller cities and towns. Tapping its strong dealer network, the company was able to cash in the relative prosperity in these markets and take away share from competing brands.