Paint Industry Analysis

Topics: Economics, Economics terminology, India Pages: 5 (1345 words) Published: February 11, 2013

Introduction: The paints industry made a beginning in India in 1902 when Shalimar Paints set up its operations in Kolkata (Calcutta). Today the size of the paints market in India is estimated at Rs 180 bn. Market Structure & Product category: The Indian Paint industry can be divided as: * The organized sector comprising of large and medium size units * The unorganized or the small scale sector.

The contribution of the organised and unorganised segments is in the ratio of 70:30. The organized sector can itself be divided into two distinct segments (Product wise): * Industrial segment which is growing at 15% approximately and consist of 30 % of the market and * Decorative segment which is growing at 8% approximately and consist of 70 % of market

Market Players The major players that control the organized sector are shown below:

Market Players| Market Share (%)|
Asian Paints| 43.8|
Kansai Nerolac Paints| 15.3|
Berger Paints India| 14.19|
Akzo Nobel India| 8.53|
Source :CMIE|

Inferences Based on Macro Environment of the Paints Industry

* The current Indian population is 1.1 billion and it is expected to be at 1.53 billion by 2030 surpassing China and become the world’s most populated nation [Ref 3], which would result in cheap labour force.

* Most of the Indian populations are migrating toward the urban area for employment and industrialization [Ref 3]. So there is a lot of opportunity in urban area.

* As the population is increasing at a rapid rate, the number of houses also increases accordingly, so there would be a huge demand for paints. Economic:
* India is the world’s fourth largest economy with the current GDP growing at 7.8 %, which is expected to grow by 8 % in the next year and paint industry growing at 1.5 times the GDP growth [Ref 1], so there is always a demand for paints.

* Foreign trade and investments have increased by 34% and stood at $23.8 billion.[Ref 2] thus it would result in more infrastructure development.
* The major concern is the Inflation which is at 9.1 % due to steady increase in food and oil prices. [Ref 2]. While this may be a concern (as the price of raw materials may go up) resulting in the end product being more expensive-still in the short run it is unlikely that the company will face any margin pressure since it is a market leader. In the long run however the company may have to look at diversifying its product portfolio by adding other related products like tiles, etc.

* Indian government is paying more attention to infrastructure development both in the urban and rural areas and lot of banks are providing home loans with nominal interest rates. So there is a scope for increase in demands for paints.

Political – legal environment:
* There are numerous political parties at both national and state level. So it’s very difficult to get consensus among all parties if we want to set up an industry. * Some of the organizations are against the concept of industrialization and protesting against land procurement for that. It could have a possible impact on the paint industry. * The manufacturing facilities need to adhere to the labour laws and the environmental standards set up by the pertinent bodies.

* There are 500 technological institutes and 1800 research institutes in India. So there are highly qualified and skilled persons available.

* The sector is developing at 35 % growth rate annually.

* With the help of technological advancement we could have a sophisticated network of communication with the customer and dealer and it could possibly reduce the lead time thereby improving supply chain efficiency.

Socio – Cultural:
* In a country like India with huge diversity the psychographic behaviour of people are likely to play a major role in influencing the buying pattern.

* Uniformity of...
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