Berger Paints

Supply Chain Management

BATCH B GROUP 1
Amit Gupta E024
Anish Dalmia E018
Ralshton Castelino E014
Rohit Lala E038
Nishant Kukkadapu E035
Rashmi Mishra H035
Industry Analysis

• The paint industry in India is more than hundred years old. The setting up of Shalimar Paints in Kolkata in 1904 can be considered
as the beginning of the paint industry. The Indian paint industry has grown to become the second largest paint industry in the
world in 2019.
• In 2019, the Wholesale Price Index of paints and varnishes stood at 112.7, highest in the previous five years, while the trade value
of the Indian paint industry was over Rs. 57 trillion. Despite this, the Indian paint imports exceed the paint exports value.
• In 2019, export value of Indian paint industry was nearly Rs. 18 trillion, while the import value was Rs. 39 trillion approximately.
The value of domestic paint industry (as of Financial Year 2019 - 2020) is Rs. 500 billion.
• In the financial year 2019, the paint industry grew about 15% in terms of value and 12% in terms of volume. The market for India
paints and coatings is expected to grow at a CAGR of 8.56% during the period of 2019 – 2024.

Industry Characteristics
More than 50000 paint shops or outlets are present in India.
Unlike other industries, where companies interact indirectly
with retail shops through distributors, the paint industry
directly distributes its products to more than 25000
shops/outlets. This is enabled by the company’s strong sales
force and large number of depots across locations.
 
Industry Analysis

 The paint industry in India can be classified into 2 segments – Industrial and Decorative.

Decorative segment - Decorative segment consists of exterior and interior wall paints, enamel and wood finishes.
Decorative segment has a strong demand in the Indian market. 75% of market share in 2019 was attributed to the
decorative segment. Rapid urbanization and easy availability of home loans in the past few years has led to growth in
the housing sector. This has further contributed to the growth in the decorative paint segment since this segment
primarily caters to the housing sector. Distemper is the most affordable type of decorative paint and is mostly used in
suburban and rural regions in India. Distemper accounts for 20% of the decorative paint segment. Decorative paints
can be solvent-based or water based.

Industrial segment - The industrial segment consists of automotive, powder and protective coatings. 25% of market
share in 2019 was attributed to the industrial segment. Around 50% of the revenues in the industrial paint segment
can be contributed to 10% growth in the automobile sector. The industrial segment is more technology driven than the
decorative segment since high quality paints of desired specifications are needed for industrial use. This segment has
lower margins on the price than the decorative business.
Market Segmentation in Indian Paint Industry

Premium Range (High End

Metros and Large Cities
Acrylic Emulsions)

Medium Range - Enamel

Decorative Segment Smaller Cities
Paints

Low Range - Distemper

Suburban and Rural Areas
Paints
Indian Paint Industry

Automotive Sector (nearly

2/3rd share)

Industrial Segment

Consumer Durables,
Marine Paints and other
OEMs
 Porter’s Five Force Analysis

THREAT OF NEW ENTRY

HIGH MODERATE

• Majority of the raw materials are crude based • Current Indian market is dominated by few big players
derivatives and thus its prices are volatile • High working capital is needed
• Titanium dioxide, another important raw material is • Raw materials are crude based and thus its prices are volatile.
also scarcely available
• Low fixed costs and lack of any big regulatory restriction.
• The production process is also highly dependent on the
raw materials
MODERATE
SUPPLIER POWER COMPETITIVE
BUYER POWER • Customers in the Decorative Segment this segment are price
RIVALRY
sensitive
• Exterior wall paint is usually sold in bulk to painting/building
LOW contractors.

THREAT OF SUBSTITUTION
• Currently very few alternatives are available. • In the industrial segment, technology plays an important role
and thus the quality and expertise of the seller company
• In the rural areas lime wash is used to coat the proves to be a distinguishing factor.
walls.
• Wallpapers can also be used as a substitute.

COMPETITIVE RIVALRY – MODERATE

• The organized market is ruled by 3 dominant players – Asian Paints, Berger Paints and Kansai Nerolac
• Asian Paints is the only company that manufactures PAN (phthalic anhydride), which is one of the major components in paint manufacturing
• Local players part of the unorganized market can create competition
• Advertising and relationship with distributors also play an important role here. Asian Paints has the largest distributor network
PESTEL Analysis

P E S T E L
Political

• India is a
Economic

• Covid-19 has slowed

Social

• Customers
preferring high
Technological

• Tinting machines
Environmental Legal

• In 2016 Government
of India directed all
down the economy changed the paint • Paints release VOC
democratic quality paint that paint companies to
• Most of the raw industry to a great (Volatile Organic
country and thus offers various produce lead safe
materials are crude extent. Compounds) in the
provides a good benefits such as paint
based or have to be • R&D to produce air even after they
extent of political high durability, • Lead content should
stability. imported better quality paints dry
quality and less be less than 90 ppm
• India has an • Slowdown in the for the decorative • US Environmental
health hazards. to make it safe
export-oriented automobile market paint customers - Protection Agency
• Special occasions high shine, anti-
especially for
economy also affects the lists paints in the top
in family and domestic products
• In 2018, the GST industrial segment of bacterial finish, anti- five pollutants as
festivals drive • Other laws related
on paints was the paint industry pollution, water- they can cause
reduced to 18% demand for to pollution control,
• India is a market- proof indoor air pollution
from 28%. Thus, decorative paints. • Use of IT based sustainability,
based economy • Waste and by-
the lower prices • Increase in income human and
• India is one of the technologies such as products produced
could drive of the middle-class environmental
fastest growing Augmented Reality. during paint
demand population of India • Mobile app launched health is important
economies in the production.
has raised the for all companies
world by companies.
standard of living
Competitive Analysis

Criteria
Segment Presence Decorative+ Industrial coating Decorative+ Industrial coating Decorative+ Industrial coating Decorative+ Industrial
coating
Revenue (INR Cr) 17,194 4,943 5691 2,662
Consumer All segments Premium + Value based Value + Premium Premium
Segments
Core Competency Market Leader, Robust network Strong Coating portfolio, IT Number two paint company in Strong brands available in
of vendors, Strong R&D enhanced supply chain India, Leader in coatings, 20000+ global portfolio
Dealers
E-commerce Yes, own website Yes, 3rd party Yes, 3rd party Yes, 3rd party
presence
Inventory Turn-over 6.08 5.31 4.88 6.28
Ratio
Installed Capacity 1.74 0.45 0.61 0.2
(m MT)
Number of 60,000 24,000 30,000 10,000
distributors
Market Share 38.87% 10.89% 12.15% 5.85%
ROCE 33.91% 17.56% 32.75% 24.4%
ROA 19.30% 11.21% 14.23% 11.86%
Company Analysis

• With its head office in Kolkata, the company manufactures and markets a range of decorative and Industrial paints products under
various brands and has its operations spread throughout the length and breadth of the country. The company has 14 manufacturing
units in India, 2 in Nepal, 1 each in Poland and Russia. The company has over 100 depots, several regional and area offices. The
company has a network of over 20000 plus dealers in India, the second largest dealer network after Asian paints.
• Berger has clearly demonstrated its performance over 90 plus years by offering wide variety of quality products backed by an
excellent customer service team. Berger has been able to maintain sustainable competitive advantage through innovation in all spears
of business.
• Berger is one of the top 5 paint companies in Asia and the second largest paint company in India, after Asian paints. It has presence in
more than 8 countries worldwide.
• The consolidated revenue for the company for the financial year 2019-20 was Rs. 60602 crores with a market capitalization of Rs.
31,438 crores.
2%
10%
• The products of the company fall under two broad categories: Decorative and Industrial.
Decorative products include higher end acrylic exterior and internal emulsion, medium 12%

range exterior and internal paints, low end distemper, wall putty, wood coating, cement
paints, primer and thinner. The Industrial products include Industrial, Automotive, 57%
protective, powder, glass and pipe coatings. 19%
• The direct competitors of the company in India include Asian Paints, Kansai Nerolac, Akzo
Asian Paints Berger Kansai Akzo Nobel
Nobel and Shalimar Paints. Others
Supply Chain at Berger Paints

Input side of the supply chain

The Paint Industry is raw material intensive. Crude oil and its related derivatives are one of the key main raw materials in case of paints
along with other chemicals. Most of the raw material used in case of paints is imported from foreign countries. Majority of the raw
material is sourced from big houses and are standardized. The change in the import policies have a great impact on the cost of the raw
material. Close to 300 odd raw materials are used by the company for making its products.
Transportation
Berger works on a format wherein the factory sends the product to the sales depot, which then sells the products to the dealers. The
dealers then sell the product to retailer who sell it to the end consumer.

Location management and network planning

Berger paints has positioned their depots in such a manner that they are closer the dealer and the end market, so that inventory can be
replenished at the dealer end in the least possible time. The company tries to monitor closely the stock at each of the depots at the
dealer end so as to keep the inventory at the optimized level and reduce inventory carrying cost and stock out costs.
Forecasting
The demand of the paint products is highly correlated with the GDP. GDP growth estimates give the company a good idea of the
demand during a particular period. The company uses various statistical tools and sales data so as to accurately predict product demand
and minimize inventory. The demand for paints products is high during the festival season.
 Value Chain Analysis

THREAT OF NEW ENTRY

Inbound Logistics: Indian Paint industry being a raw material intensive industry, a major chunk of the expense goes to the raw material.
Berger Paints try to maintain the raw material cost minimal.
Operations: Berger has differentiated its products in A, B and C categories. While inventorying the products, storing norms are used.
Through this easy access to the products is possible. Based on these product norms, it decides the duration for the product to be in the
market. Through this Berger decides the quantity of products it should produce. For efficient production it has strict maintenance norms.
Outbound Logistics: Although headquartered in Kolkata, the distribution network is spread throughout the length and breadth of the
country. In total, it has more than 85 depots, 2000 dealers, seven manufacturing facilities in India, and also four facilities overseas. Depots
of Berger receive the outbound goods. Here depot managers decide on the inventory to stock and based on the scenarios, finished goods
are sent to dealers and in turn to end customers. The feedback from customers flows in an exact reverse path. Online feedback systems
are replacing the traditional method for every element in the supply chain.
Marketing & Sales: Berger paint’s presence in PAN India and as well as global footprint has helped them to increase sales. It follows
marketing policies with many objectives such as to increase sales, customer awareness, fight against competition etc.
Service: Berger Paints is very famous for providing better service to consumers by providing them an assistant who helps consumers to
design and decorate their home. Berger’s prolink service is an answer to a world governed by expertise and driven by technology.
SWOT Analysis

Strengths Weaknesses
Brand Recognition High dependence on one segment

S W
Well established network Negative publicity
International Market Limited Pricing power
Wide product offerings No premium alternative

Threats
Opportunities
Marketing
O T
Scope for diversification
Untapped Market
Huge fluctuations
Stiff competition
New regulations
 Impact of Covid-19 on the Industry

Manufacturing Issues
 As the paint industry was deemed non-essential the factories of Berger Paints were closed for more than a month.
Demand issues
 Sale of majority of decorative and industrial business (mostly automotive) was severely impacted by the nationwide lockdown in
April. Decorative sales were almost wiped out which was traditionally the best month for segment.
 Demand In tier 2&3 recovered compared to tier 1 cities.
 BJ Nepal was severely impacted. Nepal opened only 10 days this quarter.
Supply Issues
 Two major raw material for paint industry is TI02 and Crude oil derivatives which were not impacted significantly by covid-19
 Focus on cost reduction in raw materials and overheads via renegotiating contracts
 Berger has significant exposure to raw materials imports from china even as the price of crude oil fell the impact was not translated
into raw material price reduction due to impact of depreciating rupee
Impact on employees and other stakeholders
 Commitment to painters: Cash rewards program was accelerated to help painters as they are struggling to make ends meets during
the pandemic. They also helped painters to open bank accounts and the rewards are credited within a few days.
 Continuing to hire new talent- digitally
 Company retained all their employees and associates and honoured all their contracts
 Launched a new app to keep stakeholders and customers safe: Express Painting App for a contactless painting experience
Risk Assessment and Recommendations

Strategic Vulnerability
Financial Vulnerability
• Within: Lack of diversification, Business model risk
• Within: increasing risk to business cycle, weakness
• Outisde: Tough competition, Structural risks
in key business segments, generous credit terms
• Outside: Foreign Exchange risk, Fluctuating oil
prices, limited price flexibility

Vulnerability Mapping
Hazard Vulnerability Operation Vulnerability
• Within: Trade Wars, Terrorism • Within: lack of a secure It infra, Bullwhip effect,
• Outside: Climate, pandemic, economic slowdown higher attrition rate
• Outside: Changing local government regulations,
lack of skilled labour, monsoon dependent demand
Risk Assessment and Recommendations

Risk Assessment Priority Setting (Detectibility represented by size of circle)

Lack of Diversification IT Infrastructure Business Cycle Risks Raw Material Risks Financial Risk Lack of skilled Labour Higher Employee Turnover Poor Inventory Management

4
Probability

0
2.5 3 3.5 4 4.5 5 5.5 6
Impact
Risk Assessment and Recommendations
Thankyou