'Any New Product Is Measured Against Snowcem'

With present capacities barely sufficient to meet domestic demand, Snowcem has not been able to achieve volume growth. But, with new capacities having gone on stream recently, this year is expected to see better volumes. Higher capacity will also enable it to enter the exports market too. To control quality and raw materials costs, it is also toying with a backward integration plan to make the pigments used in the manufacture of its products.

B R Ruia, chairman, Snowcem, spoke to Ravi Ananthanarayanan about the market for its products and the company's future plans for the company.

Q: How has the market for Snowcem's products evolved over the years?

 

A: Till the early fifties, construction was oriented towards load bearing structures where specialised surface coatings were not done. It was only later on that cement began to be used in construction to a great extent. Snowcem India introduced a specially prepared exterior paint compatible with cement which performed the functions of protection and decoration simultaneously. The product was a cement based paint mixed with water which protected the structure.

To explain the viability of using the product, let us take a house in a mofussil area. A typical house would, say, have an exterior surface area of about 5000 square feet. The cost of the house inc-luding the land cost would be about Rs 800,000 to Rs 1 million. The cost of us-ing Snowcem would be about Rs 4,000 plus labour cost. At such low cost, a huge capital investment is being protected.

We worked with builders, architects, civil engineers, corporate groups from the beginning. The process was difficult as people were using lime coating, distemper and in some cases even oil paint as exterior paintings. With an 80 per cent cement content, which is a binder, we emphasised on cement to cement compatibility.

Not only was the concept sold to the house owner and the architect, but even the painting contractor has to be taught to apply the product. We continue to do it even now.

We are the largest cement paint manufacturer in India. We sell roughly 23,000 tonnes a year of cement paint which translates into crores of painted square feet every year. The size of the total cement paint market is about 90,000 tonnes a year.

This represents the size of the organised sector which produces cement paint conforming to ISI standards should have at least a 60 per cent cement content. Sandtex Matt is a ready to use textured finish. In a cement paint, cement is the binder. In a speciality paint, the binder is a resin which is manufactured in-house. The total Sandtex Matt market would be around Rs 40 crore of which we have a 50 per cent marketshare.

With the expansion complete, our cement paint capacity will be up to 32,400 tpa from 19,500 tpa, and polymer resins capacity will increase from 600 tpa to 900 tpa. The liquid paints stays at 3.4 million litres.

Q: With the real estate market in a slump, how has it affected your business?

A: It has affected the exterior paint market too, but Snowcem is the least affected as we have a stranglehold over the repainting market. The repainting market size will be around 65 per cent. This is a premium product market and would not necessarily be affected as the other general products. And in the new projects where premium products are being used, we are still the preferred choice.

Builders in upcoming areas like Satara, Aurangabad, Nasik even advertise that their buildings have been painted with Snowcem. Some of the reputed builders like Hiranandani and Rahejas have used our products, but institutional selling has not been given a thrust as they ask for bulk discounts which is against Snowcem's policy.

Also, the slump in construction is mainly in larger cities (multi-storied buildings) whereas Snowcem has a dispersed presence which has helped us. In terms of cement paint, the western region is a major contributor with 34 per cent, while the north and south account for 25 per cent and 24 per cent respectively while the east accounts for 17 per cent.

As far as textured exterior finish is concerned (Sandtex Matt), the south makes up for the bulk amounting to 45 per cent which is also the reason for putting up the textured exterior finish plant there, while the west contributes 39 per cent, north 13 per cent and the east accounts for 3 per cent.

In the last two years, the paint market growth has not been very encouraging. While the last two years saw a growth of seven per cent to eight per cent, the growth was around 10 per cent to 15 per cent before that. This year, we expect the growth rate to be around 8 to 10 per cent and next year, we expect the cycle to bottom out and grow at a faster rate. And, Snowcem should do better as our new plant goes on stream.

Q: Your performance has not matched your projections...

A: We made certain assumptions which did not materialise. For one, we were expecting better price realisations. If the construction market has been in a better shape, we could have achieved better price realisations. The market too did not grow as expected. We expected a market growth of about 13 to 15 per cent while the actual growth was only seven to eight per cent. Also, while inflation went up the prices did not keep pace. With the market in a bad shape, the new product launches were postponed as the market was not strong enough to absorb them.

The higher cost of raw materials too squeezed our margins. An increase in marketing expenditure caused by our strategy of constantly targeting rural areas to expand customer base was also responsible. We absorbed the increase in the cost of raw materials and other costs as we wanted to sustain volumes. For the year ended March 1997, we are projecting a turnover of Rs 64.5 crore and we are expecting to gross a turnover of Rs 75 crore for 1997-98.

Q: What about your competition?

A: Price undercutting has been a big problem. This particular market is not different from the rest of the paint market. The organised and unorganised sector is in the ratio of 60:40. These are about 250 units with capacities between 10 and 100 tonnes a month.

There is no national brand which competes with us. We stress on quality, service and distribution. All the new players in this segment are measured against the products of Snowcem. Competition is definitely increasing with almost every major player having entered or planning to shortly. We welcome this as it will expand the premium product market. My toughest competition is in Delhi, the spurious manufacturers, who sell goods under the name of Snowcem.

To further consolidate our position, we need to improve our delivery time. For large orders over 300 bags, we need about a week to 10 days' time. We will be cutting down delivery time.

Q: What about marketing?

A: Our geographical location is unique. One plant was put up in Rajasthan due to the proximity to white cement plants. Being the main input, we take the white cement directly from the factory to our plant. Also, since the south uses more Sandtex Matt, we decided to put our resins and textured exterior paint plant at Gummidipundi in Tamil Nadu.

The owner of the structure and the architect are important and our selling pitch begins as soon as the project is announced. All offices have a list circulated to them of upcoming projects in their area and they have to follow up on it. Selling is through dealers only, though we have a sales staff which canvases for the products. This way we have a good credit control too and we realise our outstandings from the market within 30 days.

Q: What are your future plans?

A: We have so far been buying most of our requirement of intermediate products like pigments and binders from the unorganised sector. Since we have started using them in higher quantities with addition to capacities, we are now evaluating the feasibility of setting up a facility to make these products ourselves.

In new products, a liquid waterproofing agent is ready to be introduced, we are waiting for the market to improve. Another product is `Snowplast' to bridge the gap between Snowcem and Sandtex Matt. Another new product is a variation on the exterior paint, which has a smooth finish. This will be mainly for the new construction market. We will con- centrate for the moment on the re-painting market.