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Asian Paints - Adding Colours

The case examines the marketing strategy adopted by Asian Paints after
restructuring its businesses. The case provides a detailed account of how the
company initiated customer relation-building initiatives with services such as
Colorworld, Helpline and Home Solutions.

The case also highlights the problems faced by the company in building up brand
image in an industry where consumer involvement was very low.

The reasons for dropping 'Gattu' from the AP logo and the company's brand
restructuring initiatives are also explained.

In July 2002, India's leading paints company


Asian Paints Limited (AP) announced it was
dropping its famous mascot - 'Gattu'- from its
logo. Analysts were surprised at this move as over
the last 45 years, Gattu had emerged as one of the
most recognizable mascots in India, leading to
instant recall of the company AP.

However, the company sources felt that with the


changing focus of the company, 'Gattu' has lost
his relevance. In 2002, AP was the market leader
in the Indian decorative paints segment with a
market share of around 44% (Refer Table I). It
was also one of the top 15 global paints
companies.

The success of AP has been attributed to its customer-centric approach and aggressive marketing
initiatives, which had changed the way industry, functioned (Refer Exhibit I for a note on paints
industry in India.) AP wanted to be one of the top five companies in the global paints industry by
2007.

In order to achieve this goal, it focused on three main areas - building the AP brand in terms of a
new product portfolio, changing its logo and packaging. The new AP was expected to be even
more customer-friendly and service-oriented.
The history of AP dates back to 1942. It was
started by four entrepreneurs, Champaklal
Choksey, Chimanlal Choksi, Suryakant Dani and
Arvind Vakil, as a partnership firm for
manufacturing paints, in a garage rented for Rs 75
a month.

In 1945, the partnership firm was turned into a


private limited company named Asian Oil & Paint
Co. Pvt. Ltd. And in the same year, its turnover
touched Rs 0.35 million. In the 1940s, it was
largely multinational companies such as British
Paints and Jenson & Nicholson that dominated the
Indian paints market.

In order to increase revenue, AP concentrated on the smaller towns ignored by multinationals. In


1954, Asian Paints asked the famous cartoonist R.K. Laxman to create a mascot for the
company, and from his pen was born - Gattu - which emerged as one of India's most memorable
mascots

Excerpts

Changing Focus
AP emphasized on technology and marketing in
its drive to be one of the top five global paints
companies.

It implemented Enterprise Resource Planning


(ERP) and Supply Chain Management (SCM)
solutions for streamlining its processes and supply
chain.

It implemented i2 Technologies SCM solution


along with SAP ERP solution with an investment
of Rs 290 million to simplify the processes across
its operations...

New Product Launches


In the late 1990s, and early 2000s, the company launched various new products to increase its
market presence and penetrate into the segments where its presence was small (Refer Table IV)...
Excerpts Contd...

Changing Image

Along with the customer relationship building


initiatives, AP also focused on its communication
and brand strategy.

It realized that communication would help the


company to reach out to the customer and create
an attractive public image. Indian consumers were
not brand conscious with regard to paints; usually
the painter purchased paints for consumers
according to the allocated budget. In order to
change its image, in 2000, AP appointed the
Bangalore-based "Momentum" as consultants for
a new advertising strategy for the company...

Goodbye to Gattu

Along with the new logo, AP also changed its packaging in order to communicate its new brand
identity. In the earlier packing, there was no clear indication of the company name - Asian
Paints. Commenting on the packaging in the paint industry, K.B.S Anand, Vice President, Sales
& Marketing, AP, said, "Fortunately or unfortunately, no paint company in the country has used
packaging to communicate...

Colourful Future?

With its rebranding initiative, AP is likely to be very successful in increasing customer


involvement in the decorative segment. However, many analysts are skeptical about the company
maintaining high brand recall, as 'Gattu' was a important factor accounting for the popularity of
the company. However, AP was optimistic that the changes would yield many benefits...

Re: Recent Business Strategy in Asian paints - June 9th, 2010


The Asian Paints group is pursuing a three-pronged strategy to drive its export business to
quarter of its total turnover within the next five years. Largely spun around the emerging
markets, the three-way export strategy will primarily see the group train its eyes on markets
where it could gain leadership position, countries where it sees opportunities for growth and
nations where licensing arrangement possibilities exist.

The group has under its fold Asian Paints, Apco Coatings, Berger International and Scib.
Through Berger International, it has presence in dozen countries. Its presence in Egypt is through
Scib. Both are acquired units. Asian Paints has a presence in Sri Lanka through an acquisition. In
five countries, it is piggy riding on Apco Coatings.

Mr. Dani said the group had a leadership position in Bahrain, Nepal, South-Pacific Region and
the Caribbean. The group, he said, had identified Egypt, the UAE, Sri Lanka, Bangladesh,
Thailand and Malaysia as `growth focus areas'. The group felt that licensing arrangement could
be the least cost route to grow into some countries. "We can be present in some countries but
avoid financial costs," he said. In this context, he said the group had broken into countries such
as Indonesia, Pakistan and Malta through this licensing arrangement. The foray into Pakistan and
Malta happened only in the last few months.

Under the licensing arrangement, it would provide technology and brand support to local firms
with whom it had tie-ups. Mr. Dani said the group had also identified niche countries and
segments and citied Oman for wood finish and China for protective coatings. Mr. Dani, who is
also the Chairman of Berger International, said post-acquisition of Berger and Scib there had
been a good cash flow and asserted that, "We can support the business growth through internal
accruals."

To a question, he admitted that it was a real challenge for the group when it acquired Berger
nearly one-and-a-half-years ago. "Overnight, they quit 12 countries. It was a real challenge to
integrate them with Asian Paints," he said. Mr. Dani said the group still had to do a lot of work
on a strategy to cross sell technology/brands/products across varied outfits and geographical
areas. Effective alignment of HR (human resources) across operations with the overall group
corporate vision would be a tough task ahead in the coming days.

While asserting that "emerging markets will be our play ground," he said the group would follow
the `hub and spoke' approach and empower regional centres to build size and skill to drive the
value for the group as a whole. A chemical engineer, Mr. Dani entered the family business by
default when one of the founder-promoters sold his holding to a multi-national company,
triggering a convulsion at Asian Paints. The wheel had come a full circle when the MNC had
sold the shares back to the Danis. The younger Dani has a passion to make the group an MNC to
reckon with in the international sphere in all respects.

The case of Asian Paints – Marketing strategy

Asian Paints (AP) is the market leader in the Indian paint industry, commanding a market share
of 38% in decorative paints and 33% overall in the organized sector. Its annual sales turnover
exceeds Rs. 1,300 crore, way ahead of all competitors in the industry. In profits too, AP is far
ahead.

AP’s market leadership in the decorative paints segment 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%, its nearest rival, Goodlass Nerolac, commands a share of just 14%. All others have
only less than 10%. 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.

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 color and pack size was a crucial factor for success. AP literally leapfrogged
and over-look 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 rescue of the players in this regard. Customers could get the
color 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 color by mixing different shades and pigments
in the required proportion. The paint companies need to maintain only half-a-dozen basic
colorants with retailers; mixing can create the other variants. The new arrangement helps the
companies 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 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 retails outlets. It is no
easy task to provide mixing machines and computers.