ASIAN PAINTS

Group 8

Abdullah Saghir Ahmad (C002)

Mohammad Shoaib Javeed (C032)

Nilakshi Agarwal (C034)

Aman Bansal (D007)

Atishay Agrawal (D012)

Gautam KSSK (D020)

Background:

Paint — the group of emulsions generally consisting of pigments suspended in a liquid medium for use as
decorative or protective coatings — made its earliest appearance about 30,000 years ago. Cave dwellers used
crude paints to leave behind the graphic representations of their lives that even today decorate the walls of their
ancient rock dwellings.

The paint and coatings industry, however, had to wait for the Industrial Revolution before it became a recognized
element of the American national economy. The first recorded paint mill in America was reportedly established in
Boston in 1700 by Thomas Child. A century and a half later, in 1867, D.R. Averill of Ohio patented the first prepared
or “ready mixed” paints in the United States.

As soon as the impact and potential risks of various paint components have been quantified, paint manufacturers
take action. Historically, the industry readily responded to environmental and health concerns by altering the
chemistry of its products to control risks. Paint manufacturers started replacing lead pigments in some paints, for
example, before World War II, when safer alternatives became available.

Contemporary paints and coatings consist of countless compounds uniquely formulated to fulfill the varied
requirements of hundreds of thousands of applications. “Paint” ranges from the broad group of environmentally-
sound latex paints that many consumers use to decorate and protect their homes and the translucent coatings that
line the interior of food containers, to the chemically-complex, multi-component finishes that automobile
manufacturers apply on the assembly line.

Industry Analysis:

• The paints sector is raw material intensive, with over 300 raw materials (50% petro-based derivatives)
involved in the manufacturing process. Since most of the raw materials are petroleum based, the industry benefits
from softening crude prices.
• 2017-18 was an eventful year for the domestic market. The introduction of GST ushered in a new era in Indian
business. The Paint industry successfully adopted the new Tax system put in place.
• The industry did feel the impact of demonetization as well as GST and demand as a whole for the industry was
subdued in both the segments. The organized players are expected to perform better than the small and medium
scale players. The industry however views GST as positive and beneficial in the long run.
• Under the make in India initiative, the government of India aims to increase the share of the manufacturing
sector to the gross domestic product (GDP) to 25% buy 2022 from existing 16%.
• Manufacturing sector has the potential to reach US$ 1 trillion by 2025 and India is expected to rank amongst
the three growth economies and manufacturing destinations of the world by 2020. These factors expected to
significantly boost industrial paint consumption.

The paints and coatings industry is highly dynamic and one which poses several challenges to suppliers in the
market. Strong price sensitivity, rising raw material prices and the resultant squeeze in profit margins are issues
paint suppliers have to deal with on almost an everyday basis.

Buyers becoming stronger

For any industry, the key factor affecting the competitive scenario in the market is the end-users or the buyers, and
the paints industry is no exception to that. Paints are sold through direct sales as well through distributors. While
architectural paints mainly follow the retail channels, industrial paints are sold directly to end-use companies. It has
been observed that these buyers, both direct end-users and retail channel, are becoming increasing powerful with
their growing bargaining power. End-users are demanding higher quality paint for the same or a lower cost. Paint
manufacturers are continuously being forced to reduce prices, and those who fail to do so are losing out to the
closely fought competition.

In recent years, it has also been seen that, due to economic recession, end-users have lower purchasing power and
this is forcing paint companies to reduce prices in order to keep up their sales volumes.

High raw material prices squeezing paint supplier's margins

To aggravate the situation, the cuts in price of product are being accompanied by increase in the raw material
prices. Resins prices have been rising in the past few years for almost all kind of paints. Thus, paint companies are
getting squeezed from both directions resulting in thinning of their profit margins.

Another challenge on the resin front is that the introduction of newer technologies and newer types of resins are
pushing out few conventionally used resins. Governmental regulations against paints containing volatile organic
compounds (VOC) will be a major factor in throwing out certain kinds of paints from the market. This will definitely
affect the resin situation in the market and would require the paint companies to adjust accordingly. Companies
have to be proactive and cannot sit back and wait for other companies to act because these will be the companies
which will surely lose out in the market in the medium run, if not the short.

Large companies becoming larger

Paint markets in Asia are dominated by multinationals and a few large local companies. These companies are now
looking to expand in the region and almost all of them are looking at the golden goose of the region, China.
Multinationals like Akzo Nobel have already done very well in this direction and have made a significance presence
in the Chinese market. Thai paint giant, TOA, is among the top local companies which are also aggressively looking
at the Chinese market.

Besides China, these large companies are also looking into new unexplored markets like Vietnam and Cambodia as
these countries are showing tremendous growth potential for the paints industry. These countries are slowly
opening up and purchasing power of customers is on the rise. This will encourage the growth of industries like
construction and manufacturing and will correspondingly encourage paints. Besides being a growing market for
sale of paints, Vietnam is also being looked at as an important country for production and export for various kinds
of coatings. This is due to the low cost of labour and other resources making it an ideal manufacturing base.

Paint consumer looking to other alternatives to paint

Last among the key factors of competition in Porter's model is the threat from substitutes and this is one issue
which is, slowly but surely, irking the paint suppliers. As countries in the Asian region become affluent, there is an
increasing demand for more trendy and easy-to-use alternatives to paints. Colourful patterned wallpapers and wall
paneling are being preferred by some for architectural use instead of regular emulsion paints. In terms of industrial
use, the use of coatings for office equipment is decreasing significantly. Equipment suppliers prefer to use metallic
finishes and oxidation process to give a more matt and sleek look to the equipment. Also, these metallic options
are considered more hassle-free as there are no issues of paint chipping, re-painting etc.

In conclusion, based on the above-stated factors, it can be clearly concluded that the paints & coatings industry is
facing challenges from almost all directions in the competitive landscape. Paint suppliers have to act aggressively
and efficiently to stay abreast in this highly competitive market. The key to success in this market lies in building a
strong brand image through aggressive marketing strategies and gaining customer loyalties.
Paint manufacturers have to be very creative in the way they package and sell their paints. This market, like many
other markets, is moving towards being service-oriented rather than just being product-oriented. Companies need
to sell more than just paint to flourish in this market. Companies have to understand their consumers' needs and
preferences; and package products accordingly. Companies who do so promptly and efficiently are sure to see
success in this market.

Key Questions:

Define your customer’s most important priorities today

As a consumer product that is being sold to a young, increasingly more affluent customer, key success factors in
decorative paints are as below:

Brand: Paints are becoming a high involvement purchase for the end use consumer; hence the brand plays a key
role in determining his choice, both for new construction and repainting activities

Product portfolio: It is essential for paints companies to have a judicious mix of targeted products for its core
customer along with a complete product portfolio across product categories and price points for the entire
customer universe

Distribution: Sales of decorative paints requires extensive dealer networks, especially in the rural and semi-urban
markets; hence a strong supply chain and PAN-India distribution presence is essential

Consumer’s behavior in terms of buying paints is still in ‘Low need for Cognition’ with less involvement and major
decision from others like contractors, and Painters. Most of the consumers have blind faith in Brands like Asian
Paints even if others have better offering. The demand for the ecofriendly paints has not gained momentum due to
extreme high prices. People have started evincing interest towards protective coating paints for the exterior wall
especially in the premium class of population and in the case of B2B sales like Builders.

What would they be in 2030?

As the taste of people is changing not only as an individual but also in corporate sector where the architectural
requirement is becoming minimal, for example, people want thematic decoration, use of custom colours that can
be changed frequently. In corporate offices, the glass walls give more modern look there by reduces the use of
paints. Adding digitally controllable tinge in the glasses will almost eliminate the need of usage of paint.

Do you see today’s minor competitors who could become

immediate threats when combined with another type of
business design?

With IoT and connected homes soon becoming a reality,

companies like Smart Tint can become threats. Smart
Tint® film applies to any new or existing smooth glass
surface. Easily control our switchable film from clear to
frosted (opaque) with the click of a button or command
from your smart phone. Smart Tint® switchable privacy film is private frosted and opaque when powered off and
transparent clear when powered on.
Another threat can be Switchglass. It is a ready-to-glaze product that incorporates a switchable Polymer-Dispersed
Liquid Crystal film carefully laminated between two pieces of glass.

RADAR SCREEN

UNCERTAINTIES

1) Water scarcity
2) 3D printing
3) Minimal architecture
4) Change of raw material for construction (Change of chemical composition of cement)
5) Excessive usage of walls made of glass in construction
6) Climate change
7) Laser painting
8) Oil crisis
9) World financial crisis
10) Technological innovation
 Technological
Innovation

WORLD 2 WORLD 1

• Minimal use of paints (buildings • Metal reinforced steel to be as a

with chic look with raw red bricks
and pipes)
primary construction raw material
• Customer preferences inclining
towards Architecture using minimal
paint
• IoT enabled products

Traditional Architecture Minimal Architecture

WORLD 3 WORLD 4

• Industry growth as per the current • Usage of glass in construction of

prospects
• Paint Manufacturers entering into
new segments using existing
capabilities to increase their market
share
buildings
• Excessive use of beams made of
metal and steel as a primary
construction raw material

Technological
Stagnation
 Change in Raw Material (Chemical
Composition) in Construction

WORLD 2 WORLD 1

• Discovering new ways to • Change in the composition of the

manufacture construction raw
materials
• Using E-coating and Vacuum coating
for painting components.
Traditional Architecture
bricks and concretes
• Mixing paints pigments in the raw
material in order to reduce the
layers on walls
• Metal reinforced steel to be as a
primary construction raw material
•
Minimal Architecture

WORLD 3 WORLD 4

• Industry growth as per the current • Minimal use of paints (buildings

prospects with chic look with raw red bricks
• Paint Manufacturers entering into and pipes)
new segments to increase their
market share

Existing Raw Material in Construction

 Change in Raw Material (Chemical
Composition) in Construction

WORLD 2 WORLD 1

• R&D initiatives for discovery of raw • Mass Glass production and usage of
materials that require lower levels glass in construction of buildings
of water input • R&D in the field of discovery of
• Paint companies manufacturing newer raw materials
paints using water conservative
techniques
• Water Abundance
Water Scarcity

WORLD 3 WORLD 4

• Increased input costs • Technological advancements by

• Minimal use of paints paint manufacturing companies to
enter into new segments

Existing Raw Material in Construction

 Change in Raw Material (Chemical
Composition) in Construction

WORLD 2 WORLD 1

• Increase in experimentation by • Liquidity crunch for the paint

customers towards new raw manufacturers
material • Recessionary trends in the industry
• Increased usage of technologically • Sub-standard raw material used
advanced products like Smart Tint
etc
Economic
Financial Crisis
Prosperity

WORLD 3 WORLD 4

• Increased demand of high-quality • Customers will prefer essential paint

paint products products and not experiment for
• Diversification of product portfolio more
in the paint industry • Durability will be expected instead
of innovation

Existing Raw Material in Construction

 STRATEGIES

SCENARIO 1: (World with Customer preferences inclining towards Architecture using minimal paint)

• Traditional industry is dead! Long live industry 4.0, which is 100% connected, thanks to the Industrial Internet
of Things (IoT). With consumer preference rapidly shifting towards the need of having more dynamic control
over their machines, lights, surroundings, it is only empirical that controlling the colors that surround you will
be the next big thing.
• Asian paints must have the identity of a company that has “color” at its core
• They must acquire or collaborate with a technology company that powers up their wallpaper division
• The wallpapers will be just a plain sheet made up of nanoparticles and IoT enabled (easily connected with
home assistants like Amazon Alexa, Google Home, etc. and smartphones)
• Based on customer’s choice, the interiors can be customized with different patterns, textures and colors, on-
the-go
• The sheet will be able to adapt the colors of the surroundings as well to give more flexibility and options to the
customer (like the JBL Pulse speakers which adapt the color of the surface on which they are kept)

SCENARIO 2: (World with the declivity of customer preference from paints to minimal architecture)

• Minimal architecture is becoming a trend not only at office spaces but also for personal homes spaces.
• Common characteristics of minimalist architecture include:
o Pure geometric forms
o Simple, limited and plain materials, like glass walls
o Neat and straight components
o Repetition to give a sense of order and unification
o Simple, open spaces
o 'Clean' lines
• Asian paints must acquire companies like Smart Tint® to innovate
and develop solutions that would cater to this changing customer
preference.
• Easy control of switchable film from clear to frosted (opaque) with the click of a button or command from
smart phone will give customers a great deal of flexibility and will go with the idea of minimal architecture
• Asian Paints can introduce variants of colors/tint control options for increasing the array of options to choose
from
• This will find applications in automation and aviation industry as well

SCENARIO 3: (Change in Raw Material (Chemical Composition) in Construction and Minimal Architecture)

• Paint manufacturers should look into

expanding the pigments that can be
mixed into the bricks and concrete itself
• They should also gradually expand into
manufacturing colored bricks and raw
materials for construction
• Electric paints can be used for a variety of
purposes ranging from using as a switch
for electricity at home to playing music.
The paint acts as a sensor for the device,
and is activated when you hover over it. It
can be applied on various surfaces like paper, plastic, wood, glass or cardboards.

SCENARIO 4: (World with Increasing Purchasing Power and Stable Economy along with Usage of Existing Raw
Material in Construction)

• Paint manufacturers expanding into swatch indication for textile, home décor and toy industry
• Increasing the organic paints portfolio catering to the higher end customer group
• Introducing wide range of artistic wallpapers & easily replaceable designs catering to the interests of the
innovators and experimenters customer segment
 HORIZONS

Asian Paints must bank on its expertise of colors and invest in acquiring technology companies to cater to changing
consumer preference. To reach Horizon 3, they must invest in innovations like Electric paint, wallpapers, swatches for
textile and toy industry. Strategic acquisitions of IoT firms will further help Asian Paints to tap the unrealized potential
of the changing world.