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Sri Lanka's Nippon Paint in DIY strategy to kindle demand
26 Jun, 2014 08:35:44
By Anushika Kamburugamuwa
June 26, 2014 (LBO) - Sri Lanka's Nippon Paint Lanka is pushing into the do-it-yourself market as weak spending power coupled with higher labour costs has led to a slump in demand, officials said.
"As an industry we are not doing very well. This is not common to us but even the other companies face a similar situation," Yasas De Silva, Brand Manager of Nippon Pain Lanka (Pvt) Limited told LBO.

"This is probably to do with the disposable income with the end users. That’s the main issue.

"When it comes to paint, it's the least important part of everyday life of the people. People spend more on their essentials.

Listed Tokyo Cement Plc has reported that sales fell 13 percent to 2.3 billion rupees in the first quarter of 2014 from a year earlier, indicating a slump in construction activity.

ACL Cables, power cables maker said, revenues fell to 2.3 billion rupees in the March quarter from 3.1 billion rupees a year earlier while gross profits surged to 539 million rupees from 428 million rupees.

In Sri Lanka due to import protection, prices don't fall fast even when international commodity prices go down due to import protectionism practiced against the people by the state, critics have said.

Sri Lanka's economic activity has slowed following a balance of payments crisis which triggered high inflation after mid 2012 due to currency depreciation.

He said though interest rates are low, people are not yet taking loans with building material costs remaining high.

Nippon Lanka Paint, which is an affiliate of Nippon Paint Japan sells under the brand Nippolac and says it has a 23 percent market share in the decorative paints segment.

It is also making inroads to the automotive paint market from last year, which is estimated at about five billion rupees a year.

Before 2013 the market has grown about 20 percent year and had then it has stopped growing.

With weak demand stocks remain with dealers for longer periods at the moment.

"We give 5-10 four liter buckets for each dealer in each colour," Yasas said. "We have to maintain many dealers island wide and day in day out we are adding stocks.

"So when the market is not doing well our stocks gets stuck and we do not get paid and we are facing an outstanding crisis.

"Dealer will say 'I can’t pay because it won’t get sold. If you really want you can take the paints back'. We have never experienced this kind of a situation in the market."

There was also heavy discounting among paint makers amid rising demands from dealers.

"Dealers keep asking more and more discounts," De Silva said."So all the companies end up giving various discounts over each other and the growth of the industry will slow due to it.

"Every paint company is losing to the dealer and the dealer is enjoying the huge mark up

"Dealers sell paints where they get a huge discount. It’s a discount battle that we are engaged with. That's why the companies have to engage more with the customer, so that the buying decision and the power will remain with the customers."

A key factor that discourages people is also the high cost of labour.

"The labor cost is very high rather than the paint," De Silva said. "That's another challenge the entire paint industry is facing."

Nippon Paints is pushing a DIY strategy in a bid to kindle demand and rejuvenate the market.

"So you have to come up with more innovative ways and get people engage with Do-It-Yourself kind of ways to grow the market," De Silva said.

Nippon Paint Lanka has just launched a mobile app where customers can try colours and visualize how their house will look before buying paint.

It will also enable the customer to blend the colours and build up their own colour.

The users who don’t have a smart phone can experience the same in the web tools by just uploading a photo of their house.

"People who use the internet in Sri Lanka picking up in a rapid pace," Raja Hewabowala Managing Director of Nippon Paint Lanka said.

"This is high time for us to enter and capture that market."

Hewabowala said there are about four million internet users in Sri Lanka and two million of Face book users.

"That’s a smart sign and with that we can do miracles with colours," Hewabowala said.

Nippon Lanka said the company also in the process of hiring painters to create a painter team for every district to undertake the work for a better rate.

"There are people who do not have time to do it by themselves. So those people need a painter for their needs," Silva said.

"We are planning to create a painters team for every district starting from Colombo which we undertake the job for them at a very nominal rate.

"We have to do lot of ground work by hiring painters and measuring their skill levels and train them if they are no skilled enough to do a professional painting job."

The project will be launched in mid-2015 in Colombo district De Silva said.

Update II

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1. Jayarathne Jun 26
I must say this is one of the superb story that i have read about paint industry. We do talk about GDP , Electricity , Vehicles and Ports but these industries get un- noticed. Well done LBO. We were proud as a nation who buy lands and build home for our selves where as western countries govenments does it for their people due to lack of human resources and high cost. I think Sri Lanka is also heading towards that direction.

Raw material costs are really high and the long process of the banks to get a loan discouraging people. Plus Sri Lanka has no town plan at all where if anybody wants to build a house it should be under the plan of the govenment which makes every procedure much more nicer and make good environment. The authorities should look into it and people also should support without blasting at each and every steps that government takes.