Can Birla Opus grab a big chunk of the Asian Paints-dominated market?

Rakshit Hargave has done it before. In 2002, as the marketing director for Domino’s India, he was part of the team that turned a loss-making brand around and snatched the leadership of the pizza market from Pizza Hut. Can he repeat that success in the Rs 70,000-crore decorative paints market?

The big boy in this market is Asian Paints (revenue: Rs 35,400 crore), which towers above all the others with a market share of about 50 per cent. The other players are all old timers: Berger, Kansai Nerolac, and Dulux (AkzoNobel). Birla Opus wants to shake up this well-established club by getting to the No. 2 spot—profitably—within three years. If it does that, it may challenge the top spot in the long run.

How will the Aditya Birla Group venture achieve this? Hargave says that its challenger brand strategy is built around the 5D model: Design, Delivery, Distribution, Disruption, and Delight.

The group is going strong, having committed to a first-round investment of Rs 10,000 crore in the business. Why did Aditya Birla choose to make such a significant initial investment in the paints sector?

One, the market is large and growing at between 8 and 10 per cent, and likely to keep doing that. New construction and rising disposable incomes are among the major trends driving this growth. Two, with no major investment having been made in the business in recent years, the market is ripe for a shakeup.

Decorative paints is a peculiar and complex business: 

• While brands advertise directly to consumers, the final choice is heavily influenced by intermediaries (contractors, painters). Therefore, it is both a B2C and a B2B market.

• The consumer makes a brand choice only once in five to six years.

• There are innumerable shades and cans of many sizes in each, thus making the maintenance of innumerable SKUs (Stock Keeping Units) a nightmare.

Delivering the keynote address at afaqs! Challenger Brands conference in Bengaluru recently, Hargave took the packed hall through the 5D model, as he calls it: 

Design

Birla Opus wanted to challenge every aspect of the market, beginning with the product. Three years ago, it began setting up a world-class lab, which now employs 120 scientists. The stated intention: to create the most innovative product range Indian consumers had ever seen. If the product is superior and unique in its composition, it is difficult for rivals to copy it, reasons Hargave.

The final consumer can't easily make out a better product, but the influencers can. "Our R&D is a crucial aspect of our challenger brand strategy," says Hargave.

 "We’ve introduced many innovations, including spatter-proof paints that make life easier for painters, reducing the time they spend cleaning up afterwards."

The company aims to increase painters' earnings through the use of its brand. One, it claims that litre for litre, the product offers 15-20 per cent greater surface coverage. And two, for every 10 litres consumed, a painter receives one litre of white paint—so painting a ceiling is effectively free.

Rakshit Hargave, CEO, Birla Opus, addressing afaqs! Challenger Brands conference in Bengaluru.

Delivery

No new entrant has broken into the Indian market—not even the US-based Sherwin-Williams, the world’s largest paints company (2023 revenue: $23 billion), which took a shot at India about a dozen years ago. Why is that?

The simple truth: if a company can't win the dealers' trust in a high-volume, low-margin business, it’s dead. So, unless a challenger can give compelling reasons to switch, a dealer will stay with the market leaders.

Each product typically comes in four or five bases, which are different shades of the product. When a consumer selects a base and uses colourants at a dealership, she can create more than 2,000 shades. Moreover, each paint comes in cans ranging from one litre to 20 litres. A painter will need only one of these. The dealer can't stock all varieties. So, can he trust a new challenger brand to deliver the product promptly from the depot? 

The only way for Birla Opus to convince dealers was by showing commitment. This explains why the company has been talking up its Rs 10,000-crore investment from the outset, promising to set up six greenfield manufacturing plants across India.

"Our investment is so large that it leaves no room for retreat," explains Hargave.

The dealer network recognises this. 

Distribution

Paint dealers operate in a challenging environment, holding large stocks and earning slim margins. Birla Opus developed small and easy-to-store tinting machines, which are used to achieve the right shade, and gave them away for free to dealers. The internet-enabled machines provide the company with real-time sales information. "This way, I will sell him only what sells—the dealer will do as much business with Birla Opus despite keeping only 60% of the normal inventory,” says Hargave. Additionally, he consistently stocks the colours that consumers desire.

To ensure that a dealer gets the product he wants, Birla Opus has built a network of 150 depots nationwide.

“Distribution is a key part of our plan,” says Hargave.

Because distribution is so critical, the company hired a full-fledged sales force two years before launch, much to the astonishment of the dealer network. But the information they’ve collected and the relationships they’ve built are paying off now.

A Birla Opus model paint gallery

Disruption

The newcomer has focused sharply on the interests of the intermediate channel. Birla Opus has created an app that can be used to scan the cans bought (and immediately receive a reward), loyalty programmes, insurance, and training academies. It claims to have signed on three lakh painters even before launch. The company has gamified the buying experience for painters and created a tribe of brand advocates.

Delight

“This is all about improving the consumer experience. We want to make buying paint feel like a fast-moving consumer goods experience."

"They won't paint their homes every year, but we want them to interact with the brand more," says Hargave.

Birla Opus has developed a track-and-trace system that enables consumers to identify the manufacturing date and factory of a paint can. It will help with understanding warranties and creating the foundation for greater interactivity with the final consumer in the future. “When you build on legacy technologies, it becomes harder to put one layer on top of the other,” thinks Hargave.

The brand is attempting to impress consumers in various ways, including providing them with realistic visualisations of their homes, updating them on their paint job through a digital platform, and offering experience centres that assist them in making their choices. Since the brand is consciously trying to stand out from the competition in every way, even the launch ad, with its Pixar-like animation, went against the standard cues of a warm family home.

Even on the HR front, the overwhelming majority of the employees in most functions aren’t from the paints business but from areas like FMCG, durables, telecom, and e-commerce. “We may be a very large company, but we have the soul of a startup,” concludes Hargave. 

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