Paint makers turn to Bharat for growth

The rural market has grown at a rate of around 20% a year, which is way above the growth rate in urban centres

Like other consumer goods companies, paint makers have also started looking beyond cities. Their New Year resolution is to enter the legions of villages and small towns or increasing their reach if they are already present there. For, they believe only Bharat promises accelerated growth.

“Rural market is a big hope for us. It is driving our sales. We are expanding our distribution network in these locations to make the most of this opportunity,” Ramakanth V Akula, president (decorative), Nippon India, told Business Standard.

2013 was tough for the sector. Hopes of a revival in demand after a good monsoon and during the festive season were dashed by high inflation. Companies say paint is a discretionary expenditure — consumption falls during periods of rising inflation.

To their surprise, paint makers have found that while demand remained tepid in cities, consumption was rising in rural areas. A top official of a Japanese paint maker said requesting anonymity: “The rural market has grown at a rate of around 20 per cent a year (in financial year 2013). This is way above the growth rate in urban centres. We expect further increase in sales outside metros, as rural India's incremental consumption expenditure is witnessing a handsome growth.”

The increasing reach of media in villages has also helped paint makers, making easier for them to advertise their products in these regions. Companies have also discovered that demand for premium paints is high even in remote locations.

"Due to good monsoon rural India has bucked the trend. Rural centres in states like Punjab and Tamil Nadu are driving major part of our sales," Abhijit Roy, managing director of Berger Paints in India, said.

The market size of the paint industry in India is estimated at around Rs 29,000 crore. Industry players expect close to 12% growth in business volume and 10-12% rise in turnover this financial year. "Next fiscal can only be better than what the industry has seen so far this year. Rural reach will be crucial as most of the companies would be battling it out in the hinterlands," the official with the Japanese paint maker said.

The rural opportunity combined with easing prices of rutile, a key raw material, promise 2014 to be a better year for Indian paint companies.