JSW Paints tweaks distribution model, pricing to take on majors

JSW Paints is the first local player in years to enter the Rs 50,000-crore overall paints market in India. Part of the Sajjan Jindal-led group, the firm announced its foray into paints market last month with a portfolio of 1,808 shades, all priced at Rs 477 a litre.

In a market dominated by Asian Paints, Berger, and Kansai Nerolac, this strategy is a break from convention, sector experts said. “Typically, paints companies’ prices are based on colour. So different shades have different prices,” said Abneesh Roy, senior vice-president, research (institutional equities), Edelweiss. 

“By keeping price  uniform for all shades, JSW is looking to induce trials and eventually shift consumers to its brand,” he said.

The firm, which has invested Rs 600 crore on two plants in Maharashtra and Karnataka, is also eyeing a “hub and spoke” distribution model for decorative paints, where each state will have five hubs to service around 100-200 dealers. It hopes to give “personalised attention” to dealers at a time when most are beefing up their field force rapidly.

Asian Paints is estimated to have around 50-55 per cent share of the Rs 35,000-crore decorative paints market in India thanks to its hold over the dealer trade network. The company, for the uninitiated, has the largest network of dealers in the decorative market at 65,000.
 

The decorative market — the paint used within homes, offices, and other retail establishments — makes up 70 per cent of the overall paints market in the country. The balance — 30 per cent of the overall paints market — consists of industrial paints, used in categories such as cars and durables. Here multiple players call the shots from Asian Paints to Kansai Nerolac and AkzoNobel, said experts.  

JSW is also looking to make inroads into industrial paints by supplying to group firm JSW Steel. All steel companies who source hot-rolled coils from JSW Steel are its potential customers, the firm said. It has also lined up an additional Rs 1,000-crore cumulative investment at its two plants in Maharashtra and Karnataka for capacity enhancement. 

While the Maharashtra unit, located at Vasind, is into industrial paints (it is an automated coil coating facility), the Vijaynagar unit in Karnataka is a water-based decorative paints plant. The initial capacity of the two units is 25,000 kilolitres and 100,000 kilolitres, respectively, which will be enhanced over the next 18 months.

JSW is also expected to tap its cement dealer network to push paints owing to the overlap in trade. Both cement and paints are used extensively in the construction market and have a strong retail dealer base unlike steel, an institutionalised market.

JSW has said it is eyeing an overall turnover of Rs 600 crore in paints in FY20, which it hopes to more than triple (to Rs 2,000 crore) in about two to three years. Supplying to JSW Steel alone is expected to give it around half its turnover target (of Rs 1,000 crore), implying that its foray into paints is intended to fill a crucial gap in its portfolio.