"Announcement of new infra projects should boost industry"
- Nikesh Parekh, Span Cements
Based out of Mumbai, Span Cements is an exclusive stockist of UltraTech and is one of the leading cement suppliers for non trade and trade segment. Under the dynamic leadership of it's proprietor Nikesh Parekh, the company has grown by leaps and bounds. Span Cements caters to the needs of small, mid size as well as large size clients. In an exclusive interview with the ICR, Parekh speaks on the latest trends in consumer demand patterns associated with brands and brand identity.Excerpts...
What are the latest trends in buying patterns between bulk and bags in cement channels? Is there any change in buying patterns over the last two years and how do you see it panning out in the next two years?
Bulk cement is consumed by RMC manufacturers. Earlier the concept was to split the bags. Now, everybody has installed silos and has a big plant. In South Mumbai, you can see new towers coming up. This is practically due to space constraints. Because of that they are doing RMC order. This is the reason bulk cement has moved there, and this will continue.
A cement bag goes for pure retail purpose. It goes into retail shops and retail shops give it to small contractors. With the entry of specialised products like ready-made plasters, tile adhesives, mortars, polymer mortars,etc., bag cement in retail will slowly diminish in future. In other developed countries, you do not get loose bag cements. Bagged cement will 100 per cent diminish in India.
Is there any change in supply chain strategies over the last few years versus traditional pattern of company-godown-dealer-last mile delivery? What are the evolving low-cost structures?
There has been a change in supply strategies over the last few years versus the traditional pattern. Now the company is giving minimum delivery of 60 bags to the customer. Earlier, even less than 60 bags were ordered. We get online bookings and deliver it adding unloading charges. This also has become cost effective for the customer.
With emergence of mega distributors for a state or region, is there any change in the relationship with the manufacturers that is happening?
It is not happening at least in Mumbai. They are not appointing any sort of mega distributors. We have not heard of that.
Now are there changes in strategies adopted by dealers for attracting customers.
The company comes out with schemes for retailers, masons and contractors. The schemes in fact are pretty good. During festive season, they come up with some scratch-card scheme. This will keep on happening. UltraTech has got a scheme for masons and small contractors called e-Kutumbh, which is for masons and small contractors.
What are the latest trends in consumer demand patterns associated with brands and brand identity? Are small brands comparable with big brands, or they need some pushing?
It all depends on the region. Bharti is a small brand but now it is becoming a big player in Mumbai. So they will do something to create their own identity. Cement companies having their home markets will pay heavily on advertising, policies, promotions, and so on.
How the cement channels are comparable to other peers in other channels like steel, sand and bricks?
Cement is a pure commodity. We have virtually become insurance agent for our principal (manufacturer) and financier for our customer. We have become more of a financing agent than a marketing agent. Steel is one industry that is also competitive but there you get interest in case of delayed payment. In cement, there is no such thing.
As far as sand goes, they have to make payment, because sand is a very rare commodity. Natural sand has become a rare commodity. Whatever available is manufactured sand.
Seasonal and regional disparities affect cement prices. How do they affect your strategies?
Builders are affected by RERA. In fact, RERA is affecting us because of low funds availability and there are many other things with builders.
How do you see price patterns changing in your region in near future, and why?
Now with the government announcing so many infrastructure projects and with 2019 being the election year, there will be a big movement in the cement industry. The government will have to push to show to people that infrastructure movement is happening. Prices will also go up. During the April-June period, the demand should be on the higher side. There is also consolidation happening among manufacturers.
Is there any change in price patterns due to GST?
No.I don't see any change. Because of decrease in demand, prices have gone so low that there were many brands coming from the north. Earlier when they were ordering 10 rakes, but now it has come down to a mere two. Because of the prices being so low they feel it is better to market it in their home area.
Is anything happening in rural areas? Is there any growth?
In rural areas, only infrastructure will happen, road building and other stuff. Housing doesn't happen so frequently. In Pune, you can see it is totally overbooked. Sale of real estate is down, so builder is unable to generate funds, and with all these scams happening, bank credit has become scarce.
Financing has become tight everywhere. We have a certain capacity and I cannot go beyond that or else I will also fall. If any builder calls me and tells me that I can only pay in the first week of April and not March, I will have to accept it. Otherwise they will stop taking my supplies. In payments to companies, we work on one principle, that is - RTGS 48 hours.
Do you have to immediately bill the client because of GST?
No, we have to build it. With an e-way bill coming in, things will be completely different. Assume that I want to send the order of 70 bags that you ordered. I will have to prepare an e-way bill, take a number, write it and then send it. Otherwise, if anybody catches him in the middle of the road, transfer will be stopped. This means even the movement is tracked now.
What are the areas you are dealing in apart from cement?
I deal in everything except steel, tiles and wood. I deal in paints, cement, construction chemicals, tile adhesives, and I also deal in branded products. I have agencies of all big companies like Asian Paints, ExxonMobil, Nerolac to name a few.
I am the exclusive distributor for UltraTech Cement. In Mumbai, there are many distributors right now, and I am one of them. UltraTech has come up with a range of value-added products like tile adhesives, plasters and also polymers.
- BS Srinivasalu Reddy