Re-painting the state

C&I Issue 14, 2009

While companies in mature markets face the challenge of even maintaining sales throughout the ongoing financial crisis, continued economic growth in India is likely to lead to an additional million tonnes of coatings demand by 2013, when the total Indian paint market will be in the region of 2.7m t. That is among the key findings of paint and coatings consultancy firm IRL's latest study, A profile of the Indian paint industry, 4th edition.

  Such figures should hardly come as a surprise. The country has a young and booming population, which, unlike China, is geared towards large families. Census data show that India has a relatively young population, of which half is under 25 and 40% under 18, boding well for both current and future demand. What’s more, India is in the midst of a massive state investment programme that will construct, renew and upgrade infrastructure and architecture on a scale not seen before. Thus a long history of neglected structures prone to collapse through lack of protection at last looks as if it might begin to be corrected, as the benefits of coatings finally start to be appreciated.

Investors open doors
Then there is the industry perspective. India has been winning industry investment like never before, finding itself the latest destination for investment after successive waves have homed in on Southeast Asia, Mexico, Eastern Europe and China. The perfect example is the automotive component sector, which at some point in the future will create an enormous market for coatings for plastics in India. It has seen investment more than double between 2003/4 and 2007/8, while turnover and exports have both tripled. Clearly, India is much more than a base from which to serve mature markets. To this end, the fact that car ownership in India stands at just about 1% provides the biggest clue of all to the potential for consumerism.

 The Indian paint and coatings industry is changing only slowly with time. For a long time the status quo seemed to be totally unshakeable as a combination of Asian Paints, Goodlass Nerolac, ICI India, Berger Paints India, Jenson & Nicholson and Shalimar Paints seemed to dominate the market as the top six producers. The effects of time and industry upon this line-up have seen Jenson & Nicholson all but disappear, Kansai Paint take a majority stake in Goodlass Nerolac and AkzoNobel move to control ICI’s stake in its Indian joint venture operations.

 As such, foreign paint companies have found little opportunity for exports in the Indian paint market – exports of paint to India have always been exceptionally low, usually accounting for 1% of the market. Instead, the indirect role that foreign paint makers have had in targeting India from the outside has usually taken the route of technology licensing, especially in the industrial coatings sector, where specialist coating technologies otherwise not available come into their own. With the exception of the special-case of ICI, all of the other top-tier players have pursued technology from overseas. However, some medium, small and even nascent producers of coatings have managed the same. Table 1 summarises a few selected examples of technology licences that support the Indian coatings industry.

Switching on to growth
Over the last few years, though, things have started to change more rapidly as paint companies have become increasingly switched on to the growth markets of China, and in its shadow, India. Comparatively recent entrants into the Indian paint market were previously testing the sector by exporting from the Middle East, in the case of Jotun, or Southeast Asia, as seen with Nippon Paint. Sherwin-Williams also boldly re-entered the market in 2007, by acquiring Nitco Paints, thereby giving it leverage for entry into the market with its own paint stores in the Bangalore region.

A golden key
Years ago this idea would have been unthinkable, because across the top tier of the decorative market, distribution was the major hurdle that any new entrants would have to overcome. Luckily, the regional nature of the paint market in India has afforded new entrants a golden key with which to enter, allowing them to test the market with select, high-quality paint ranges, targeted at a wealthier demographic. The route to the market in these cases has been through the control of the paint makers’ own stores, as seen with Nippon Paint and Sherwin-Williams. Jotun’s different path has seen it join up with the retailer Lifestyle International in order to showcase its high-quality finishes on in-store room sets. This is a significant departure from the small paint shops found in India, which are crammed with competing paint brands in a store that can barely hold two or three people.

 The entry of overseas decorative paint companies into the Indian market has had only minimal impact so far. But it also represents a time when new and different ideas are being brought to the market from industry outsiders. Although nothing beats a history of local knowledge for entry into a new market, these companies arrive in India armed with a wealth of knowledge, staggering budgets and often better standards and technologies, so sooner or later they will emerge as more serious competition.|

 It is the sheer size of the decorative paint market and its potential that reigns supreme and generates the most interest in India. Indeed, India has the highest percentage of decorative paint use of any country in the world. At 79% of the nation’s coatings demand, this is already a 1.3m t market; by 2013 a further 900,000 t of decorative paints stand to be used, driven by the aforementioned government investment in the construction of housing and apartment blocks to civil and tourist amenities. There is enormous potential in India, even in such unlikely ideas as the development of skiing resorts in the Himalayas!

 The flip side of that highly predominant decorative paint demand is a comparatively small industrial coatings sector, which amounted to about 340,000 t in 2008. This will be abundant with opportunity in the future, largely as a result of growing awareness of the benefits of compliant coatings technologies. Powder coatings offer the perfect example; a long-held technology that has seen spectacular growth in India, going through many phases of use from architecture to fridges and fans and now into significantly different areas, such as telecommunications towers. The hurdles for powder coatings are the initial investments and development of the finishing process itself. However, the efficiency of the process and the complete absence of VOCs have woken up many in the industry to the benefits of clean technologies.

 Legislation is still far from being a driver for cleaner technologies in India, although on the international front, highly regulated and globalised segments, such as the marine paints market, will almost certainly be using compliant technologies in the future. The potential of the Indian marine paint market is something to consider for the next decade, as ports continue to develop. India has an eye on entering the shipbuilding sector on a scale that could upset the Far Eastern applecart. However, it is in land-based, rather than seabased, transport that the greatest changes stand to be made. Despite the rising Japanese influence in India, especially behind the automotive and automotive coatings sectors, there is still some way to go before there is widespread use of water-based finishing in the sector.

Igniting demand
Although vehicle launches in India are quite frequent, none have created quite the buzz that the Tata Nano has generated. With the sacrifice of many modern design features, the Nano has been conceived to be the world’s cheapest production car. It stands as a testimony to Indian engineering, and holds enormous potential in India, where it is claimed that it could expand the vehicle market by up to 65%. This can only be good news for the home-grown automotive components, OEM finishes and refinishing segments, especially owing to the regrettable state of many roads in India. What is going to be even more significant is the arrival of the Nano in Europe, especially at a time when economy is high on the agenda and the trend in car sizes is downwards. The level of its progress in conquering these more competitive markets will be a true barometer of just how popular Tata’s Nanotechnology really is.

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