DISTRIBUTION STRATEGY – THE CASE OF ASIAN PAINTS
Asian Paints (AP) is the market leader in the Indian paint industry, commanding a market share of 38 per cent in decorative paints and 33 per cent overall in the organised sector. Its annual sales turnover exceeds Rs. 1,300 crore, way ahead of all the competitors in the industry. In profits too, AP is far ahead. AP’s market leadership in the decorative paints segments 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 per cent, its nearest rival, Goodlass Nerolac, commands a share of just 14 per cent. All others have only less than 10 per cent. 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. How did AP achieve this success? AP’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 AP’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 colour and pack size was a crucial factor for success. AP literally leapfrogged and overtook 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 the rescue of the players in this regard. Customers could get the colour 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 colour by mixing different shades and stainers in the required proportion. The paint companies need to maintain only half-a-dozen basic colourants with retailers; mixing can create the other variants. The new arrangement helps the campanies 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 the 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 retail outlets. It is no easy task to provide mixing and computers. Before we actually go into AP’s distribution strategy, let us have brief profiles of the company and that of the paint industry, so that the contextual setting of the case is clear. Let us start with the industry.
THE INDIAN PAINT INDUSTRY The paint industry of India is 100 years old. Its beginning can be traced to the setting up of a factory by Shalimar Paints in Kolkata in 1902. Till the advent of World War II, the industry consisted of just a few foreign companies, and some small, indigenous producers. The war led to a temporary stoppage of imports leading to many more local entrepreneurs setting up manufacturing facilities. Nevertheless,...
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