From Bags to Bulk
Cement gets sold in India in 50 kg bags, in the retail market, which is 65-70 per cent of its total sales. Therefore, it is not a surprise that appearance of the bag, its colour, design, finish and overall presentation is somewhat important in helping the retail consumer making a choice. What would come as a surprise, however, is that most of the cement sold in the remaining 30 per cent of the market, the institutional or non-trade segment, is also packaged in 50 kg bags. The reason for this anomaly is that the cement supply chain has not yet upgraded itself to transport, handle, transship and store cement in units of larger quantities.
But of course, some special cement related products like white cement, putty, waterproofing compounds, coloured/pigmented cements, are packaged in even smaller units. It is not rare to find 25 Kg or even 10-5 kg packs of some of these products in the market. In some countries in South/Southeast Asia, we can expect to encounter 25 kg packs of plastering cement also. But all these cases do not make up any sizable chunk of the cement industry's output.
In the urban areas and other construction hotspots, the bulk cement consumers like ready mix concrete companies, large construction companies and big developers are preferring to receive cement in bulk, but only a few cement companies are currently geared to supply cement in bulkers to these customers. A few other cement players had initiated experimentation with concepts like bulk terminals, one or two tonne bulk bags, bottom opening bulk bags, and such other bulk-handling strategies, but essentially these remain a mixed bag of successes and failures!
It is expected that as the retail segment shrinks, and institutional segment grows, as an inevitable outcome of increasing urbanization, then at some point in time in future it might start to make sense in investing in modern facilities for handling and storing bulk cement. And we do hope that this happens sooner than later, because the bulk handling of the commodity is obviously more environment-friendly on several counts, such as saving of packaging material like paper or polyethylene, higher transportation efficiency, lesser leakage/seepage into the atmosphere etc. The matured economies of Europe or USA or Japan or Australia have already more or less eliminated cement bags. Even the mid-range countries like Thailand, Malaysia, South Africa or Turkey are moving much faster in this direction. Together with this shift from bags to bulk, institutional segment gradually tends to becomes larger than retail, and as this happens, cement brands lose their sway over consumers. This whole movement of segments, marks a major structural change of the cement marketplace, and runs concurrently with an economy's transition from "Developing" to "Developed".
In the longer term, we look forward to the shift from bags to bulk. However, in the shorter term, the industry is perhaps waiting for some good news on GST rate (from 28 per cent to 18 per cent) to emanate from the forthcoming budget.
Sumit Banerjee Chairman, Editorial Advisory Board