Berger Paints to stabilise top line

With Prime Minister Narendra Modi’s move to flush out black money from the economy by demonetising Rs 500 and Rs 1,000 bank notes overnight setting off an urgent situation in the cash-driven paints industry, Berger Paints is responding to the crisis by effecting a course correction in its growth strategy.

The Kuldip Singh Dhingra-promoted company, which is the second largest in the country and commands 18 per cent of India’s decorative paints market, has adopted a two-pronged strategy to ensure its top line takes minimal hit as customers resort to discretionary purchases treating paints as a secondary or deferred priority. First, it is encouraging dealers to shift to digitised payments, and secondly the company is focusing more on the up-country market. The Kolkata-based firm was expecting a 17-18 per cent growth in the paints business in the ongoing October-December quarter, but the number has now been downgraded to 12-13 per cent.

About 80 to 85 per cent of the paints industry is cash-driven with retailers accepting only cash payments for sales. Abhijit Roy, managing director and chief executive officer, Berger Paints, is now asking its 3,000-strong major dealers to shift to digitised payments to keep the business going. “We have changed the strategy now to maintain a top line growth,” Roy told Business Standard.

Besides touring the country to restore dealer confidence, he is also facilitating their shift to e-payments. The company is in talks with various agencies to install card swiping machines in the dealer outlets, apart from roping in mobile wallet provider Paytm to connect them to the mobile payments network. “They (dealers) too have started to understand that the future of this trade is in digitised payments and the time of cash transactions is nearing an end,” Roy said, adding that at least 50 per cent of the paints dealers would shift to electronic payments in the coming days. A 1.4-1.8 per cent fee attached to all transactions pulls down the net bottom line of dealers contending with credit and debit card payments. Also, about 70 per cent of the dealers in the segment lack card swiping machines. The firm plans to focus more on the up-country market, where it perceives the impact of demonetisation —  to last for the paints industry for another month and a half .