The scenario post demonetisation and economic reforms can give a boost to the sector but not before a sluggish and corrective phase.The government’s thrust on infrastructure and road sector spending is likely to be the key driver of material demand in current fiscal year 2018 (FY18), said a report by CARE Ratings. The report hints that cement consumption would witness a growth of 3-4.5% during the year, that means a possibility for new able sites for construction and building material requirements in years to come.
However, the report also hint that while the government’s “Housing for all” initiative, would partially compensate for otherwise sluggish activity in the real estate sector, still the overall demand from particular housing requirements may see a decline. The GDP growth forecast by Indian agencies or international organisation like IMF points to a growing figure beyond 7 percent. But many of the retail counters and wholesalers of wood panel products complain of piling up inventories, falling prices and struggling sales. The demand scenario in the end looks uncertain yet capacities are building up is genuinely asked by many people in the trade.
According to experts, the housing sector constitutes almost 65 percent of the total consumption of the interior and wood panel related building materials at present. It is also true that in ‘wood Panel and decorative material manufacturing segment’ thecapacity utilization is 25 to 30 % lesser than capacity already in place across different states in India. Now a seller has to think of not only selling to walk in customers or contractors of their connect instead reach out to remaining 35 percent of the market that is targeted only by organised brands. Once GST in place many companies would be able to reach out to remaining 35 percent of market share that was never ever targeted by them. If a serious working on marketing expansion by distributors and regional marketing/whole sale points are not considered the going ahead for many would not be easy and rosy.
The limitation on price increase, increase in selling and marketing expense and the rise in input costs may put pressure on the producer’s margins in year to come. Hence ultimately the manufacturers will have to consider price hikes in time to come and pass on the burden of rising costs to customers. In this process, there could be a test of internal strength of a company or the tolerance of an owner, where many would blink before it comes to the final test. A leading consultant for various large companies suggest ‘that an entrepreneur in wood panel manufacturing or distribution has to be market ready where he can sell volumes to certain pockets and sell value to end consumers’.
Points to be considered for Plywood industry;
Plywood as a product has a deep rooted history for Indian consumers and carpenters both. There has been a shift from plywood to PB/MDF/Glass in office category but the residential chunk is more or less still the same. The strong hold of plywood acceptance as a durable and strong product is continue to dominate the furniture making process.
The possibility to sustained demand of plywood among Indian masses for decades depends upon how the plywood industry evolves itself to remove its inefficient methods and ways.
The Indian household is carrying on with legacy of the habit and emotional connect with very durable interior/furniture concept and hence choose plywood as a most trust worthy option. The result is ‘unlike other countries’ plywood uses still holds 80 percent of the market share.
The growth in rural areas is still giving growth avenues to plywood demand and that is where every old or new plywood industry/brand is rounding off.
The statistics indicate that growth in housing will lead to more demand of plywood but with a clause which are: -
1. Dealers must earn good by selling plywood.
2. The plywood must be economical and good quality.
To combine the both mentioned above, a manufacturer and the whole-seller has to rework on the process, pricing and way to work. The manufacturer has to reduce the cost of raw material and wastage where a whole seller has to market the product on its own instead of expecting to let the brand sell itself belief.
To add to the woe of ply producers, the Indian plywood industry is heavily tilted on timber availability and timber prices. Since Agro-farming of poplar and eucalyptus is erratic and fluctuate in prices, the risk of plywood industry can only be overcome by cutting down wastage and raw material cost. Saving fuel and energy, increasing production volume thus reducing overhead expenses and producing consistent quality will be the key characteristics of a successful plywood factory. The feather in success cap could be added by expanding retail network with strong brand image and brand push.