Berger Paints eyes sales boost amid mass consumption slowdown, focuses on premium products: Abhijit Roy, MD & CEO

Sort of. Usually, it tends to move up a bit in the festive season. There were excessive rains this year. And therefore, there was a bit of a disturbance there. In general, the economy has not been growing at a fast pace. There was a slowdown, and coupled with that, the weather took its toll. So, overall, the growth rate was muted in the second quarter. However, we still grew at about 5 per cent odd in volume terms, the value was even lower because we had taken a price decrease last year of 5 per cent.

There was some decent traction during Diwali at the end of October. It was reasonably good, I would say. Volume growth remained at about 4-5 per cent, and that was where October ended. November continued on a similar track. We are hoping that December will be slightly better compared to what happened in October and November. January-March quarter will be even better. The bases are less, and the volume-value differential that we had because of price decrease, impact will go away in the fourth quarter completely

So far, the volume growth is coming from network expansion and construction chemicals and waterproofing. Construction chemicals and waterproofing are areas where we are growing well. The other segment that is doing reasonably well is the project segment. Project business in the urban areas has moved up a little bit because buildings are coming up and builders are making a lot of announcements.

Mass-consumption products are not growing as fast as premium products. Premium and luxury products are doing better. Mass-consumption products, commonly used by the general population, are the category most affected by the current economic slowdown. 

Yes. The gross margin has improved. Last quarter (Q2), it went up to the highest level in the last eight-nine quarters. However, since sales growth is not happening to that extent, expenses are not covered fully. Obviously, it is going to impact my EBITDA margin. In this scenario, we must consider increasing sales to boost profitability. So our focus is on increasing the sales. We are gaining market share in terms of value. We have gained market share over the last five quarters. And we would like to continue to do that as much as possible to keep improving our market share. We are a clear no. 2 in terms of market share. We are distinctively away from No 3 and No 4 players. The market leader (Asian Paints) is declining slightly in terms of market share. If you look at the total sales, we are around 20 per cent of the total sales in India, decorative and industrial, put together by the organized players who publish their results. We will gain 2 -2.5 per cent from current levels despite increased competition in the next three years.

First of all, this information is incorrect. Our installed capacity is still much higher than that of Birla Opus. That is very clear from the capacity that we have already installed on a three-shift basis. The second part is capacity, which means little or nothing. First of all, it is to be compared with the production that is being done. And then, much more importantly, what sales are being made? Regarding production or sales, they are much, much lower than what we are doing. The third part is that, ultimately, we are still operating at about 60-65 per cent of our capacity in the paint trade. So, capacity is not a constraint for us. So, what is the point in trying to become No. 2 in capacity? I think we should put up the capacity when the sales move up.

So there is a lot of scope for distribution expansion in upcountry and urban areas. In urban markets where we were very weak, we have formed a separate team now to focus only on the urban markets. Therefore, we are building up our presence in Bengaluru, Hyderabad, Chennai, Mumbai, and Pune, where we are relatively weak. In the next five to six months, we should be improving our presence in all of these urban centres. In upcountry areas, too, there are large network gaps in many big states like Tamil Nadu, Maharashtra, Karnataka, Rajasthan, etc., which we are trying to bridge by putting more front soldiers/manpower/resources on the ground.