Akzo Nobel India, the makers of Dulux Paints, is looking to scale up distribution, both online and offline channels, and invest more on brand building moving forward. It has also identified creating “differentiation” and “winning in adjacencies” as strategic pillars of growth.

According to Rajiv Rajgopal, MD, Akzo Nobel India, the company has been able to ramp up its distribution and is available across 5,000 towns at present, up from less than 2,000 towns in 2020. It currently covers almost 20,000 paint retailers and about 4,000 B2B customers.

“We are focused on scaling our distribution, both online and off-line channels. And really, our intent is to try and see how we can increase our coverage….our intent is to see how we really start becoming a very significant player as we move forward,” Rajgopal said in the earnings call transcript post the announcement of Q4FY23 results.

On ramping offline distribution, he said, the company is looking to increase its footprint across the country. In fact, in the first five months of the current year the company has almost covered the number of retailers it did the whole of last year. “It is the first time we’ve achieved this feat, so it’s a fantastic achievement, augurs very well as we enter into the season, which I believe will be quite a swing this year compared to the prior years because of the later Diwali,” he said.

The company is also witnessing a good build up on the e-commerce platform, digitisation. It has been working on global CRM tools, IoT in its manufacturing sites and also on digital-first approach for consumers and printers in order to create readiness as more players get into the market.

Hold on to EBIT margins

Akzo Nobel, which witnessed an almost 10 per cent growth in the fourth quarter of FY23, saw a “sharper growth” from the B2B segment. The retail business also witnessed faster growth in the smaller towns than in the large urban towns. The premium segment grew by high double digit. Though it had some challenges in some of the economy segments, it has been addressing those moving forward.

The company, which witnessed 32 per cent growth in EBIT margin in the fourth quarter of FY23, is hopeful of holding on to the margins at steady levels.

“So we are in that zone where now for us building scale takes precedence or driving one leg, which is driving profitability. As far as EBIT margins are concerned, we’ve committed to double-digit profitability. But yes, we do see a bit of challenge. Our endeavour is to hold the margins where we are right now…. and not really with improving EBIT,” he pointed out.

Nearly 70 per cent of the company’s growth in the last two-to-three years has come from three segments —mass market, waterproofing and economy. The company is looking at some product innovation and differentiation in the premium segment, he said.

The company’s A&P (advertising and promotion) spends as a percentage of its total revenue had dipped over the years to almost 1.7 per cent, whereas it has been around 3-3.5 per cent for other players, he said and added that the intent would be to get back to 3-3.5 per cent immediately.

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