Sat | May 30, 2020

Berger entering retail market with own paint stores

Published:Sunday | March 15, 2020 | 12:12 AMNeville Graham - Business Reporter
The Berger Paint Jamaica complex in Kingston.
The Berger Paint Jamaica complex in Kingston.

Berger Paints Jamaica Limited is entering the retail market with a line of its own stores as the paint maker tries to claw back market share and rebuild profits.

At one time, Berger was considered to have control of 80-90 per cent of the Jamaican market, but that has been eroded to just over 50 per cent as other paint makers and imported brands have deepened their footholds.

The first of three Berger stores will open by the end of April in Kingston, according to General Manager Shashi Mahase. The other two locations are expected to be sited in Montego Bay and possibly Clarendon or Manchester in central Jamaica.

The marketing specialist who took over the reins at Berger Jamaica last October 30 – he succeeded Barrington Graham, who held the job for 18 months – says the 3,000 square feet facility is not aimed at competing with other outlets that carry Berger products but rather at driving up sales to enhance the Berger brand.

The regional operations of Berger are owned by Trinidadian conglomerate ANSA McAL, which bought out the business in 2017 from its ultimate Indian owners, Asian Paints Limited, through subsidiary Ansa Coatings International Limited.

“This is really one way of managing our brand in terms of the look and feel of it. This will re-establish us as a premium brand. The store will, essentially, be an experience,” Mahase said in an interview.

“What we want to do is to appeal to our contractors, homeowners, and projects personnel who may want to come in and have a consultation and view all our brands on offer so that we can supply the needs that they, want,” he added.

DROP IN PROFIT

Berger’s entry into retail is one of several strategies being executed to drive growth at the company, including increasing production at the company’s Spanish Town Road, Kingston plant, and a programme to quadruple market share in the automotive paints sector.

In the past year, however, the company has ramped up its investments, with a fourfold increase in capital expenditure to $47 million, up from $12 million in 2018.

The push for more sales comes as the company is working to turn around an 83 per cent drop in profit. Berger’s bottom line shrank from $173.55 million at the end of December 2018 to $29.3 million at the end of 2019.

The decline stems from a $190 million, or seven per cent, drop in sales revenue to $2.52 billion from $2.71 billion in 2018.

At the same time, the company’s profit margins have been getting thinner: from 9.11 per cent in 2017 to 6.39 in 2018 and 1.16 per cent in 2019.

Mahase says lower sales volumes, accompanied by price discounts aimed at boosting volumes, accounted for last year’s revenue decline.

“The shortfall in revenues was brought on by lower volumes in the first instance and then the weighted average selling price being lower than budgeted. It was a case of reacting to market activity by offering discounts to increase volumes but that did not work out the way we planned,” the GM said.

MARKET SHARE

Berger now controls about 52 per cent of the market share, but Mahase insists that the company has not, as it were, lost market share.

“It’s not so much losing market share as it was a combination of the weather and the road construction, which affected some of our key clients,” he said.

Mahase says he wants to take Berger up to 60 per cent market share in the first instance and is looking to the automotive sector for new business. The paint company holds a 3 per cent share of that market segment but wants to grow its share to around 10-11 per cent.

Berger manufactures the top-shelf PPG automotive paints under licence from PPG Industries. In mid-2019, it introduced the Roberlo brand, a popular European paint line out of Spain.

“This brand is purely for the Jamaican market. We haven’t been carrying this brand anywhere in the other regions. We brought it straight out of Spain for the Jamaican market,” Mahase said.

He is looking at a two-year time frame to return Berger to a stronger profit position.

“I don’t think full recovery will come in the first year, but, certainly, the strategic initiatives that are in place but a better alignment of our sector teams should bring about some focus. By the looks of it, we expect that by 2021, we should be seeing a better picture,” he said.

neville.graham@gleanerjm.com