With the spike in raw material costs and the pandemic-induced supply chain constraints pushing up the prices, consumers are shifting from premium paints to mid-range and economical products, according to a senior official of a leading paint company.
“The prices of paints and other building materials have gone up due to increased demand and less supply. When it comes to painting, people either postpone the process or go for lower grade, mid-range, or economy products. Premiumisation has been hit a bit,” Mahesh S Anand, President, Nippon Paint (India) Private Limited (Decorative Division) told BusinessLine.
“We are witnessing 20-22 per cent industry inflation across all categories of paints due to unprecedented increase in raw material costing,” he says.
Nippon’s range spans ₹600-800 per litre for premium, ₹300-500 for mid-range and ₹150-250 for economy.
“This situation might continue for another six months or so. Once people accept that the price rise is uniform across all building materials and paint is also part of that, they may decide to buy premium products. We expect the segment to pick up after that,” he added.
Raw material shortages
Anand said even after two years since the onset of the pandemic, the issue of raw material shortages in the paint industry has still not normalised due to vessel shortages and other challenges.
Approximately 40-50 per cent of raw materials for the paint industry are dependent on direct and indirect imports.
“Also, sea freight has gone up drastically, and input costs have also gone up because of Covid, supply chain disruptions, and rupee devaluation. The inflow of some raw materials was also affected due to the latest Bureau of Indian Standards (BIS) norms,” he added.
Traditionally, 60 per cent of the paint industry’s business comes from the replacement market (repainting), while 35-40 per cent of its business comes from new construction.
Growing demand
Anand said with the government’s increased focus on infrastructure projects and a greater push for smart and affordable housing, the demand for new painting businesses has been witnessing good growth.
“The decorative paint consumption in India is only about 4 kg as compared to 7-8 kg in developed countries. So, there is still a large scope for paint consumption to go up. On an average, people paint their houses only once or twice every 15-20 years, but now it has reduced to 6-7 years. The industry is looking at how to further reduce this interval,” Anand said.
He added that paints, which used to be meant only for colour and protection, today have several functional properties such as Unique Absorption Technology (UAT), air purification, antiviral and anti-bacterial properties, etc.