by Sonu Bhasin
Rishma and Raninder got married soon after. Life changed for Rishma after she became the Yuvrani of Patiala. She had given up her job at the bank and she now understood that her desire to study more also could not be achieved. Within a year of her marriage she gave birth to Seherinder Kaur, her first child. Raninder and she had moved back to Delhi within a few weeks of the wedding. Capt. Amarinder Singh had bought a house in Jor Bagh. The only problem was that he had bought it along with the tenant who lived on the ground floor.
‘It took a long time to get the tenant to move out. And therefore, we had only the first floor with us,’ said Rishma. The first-floor house had only two bedrooms and a small drawing room. One bedroom was for her in-laws, which left the smaller room for the new couple. And when Seherinder Kaur was born, the drawing room virtually became her nursery. It was a far cry from the sprawling farmhouse and the acres of space that she had become used to at her father’s farmhouse. ‘But Patiala was very different. It was a huge palace,’ she said.
After her other children were born, Raninder and Rishma decided to move to Patiala. ‘Tikku wanted his children to grow up familiar with their heritage. So, he decided that we should all move back to Patiala,’ said Rishma. She took charge of the large house there.
After a few years at Patiala and once her children were in school, Rishma realized that she needed to get back to work. During the intervening years she had kept in touch with the company, but her children and family had been her priority. Once she started reconnecting with the Berger office she realized that her father and uncle had done well with the company in the intervening years!
Forty-four
‘Sapno Ke Rang, Bane Sang Sang’
‘YOU CAN MAKE THE COLOURS OF YOUR DREAMS YOURSELF’
Berger Paints had indeed done well. Kuldip was the chairman of the company now and gone was his initial diffidence. He was the true owner of the business. Paints was a business he knew well and it was a business he was passionate about. Subir Bose, the CEO, understood his chairman and appreciated the knowledge he brought into the business.
‘It was good to have a chairman who asked us the right questions,’ said Subir as he described the interactions with Kuldip through the years. Berger, till the Dhingras came on the scene, had got accustomed to cursory meetings and shallow questions in the board room. ‘Now the questions were pointed and focused. Earlier we could get away by faffing. But now no bullshit was possible. You could not fool Kuldip,’ said Subir.
Kuldip has always said that destiny had played an important part in his success. It was destiny again that was on the side of the Dhingras in the 1990s. The paints industry had been stagnant and even shrinking during the 1980s. Paint manufacturers were struggling with the high excise and import duties. Manmohan Singh presented his landmark budget in 1991. The liberalization of the economy did not happen overnight. It took a few years for the government to implement the changes introduced by Manmohan Singh.
‘The first major change for us happened in March 1993. The excise duty fell to 35 per cent and the import duty was almost halved,’ said Subir. The market reacted positively to these changes. For many years the prices had gone up because of the increase in the various duties imposed by the government. In 1993, there was for the first time a marginal reduction in prices due to the reduction in duties and taxes. The demand in the market skyrocketed. Berger was at the right place at the right time and in the next six years moved up from being the seventh largest in India to the third largest paints company.
One of the reasons that Berger was able to grow faster than the industry from 1993 onwards had to do with its suboptimal operations during the 1980s. Berger, which had been struggling during the 1980s, had used that time to streamline its operations. Costs had been brought under control but capacities and working capital had been a problem since the Mallya days. In late 1991, the deal with the Dhingras was made public and Kuldip became the vice chairman, and in 1992–93 the Dhingras pumped in the first tranche of much-needed funds. The infusion of funds coincided with the time when the tariffs and duties were brought down by the government. Berger now had additional capacities through the UK Paints factories, fresh funds to keep the operations going and a market that boomed with increased demand. ‘I am very blessed that luck has helped me many times,’ said Kuldip.
It was not only luck that saw Berger grow. It was the focus on the business, which started from the very top. Kuldip had always been the face of UK Paints. Gurbachan was more the back-room man managing the factories and production. The same arrangement continued even at Berger. Both brothers had bought Berger, but it was Kuldip that the management saw and interacted with. ‘We did not see Mr GS much as he was more involved in the factories. And he was also quieter than Mr KS,’ said one of the old-timers at Berger.
One of the advantages of the cash infusion was that the company was able to bring down the cost of raw materials. ‘We never used to have money to pay for the supplies and would ask for a credit period. This would increase the cost as the interest had to be built into the cost. Having ready funds available freed us from the tyranny of our suppliers!’ said Subir. The cost of raw materials went down and Berger converted 60 per cent of dealer to the cash-and-carry mode. ‘I had introduced the credit system where the trade would be able to book their orders only if they had paid for their previous one,’ continued Subir. ‘And now when the demand came we started flying,’ said Subir gleefully. Berger grew by over 17 per cent in 1993–94 while Asian Paints, the largest paints company in India, grew at only 8 per cent, according to Subir. He also added that Berger grew by 23 per cent in 1994–95.
The company also shifted focus in the products. Berger had been known for its protective and industrial paints including primers and enamels. But the largest market in India was for decorative paint in the water-based category. They were called the emulsion paints. Berger did not have products in this category and had been struggling to compete in the decorative paints category. Demand in this category was not only booming but was also more profitable. ‘We had been in the decorative paints segment and we got the management to fill the gap,’ said Gurbachan.
Subir understood this and worked with the Dhingras to fill the gap in their offering. The problem was that Berger was an unknown entity in the emulsion paints category. Asian Paints and Jenson and Nicholson were established and the shelf space in the dealer showrooms was already taken up by them. The dealer had no space to hold yet another brand of paint. Besides, the working capital of the dealers was tied up in the stocks of Asian and Jenson and Nicholson. Since these were the market leaders, the dealer could not afford to cut down on stocking the various shades offered by these companies. Thus, the dealer also had a working capital problem.
Each dealer would store twenty to thirty shades of emulsion paints from each company. The choice of the shades was made based on the history of sales through the dealer. However, the dealers did have customers coming in and asking for a particular shade that was not available. Thus, it was a challenge for the trade to stock Berger Paints. There was simply no space even if the dealers had the money. Kuldip understood this space problem very well as he had sold paint himself at the Amritsar shop. He looked around for a solution to his problems.
The solution came in the shape of a computerized machine—the colour-tinting machine introduced by Jenson and Nicholson in some parts of the market. Kuldip remembered Subir Bose talking about these machines at a review meeting and wanted to know more. Subir was happy to provide details.
The colour-tinting machines were the size of a small ATM and were essentially computerized colour mixers. The computer in the machine had formulas for a number of paint shades stored on its microchips. Each machine could store upwards of 5000 shade formulas. Each shade had a shade code attached to it.
‘If you wanted a particular shade of paint, the dealer had to simply punch in the shade code into the machine,’ explained Subir. The machine would then drop the colourants or the pigments int
o the paint can, which had the base variant of paint. The dealer could choose the base variant from pastel, medium and dark. For a darker colour the dark base was chosen and for a lighter colour, the pastel.
‘Each colour is a mixture of various basic colours. The machine was programmed to drop the required colour pigments into the can,’ he explained. Once the pigments were in the can, the lid was closed and taken to a gyro-mixer. A gyro-mixer is nothing but a mechanized mixer. The arms of the mixer held the paint can in a vice grip and the gyro-mixer machine then took the can around rapidly. This vigorous shaking ensured that the pigments got thoroughly mixed into the white paint. When the can was subsequently opened, the inside paint was of the desired colour shade.
Kuldip listened to Subir with great interest about these colour-tinting machines. Kuldip remembered his days at his Amritsar shop. He looked back at the difficulty of storing many different types of colours of paints and the working capital it required. He also remembered the number of customers he had to send back due to unavailability of the required colour. He also thought back of the time when the customer liked the shade available but wanted it in a lighter variant. He understood immediately the opportunity these machines offered Berger Paints.
‘From just sixteen colourants each machine could produce 5000 shades of paints and that too with a much less working capital. Just imagine if in Amritsar I had to store even one can each of the 5000 shades. Possible hi nahin hota [It would not have been possible],’ Kuldip exclaimed.
Kuldip realized that the machines could reduce the requirement for space for the dealers and their inventory management could also improve. However, the biggest benefit of these machines according to Kuldip was the fact that the customers could be given a shade of their choice.
‘If Jenson and Nicholson had introduced them already in 1990 why were the dealers not using them?’ I wondered aloud. The reason lay in the economics of the machine. Each machine cost approximately Rs 8.50 lakh. In the mid-1990s it was a large amount for any dealer. Jenson and Nicholson were unable to take the capital expenditure of these machines.
Kuldip had become a co-owner of a multinational brand but his street instincts were still alive. He remembered his annual 2 per cent bonus scheme that had worked both for the dealers and the Russians. Subir was told to work on an innovative marketing tactic and to put together a sales incentive scheme for the dealers for these colour-tinting machines. Once the scheme was approved by the chairman it was pushed aggressively by the sales team in the market. The dealers responded with enthusiasm. Within a couple of years Berger was able to install 400 machines, one-third of the total machines installed. From an unknown in the emulsion paints category, Berger became a big brand with a strong presence.
‘We backed our on-ground sales incentive schemes with an original television commercial. The catchphrase was, “Sapno ke rang, bane sang sang [You can make the colours of your dreams yourself],”’ said Subir with pride. Asian Paints, the market leader, soon followed with their own campaign which turned iconic—Mera wala cream!
It, however, took Asian Paints one more year to launch their own version of the colour-tinting machines. This time was enough for Berger to go out aggressively into the market and expand the dealer base for water-based products where the company market share was virtually negligible in the mid-1990s. The novelty of the colour-tinting machines proved to be the initial draw but the practical benefits of the machines soon overcame the sheer novelty. As the dealers started signing up Berger decided to develop the southern market where it had low market share.
‘The south market is the best market in India and we were not present there,’ Subir said.
‘Why is the south market the best?’ I asked Subir.
‘The southern part would have a growth of almost double that of the northern part,’ he explained. The education levels in south India coupled with better industrial growth led to wealthier households. People were ready to spend more to keep their homes in better condition. Berger used the colour-tinting machines to open up the southern market for itself. ‘And that became a huge boost,’ said Subir.
While Kuldip was focusing on the sales, marketing and overall business development with the Berger management, Gurbachan was doing what he does best—focusing on the manufacturing and processes, purchase, and the civil construction of paint factories. ‘When I first went to the Berger factory in Howrah I was very surprised. It was an old factory making industrial and protective paints. In fact, our UK Paints factories were better than that as they produced at higher levels but at lower costs,’ he said. Gurbachan too had initial apprehensions about dealing with the management of what had been a multinational company. ‘The managing director, Biji Kurien, was like an Englishman himself!’ laughed Gurbachan. ‘But when I saw the factory I told myself, ‘I can handle all this!’ he continued smiling.
Gurbachan had been running the UK Paints factories single-handedly since 1982 when Sohan Singh had his stroke. ‘We were not only producing Rajdoot brand of materials for the local markets but also for exports to the Soviet Union. Our factories were also supplying to Jenson and Nicholson and to Shalimar Paints. Berger was aware of this and of the quality we were producing. I was familiar with the machines and the other equipment. The Berger factory at Howrah had had no new machinery because of lack of funds. But their R&D was much better,’ said Gurbachan.
UK Paints had not invested much in R & D. However, most of the formulations had been developed in-house and with help from their technical collaborators—Glidden Co. Gurbachan and Mukherjee, their chief chemist, had worked in Glidden’s laboratories in Cleveland, USA, and had developed decorative paints suitable for India. Rajdoot had thus focused on selling decorative paints in the Indian market. ‘I saw that Berger was largely into industrial and protective paints,’ said Gurbachan. Protective paints are coatings that are used to protect metal and concrete surfaces of chemical, steel and power plants, bridges and refineries from corrosion and erosion. However, the margins were much better in the decorative segment, and Gurbachan had the expertise to guide the teams at Berger. ‘My brother worked on the Berger management to enter into the decorative paints segment. But the management was apprehensive. They kept saying that they did not have the money to get into the decorative category. They did not have the containers,’ said Gurbachan. Berger had been short of funds during the Mallya days and decorative paints segment did need huge investments in factories, packaging materials and attractive cans. Further investment was required to build the brand as well. ‘Basically, the confidence levels were low,’ explained Gurbachan.
The Dhingras had the confidence but the challenge was to transmit that confidence into the management. ‘UK Paints had a great factory manufacturing attractive printed paint containers for Rajdoot Paints and for exports. I knew about all the costs, the material used, the printing process for the cans,’ said Gurbachan. The decorative segment is very different from the industrial segment. The decorative segment caters to retail consumers and the industrial segment caters to corporate customers. Decorative paints account for three-fourths of the overall paint market in India and the demand comes from households both in the rural and the urban areas. Though price-sensitive, the decorative paints segment generates better margins for the manufacturer.
‘My biggest challenge in the initial years was to get the buy-in from Berger teams about implementation of new ideas. I also arranged for Glidden’s engineering team to guide the team at Berger. The first reaction of the Berger team used to be “we know it all” and “what will this foreign engineer teach us?” I used to get frustrated at times,’ said Gurbachan. But he continued to push for implementation. ‘Subir Bose was always open to new ideas and that helped,’ said Gurbachan. Kuldip was pushing the sales and marketing and overall business development and Gurbachan provided the thrust from the manufacturing.
‘I kept pushing for setting up of new factories, new facilities. I wanted a modern resin plant to be set up, I wanted newer m
achineries,’ he said. The Berger teams, during the 1980s, had become accustomed to doing things according to their own will. Supervision from the bosses had been minimal. Guidance almost non-existent. ‘In fact Berger had no civil engineer in their team,’ said Gurbachan. It was not surprising, therefore, for Gurbachan to run into passive resistance from the Berger team.
‘They were apprehensive about their own ability of doing all that at low costs. I had done all of that myself and knew that it was no big deal. But I guess they were used to the multinational style of working,’ said Gurbachan, somewhat disparagingly. He also found that the effort on production and sales was suboptimal while the expenses were in line with the market. ‘Fizool kharchi mujhe pasand nahin thi [I don’t like wasteful spending]. So I told them to manage with lower production expenses with better and larger machines for bigger batch sizes,’ said Gurbachan.
The wheels turned slowly but surely. The management realized that the owners knew their stuff and sometimes even better than they did. The fact that the sales teams on the ground were marching with confidence generating more orders than before also galvanized the teams to get their act together. ‘We were getting the orders and needed to fulfil them. Actually, when Subir Bose took over as the managing director he was able to implement our vision much better,’ said Gurbachan.
The Berger teams knew that the factories of UK Paints were capable of producing quality material. Further, they knew that the UK Paints factories were already manufacturing decorative paints. It would have been galling for the erstwhile multinational to find out that should they fail to produce decorative paints, the Dhingras would simply use the UK Paints factory to produce it!
2000 Onwards
‘Mr Dhingra drove us hard to achieve targets but the results were for all to see. Berger Paints moved up many notches’—Subir Bose, ex-managing director, Berger Paints.