Berger Prefers to Go Slow and Steady, Doesn’t Take Bold Risks: CEO Abhijit Roy

I passed out from IIM Bangalore. In our times, on the first day recruiters were Asian Paints, Unilever, Citibank and three or four other companies. I got selected on the very first day and joined Asian Paints.

That's how, by luck, by happenstance, I got into the paint sector. But I quit after two and a half years. In Kolkata, in those days, there was some major agitation and there was a lockout in the branch operations. After four or five months of this painful existence there, I decided to quit and then joined L'Oreal in sales. I spent two and a half years there. Then I joined Berger in product management and marketing.

At that point of time, they were introducing the tinting system called the “ColourBank machine”. I had exposure to that. They needed an MBA, preferably from IIM, and someone with exposure to a tinting system, which was a rare commodity.

I used to go around explaining to the dealers what the concept was and try to sell this machine. Berger Paints had no presence in the wall coating segment in those days. And this machine used to cost about ₹8.3 lakh in those days.

Why would people want to invest in a company which didn't have any strong brand or sell much wall coating? What would you do with the machine? But some of the dealers took that bold step, and we formulated one sort of a lease process. We used to collect ₹9,800 per month for 72 months and an initial deposit of ₹1.25 lakh, and that was the scheme which used to run for the dealers.

These dealers thought that this was a unique proposition because you can tint whatever shade you don't have to stock any material anymore. Whichever customer came, you could have thousands of shades, easily tint and give. The inventory levels came down, and they were able to satisfy the set of customers with this product. Sales started picking up gradually, and they made good money per litre sold.

The market leader came in one year down the line. They brought in a machine which was half our cost. They also brought in colourants which are used in the machine for the shades. Their cost was about one-third of ours.

In those initial years, people were not very sure whether it (tinting machines) would take off in India or not. It was expensive, and there was no surety about how many dealers would invest in it. That is why others waited, and when they saw that we had installed about 200-odd machines and were growing heavily, they got a bit worried and jumped into the fray with this low-cost machine and colourants in order to kill us off completely.

We had to furiously innovate. For example, we created coloured bases. We created a yellow base from which you could tint. If you put a little bit of blue, it becomes greenish in colour. You put a little bit of red, and it became orangish in colour. We created yellow, brown and grey bases.

Because those colourants were very expensive, we used to import them from Italy. The duties in those days used to be 60–70%, and then there was the freight cost. That is why it was almost three times the cost.

Instead of that, we started making these factory-made brown, yellow and grey bases. Just a little bit of colourant is added to the brown, and you get seven or eight different shades of brown, which were the most popular shades in those days in India for ledges.

Therefore, we could survive that onslaught of price cuts by moving to these coloured bases. The coloured bases are still the norm in India.

Because we had no money, no R&D or technology coming from abroad, nothing. Whatever we had, we had to develop on our own. To survive, we had to innovate. Because we were fighting ICI Dulux, which is the No. 2 in the world even today, and they had all the technology and strong brands. Then you had Kansai, which is a Japanese multinational and is No. 5 in the world. Both of these companies didn’t lack money. We had to fight all of these players.

That's (innovation) the only thing that we could have done in order to survive. We started doing a lot of good things. We introduced Easy Clean and Anti Dustt.

Around 2010, I had become VP Sales and Marketing. Till that point of time, I had risen up to GM Marketing. New players had come in in 2002, 2003, and then they were trying to improve their presence. We used to follow the market leader. Whatever they had, we would give the same product at a lesser price, just like new players are doing these days.

We used to do that to build up the ground presence first and have the dealer network running, so that we could exploit that network to sell more products.

Then in 2010, we started switching and decided that we will now innovate ourselves, advertise and try to sell. We had no money to advertise initially. It was a difficult task to manage within the funds that we had.

The first time Aaj Tak was getting introduced in India, and they came with a very lucrative offer, saying that since no one is now advertising, we are a new channel, maybe you can take the risk and if it works, then you gain heavily. We put most of our money into that channel. That channel took off, fortunately for us. The advertisement clicked heavily. We started advertising various interesting new products which we kept coming up with.

Both have deep pockets, they could spend a lot of money. The multinationals also could spend money. The current conglomerates who have come in also have deep pockets. They can afford to take losses for some time. The difference is that MNCs had their own technology, which they could quickly bring in. Some of them are very high-tech. They also had linkages to the paint industry for long years. They knew how it operates, except that they didn't know how the Indian market operated. They knew what was going on in the Middle East or in Europe or in the US. 

But we actually improved our market share this time around. The first year, we held on to it and improved our market share a little bit, primarily because I think we are very committed people, very passionate.

We didn't even bid for AkzoNobel. Though it would have been a very good fit for us, possibly. We walked off at the last moment. The final bid, we did not participate. It was valuation. We are risk-averse in terms of capital allocation. We don't take those bold risks. We prefer to go slow and steady. We have no ego as such that I am No. 1, No. 2, whatever you become, that is fine. As long as we are profitable, growing well and growing better than the industry, it's fine. That's what we have been doing.

The first is that we have a strong brand. We are making it even more powerful through this new ad, which will leverage our existing brand and make it stronger. We have many areas where we have no representation or big gaps. We will be increasing and improving our distribution network in those places. We'll be installing machines and improving our presence, especially in the southern and western states of India, where we have started working and are seeing good positive results. We can see even better results going forward. Typically, if you don't have a strong brand, then it becomes difficult, but since we have a reasonably good brand, it's easier for us to leverage this particular strength.

The second is construction chemicals and waterproofing, which I have said is an opportunity. The sector itself is growing at a good speed and we have a good presence.

The third area, which is a big area, is protective coatings and general industries. In both of these, we have been the leader in industrial paints in India for a long time. Since infrastructure spending has gone up, and many industries are coming to India and manufacturing in India, these two categories should grow very well for us. These are the three major growth levers.

Typically, we see half a percentage-point increase in market share on an annualised basis. Maybe two or three years down the line, we will be at 21, 22, somewhere around that. As I have said, we are not someone who looks at jumping from 20 to 50. This industry is also not like that. You have to sustain yourself over a period of time. Slow and steady is what wins the race, and that's what we are looking at.

As far as Birla is concerned, they have raised their prices by about 5%. Now, they are matched to the industry. So, to that extent, some competition has eased a bit, but they are still rebating much higher than us. They give 10% free material in many of their products. That is still continuing. But I think sooner or later, they will have to wind up all of these as well.

Gradually, that is going to happen. It's not going to happen immediately, but it is going to happen. I'm sure if they have to become profitable, they will have to do that. As far as other players are concerned, they have been very responsible. I don't see any major reaction as such. Therefore, overall, the industry's profitability remains decent. I think most of the storm has gone by.