Reeling under increasing prices and fall in demand, paint manufacturers are staring at a 'moderate' festive season, due to high inflation.
They expect this year's festive sales to be moderate against the backdrop of extended monsoons, rise in import price of raw materials, stringent financial measures and less number of construction projects in the pipeline.
Normally, the festive season, spanning from September to November, comprises almost 35 per cent of total annual sales in the paint industry—a 7-10 per cent hike compared to other months.
“While 70 percent business comes from individual houses, the other 30 per cent comprise organised buyers, who are now refraining from taking up new projects due to stringent financial measures and increased interest rates. The demand has also slightly moderated among individuals because of inflation pressure,” said Manish Bhatia, national sales head, Akzo Nobel India Ltd, makers of the Dulux Paints.
Paint companies feel the price revision has led to lower litrage of paint's consumption among individuals. Bhatia said though the second half is considered to be a better consumption period, it has moderated in the last 4-5 years owing to inflation. As a result, people are not investing in new houses or renovation work. Though the volume of sales have dipped, prices increase has been able to offset the loss to some extent. “The price hike has ensured that our bottom line growth remains unaffected.”
Berger Paints also said there was a fall in demand. Company COO Abhijit Roy said: “Our sales were impacted till July and August because of the extended monsoons. However September did fairly well. Though, it's too early to comment on the festive season, I do see a certain degree of slowdown happening in consumption.”
Berger Paints said they have been able to balance out the previous quarter by the extra demand from smaller towns. “A person residing in a smaller town is not directly impacted by the slowdown in the economy. He would readily spend on repainting in weddings and festivals like before,” said Roy.
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Companies said the urge to upgrade the texture of paints can still be a stimulating factor among customers to do up their houses, this season. Akzo Nobel has come out with a range of paint variants to tap the consumers' needs. The company says that premium paints contribute maximum business of up to 40 per cent of their total sales these days.
“We need to give consumers a strong compelling proposition to buy. For instance, mass segment consumers want to buy emulsion which comes at a premium. We launched ICI Magic (Rs 50 a litre) about a month-and-a-half ago which is a distemper, but gives a smooth finish like emulsion for entry level consumers,” said Bhatia.
While Akzo is playing on functional benefits of its products, Asian Paints has chosen to follow a two-pronged strategy—incentives and perks to its dealers and distributors and promoting consumers to paint their houses through various schemes.
Asian Paints sends a free 'Happy Painting Guide' to every customer who expresses his interest to buy its products. The guide helps one to decide on the shade and explains the right techniques of painting the house. However, the company refused to comment on its sales projection for the quarter.
Berger is pushing its products by increasing its availability through increased number of outlets. The company has added 700-800 new outlets to the existing outlets in the last four months. The company has also increased its advertising budget this year by up to 17-18 per cent of its total turnover. “The advertising budget is slightly higher this time to beat the consumption blues,” said Roy.