Asian Paints is one of the largest paint company not only in India but in the whole world. Started in 1942 the company has grown from a very small business to a large multinational corporation and today has its operations in 15 countries, has 27 manufacturing plants and serves consumers in over countries and on top of that it ranks 4 in the Brand Value in the paint category.
The most stunning thing about Asian paints is that it is the only company that has grown at a CAGR (Compound Annual Growth Rate) of 20% in the past 60 years. The stock price of Asian paints has grown from Rs.11.88 (in 1999) to Rs.2756 (as Feb 2023) .
So you can imagine that how much good returns Asian Paints has given to its investors.
To explain Asian Paints spectacular growth we decided to publish a detailed Case Study on Asian Paints.
In this Asian Paints case study we will explain Asian Paints Supply Chain and strategy, its distribution strategy, marketing strategy of Asian Paints and How it became the giant paint company today.
Asian Paints Starting Story - First Phase of Asian Paints Case Study
- Before jumping to the Asian Paints Case Study lets quickly go through the how the idea of starting Asian Paints came to its founder Champaklal Choksey. It will be really helpful in to go through this to understand the Asian Paints Case Study so please don’t skip this section.
Asian Paints was started in 1942 in India. Most of you would be familiar with the fact that during those days India was still under the British rule and the World War Two was still going on because of which the British Government had temporarily banned the imports of paint into India.
At that time the Indian paint industry had only few foreign companies and Shalimar Paints which was one the biggest Indian paint company during those days.
The ban due to the World War 2 opened up the opportunity for domestic production. This was the time when Asian Paints founders Champaklal Choksey and his three friends decided to setup a Asian Paints in Mumbai in 1942.
Mr. Champaklal Choksey was really an Incredible market researcher and he spent really a good time to understand the paint industry. Mr. Champaklal Choksey came to a conclusion that there were two segments in the paint industry:
- Industrial Segment : The industrial segment was a B2B (business to business) space which was all about supplying paints to the giant factories and plants.
- Decorative Segment : The decorative segment was a B2C (business to consumer) segment where a common citizen would buy paint for his house.
This was when Mr. Champaklal Choksey figured out that in villages the villagers painted the horns of the bulls and the South Indians were very concerned about their houses especially the house entrances and painted them frequently as the believed this was auspicious.
Innovation in Product - Phase 2 of Asian Paints Case Study
By 1952 Asian Paints revenue grew to Rs.23 crores and Mr. Choksey found that there were two major products in the market which were:
- Dried Distemper : It was extremely cheap, but after some time it used to peel off which could even stick to your clothes which resulted to a foul smell from clothes.
- Plastic Emulsion : The plastic emuslion was free from all these problems but it was 5X times more costlier than tried distemper. Thus it was out from the budget of economy class which was large in number especially during 1950s.
To solve this problem Asian Paints came out with an Innovative solution and became the first company to bring out the washable distemper that had some qualities of plastic emulsion but was very cheaper than the emulsion paint.
Marketing The Washable Distemper - The First Marketing Campaign
After developing the innovative washable distemper Asian Paints carried out their first marketing campaign which was,
“Don’t loose Your Temper, Use Tractor Distemper”
This campaign was so successful that in no time the Asian Paints washable distemper was a massive hit in the market and the company started to make good sales and immediately had a great brand value among its customers.
Although from 1952 to 1962 Asian Paints made only 2% to 13% margin but the company grew at a compound annual rate of 21%.
By 1967 Asian Paints was third largest paint company in India. Moreover till to day Asian Paints still holds the title of the biggest paint company in India and is recognized all over the globe.
But Now the question arises that how is it possible that a single company like Asian Paints defeated all foreign and domestic companies to became the largest player in the market ?
The answer to above question lies in the Supply Chain and Distribution System Asian Paints has setup. So guys now pay full attention as we are moving towards the most interesting part of the Asian Paints case study.
How Asian Paints Defeated All Big Competitors to Become Largest Player
Bringing out washable distemper, conducting successful marketing campaign and bringing more variety in products did help Asian Paints but there is more stuff at the backend which has helped Asian Paints to become largest player in India and get a good position in the world too. So lets check out what exactly were these strategies.
1.Innovation In Supply Chain - Phase 3 of Asian Paints Case Study
Asian Paints is one the few companies that has built a very adaptive and resilient supply chain.
An adaptive supply chain is one that is flexible and capable of quickly adapting to the changes in the demand, supply and other factors. Whereas, a resilient supply chain means that how quickly a supply chain can recover from unexpected events such as natural disasters, political instability, pandemics etc.
Asian Paints have built a world class supply chain in the past 60 years. The first big innovation in their supply chain took place in the early 1960s when large multinational corporations used to offer 180 days of credit period to their distribution channels which had shopkeepers, retailers and distributor.
For Example: Lets say that you are a shopkeeper and Asian Paints gave you paint worth Rs.80,000 and you are required to sell them at Rs.100,000 to make a profit of Rs.20,000. This means that first Asian Paints will give you the paints worth Rs.80,000 on credit and you can take up to 6 months or 180 days to sell them and then you can keep your Rs.20,000 as profit and return Rs.80,000 to Asian Paints.
This strategy was adopted by large MNCs as retailers would found this policy very good but this meant that if an MNC is giving paints worth Rs.80,000 to one shopkeeper on credit then giving it to 1000 shopkeepers would mean that Rs.8 crore is in credit and the company would need another Rs.8 Crores to carry out its day-to-day operations.
Thus this strategy could only be adopted by big MNCs who had a lot of working capital/cash to operate business and smaller businesses would find difficult to compete.
Now even if shopkeepers sold the paints worth Rs.80,000 within a month then most of them would still return the money after 180 days. The Asian Paints team understood this very clearly and they came out with a Game Changing Policy called “The Regular Payment Performance Discount”.
This policy is really game changer and one of the most interesting thing in the Asian Paints Case Study.
The Regular Payment Performance Discount
Under this scheme Asian Paints rewarded the shopkeepers for regular payback. For Example, a shopkeeper would get a 3.5% extra margin if he made the payments within the 30 days throughout the year. Similarly, if a shopkeeper or a dealer payback the payment in cash then he/she would get 5% more margin.
Now this single credit policy worked wonderfully for Asian Paints due to the following reasons:
- The Asian paints was able to rotate its capital faster and as a result it was able to serve a large network of distributors with less capital when compared to other paint companies.
- The paint industry operated at a very thin margin, i.e., shopkeepers would get very low margins but the Asian Paints provided them with more margin if they sold their products within 30 days. As a result shopkeepers usually used to promote Asian Paints products to their customers to make more margins. Thus Asian Paints Sales got a sudden boost.
2. Supercomputer and Other Technological Advancement - Phase 4 of Asian Paints Case Study
Mr. Choskey was such a brilliant that he understood the technology very well and to further improve the supply chain he bought a first ever supercomputer in India in 1970 for Rs.8 Crores !
Now let me just tell you that Asian Paints had a supercomputer 10 years before ISRO had it and 21 Years before any other company in India.
They used the supercomputer to forecast demand by which they could run their supply chain very very efficiently. Moreover to collect data for the supercomputer they installed computers with billing systems at their each production unit and other distribution channel to know the demand for raw materials, Paint cans and other materials. Further they even started GPS systems for tracking their trucks making the logistics more efficient.
All these steps helped Asian Paints to save capital on labor cost and make day-to-day operations of the company more smooth and efficient.
For Example: In 1980 Asian Paint’s Bhandup plant had 1600 workers but when Asian Paints started production in Ankhleshwar it had only 250 workers and produced the same quantity as of Bhandup plant. Further by 1985 they became so efficient that they needed only 100 workers to do the same work and the credit for all these things go to Mr. Choskey brilliant understanding of technology.
3. Eliminating Distributors and Middlemen - Phase 5 of Asian Paints Case Study
From the early 1970s Asian Paints started to remove distributors and other Middlemen, which means they started building a supply chain to reach the shopkeepers/retailers directly without any middlemen like wholesalers or distributors.
Today Asian Paints has built such a huge network that it reaches more than 70,000 retailers directly. As a result Asian paints is able to keep 95-97% itself as no other middlemen is there and provide retailers with 3-5% margin.
Adapting to right technology over a period of time and removing middlemen made Asian Paints so much efficient that Asian Paints makes a revenue of Rs 100 crore per depot and Rs 1500 crores per factory while Nerolac generates only Rs 40 crore per depot and Rs 700 crores per factory.
4. Maintaining Healthy Relationship With Dealers - Phase 6 of Asian Paints Case Study
Asian Paints took certain measures to maintain good relationship with its dealers. This topic in the Asian Paints Case Study will help you to understand that how maintaining relationships with your distributors can help you to grow your business. So lets quickly check out some steps taken by Asian Paints that helped them to built really a massive network of distributors.
a) Providing the Tinting Machine
I know most of you won’t know what are tinting machines? and why are they really crucial for paint companies ?
So Tinting machines are somewhat like a magic that has a superpower to produce any type of color shade you desire by using only a small set of some standard colors.
For example: Lets say you want Lemon Green color, you just need to enter the color code in the tinting machine and it will produce the exact same color by mixing the standard yellow and green colors in the appropriate proportions.
Thus using tinting machine means that paint companies don’t have to store every single in their inventory which would help them to save tons of money on inventory !
Thus by using tinting machine companies could easily boost their sales by providing the desired color to their customers in time. Now, you will be shocked to know that while Nerolac and Berger Paints together deploy 46,000 tinting machines. Asian Paints alone has more than 55,000 tinting machines.
But now the question arises why is the difference such huge one ?
Well, back at that time tinting machine needed significant space and were extremely costly. Thus many paint companies asked the dealers to bear the cost of tinting machine. But Asian Paints understood the pain of dealers and decided to pay for the initial cost of the tinting machines and then gave them on lease agreement to the dealers.
Due to this the dealers felt less burdened and Asian Paints was able to build a solid relationship with its dealers.
Moreover as Asian Paints used to bear the cost of initial investment for the tinting machine so even the smaller dealers were able to tie up with Asian Paints.
With this strategy Asian Paints went from having 15,000 dealers in 2001 to more than 52,000 dealers in 2018 as even the smallest dealer was able to tie with Asian Paints.
b) Providing Easy Financing to Dealers
Asian Paints set-up a three way agreement wherein Asian Paints helped dealers to get loan from bank and in return the dealer would use that loan only to work with Asian Paints and then return the money borrowed from the bank with interest.
In this way banks could get potential borrowers to take loan, dealers would get loan to to expand their business and Asian Paints would add more dealers to their network, thus benefiting all three parties.
c) Great Support Team and Logistics Services
Asian Paints help portal is so efficient that the queries of their dealers get resolved within 24 hours no matter whatever the situation and circumstances are.
Next Asian Paints logistics service is so good that even in tier-4 cities they deliver the products within 12-18 hours. When it comes to in tier 1 cities Asian Paints is just super amazing with its services. In tier-1 cities Asian Paints deliver goods at least twice daily and sometimes in certain areas even 3-4 times a day !
5. Independent Board of Directors
Most of the companies fill their board of directors with their relatives and friends in order to control the decision making power.
But in the case of Asian Paints we have really independent board of directors that are experts in their fields and make sure that company is always stays ahead of its competition.
Asian Paints Strategy for next 50 Years to Stay Ahead of its Competition - Phase 7 of Asian Paints Case Study
Asian Paints is really a very active company. They familiar with the emerging changes and trends in the market and thus keep working on their business model by entering the new emerging fields related to house decor. Some the areas Asian Paints is slowly entering to stay ahead of its competition are:
a)Entering into Home Decor
Asian Pants not only want to just sell paints but they want to sell each and every item that your house requires.
They have already started selling furniture for your living room, bedroom and study room. Not only this they also sell kitchen and bathroom fittings. Next they have also started selling rugs and carpet, wallpapers and wall stickers as they enhance beauty of our houses.
b) Providing Different House Decor Services
Asian Paints not only wants to sell the home decor stuff to you but they also want to provide you with the home decor services. Some of them are:
- Color consultancy
- Interior design services
- Modular Kitchen services
- Both interior and exterior paints services
- Wood solutions as well as wall solutions for protection
c) Selling DIY (Do It Yourself) Tools
Guys many of you may be familiar that when labor costs rises they more and more people prefer to do the work on their own rather than paying for costly labors.
As an example many people in the US paint their own houses as its always a cheaper option. Only the rich in the US hire labors to paint their houses.
Although currently India has still affordable labor rate but it is expected that the labor cost will shoot up rapidly and labor cost would be 90% of the project cost. Thus Asian Paints has designed some sophisticated tools which a common man like you and me can easily use to paint our dream house.
Conclusion
Asian Paints’ success can be attributed to its focus on innovation, customer satisfaction, and brand building. The company’s ability to adapt to changing market conditions and its commitment to providing high-quality products set it apart from its competitors. This Asian Paints case study highlights the importance of staying ahead of the competition and constantly evolving to meet the needs of customers.