Scale Painted
Posted in Uncategorized on 08/12/2010 01:04 pm by admin
Scale Painted
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US $.99
Small Paint Companies Witness Fading Market Demand
The unorganised paint industry has been struggling to maintain a firm footing in the market, given the fierce competition that exists due to the presence of bigger players. For over a year, the smaller players in this sector have been striving to meet all the technological upgrades required and stocking demands. Moreover, the current recession has placed even more strain on these players.
In 2008, the rise in crude oil prices, mineral turpentine oil (MTO) and other petroleum-based solvents resulted in around 2,000 units closing down. Soaring input costs made it difficult for small paint makers to sustain their production. Thus, a number of these players recorded a considerable negative growth in the last financial year.
Small paint units affected by steady demand drop
Last year saw the unorganised sector struggle with the steep hike in raw material prices. However, now the sector is plagued with the dwindling demand due to the economic decline.
“The lull in activity in sectors like real estate and construction, the key consuming markets, has severely impacted the small-scale paint units. Reduced demand is compelling these units to cut down their production. This has resulted in lower-capacity utilisation,” commented D Sivaram, President of Indian Small Scale Paint Association (ISSPA).
The steady drop in demand has forced several small paint units to reduce their capacities by 20% to 25% in the last few months. Saddled with low-capacity utilisation, the profit margins of most paint units have shrunk significantly in the recent past.
Increasing obstacles
Aside from the current demand contraction, the small paint sector is also rapidly losing its competitive edge in the domestic market.
“With prices of raw materials and packaging and transportation costs soaring since last year, paint companies have been finding it increasing difficult to price their products competitively in the market. The current price difference between branded paints produced by big players and the finished products of small companies has narrowed down to a meagre 10%-15%. Consequently, more buyers are opting for branded paints,” said P Gupta, proprietor of a paint company in Hyderabad, Sri Trapu Coating.
In addition to the falling demand, the absence of tax incentives and subsidies has also affected small paint units. Small paint manufacturers have also been losing out to big players in terms of financial capacity, network distribution, product range, and access to improved technology.
Despite the increasing concerns, ISSPA anticipates that the unorganised paint sector would tide over the present crisis and witness a steady recovery from the second half of the current financial year.
For more detail on B2B Directory log on to http://www.bizxchange.in
About the Author
David Parks is a well known author and has written articles on SME News, B2B Portal, Trade Leads, suppliers, Manufactures and many other subjects.
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