How did Birla Opus disrupt the decorative paints market?

Rakshit Hargave’s experience in the consumer space is vast: early on, he was the brand manager for Maggi, the marketing director at Domino’s and later MD of Nivea India, among other assignments, before landing at Aditya Birla Group to get Birla Opus off the ground.

The Rs 70,000-crore decorative paints market is an unusually complicated business over which the much-loved Asian Paints has a vice-like grip. The only way Birla Opus can find a way in is by disrupting the existing order. Can it?

The following are excerpts from Hargave’s conversation with Sreekant Khandekar, co-founder and CEO, afaqs!. To view the complete interview, visit YouTube 

Sreekant Khandekar: Aditya Birla Group has diversified interests in chemicals, cement, telecom and metals. What drew it to decorative paints, a mature, century-old business? 

Rakshit Hargave: The group had been studying the business for a while. Whenever the group enters a business in a big way, the objective is to be among the top two players.

The group realised that the industry had a certain structure where there was a large market leader and the rest were all followers. Therefore, the group could create a sizable opening.

To convince dealers to stock your brand, you need strong manufacturing and logistics. Aditya Birla has a robust manufacturing background in many industries.

Secondly, through Ultratech Cement, the group owns Birla White Putty, a market leader. And putty is a part of the painting process.

Sreekant Khandekar: How big is the putty business in India?

Rakshit Hargave: If you add up all the organised players, it would be about Rs 4,500-5,000 crore. 

Sreekant Khandekar: So, you already had a relationship with dealers in paints via putty. 

Rakshit Hargave: Yes, all paint dealers stock putty. So, we already had an understanding of the paint distribution ecosystem, as well as an insight into the types of paints sold. Combine that with our manufacturing expertise. Incidentally, the group is entering various other consumer businesses. 

Sreekant Khandekar: What are the peculiarities of the paint business? Is it a B2B or a B2C business?

Rakshit Hargave: It is both. At one level, it is like the white goods business in that you get your house painted once in five or six years.

The category can confuse many people because paint is not just one product. There are various kinds of paints, and you end up mixing and matching when doing a paint job. Moreover, to get a particular shade, the dealer uses a shade generator tinting machine. 

Most importantly, there is no standard MRP, as paints are not sold in packaged quantities.

The labour cost exceeds the cost of the paint, making the category somewhat opaque. 

Because of this lack of transparency, influencers such as painters, contractors, dealers, designers and architects have a lot of influence in the decision-making. 

Sreekant Khandekar: Frankly, it sounds more B2B. In which case, why do paint companies spend so much on advertising and create pull? 

Rakshit Hargave: It is true that dealers have a lot of influence, but ultimately it is the end consumer who makes the final brand choice. That’s why I’d call it a hybrid category – both B2B and B2C. If you don't create a brand and leave it only to dealers, painters and contractors, they might end up selling a brand where they get the highest margin. So, there are these checks and balances in place.

Sreekant Khandekar: I notice that in your communication, the company keeps repeating that it is investing Rs 10,000 crore. Why is that? 

Rakshit Hargave: It is important for the paint ecosystem, especially the dealers, to understand our commitment to this venture – that we are here to stay. It creates confidence when he knows that we have six factories—140 depots and can meet his every need.

Sreekant Khandekar: You did a couple of things before launching that were unusual. One, you set up a large lab with more than 100 people. Two, you hired your entire sales force two years before launch, when they had nothing to sell. Could you explain both decisions? 

Rakshit Hargave: The homework before launch took three and a half years. We wanted to introduce products that surpass existing options.

We tested these products across 13 cities with more than 500 contractors and painters under different climatic conditions.

That is why our products are superior to anything that exists in the market. This kind of exercise has never been conducted by any paint company.

Sreekant Khandekar: Did you conduct extensive market research before deciding to create these products?

Rakshit Hargave: Yes. We used it to identify the qualities that can be incorporated into these products, which are currently absent in the market. We've also tested many of our products in labs. We've got certifications. You need certified products to be listed with many government entities. That’s why we needed such a strong lab.

Similarly, we hired the sales force two years before launch because we wanted to do a census of all the paint stores in India. We met all the dealers and geotagged them. We knew the size of every dealer and exactly what he sells. This helped us formulate our selling plan. 

On the day of launch, we possessed a solid repository of information regarding the sales and distribution system that would typically be accessible to a company that has been selling paints for three or four years. 

Sreekant Khandekar: How can a paint company engage with consumers considering that they buy the stuff only once in many years? Can technology help? 

Rakshit Hargave: Consumer behaviour is changing. While consumers typically paint their entire house every five to six years, there is a growing trend of people undertaking smaller jobs in between. For instance, a waterproofing job or applying textures to change the look of a particular wall.

Even if they are not about to paint their home, they still have a fondness for advertising from paint companies. They are also subconsciously forming opinions about the brand.

We are very tech-driven. One advantage of arriving late is that we have been able to develop a technology ecosystem which is probably the most advanced in the paint industry. We connect with our contractors, painters, and consumers through our app.

Sreekant Khandekar: What makes you think consumers love advertising? 

Rakshit Hargave: We have received so much positive feedback. I don’t think anyone in the country has created Pixar-quality animation as we had for our launch ad, Duniya Ko Rang Do, which was made in Brazil. The music from that film has become the ringtone for most dealers. 

One of the challenges we faced was how to create brand love. This gave us a very good foundation. 

The second campaign we launched, Naye Zamane Ka Naya Paint, aimed to humorously highlight that Birla Opus has excellent products. It represents a new generation of high-quality paint.

You're going to see more communication coming from us, which is going to be engaging and entertaining because that's how you want to build a brand.

The existing paint brands had similar communication. They would follow a celebrity model. They would have a similar depiction of a house with similar exterior visuals. There was considerable misattribution. We realised that many customers who saw advertising for brand A mistakenly identified it as brand B. We wanted to be distinct.

Sreekant Khandekar: This has been your first experience in the paint business. What has struck you as unusual about it? 

Rakshit Hargave: Certain aspects are markedly different from those in other consumer goods sectors. 

The first is the dealer ecosystem. Some of them are linked to a downstream ecosystem that includes painters, contractors, and customers. This system is highly focused on relationships.

While they are excited about Aditya Birla Group’s entry, it still requires significant relationship-building to generate more business. This is due to the choices available to these paint dealers and the power they wield. 

The final value addition at a paint retailer is remarkable, as it is the point at which you actually get the shade that you want. It's unlike retailers in other sectors who are largely traders displaying products, and consumers buy them of their own choice.

Here, the dealer converts the product into the shade you want. Thus, the exercise of building relationships is necessary, and it takes time. 

Paint dealers are driven by a personal touch, personal recommendations, direct contact, and a sense of belonging to a large family. In fact, the families of paint dealers are often interconnected with one another. It constitutes a complete ecosystem, providing a valuable opportunity for learning.

When a house is painted, it involves not a single product but a combination of various components. The house becomes a mini-factory where the paint is produced and applied. 

The process involves extensive testing, sampling, and managing expectations. It is a quasi-service industry where the brand has only so much control. Even though the contractor is an individual entity, if he uses Birla Opus, consumers perceive him to be a representative of the brand. If his work is sub-standard, the consumer may transfer her dissatisfaction to Birla Opus. So, the role of the contractor is quite significant. 

It is a collaborative effort between our team and this group of dealers and influencers that has led to the establishment of a company like Birla Opus.