Up against odds, paint-makers spot growth prospects in non-metros

Industry biggies like Asian Paints and Berger have a reason to rejoice. There has been a growing evidence that more and more rural folks are lapping up branded paints to spruce up their walls this festive season.     This is particularly sweetening for them because the pain of slower growth in urban areas is easing. What this also means is these companies have started making aggressive inroads into hitherto uncharted rural as well as tier 1 and tier 2 cities, effectively grabbing market share from unorganised players, which have dominated so far, officials told analysts.“It is the smaller cities that are driving the demand though post monsoon the demand has recovered a little bit in urban areas. Part of the strategy there is to combat the unorganised players in these markets. Distribution is being focused by everyone in the industry in the rural market and newer markets are being opened up as network expands and as new products reach them,” Srijit Dasgupta, Berger’s director and chief financial officer, has told analysts. “Earlier, bigger organised players were letting go of these markets, but now nobody is willing to lose that.” Focusing on rural markets has add-on benefits, which help paint makers exploit a more seasonal surge in demand particularly seen during festive seasons.“Apart from higher demand, sales in smaller cities show better growth before events like Diwali as dealers in those cities are able to stock much more than their counterparts in metros,” KBS Anand, managing director and CEO, Asian Paints, recently told analysts. This time, an early Diwali had led to high retail stocking, he added.While an extended monsoon would surely boost farm income and consequently push up rural demand, heavy rains have adversely affected usage. “Demand in some parts was hurt by heavy rains and prolonged monsoon, particularly in markets like Gujarat and Kerala,” Anand said.Both Asian Paints and Berger have raised prices by a little more than 4% since the beginning of 2013-14. But that has mostly happened in the decorative segment as conditions remained subdued in industrial coating demand with many capital investments getting postponed. “We couldn’t get desired price increases in automotive and industrial segments,” the Berger official said.Nevertheless, the price hikes have taken care of margins as input prices have moderated.