Due to the current boom in the construction and housing sector, the paint industry is experiencing rapid growth. In 2016, the housing sector’s share in GDP was 6.71% and it has maintained a growth of 3.99% over the past three years. (Pakistan Economic Survey 2016). This growth is evident in the fact that the two paint giants, AkzoNobel Pakistan (previously ICI paints) posted a turnover of Rs 7.2 billion in 2015, compared to Rs 6.9 billion in the previous year (ANPL Annual Report 2015), and Berger, a turnover of Rs 5.08 billion in 2016, compared to Rs 4.3 billion in the previous year (Berger Annual Report 2016).
Pakistan’s paint industry is valued between Rs 33 and 38 billion (source: Berger). The industry is divided into two segments; the organised one, accounting for 30 to 40% of the market, and the unorganised segment that takes in the rest. In the organised sector, major players include the multinationals (AkzoNobel Pakistan, Berger, Jotun, Kansai, Nippon) and local companies (Brighto,Diamond, Happilac, Master and Nelson).
Paints in Pakistan can be broadly classified into three categories; decorative, industrial and automotive. In the organised segment, the share of decorative paints is about 60 to 75% (source: Happilac and Berger). Decorative paints are either oil-based or water-based. They are further segmented into emulsions, enamels, distempers and deco paints for surface preparation and include wall putty, primers, special effect paints for interior and exterior use and wood polishing systems.
Following the entry of relatively new players in the market (Nippon, Kansai and Jotun), the rising demand and consequent competition, local and international paint companies have started aggressive advertising campaigns, with a focus on decorative paints for brand building and product promotion. These companies are working on innovation by producing environment-friendly products, introducing new finishes and textures along with an endless choice of shades. In terms of marketing, there has been a shift in focus, from painters or dealers to the end-consumer.
Aurora interviewed some of the major players to find out more about the reasons behind this rise in demand, the innovative ways they are adopting to attract consumers and new trends in the decorative category.
“Demand is increasing because customers are becoming aware about the various brands,” said Khawaja Ammad Khalid Sikka, Director Sales and Marketing, Happilac.
Abdul Waseem, Assistant Manager Marketing, Nelson Paints, was of the same opinion, adding that “people have more spending power; they are travelling abroad, seeing new concepts and designs and demanding them here.”
Both agreed that the globalisation factor has amplified the influence of western culture in Pakistan, with easy access to information on the internet playing a vital role. In their view, people are more conscious about their ‘house presentation’ and look forward to new product launches. Health and wellness, environment, convenience and technology were also important considerations, and contrary to earlier trends, when people used off-whites, ash-whites, light blues and pinks, people are now asking for all kinds of shades.
There have been changes in the decision making. “Earlier adults made the decision about which paint would go on which wall; now teens are actively involved in shade selection,” remarked Mohsin Bhatty, Marketing Services Manager, Berger.
“Earlier adults made the decision about which paint would go on which wall; now teens are actively involved in shade selection.”
Local companies believe that in contrast to previous times, when painting a house was only seasonal and the objective to merely give the living space a neater look, it has now become a family activity. Women have also become more proactive in negotiating directly with painters, dealers, contractors and architects. All family members enthusiastically participate in picking out colours.
Surprisingly, a significant chunk of this demand is coming from the rural segment, a positive sign for the industry. According to Waseem, if Nelson’s demand is worth 100 gallons in Sindh, about 15 to 18 gallons is the share of the rural areas. Furthermore, the demand is higher in Sindh compared to Punjab. In his opinion, there is a cultural factor at play here. “Sindhis love colour; it is part of their tradition. They pick the brightest colours for their walls. People in Punjab paint their house once every two years; in Sindh they will do it every year.”
According to Bhatty, painting a house has become a fun business; ‘Do-It-Yourself’ as an activity is trending among the urban population and many families are buying paints, brushes, rollers, colours and trays, and colour everything themselves.
Given that most companies in the decorative category have an identical range of products, they are trying to gain an edge through value-added services and instead of supplying only products, they offer ‘complete home solutions’ (material and labour).
Apart from advertising on TV, print and OOH, these companies are also active on social media and some have made their websites customer friendly with ‘how-to-paint’ videos, paint calculators and painting tips and guides to give customers a personalised experience.
Last year, AkzoNobel launched their Dulux Visualiser app whereby customers can pick any colour/shade with the help of their camera and through Augmented Reality (AR), apply that colour to any wall in their house. Berger offers a free Colour Advisory Service accessible through a UAN to offer professional advice on different colour schemes and types of paints.
A new trend in the main cities is that of the colour studios or decorative centres, which act as one-stop shops. They are set up like any other high-end store where customers can browse through different products, find out prices and buy the one that suits them.
“Just walk in to a decorative centre and walk out with a colour solution to make your dream home come true,” is the tag line of Dulux (AkzoNobel), which have decorative centres in Lahore and Karachi. Berger has a studio in Lahore and Nelson is the only local company to have a studio in Karachi.
Nelson, which claims a 45% market share in Karachi, has been focussing on OOH platforms, rather than on TVCs or print.
“We did not develop a TVC because we were generating adequate sales through OOH,” said Imran Shaikh, Marketing Head, Nelson Paints. The company says that although they have a good hold in the Karachi market, penetrating the higher segment is difficult, hence the plan to open a colour studio in DHA, Karachi.
“People have a mindset about local companies and it is difficult to convince people that a local company can make quality products, capable of competing with any international player.”
Nelson’s latest product Nelson Splendor has been exclusively launched for the higher income segment and is only available at their DHA Karachi studio.
Although every company tends to claim that their products are the highest selling ones, a trip to a local paint market revealed that if we go by the product category, the higher-tier usually tends to pick emulsions that are richly pigmented (water-based acrylic plastic emulsions or matt enamels, and in the lower-tier group, distempers are popular because of their cost-effectiveness.
Selling decorative paints requires extensive dealer networks, especially in the rural and semi-urban markets, and hence a strong supply chain is essential.
In terms of sales there are mainly four influencers; the customer, painters, dealers,architects and ofcourse word-of-mouth. Although the target audience for TV and print ads are end customers (both urban and rural), other marketing strategies are deployed to lure the other three. To market the product to painters or dealers, companies offer discount on sales (five to 10%) depending upon performance. Credit facilities are extended along with material gifts as incentives. For example, every year, AkzoNobel and Berger take their high performing dealers abroad. As for architects and interior designers, brands liaise with the Institute of Architects of Pakistan (IAP), pay regular visits to architects and interior designers to introduce products, and participate in exhibitions targeted towards business buyers and interior designers.
All brands agree that distribution is their backbone. Selling decorative paints requires extensive dealer networks, especially in the rural and semi-urban markets, and hence a strong supply chain is essential.
In spite of the innovation, improved distribution and enhanced ATL and BTL activities, the opportunities for the branded sector to gain share in the unorganised market are limited because most companies in the unorganised sector are non-taxpayers. Organised companies complain that the Government is not providing them with a level playing field and unless these issues are resolved, the organised sector will not be able to reach its potential. “The Government needs to take action against companies that are tax evaders and involved in unethical marketing practices,” said Bhatty.