Aiming For A Clean Stroke

Aiming For A Clean Stroke

Consumer Retail

Through a combination of product and service innovation, improved distribution network and revised recruitment strategy, Berger is pulling all the stops to climb the ranks to be among the Top 15 companies in the paints industry world over, from its current ranking of 24

Gerger
ABHIJIT ROY, MANAGING DIRECTOR, BERGER PAINTS

When Abhijit Roy took over as the Managing Director of Berger Paints India in July 2012, he had clear mandates – to change the recruitment policy, to improve the distribution network and to innovate at the product and services level, among other things, with the end goal being to improve market traction for the company.

Today, the result of this approach is evident in the company’s progress on all fronts and in the way it has grown to become the second largest player in the paints industry in India. From a turnover of US $383 million in FY11, the company has grown to touch US $707 million in FY15. In fact, for the nine months ended December 2015, its sales increased to Rs.3,122 crore from Rs. 2,880 crore the corresponding previous nine months. For the same period, its operating profit margin increased to 14.60 per cent from 12.30 per cent while the net profit margin stood at 8.30 per cent as against 6.80 per cent. These numbers are reflected on the company’s performance on the bourses as well. Trading at Rs. 252 in the Bombay Stock Exchange, the company currently has a market capitalisation of Rs. 17,506 crore. On earnings per share of Rs. 4.42, its price to earnings ratio is 57.12 times.


Currently, the leader in the market has around 35,000 dealers in the country while we have about 14,000 active dealers. There is a significant gap there. We are focussing on improving this distribution network which can help us grow.


As far as the future goes, Roy expects the paints market to grow further in India which will accelerate the company’s growth rate in the coming years. This apart, Roy says, “With work going on to improve infrastructure and build smart cities, the growth potential looks good in the coming years.”

Winner of the ‘Construction World Magazine’ Fastest Growing Company award in the Indian paint industry, Berger has a 17 per cent market share in a segment which has 75 per cent share for the organised players.

The growth drivers

While the company has diversified its business segments into retail (decorative solutions), general industry and automotive, protective coating and infrastructure, and powder coating, its decorative business, which constitutes around 80 per cent of its overall business, continues to be a consistent performer. This was possible through new business development, sale of higher value added products and enhancement of product portfolio.

In terms of innovation, the company has, over the years, strengthened its R&D and focussed on innovations at a product and service level. In fact, its R&D lab is recognised as a centre for basic and applied research in paint and resin technology by the Department of Scientific And Indian Research, Ministry of Science, GOI.

Some of its recent innovations include the express painting service – a hassle free, fast and clean solution for painting houses using automated tools that give walls a good finish in 40 per cent lesser time. “Customers have often expressed their apprehension about the dust generated and time taken to carry out painting work. This is one of the major reasons for people deferring from this essential task. We decided to address this with the express painting service,” states Roy. Express painting or XP involves dealers, contractors and painters along with special equipment and customised training for the purpose of providing a quick and convenient painting service. “And this has yielded good dividends for us,” says Roy. Another product, Easy Clean Luxury Emulsion for interior walls, also witnessed a growth of 25 per cent y-o-y over the last six years.

On the distribution front, the company has taken several steps to challenge its perception of having lower distribution intensity as compared to the market leader. “Currently, the market leader has around 35,000 dealers in the country while we have about 14,000 active dealers. There is a significant gap there that we’re trying to address,” he shares.

Over the last couple of years, the company has made some changes to its recruitment policy as well, wherein, it has started standardising the process for recruitment. “As far as management trainees are concerned, we started recruiting from IIMs to improve our managerial strengths and also look for people with a hunger to deliver,” comments Roy.

Not without challenges 

From top line growth to recruitment to setting up new manufacturing units, Berger is facing its fair share of hurdles in recording consistent growth. As Roy elaborates, on the growth front, while the company’s decorative business showed improved performance in 2016 fiscal, the segment continues to be affected by the overall subdued demand conditions. In fact, its protective coating business is also impacted by lower demand from the infrastructure sector.

Moreover, on the recruitment front, he points out that attracting and retaining talent is a big challenge because most youngsters are taken by the ecommerce sector.  “A third challenge lies in setting up new manufacturing units when we are a red category industry,” he adds. This means, pollution control is stringent and getting permission is a problem.  He believes that in terms of duty structure there should be a reduction in the raw material duty rates and it is important to encourage local manufacturing.

All being said, this does not deter his team and their spirit. They are all set to tackle these difficulties by differentiating themselves from their competition. The launch of express painting and washable paints is one such example.

The path ahead

The company has eight factories already operational in India and is in the process of setting up two new factories in Pune and Assam. The expansion operation in its Pune factory, which is already operational, will be completed by 2018 while the Assam factory will be operational by January 2017. “This will increase the number to 10 and we will make a significant contribution to the government’s Make in India campaign. We will continue to invest in India as it is our main market,” states Roy firmly.

To aid its growth, for the retail market, it plans to launch new products that have high durable exterior, high solid resin, fire retardant enamel; new protective coating products and automotive and general industrial products.

With these strategies in place, Berger Paints is all set to continue to gain traction in the market place. It is currently among the top 24 paint companies in the world and Roy and his team is working towards bringing it to the 15th position in the next five years. Going forward, it aims to cater to the changing needs of the end user segment which has a strong exposure to the global market and is on the lookout for better quality products with very specific needs.


What Next:

  • Make it to the top 15 companies in the world in the paint industry, in the next five years.
  • Launch new products for the retail market that have high durable exterior, high solid resin, fire retardant enamel
  • Launch new protective coating products and automotive and general industrial products

Poornima Kavlekar has been associated with The Smart CEO since the time of launch and is the Consulting Editor of the magazine. She has been writing for almost 20 years on a cross section of topics including stocks and personal finance and now, on entrepreneurship and growth enterprises. She is a trained Yoga Teacher, an avid endurance Cyclist and a Veena player.

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