Come Diwali and India moves into the 'colour' mood. Be it a businessman, a coprorate executive, a clerk or local 'paanwala', they all settle for a 'Royale', 'Apcolite', 'Utsav' or 'Gattu', all brands belonging to India's largest paints company - Asian Paints.
Asian paints started out in 1942 as a small partnership firm between four families Chokshis', Danis', Vakils' and Chokhseys' in paint trading business. In over five decades of its existence, the company has transformed from its humble beginnings to become India's No. 1 paints company. Today it accounts for nearly 44 percent market share in the decorative paints segment and 15 percent in the industrial segment.
Asian Paints has managed to stay ahead of competition thanks largely to its innovative management, which understands the Indian market much better than competitors and is therefore able to identify latent demand and meet it much before the competition realises what hit them. For instance when competitors were concentrating on premium brands Asian paints introduced 'Tractor' which was a low priced distemper. Today it accounts for nearly 25 percent of the industry sales. In the intermediate segment the company managed to capture higher market share by offering more choices in colors than the competition. Moreover, its basket of excellent brands gives it an edge over competitors ICI and Goodlass Nerolac.
As demand in India is dispersed and spread over a wide geographical area, Asian Paints strategy to focus on building an extensive distribution (nearly 15,000 retail outlets) and logistics management network has paid it rich dividends. As a result of its wider reach and better logistics management, it has been able to market brands aggressively, thereby outperforming the industry year after year. In financial year 1999 its paint business grew by 13 percent (beating overall industry growth of 8 percent). Among its various products Exterior Emulsion 'Apex' and the economy product 'Utsav' performed well clocking growth rates of 80 percent and 50 percent respectively.
Apart from paints, which account for 92 percent of the company's sales, Asian Paints also manufactures chemicals (paint intermediaries) - PAN (Phthalic Anhydride) and Pantaerythritol, accounting for the balance 8 percent. In a bid to remain focused on decorative paints and on non-automotive industrial paints, the company has hived off its automotive coatings business into a 50:50 joint venture with PPG, the world's largest automotive refinishing company.
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Not the one to rest on its past laurels, the management has widened its horizons. It has set itself a stiff target to acquire 60 percent plus market share in the domestic market and has plans up its sleeve to make inroads in the international market. To achieve its goals, Asian Paints plans to launch a range of new products across all segments, backed by a further strengthening of distribution network. In the current year it launched 'Ace Exterior Emulsion' a mid-market exterior paint, Asian Wall putty (for filling walls prior to painting) and a range of wood finishing products.
As for international expansion, it is exploring South Asia, East Africa and Middle East, where there is a sizable Indian expatriate population and hence, high brand recognition. Asian Paints has also made huge investments in information technology, to effectively manage its large distribution system.
Rising rural incomes coupled with sops given to the housing industry during current year's budget, should send demand for decorative paints soaring and the cash registers ringing for Asian Paints, at least for the next couple of years. The recent upsurge in the domestic automobile and engineering segments should butter its bread on both sides.
But not everything is going Asian Paints way. Since 40 percent of its total raw materials are imported the company's earnings are directly exposed to currency fluctuations. Also, the company's export sales have taken a beating and declined by 7.2 percent due to lower exports to Russia in the financial year 1999. Moreover, the company's chemical business continues to be a drag on its resources. But you can trust Asian Paints to do something even about that!