Rakesh Rao, CEO of Crown Berger Kenya Ltd, East Africa’s largest paint maker, talks to Jayne Flannery about maintaining the company’s leading position in the region.
Although the global economy is still struggling to recover, Crown Berger Kenya can point to the healthiest of balance sheets. Firmly established as East Africa’s leading paint maker for over 50 years, profits after tax rose by a heady 180 per cent during the last financial year, while overall revenue rose by 34 per cent to $31.5 million.
“Not only have our sales and profits grown, but we are also trading from the position of a very positive cash flow with almost zero reliance on bank finance,” states CEO Rakesh Rao.
The company manufactures and distributes an extremely broad range of decorative paints, industrial paints, marine paints, powder coatings, automotive paints, resins, adhesives and wood finishes. This balanced portfolio means that there are numerous applications; so a downturn in one sector, such as ongoing weakness within the automotive industry, does not seriously impact on overall sales.
The Kenyan economy has slowed, but continuous investment in infrastructure improvements last year still saw an increase in activity of more than eight per cent within the building and construction sector. Almost two-thirds of the total cost of commercial and residential buildings is accounted for by fittings and finishes, where paint has an integral role.
To date, the company has focused on the premium end of the paint market, where it has a market share of over 60 per cent, but the recent launch of a new economy range is expected to quickly boost sales at the lower end of the market.
“People buy from us because we are the most respected brand in the marketplace,” explains Rao. “Our name inspires trust and confidence. We are the only paint manufacturer in the whole of East Africa to be publicly listed—we are listed on the Nairobi Stock Exchange—and this gives us a great deal of professional status.
“Here in East Africa, most manufacturing enterprises still tend to be local family-run businesses,” he continues. “At Crown Berger on the other hand, we manage our business to the highest international standards and seek to adopt world-class quality standards and practices. This difference in management focus is very important in shaping the way that the marketplace views us,” he explains.
Production is based at a plant in Nairobi, where 400 people produce over a million litres of paint every month. Output is marketed principally under the Crown brand. “Enhancing our productivity has been a very important facet of our success,” Rao continues. “Over the last five years a programme of continuous improvement and kaizen has seen us improve our productivity by 100 per cent. This has been done without any investment in new plant, simply by making better use of what we already have.”
All of Crown Berger’s facilities now have ISO 9001:2000 accreditation; and the company has invested in a world-class effluent plant capable of processing 15,000 litres per day. The company has also become the largest SAP Business One user in Africa, which has greatly improved inventory control, production planning and communications.
Decorative finishes are largely a matter of taste and style, and fashions change quickly. To maintain market interest, the company has pioneered a steady stream of technically advanced product innovations. The latest new product launch has a wood protection system as its centrepiece. The Woodcare 365 range greatly extends the life of wood fittings and Crown Berger believes this aspect of the product offers important environmental advantages, as well as long-term cost savings to architects and planners.
Another innovation was the launching of an exterior product which carried the tagline ‘To Last the Lifetime of the building’. The new product, branded as Crown Variations, offered a new concept of lifelong decoration—with no maintenance. This product follows the leading products of the world which embrace smart maintenance.
Meanwhile, the Crown brand itself has been reinforced by a cutting-edge, award-winning advertising campaign; and over the past decade, Crown Berger Kenya has attracted a host of similar accolades. In 2006, it was awarded the Marketing Society of Kenya’s Most Improved Brand award, followed by second place in 2007 with the Best New Product Launch award.
Crown Berger has also opened a third paint gallery in Nairobi’s Parklands estate. This is aimed at providing the construction industry with a training and education facility while offering a showcase for Crown products. The first gallery of its kind at Westlands has seen turnover increase eightfold since it opened two years ago. All training is provided free and so far thousands of local painters have benefited. Meanwhile, correct use of Crown products means they deliver all the intended benefits.
Although Rao still believes there is scope to grow further in Kenya, he is now casting a keen eye towards opportunities further afield. The creation of the Common Market for East and Southern Africa (COMESA) has also created a raft of new opportunities. The trade liberalisation programme which began in October 2000 has gradually seen the elimination of tariff and non-tariff barriers to intra-regional trade.
“The opening of a large regional market through COMESA is a major opportunity and gives us a big incentive to expand our business in East Africa, particularly as now there is no export or import duty to pay,” Rao affirms. “We have had a presence in Uganda for the last three years, but we are already selling products into a number of other East African states, and expanding our distribution network throughout the region is a big priority.”
However, Rao is clear that the company does not intend to create a network of manufacturing subsidiaries. “We still have capacity at our plant here and we are very proud of the safe, waste-free environment we have created. Also, there is a real problem in other East African countries with attracting the skills and expertise needed to run a successful enterprise. We are very fortunate in Kenya that we can easily find the calibre of people that we need,” he explains.
“The opportunity that COMESA offers is to generate more sales and I believe we can expect to double our turnover again over the next five years,” he concludes. www.crownberger.co.ke
