Berger expands distribution to battle Grasim’s paint foray

Berger Paints, India’s second largest paint maker in terms of market value (₹60,000 crore), plans to expand its distribution footprint and build paint manufacturing units in West Bengal and Odisha as Aditya Birla group firm Grasim looks to foray into the market with an investment of ₹10,000 crore. “We see a lot of distribution expansion that can happen for us as the company has many gaps in network and distribution in states like Tamil Nadu, Karnataka, Maharashtra, Madhya Pradesh, Rajasthan, Telangana and the last stretches of Andhra Pradesh,” said Abhijit Roy, managing director and CEO of Kolkata-based Berger Paints.

“These are states economically well-off. There’s a lot of paint consumption as well. If we do well in these states with the right distribution strategy and branding, the scope for growth is high,” Roy tells Fortune India.

Kerala, eastern states and Uttar Pradesh are big markets for Berger Paints. It is developing the market in Western states--- Maharashtra and Gujarat, while improving the network in Delhi and Haryana. “All that you have to do is to get the right dealers and distributors. We are strengthening the protective coatings and general industries categories. In waterproofing and construction chemicals, we have done well in the last 5-6 years,” said Roy.

Decorative is over 80% of Berger’s portfolio and industrial is the rest. “The margin from decorative should be around 17-18%, but it would be much lower for industrial at 11-13% if you don’t have strong product USPs,” he said.

Grasim plans to build six manufacturing plants in Haryana, Punjab, Karnataka, Tamil Nadu, Maharashtra, and West Bengal by March 2025 with a total capacity of 1,332 million litres per annum and a project cost of ₹10,000 crores. Asian Paints (1751 million litres) and Berger Paints (1,100 million litres) are the top two in the segment at present. Kansai Nerolac is the third largest in the segment, while JSW is the new entrant.

“It’s not only technology and money which is going to win the game. This is a trade where you have to focus a lot and the returns are not the way you put in money. Paint business is not a capital-intensive category,” said Roy.

Citing Grasim’s ₹10,000 crore investment, Roy said, “They are formidable competitors and they have resources and capital. But we have faced quite formidable competitors and battled through.” However, he expects that there will be some battle on the ground. “There’s enough opportunity and the market is expanding. The new player will get a share out of the expanding market. We expect we will continue to maintain our market share,” he added.

The unorganised players in the paint manufacturing industry control a 25% market share. “They are responsive and agile. Their adaptability is strong. People think we can ride roughshod over the unorganised sector, but it doesn’t happen that way. They can respond to the needs of an industry, and quickly formulate and deliver. They have a low fixed cost. They can cut prices and compete with big players,” he added.

Berger Paints, which started the business as a British factory in 1923 from a factory in West Bengal and was taken over by Kuldip Singh Dhingra in the late eighties, has recently commissioned a 33,000 tonne/month plant at Sandila in Uttar Pradesh. With this, the capacity has increased by 45%. The capacity is enough for the next two years, said Roy.

“We will have one plant coming up in Panagarh in West Bengal which will start production probably by the end of 2025. The Panagarh plant would primarily in manufacturing construction chemicals and industrial paint. The capacity would be 15,000-20000 tonne per month,” he said. The investment would be around Rs 700 crore. “We will have to look for another plant in the east after this, which we will probably put up in Odisha at a later date,” he added.