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Battle Colours! Asian Paints, ICI India slug it out

Kishori Gopalkrishnan in Bombay

It is no longer just a question of painting the town red. Paint-makers, warring for every inch of the consumers' wall and offering every shade and hue under the sun, have unleashed an unprecedented price war.

With the paint majors fighting each other black and blue in the marketplace, discounts offered to traders have doubled while extended credit periods have been offered by most companies over the past couple of months.

The scene turned red after the standoff between ICI and Asian Paints last year with marketing teams of both companies vying for greater visibility on the retail shelf.

At Rs 35 billion, the Indian paints industry looks healthy enough. Add to that the fact that from its poor showing in the pre-1993 years, when it was declining at the rate of two per cent per annum, the industry has posted a growth of a healthy 16 per cent per annum till fiscal 1996 -- according to ICICI Securities and Finance Company -- thanks primarily to the excise duty cuts from 1993 onwards. This levelled the playing field for the organised sector, which today commands around a 60 per cent share of the industry in value.

The paints market is divided into two segments. One is the decorative paints, including wall, furniture and exterior paints; while the other comprises industrial paints, including automotive and marine paints, and powder and coil coatings. So far, it is the decorative segment that has dominated the paints market with a 70 per cent share (Rs 24 billion).

Senior industry members blame the still ongoing industrial slowdown for this hectic market activity in the paint market. Greater online capacities, a lacklustre real estate and construction sector, and sluggishness in the white goods segment are factors that are forcing paint-makers to push their products aggressively, they added.

As per the 1996-97 estimates of the Indian Paints Association, Asian Paints is the market leader with a share of 23 per cent. It is followed by Goodlass Nerolac at 12 per cent, ICI at 7 per cent, Berger at around 6 per cent, while Jenson & Nicholson controls 5 per cent and Shalimar 4 per cent. The rest of the industry is in the small-scale sector.

The real battle sparring is over the premium emulsion segment Asian Paints in red corner, and ICI India in the blue. According to another survey by the market research agency ORG- Marg, red is clearly ahead. Asian Paints, already the leader in the decorative segment, took over from ICI India the numero uno slot in the premium emulsion segment.

The survey did a study of 460 retail outlets in 23 cities across the country and compiled sales volume figures. Asian Paints' Royale brand leads in the Rs 220 per litre and above premium emulsion market, having a share of 46 per cent. It is followed by ICI Velvett Touch with a market share of 34 per cent.

The earlier statistics on the emulsion section, put out by ORG, had placed ICI India ahead with a market share of 42 per cent and Asian Paints trailing with a market share of 34 per cent in the premium emulsion segment. The reversal of fortunes for the two companies in a matter of a few months only typifies the no-holds barred marketing war going on.

The only other brand to gain in the premium segment during this period was Allscapes, the brand from Goodlass Nerolac Paints Ltd, which commands a 10 per cent share, up from 8 per cent in July 1996. The market share of Luxol Silk (Berger Paints) and Special Effects (Jenson and Nicholson) were put at 7 per cent and 3 per cent respectively, compared to 8 per cent each earlier.

The premium emulsion market, estimated worth Rs 500 million, is the fastest growing segment with a growth rate of over 15 per cent. The increased aggressiveness of Asian Paints in the premium emulsion market comes as a surprise because it has traditionally been recognised for its strengths in the low-end distemper and enamel segment.

Asian Paints slashed the prices of its water-based paints (Apcolyite emulsion & Tractor distemper) by around 3 per cent in the middle of last year. It was following the lead of ICI which was offering a major discount scheme on its Dulux Acrylic emulsion, offering customers a 24-litre pack for the price of 20 litres.

However, if the blue corner occupant is losing in the upper-end, it is not sitting idle in the lower end. ICI is increasingly targeting the low-value high-volume segment of the paints market and launched a number of low price brands in the market during the financial year 1996-97. These include Supercoat at a price of Rs 67 to a litre and Farco at a price of Rs 27 to a litre. This helped the company record a 14 per cent volume growth during the financial year 1996-97.

The current round of price cuts reflects the current mood in the paint industry with everyone seeking to increase their own market share. And Asian Paints has decided to take the battle into the opponent's (read ICI) camp, an increasingly aggressive in the paint market. ICI Executive Director Param Bhargava, however, denies accusations by the industry and trade that his company was responsible for the onset of the price war.

Asian Paints claims that its Royale brand was able to tap a wider cross-section of outlets as a result of the wide distribution network established by the company. "The marketing for the product was done with a view to offering customers an upgraded product from the regular emulsions," says R Ramakrishnan, trade sales manager, Asian Paints. "Also, a market had to be created for premium emulsions (read Royale) in some parts of the country which were not serviced by competing brands."

Meanwhile, ICICI Securities and Finance Company has predicted that the ratio of decorative paints to industrial will touch 50:50 in the next 10 years. In addition, by I-Sec's estimation, the overall growth rate of the paints industry is expected to decline to 12 per cent per annum. This will only see a further tightening of belts and a sharper business focus.

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