CEO of the year: How KBS Anand planned Asian Paints' success in India

The lasting legacy of the Asian Paints chief, who retired last year, will be the diversification he undertook without hurting the core business

Kanwar Bir Singh Anand recalls a survey by Asian Paints in 2000 and the surprised glances that he and his colleagues exchanged on discovering that it was the woman of the house who drove the choice of paint. It taught him the foolhardiness of preconceived ideas. 
 
“She wasn’t interested in paints per se, but how it could change her home, which was the second most important aspect of her life after her family. The idea that Asian Paints could add value to the home came from there,” said Anand.
 
This insight came long ago, not when he joined Asian Paints, the country’s largest paint company in 1979, straight out of B-school but almost two decades later when he became vice-president of sales and marketing. It explains the focus on the consumer that has been a source of Asian Paints’ success.
 
The other enduring legacy of Anand’s four decades long career — he was CEO from 2012 to last year, when he hung up his brush — has been the company’s diversification while preserving the core business.
 
Under his leadership, Asian Paints moved into kitchen and bathroom fittings, home décor, and water-proofing solutions. Alongside, the paints business was made scalable and affordable and the consumer experience of buying paint was elevated through ‘experience stores’ where they were able to consult staff on colours and textures for their homes.

 
At the same time, Anand, an IIT-IIM alumnus, realised that the only way to ensure that the focus on the consumer was not lost or diluted was to embed it inside the organisation. To this end, he delegated more responsibilities to the chief financial officer (CFO) and to the heads of sales and marketing and human resources (HR) as part of a larger integration exercise within the company.
 
He also juggled things around, disrupting the usual management approach under which teams worked in silos and there was no cross leadership. So, the CFO was put in charge of the industrial paint business. The sales and marketing head was asked to handle research, development and technology, while the HR head was put in charge of the international business. All three were asked to work closely to ensure operations were smooth at all levels.
 
This new approach brought a fresh perspective to the business, since leaders with diverse skills were handling portfolios such as R&D and international operations. Cross leadership also eliminated the intermediate levels that slowed down the pace of change, improving agility, innovation and route-to-market activity.
 
For instance, Asian Paints introduced 3-D visualisation of colour and home décor at its ‘experience centres’ a few years ago. It introduced a software called ‘Eureka’ to capture ideas around new products. Special apps have been launched for smaller dealers to improve connectivity and provide them with a focused service.
 
At the same time, factories were automated and systems were upgraded with new technology, new lines, and products.
 
With the customer in his sights constantly, Anand made transformation a constant. He dropped the mascot Gattu, launched ad campaigns such as ‘Har Ghar Kuch Kehta Hai’ (every home says something about its owner) to strengthen direct distribution, started a painting service for consumers, and rolled out a reformed complaints management system.
 
Under this, consumer complaints were resolved in three days, compared with a month earlier. All these changes happened in a span of five years between 2001 and 2006.
 
The next few years would see Asian Paints build on these strengths: It launched a network of nearly 70,000 shops, kept up fresh ad campaigns, products and services, and launched its first experience store — part of the Colour Ideas Network — in the Mumbai suburb of Bandra.
 
Anand says the Colour Ideas network of stores provides 12-15 lakh consultancies a year, with people trusting the colour consultant more than they do their next-door hardware dealer or shopkeeper.
 
“Paint tends to be a low-involvement category on the face of it. However, if you add these services, it can become interesting for the consumer, who loves to get involved in the process,” said Anand.
 
In the last few years, Anand has also aggressively pushed the company’s presence in smaller towns and rural areas, regions that are growing faster than the larger cities.
 
For this, he put ‘feet-on-the streets’ to help understand what dealers and shopkeepers needed. He offered dealers incentives. While painters still tend to be a key reference point for most householders, reaching the dealer-distributor and retailer has its advantages, said experts.
 
Paint companies can understand demand trends in the marketplace and pinpoint what is moving quickly on shop shelves. If required, retailers can be provided with appropriate paint shades and dispensers to help bring the right colour combinations to consumers.
 
But there is no point leaving the painter out. Anand has made sure the company trains painters from time to time to keep them up-to-speed with techniques and new colour combinations.
 
Anand’s achievements are reflected in the fact that Asian Paints has been consistently ahead of its peers across financial parameters, despite competition growing sharply.
 
Its net sales and net profit growth in the last three years has been 5.3 per cent and 11.7 per cent, respectively. Its return on capital employed (ROCE), which measures a company’s capital efficiency per unit, has been the best in the industry — in the region of 33-36 per cent in the last three years (FY18-20).
 
The ROCE of Berger Paints and Kansai Nerolac has hovered between 18 and 29 per cent in the same period.
 
Asian Paints’ return on net worth (RONW), or the profit it generates on shareholders’ money invested in the business, has also been the best in the sector. It has hovered at 24-28 per cent in the last three years, compared with 13-25 per cent for Berger and Kansai Nerolac.
 
Asian Paints remains the leader in the Rs 50,000-crore domestic paint market, enjoying a 56 per cent market share in the decorative paint segment. The latter constitutes 75 per cent of the overall paint market in India. Industrial paint makes up the remaining 25 per cent and is a business-to-business (B2B) segment.
 
Decorative paint, on the other hand, is the consumer-facing side of the market, with cut-throat competition for share of mind and wallet. Here, Asian Paints continues to enjoy high brand recall both on the shop floor and in consumer homes, sector experts say.
 
Asian Paints’ market capitalisation has grown at a compounded annual rate of 24.5 per cent over the last three years (ended November 2020) and its price-to-earnings ratio has ranged between 63 and 79.
While Berger’s market cap growth in the last three years has been better than that of Asian Paints at 36 per cent, Kansai Nerolac’s has been poor, at just 2.7 per cent.
 
Berger’s PE ratio has hovered between 67 and 97 (FY18-20) while Kansai Nerolac’s PE ratio has ranged between 48 and 62.
 
The year 2019-20, in fact, has been the best of the last three years for Asian Paints on most of these parameters, including net profit growth, RONW, increase in market cap, and PE ratio.
 
The company reported double-digit volume growth in its decorative paint business for all four quarters of FY20, led by affordable pricing and a push into rural areas.
 
This success was all the more surprising given that construction activity slowed in the metros and the pandemic struck in the fourth quarter.
 
“Asian Paints demonstrated incredible resilience through all this, investing in brand-building, distribution and marketing,” said one sector expert.