Price 'not only game' in paints industry; brand important: Berger CEO

Company has 'broad growth opportunities'; inflation worrying for industry: Abhijit Roy

Competition is intensifying in the decorative paints segment. Berger Paints India, the country's second largest paint manufacturer, plans to hold on to its share in the face of challenges. ABHIJIT ROY, managing director and chief executive officer of Berger, spoke to Ishita Ayan Dutt in Kolkata about his 100-year-old company's plans and why price is "not the only game in town" in the industry. Edited excerpts:

 

Birla Opus recently flagged off its fourth plant and is said to have become the second largest decorative paints player by installed capacity. Would it prompt you to accelerate expansion plans or look at inorganic options?

 

First of all, they are not the second largest. We have an installed capacity of 1.5 million kilolitre (KL) and they are about half our size. We are actually operating at 55 per cent of our installed capacity. So, there is no need to increase capacity (immediately).

 

Dutch firm Akzo Nobel said in October that it was reviewing its decorative paints portfolio in South Asia. Does it interest Berger?

 

We look at all options and proceed only if it makes sense. As of now, they have not made their plans very clear. For any acquisition that we have made in the past, big or small, the same logic is applied. If the acquisition cost is less than the value we can derive out of it, then we look at it. If not, then we give it a pass.

 

Berger’s revenue was flat in Q2FY25. Was it due to extended monsoons?

 

Extended monsoon was one of the factors – sales were impacted and material was stocked up with dealers. There was tremendous pressure in the system. Also, there is a general slowdown in the economy. The consumption part of the story is muted as of now. Inflation is playing spoilsport and a lot of people are trying to postpone consumption in discretionary categories.

 

While these are general factors, the paint industry saw a price decrease of 5 per cent last year. That played out in the second quarter (of the current financial year). But from the fourth quarter onwards, this will change. In fact, we have taken a price increase of 2.5 per cent in the second quarter, which will have a positive impact in the fourth quarter.

 

Another negative impact, peculiar to the industry, is increased competition. As of now, Birla would have got 2.5-3 per cent of the market. In spite of all the factors, we have been able to grow our market share over the last 2 to 2.5 years.

 

Is the consumption slowdown just in urban centres?

 

It’s mostly urban for us, which has been relatively muted in terms of consumption demand. The upcountry markets are showing better signs of movement and expected to grow faster in the next few months. The rains have been good and crop prices are reasonably high. So, small signals coming from upcountry locations suggest that it’s doing better. But we don’t see any major signal coming from urban (areas).

 

What is the impact of increased competition on pricing?

 

Not much, it’s too premature. But price is not the only game in town. The consumer perceives a cheaper product to be of lesser quality. So you have to be careful going that way. Brand strength, distribution strength, equation with dealers and painters – these are much more important. The fact that it has not impacted is indicated by our gross margin percentage in Q2, which went up a bit and was the highest in the last 10 quarters. If we were getting impacted by pricing of competition, it would have shrunk substantially.

 

The brand and influencers play a very important role; it’s not the price which makes the difference. This is not a commodity play.

 

How do you plan to hold on to your market share?

 

Three broad growth opportunities exist in front of us. In upcountry locations, we have big gap areas. We are growing in these areas, but we have also reinforced manpower and increasing pace in terms of getting our products distributed to a larger number of areas.

 

In some urban markets, like Hyderabad, Mumbai, Pune, Bangalore, Chennai, we have a small presence compared to our overall share. So, there is a lot of catching up to do in these markets. And we have set up focused teams for these markets.

 

The construction chemicals and waterproofing segment has become sizable for us; we are currently the number three player.

 

So, these three are big areas of opportunities for us.

 

What is the status of your expansion plans?

 

We have two plants coming up. By August 2026, we should be ready with our Panagarh (West Bengal) plant. And by 2028, we should be ready with our Odisha plant, which will be our largest. The total investment in these two projects and expansion at our existing factories would be Rs 2,500 crore over the next four years. And it will be all through internal accruals.