Asian Paints
We should look outside our industry and geography to find inspiration from everyone, including African startups
KEY TAKEAWAY: Asian Paints of Mumbai has built a $35 billion market cap company by bringing beautiful decorative paints to rural areas in India. Their sales and logistics networks extend deep into India's 660,000 villages, 8,000 towns and cities, and 500 large urban agglomerations.
Their ability to bring glamorous colors to that many remote places with otherwise drab construction, enabled them to build a strong brand amongst 900 million people, most of whom have been ignored by almost all of the world's large companies, including those in India.
Yet, Asian Paints seems not to be capitalizing on this immensely impressive advantage and strong moat. They could scale much more rapidly and profitably if they were to take a page from mPharma.
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Over its 80+ year history, Asian Paints has focused on decorative paints, i.e. those used in homes, rather than industrial coatings, i.e. those used in factories. Individual retail consumers in otherwise ignored locations are far likelier to to develop brand enthusiasm than manufacturing companies who view paints as utilitarian inputs.
The value of their extensive logistics and sales network is immense. Replicating it would be almost unimaginably difficult and time consuming. Even if some competing paint company were to attempt it, they would be confronted by a populace with enthusiasm for a competing brand.
It could very well be that Asian Paints is not taking full advantage of its biggest strength - its sales and logistics network in India. Expanding into less profitable, less moat protected businesses like industrial coatings and big cities in foreign countries where their Indian network is useless, is likely less attractive than increasing their product line in India.
Reimagining itself not as a paint company, but rather a glamorous retailer with a unique presence in 660,000 villages, 8,000 towns and 500 metros seems a better use of its advantages.
Suppose it outsourced paint manufacturing to a foundry. Then suppose it sought out beautiful and trendy curtains, blinds, floors, ceiling fans, kitchens and furnishings, all sold under the Asian Paints brand.
Now suppose it implemented a modified version of mPharma's international expansion strategy wherein it sourced these items, and distributed them via local logistics firms. And suppose it gave these distributors tracking and analytic software to maximize their efficiency.
Instead Asian Paints has branched out into industrial coatings via a 5% investment in Akzo Nobel. It learned the hard way that industrial coatings is a commodity business where the industrial buyer has the end user relationship.
Akzo Nobel's revenue and net income have shrunk to half of their 2013 levels, by cutting off the most unprofitable activities. Despite this drag, Asian Paints has grown its net income nearly 17% per annum since then.
Next up the largest collection of the world's best luxury brands...other than Hermes.