Growth drivers of Paint Industry

1. Increasing level of income and education: The increasing proportion of young population along with increasing disposable incomes is leading to a change in consumer habits. The Indian economy is shifting from a savings economy to a spending economy. With more income at their disposal, people are now ready to pay for better products and paint is no exception.

Educated consumers are more brand conscious and seek value in what they consume. Thus, paint companies offering value-added features like non-toxicity, weather protection, texture, eco-friendly production, etc. will attract more demand. These value-added products enable the manufacturers to earn a better premium as compared to the regular paints, thus offering higher margins.

2. Increasing Urbanization: Urbanization is leading to a shift from temporary houses to permanent houses. Urban houses are well-designed in its interior as well as exterior aspect. This calls for more houses being painted using medium and premium paints. For urban houses, interior design is becoming a fashion statement and a lot of paint is used to decorate the interiors. This will lead to an increase in the per capita consumption of paint which will increase the overall demand of paint. Urbanization also brings more nuclear families. More nuclear families mean more number of houses even for the existing population thus further driving the demand.

3. Increasing share of organized sector: Decrease in taxes on key raw materials will improve the position of the organized players. The Organized sector is expanding its distribution network and adopting the installation of tinting machines at retail outlets. These tinting machines offer a wide variety of colour shade options to choose from. The unorganized players are not in a position to offer such facility as it is comparatively capital intensive. Shift in use, from distemper segment towards premier segment is also shifting market share from the unorganized sector to the organized sector.

4. Development of the Realty, Automobile and Infrastructure sector: The growth of the paint industry is largely dependent on the development of the realty and housing sector, as decorative segment generates about 70% of the total paint demand from this sector.  The Automobile segment generates more than two-third of the demand for Industrial paints, and hence is the growth driver for Industrial Paints. The Infrastructure segment creates direct demand for paints as well as creates indirect demand through supporting the growth of the realty, automobile, FMCG and other industries where paint is used.

The growth potential in the above 3 sectors is immense, the paint industry being dependent on these 3 sectors is expected to grow along with them.

5. Availability of financing options: Easier housing finance and auto finance is expected to favour more people to buy houses and travel in personal vehicles. This will drive the growth of housing and automobile sector, of which the Paint industry will get its share.

6. Increasing Penetration in the Rural Markets: Paint usage in rural areas is generally in the distemper segment, hence dominated by the unorganized players. Demand in rural areas is dependent on agriculture, which is dependent on the monsoons. With the development of irrigation facility, the dependence of agricultural output on monsoons will be on a decreasing trend. Also, with the modernization of agriculture and accompanying development of rural India, consumer preferences are expected to improve. Paint companies are expanding their distribution network in rural parts of India, which is a relatively untapped market for the organized players. These factors supported by the increasing penetration of the paint companies will help drive the demand for paints.

By : Reema Kapoor

ICIS, NOIDA