Berger Paints has come a long way from being a company with a British heritage to transforming itself completely into a company with Indian DNA in the last 100 years of its existence. As it celebrates its centenary this year, TNIE spoke to MD and CEO Abhijit Roy about this transformation. Here’s an excerpt of the interaction:
It’s been 100 years for Berger Paints. How has been the journey so far and what lies ahead for the company in the next 10 years?
It’s been a different type of a journey for us, from being a British boxwallah to being an Indian company, which delivers sales, delivers profit, and doesn’t sack people at the drop of a hat. We are today in the top 100 most valuable companies in India. We are No. 2 after Asian Paints in India, we are the fourth largest in Asia in paints and coatings, and the seventh largest in the world. Primarily our operations are in India and we also have a presence in Nepal and Bangladesh. In Bangladesh, we are the leader with 56-57% market share. We have operations in Russia and in Poland as well, which are direct subsidiaries of Berger India. We have acquired a few companies -- small ones -- in the recent past. We acquired the ICI India Rishra factory in West Bengal. We acquired Saboo Coatings, which is a specialty chemical company. We acquired STP Ltd, which is a construction chemical company, a few years back. And then we acquired Jensen Nicholson, Nepal. We have done an enormous amount of new things in the industry in the recent past. Much of it has been also copied by the entire industry including the leader. Earlier, we used to copy them, but in the last 8-9 years, we have been innovating and mostly they have been copying at a lower price.
When it comes to innovative products, what are they, can you elaborate?
So, the first one which we introduced was Easy Clean. The entire tinting system, which has become very common in the paint industry today where you have a machine, which contains whatever shade you want, that particular thing was initiated by Jensen Nicholson. They of course collapsed in 3-4 years after that but we continued. Then we created a product called Easy Clean, which is advertised heavily. That’s a product which has been a big hit. We introduced anti-dust paint for exteriors that is again a very interesting product. Patti, which is used to level the wall, is a commodity product. But we created a product called Waterproof Patti. We combined waterproofing with Patti and launched it as a waterproof Patti at 70% price premium to normal commodity Patti. We, for the first time, have launched the Express Painting service with automatic machines, which can do the same job in much less time in a much cleaner way.
How is Berger Paints coping with fast technological changes?
Technology is very important, if you have to stay with the time, that’s something which you cannot ignore. We have done all the basics. This is a very high supply chain-oriented industry, and there are too many SKUs, too many dealers, you have to reach the right place at the right time. It’s a very complicated category. Without technology you can’t do it. We have taken Oracle instead of SAP and that’s the ERP backbone for us. We have different types of software, which we called o9 etc for the supply chain site.
Are you implementing automation in production?
We just set up a plant in Sandila, Lucknow. It’s a big plant with Rs 1,000 crore plus investments. This is a fully automated plant in almost everything. The entire paint production, storage, everything is automated.
With your Sandila plant, you have added 50% more to your existing capacity. What is the reason for choosing UP for such a big plant, and what are your big plans with that particular plant?
I have coined a term – Milte – to answer the question on the choice of location. Basically, Milte stands for all the necessary elements for us to set up our factory.M stands for the market. UP is a big market for us, we are very strong in UP and so it made sense for us (to have that plant in Lucknow). We are the market leader in Lucknow. In Bareilly, we are the market leader. In Aligarh, we are very strong. Moradabad, we are the market leader with more than 50% share in these markets. I stand for infrastructure. Does the state have good infrastructure? They gave us industrial land without any hassles. The plant is in the Sandila Industrial estate, which is very close to Lucknow. It is connected via all the expressways that they have created all around in UP. Labour is abundant in UP. They supply labour across the country. So, they’re available at the local place and cost-wise also it is very competitive. Then you know, if you look at the other two – T and E. T stands for transformation and E stands for ease of doing business. This transformation and ease of doing business is very evident in UP these days.
What are the steps Berger Paints is taking towards being ESG compliant?
Our Sandila plant in Lucknow is completely run by solar. Under normal circumstances on normal days we don’t have to buy any electricity from outside the grid, we can self-generate the entire power that is required. The ETP (Effluent Treatment Plant) process that we have followed there again is very unique. Liquid is not discharged into the ground and almost everything is being recycled and reused there. We are also working on water conservation. So, the plant scores very high on the green front.
With many new players announcing entry into the market, and increasing competition do you think there would be some threat to the incumbents?
Yes, competition is increasing, there’s no doubt. You know there have been many entries. In the past also many MNCs had come in. Now, some of the domestic players have also started getting in.JSW came in about 3-4 years ago, but hasn’t had any major success so far. Then JK has announced their plans to come in, in northern India and they have acquired one company called Acro Paints. Astral Paints, which has bought one Gem Paint, is also trying to do something. The big threat, however, will be Birla (group) because they have deep pockets to spend and they are investing big. We are prepared for some skirmish in the near term -- no one is going to leave or spare market share. The market has been growing at a rate of about 12-13% overall, and if one major player comes, it may take some share away. Our growth rate has been compounded at 14% over the last 20 years. Maybe under normal circumstances, we would lose about 4% growth and come down to 10%. And if we do certain other things better, maybe we can restore it back to 12%. So it’s not a major transformational thing that’s going to happen as far as we are concerned. And we should still continue to be able to grow at a reasonable pace.
You have been in the number two spot for a long time. Are you not eyeing No. 1 spot?
It is a very difficult task. This category doesn’t lend itself to certain transformations. There is no great technological breakthrough that one can bring about. You know the industry establishes itself with dealers, contractors and consumers. All three have to be broken together in order to penetrate the market. So, that’s not very easy (to dethrone someone). We don’t expect too much change (in the current hierarchy). If you look at the Bangladesh market, Asian Paints is 1/4th of our size in Bangladesh for the last 18 years. They have tried everything – they have tried the pricing route, put in two times more people on the ground in order to break through the distribution network. They advertised heavily. They tried all the tricks in the trade, and yet they stand where they are. So even in the case of India, if you look at the Lucknow market, we are the leader. As I said in Kanpur, Asian Paints is the leader. Each one of us has been trying to break into each other’s area for the last 20 years and we put in some of our best resources, and tried everything and yet it hasn’t worked much either for them or for us.
In the next 10 years, where do you see Berger Paints, in terms of turnover and market share?
That is very difficult for me to say – 10 years is a long time and I know my term ends before that. I maybe see the next five years. So, the next 5-6 years, we should be able to nearly double from where we are currently. So, we are looking at Rs 20,000 crore in next six years. So 12% is the growth rate that we should be able to generate in spite of the increasing competition. We have been generating 14% in the past, which means we are doubling almost every five years. This time, it will take one more year for us to double.