About Asian Paints:-

Asian Paints Ltd is an Indian multinational paint company, headquartered in Mumbai. The
company is engaged in the business of manufacturing, selling and distribution of paints,
coatings, products related to home decor, bath fittings and providing of related services.

The company has come a long way since its small beginnings in 1942. It was set up as a
partnership firm by four friends who were willing to take on the world’s biggest, most
famous paint companies operating in India at that time.

Over the course of 25 years, Asian Paints became a corporate force and India's leading paints
company. Driven by its strong consumer-focus and innovative spirit, the company has been
the market leader in paints since 1967. Today, it is double the size of any other paint
company in India. Asian Paints manufactures a wide range of paints for decorative and
industrial use and also offers Wall Coverings, adhesives and services under its portfolio.

The company is also present in the Home Improvement and Decor segment and offers bath
and kitchen products. The company also introduced lightings, furnishings and furniture in its
portfolio. In the Health and Hygiene segment, Asian Paints offers range of Sanitizers and
Surface Disinfectants.

Today, the Asian Paints group operates in 15 countries across the world across four regions
viz. Asia, Middle East, South Pacific and Africa through the eight corporate brands viz. Asian
Paints, Asian Paints Berger, SCIB Paints, Apso Coatings, Tubman’s, Asian Paints Causeway
and Kaiso Asian Paints.

Asian Paints in India, Bangladesh, Nepal and Indonesia (Asia)

Asian Paints Causeway in Sri Lanka (Asia)

Kaiso Asian Paints in Ethiopia (Africa)

Tubman’s in Fiji and Samoa (South Pacific)

1. Asian Paints (AP) Distribution Strategy:

a) Prevailing Market Situation: Previously, for Indian paint business, distribution

was the most crucial task for any new entrant. Both physical distribution and channel
management posed formidable challenges. The foreign companies and their
wholesale distributors dominated the business. The foreign companies appointed a
few traders as their wholesale distributors and allowed them to perpetuate a situation
of monopoly. Each distributor was assigned a large territory and was given the right
to operate as the exclusive channel of the company in the assigned territory. The
trade terms were also very liberal. The companies also extended virtually unlimited
credit to the distributors. The credit out-standings for the supplies made throughout
the year were required to be settled by the wholesale distributors only at the year-
end, at Diwali time. These distributors had neither the compulsion nor the
motivation to invest in distribution infrastructure. They were not required to move
out to semi-urban and rural areas. They concentrated on big cities where they could
make the sales without much investment in distribution infrastructure and market
development. Also, they were shutting the doors on any new paint company seeking
an entry into the business. In other words, these distributors controlled the paint
business and were making it impossible for a new paint company to enter and
establish itself in the business. Asian Paints sized up the scenario correctly and
formulated a unique distribution strategy. In the normal course, a firm entering the
industry in this scenario would have opted for the low risk strategy of gaining a
limited access to the wholesale traders and be satisfied with a small share of the
existing business. But Asian Paints went in for a strategy that differed totally from
the existing pattern. Its strategy in fact, meant the polar opposite of the
established/existing pattern.

b) Bypassing Bulk Buyers Segment: Bulk buyer segment was the major segment of
the paint business in the earlier days and any paint company needed a share of this
major segment for sheer survival. Though, this segment was dominated totally by
foreign companies and their wholesale distributors, a company like AP would
normally have rushed to this segment and tried to garner a share of it. AP, however,
had a totally different game plan. Seeing that this segment was not a growth
segment, though it was certainly the major segment at that point of time, AP decided
to ignore this segment for the present and go to individual consumers. And that was
a crucial decision. It influenced every subsequent decision AP took in the realm of
distribution. Over time, AP proved to the paint industry that there existed a large and
bottomless segment in the paint business of India, outside the bulk buyer segment,
comprising of individual consumers.

c) Entry to Semi-urban and Rural Markets: Along with the decision to go to

individual consumer segment leaving aside the bulk buyer segment, AP also decided
that within the individual consumer segment, semi-urban and rural areas would
constitute AP’s priority market. All the major paint companies and their wholesale
 distributors were content with the market that was available in the urban areas. In
contrast, AP clearly saw that a large market for paints was emerging in the semi-
urban and rural areas, and felt it wise to tap this market. AP also understood that a
company like AP had also a compulsion to go to the semi-urban and rural areas. The
major companies and their wholesale distributors were not giving any worthwhile
opening in the big cities for new entrants. AP found it difficult to attract the
wholesalers in the cities to deal in its products. It had to necessarily turn to the semi-
urban and rural areas for support. AP wisely decided against committing all its
resources on a head on collision with the foreign companies and their big wholesale
distributors in the urban areas.

d) Going Directly To Retail Dealers: It was the next major strategic decision of AP in
the realm of marketing and distribution. Here too, AP totally broke with the
prevailing distribution practice. It totally bypassed the well-entrenched wholesale
distributors and went directly to the retailers. While AP’s competitors remained
content with their linkage with a handful of wholesale distributors, AP preferred
direct contact with hundreds of retail dealers.

e) Open-Door Dealer policy: AP followed the policy in the matter of adding retail
dealers to its network. The prevailing trend in those days was to limit the number of
dealers to the barest minimum. AP broke this trend and chose to use practically
everyone in the trade, who was willing to function as its dealer. It was as a combined
result of the policy of going directly to retailers and the policy of open door to
dealership that AP’s dealer network swelled rapidly. Even after achieving stability
and maturity in distribution, AP continued to follow a policy of continuous
expansion of dealer network. By 1990, AP was having a 7,000 strong dealers
network. By the year 2000, the number had swelled to 12,000. And even now, on an
average, AP is adding 200 to 250 new dealers every year and now in 2014, the
number reached to 35,000.

f) Nationwide Marketing/Distribution Reach: AP took yet another important and

strategic decision in the realm of distribution. Those days nationwide
distribution/marketing was not the standard practice in the paint business. On the
one side, there were the 1,000 odd small paint companies who, as a class, believed in
marketing their paints in limited territories in and around their point of production.
On the other side were the big companies, who as a class, believed in limiting their
distribution to the big cities. In contrast to both these existing practices. AP voted for
a nationwide distribution/marketing. It wanted to have an active presence throughout
the country, in all the geographical zones, states and territories.

2. Implication Of Distribution Strategy: AP’s distribution strategy described in the

preceding paragraphs had its associated implications. AP had taken due note of them and
faced them squarely.
a) Had AP concentrated on the bulk buyer segment, it could have managed with a
limited product range, at least, in the initial years. But, AP’s decision to turn to the
individual consumers necessarily meant a wide product range. In the nature of things,
the individual consumer segment involves a very wide choice in terms of products,
materials, shades and pack sizes. On top of this, AP believed in making products
based on the preferences of consumers. It gathered feedback from the consumers and
turned out products, shades and pack sizes on the basis of such feedback. This policy
resulted in a further burgeoning of the product range.

b) At the time of AP’s entry, paint companies were supplying paints in containers of 500
ml or larger. AP saw that there was a felt need in the market for paints in smaller
packs. All end uses did not require a large quantity. Moreover, it was common
practice for consumers to buy paint initially in a larger quantity and supplement it
with small size purchase to complete the job. AP decided to harness the business
opportunity and started supplying it paints in small packs- in 200 ml, 100 ml and 50
ml packs. This proliferation in pack sizes also contributed to AP’s growing product
range. AP was by now manufacturing and marketing as many as 2,000 distinct items
of paints, none of which was strictly a substitute for the other.

c) The policy of having the widest range of products, colours and pack sizes had it
implications on AP’s distribution. When 2,500 different items had to be made
available to the consumers, it automatically meant that the company had to be
prepared for high inventory holding in its various depots/retail outlets. Accounting
and sales arrangements had also to be provided for on a matching level. Naturally,
distribution was becoming more complex and expensive for AP.

d) The decision to go to the semi-urban and rural markets instead of confining to the
urban markets also meant enlargement of the distribution function. AP had to go in
for more dealers in order to serve the scattered semi-urban and rural market. The
decision also meant that AP could not opt for a simple, centralised distribution of its
products from its factory. It had to go in for a decentralised, field-focussed
distribution, with a network of depots located all over the country/marketing territory.
Without such extensive and intensive distribution network, it would not have been
possible for AP to cover the semi-urban and rural markets.

e) Through its decision to go retail, AP was getting deeply involved in physical

distribution and channel management. In the system chosen by AP, the physical
distribution-cum-channel management task was far more demanding, compared to the
wholesaler-oriented system practised by the other paint companies. While, for
companies that embraced the wholesaler-oriented system, it was enough to service a
handful of distributors, AP had to service a network of thousands of retail dealers.
Having taken the decision to go retail, AP necessarily had to create and service a vast
dealer network. It also had to create the physical distribution facilities required for
servicing such a large network.
 f) Extent of marketing territory and complexity of distribution organisation are
interrelated. The moment AP voted for nationwide marketing, it was getting into
intensive as well as extensive physical distribution and channel management. AP thus
had to create a nationwide distribution-cum-marketing organisation.

g) AP’s strategies made distribution the most important element of its marketing mix. And,
AP gave to distribution all the inputs that were demanded by it.

General Manager
Marketing

Sales Manager Sales

Manager Export Manager
Trade Industrial

Regional Sales Product Product Zonal

Manager Managers Managers Managers

Branch Product Product

Managers/ Depot Executives Executives
Executives

Sales
Supervisor

Sales Service Sales

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STEPS INVOLVED IN DESIGNING A CHANNEL SYSTEM

Formulating the Channel Objectives

Identifying Channel Functions

Linking Channel Design to product

characteristics

Evaluation of the Distribution

Environment

Evaluation of Competitor’s
Channel Design

Matching the Channel Design to

Company Resources

Evaluation the Alternatives and Selecting

the Best
 Distribution Tasks

Producer:
 The producer sells the paints directly to the consumer with no involvement with a middle
man such as an intermediary, a wholesaler, a retailer, an agent, or a reseller.
 The consumer goes directly to the producer to buy the product without going through any
other channel.

Agent:
 Agents or brokers are individuals or companies that act as an extension of the Asian
Paints company.
 Their main job is to represent the producer i.e., Asian Paints to the final user in selling a
product.
 Thus, while they do not own the product directly, they take possession of the product in
the distribution process.
Wholesaler:
 Wholesaler is an important chain of the channel of distribution because it is an agent
between a manufacturer and retailers.
 A wholesaler purchases the paints from Asian Paints in bulk quantity and re-sells it to
retailers in small quantity.
 Wholesalers play an important part in the distribution of goods.

Retailer:
 In the entire distribution chain, a retailer is considered to be the final link, who deals
directly with the customer.
 A retailer purchases in bulk from the wholesalers and sells the paint to the customers in
small quantities.
 A retailer essentially maintains a variety of merchandise.

Consumer:
 Consumer behaviour reveals how to appeal to people with different habits to the producer
or original point of sale. For ease of availability for the consumer, i.e., a good marketing
mix.
 Alternative Channel

 Before Covid 19 situation, Asian Paints used to use the three-level channel which is
similar to the two-level channel, except the goods flow from the producer to an agent and
then to a wholesaler.

 Agents assist with selling the goods and getting the goods delivered to the market
promptly.

 The agents normally receive a commission and are allocated the task of product
distribution in a particular area.

 The three-level channel is suitable for goods that are in high demand and with a target
market that stretches across a country.

Three level Channel

It refers to the channel where along with wholesalers and retailers, the mercantile agent is
also involved. Hence, the producer deals with a mercantile agent, then the wholesaler buys
goods from that agent, and sells them to retailers, who further sell them to its ultimate
consumer.
 After, the pandemic situation, company switched to the two-level channel follows the
following process :

 In this process, wholesalers generally make bulk purchase of paints, buy from the Asian
Paints producer, and divide the paints into smaller packages to sell to retailers.
 The retailers then sell the paints to the end buyers.
 The two-level channel is suitable for more affordable and long-lasting goods with a larger
target market.

Two Level Distribution

A two level channel encompasses two intermediary levels – a wholesaler and a retailer. A
wholesaler typically buys and stores large quantities of merchandise from various
manufacturers and then breaks into the bulk deliveries to supply retailers with smaller
quantities. For small retailers with limited financial resources and order quantities, the use
of wholesalers makes economic sense.

Why Use Two Level?

 Reduced costs
 A tighter focus on your core competencies
 More efficient marketing
 Wider customer reach
 Logistic support
 Easily available feedback
 Faster growth
 Stage #5
Evaluate the Relevant Variables

The basic categories of variables:

1. Market (customer) variables:
 Asian Paints has operations around the world. They are carried out through a network
of five regions worldwide, via the Caribbean region, the Middle East region, the
South Pacific region, South-East Asia and South Asia, with large resources spent on
R&D centres.
 Asian Paints’ major competitive advantage is its well-established, extensive
distribution network.
 The organization targets all- semi-urban, rural and urban areas. It launched an open-
door policy for dealers after entering the retail market and began a national marketing
and distribution operation.
 It has different manufacturing locations and is India’s largest. This dynamic network,
along with sales managers, executives and the sales team, manages all development
and delivery phases.

2. Product (or services) variables

 The industry comprises two main segments—application-wise—
decorative/architectural paints and industrial paints. The decorative/architectural paint
segment accounts for 70 percent of the total paint market while in the industrial paint
segment accounts for the remaining 30 per cent. Industrial paints are technology
intensive.
 The industrial paints segment can be further classified into automotive paints, marine,
powder coatings, high performance coatings, and others. Original equipment
manufacturers (OEM) of products such as automobiles, furniture and while goods
such as refrigerators are prime consumers of industrial paint.
 The automobile industry accounts for 50 per cent of the industrial paint market. A
good part of the demand is from shipping and heavy industry, Navy being the largest
customer in shipping.
3. Intermediary (middleman) variables

A. SOLE-SELLING AGENT/MARKETER: A ‘sole-selling agent’ or a ‘marketer’ is

usually a large marketing intermediary with large resources and extensive territory of
operation. He will be having his own network of distributors/stockists/wholesalers,
semi-wholesalers and retailers.
B. C & F AGENTS: They supply stocks on behalf of the manufacturer to the wholesale
sector or the retail sector. Their function is distribution. In essence, they are
manufacturer’s branches.
C. WHOLESALER/STOCKIST/DISTRIBUTOR: Operates under the marketer-sole
selling agent, where such an arrangement is used by the manufacturer.
D. SEMI-WHOLESALERS: Semi-whole seller are intermediaries who buy product
either from producers or wholesalers in bulk, break the bulk or resell the goods
(mostly) to retailers in assortment needed by them.
E. RETAILER/DEALER: retailers sell to the household/ultimate consumers. They
operate in a relatively smaller territory or at a specific location; they do not normally
perform stock-holding and sub-distribution functions. The stocks they keep are
operational stocks necessary for immediate sale at the retail outlet.
F. VALUE-ADDED RESELLERS: they are intermediaries that buy the basic product
from producers and add value to it or, depending on the nature of the product, modify
it and then resell it of final customers.
G. MERCHANTS: They are intermediaries that assume that ownership of the goods
that they sell to customers or other intermediaries. Merchants usually take physical

possession of the goods that they sell.

Stage #6
Choose the “Best” Marketing Channel
Today’s retailers increasingly recognize that new media, including web, mobile devices, and
social media, have given customers a wide array of new channels through which they
research products, make purchases, and give feedback.

Omni channel retailing describes the ways in which these companies attempt to contain and
leverage these multiple channels to improve the customer relationship, create more effective
outreach, and increase share of wallet. 

Having identified the segments, Asian Paints realized that given the vast differences in
customer personas and associated habits, Omni-channel presence was the only way for them
to fully

realize their aspirations. This led to an Omni-channel strategy that involved reaching out and
serving stake-holders in all 3 modes – Physical, Human, and Digital. Refer figure below for
more details.

With an Omni-channel strategy to capture a wide spectrum of potential customers and having
identified full lifecycle of customer journeys, the final frontier left was to extend the product
and service lines to include partners, contractors, architects, and interior designers. This
required building systems, processes and business models to cater to these new emerging
business models. All of this leading to a potential higher Top line growth in the years to
come.
 Stage 7

Select the Channel Members

Middle Man
Middle man is a slang term used to describe the role of a wholesale business within a
traditional distribution channel. A wholesaler typically buys goods from a manufacturer and
resells them to a retailer. For the wholesaler to profit, it must provide expertise and services
not available to the manufacturer or retail buyer.

One of the main reasons the middle man exists in the distribution process is to fill a gap
between the time a product is made and the time a retailer needs it in its inventory. Thus,
typical wholesalers operate one or more storage facilities where they hold goods purchased
from manufacturers. As retail customers need to replenish inventories, the wholesaler ships
them either to the retailer's warehouse or directly to stores.

How Asian Paints do chose the best middle men?

The Asian paints choses the middle men on the basis of below given conditions:-

 Transportation Management

Wholesalers are also commonly known as distributors, which describes their common role
in helping products and information move through the distribution channel. Wholesalers
often collaborate closely with retailers to ensure that goods are shipped just in time to meet
customer demand, but to avoid the retailer having excess goods in the store. Wholesalers
commonly manage truck fleets or other shipping processes to get goods out the door as
needed.
  Understand Market Demand

Understanding marketplace demand is another common responsibility of the wholesaler,

though this is shared with manufacturers and retailers in many cases. The wholesaler is
often described as the business that "carries" goods to market. Essentially, wholesale buyers
often make the call on whether manufactured goods will have enough demand from
consumers or business buyers to make it worth it to them to get involved in the distribution
process. They often collaborate with retailers to research customer demand.

Vertical Integration
In some cases, manufacturers or retailers make an effort to eliminate the middle man. If a
manufacturer sells directly to retailers or consumers, it can often generate greater profit.
Retailers can often get a better rate by buying directly from the manufacturer. When a
company carries out more than one distribution activity, it is called vertical integration. The
challenge in this endeavour is that your business must possess the expertise and resources
to function as the wholesaler along with your other operations.