Crown sees volume demand falls by 20% on reduced consumer appetite

By Reporter

Reeling under increasing prices and a fall in demand, paint manufacturers continue to grapple with soaring inflation numbers – a situation that has seen most consumers stay away from paint shops.

NSE – listed paint maker Crown Paints, for instance, expects sales to be moderate in the coming weeks against the backdrop of a rise in the import price of raw materials, stringent financial measures, and a reduced number of government-backed construction projects in the pipeline.

The firm’s CEO Rakesh Rao in an interview noted that sales demand had dropped by 20 percent since the start of 2023 and the trend might come to nought in the weeks ahead due to high inflation.

“I do not want to sound pessimistic but we are hopeful that the situation with the dollar for example should be able to change by May at least,” offered Rakesh, but was adamant that price revision in the previous months, had led to lower litrage of paint’s consumption among individuals.

The paint industry uses crude oil derivatives such as titanium dioxide, zinc oxide, solvents like mineral turpentine, and resins and additives as raw materials, which account for more than 50 percent of a company’s total expense.

The stock for such materials coupled with higher crude prices rallied to low levels last year owing to the disruptions of the supply flow brought by the war in Ukraine and the effects of Covid-19 both of which fractured the local market.

“There is low cash flow in the economy and most contractors are yet to be paid, but we remain optimistic,” said a hopeful Rao, who is predicting the cost of raw materials to drop in the second half of the year, which should give the firm an opportunity to grow its margins or reduce prices.

Cash circulating or the amount of money sloshing outside the banking system has been in short supply since the start of the year, which has been blamed on the soaring inflation numbers.

Kenya’s inflation soared to 9.2 percent year-on-last month from 9.0 percent a month earlier, according to the Kenya National Bureau of Statistics (KNBS), which said the growth was largely driven by food and gas prices. February’s inflation rate has broken three consecutive months since the rate fell.

It rose to 9.6 percent in October, its highest level since May 2017, even though last month’s rate was still above the government’s preferred range of 2.5 percent to 7.5 percent.

Inflation is a measure of the cost of living over the last 12 months.

The precipitous rise in the costs of food, fuel, and energy alongside more disconcerting factors including rent and wages over that period, suggests that the trend upward may not prove transitory – as supply chain upsets, consumer spending among other factors continue to erode the purchasing power of the shilling against the US dollar.

These factors tend to affect the performances of several consumer market sectors like the decorative paint market. Reduced disposable incomes among Kenya’s working class have ensured that secondary demand—from repainting existing houses and hotels has remained weak.

The market is expected to grow annually by 2.86 percent in the next five years according to a prediction by Statista.