A battle of paints hits Uganda

A paints dealer gives a customer a receipt in Kampala. Paint manufacturers in Uganda are struggling to get a share of the market. PHOTO BY STEPHEN WANDERA

What you need to know:

  • There is an intense war waging between the two key players in Uganda’s paint industry.
  • This war has gone from comparative advertising to legal, in a quest to gain a slice of the market. We analyse how this battle is affecting the paint industry from customers to dealers.

A war has come to Uganda but fortunately, no gunpowder is involved. It is a battle between the biggest players in Uganda’s paint industry, Kansai Plascon and Dutch global paints and coatings company, AkzoNobel. This war became clearer last week on Wednesday when AkzoNobel cancelled its licensee agreement with Kansai Plascon over what it deems as “numerous breaches” by Kansai Plascon.

Mr Johann Smidt, the managing director for AkzoNobel Decorative Paints in Sub-Sahara Africa said the move meant that Kansai Plascon who acquired the Sadolin East Africa paints brand would no longer trade, manufacture, sell and market Sadolin paints as they were earlier contractually obligated to do until January 2018.

According to Mr Smidt, following an acquisition announcement of its AkzoNobel Paints Licensee, Sadolin Paints East Africa Limited, by its competitor Kansai Plascon, AkzoNobel took the decision to issue notice of cancellation to the licensee.
Kansai Plascon, however, says they are going to court over the cancellation of the licensee agreement.

“We dispute what they are doing and there is a court case to be heard in the future to see if they behaved legally,” he said, adding: “We are selling Plascon and we are saying Uganda’s biggest paint company is now Plascon. We have not mentioned Sadolin and I do not think that is a fair comment.”

Advertising war
The crack between Kansai Plascon and AkzoNobel widened after the former intensified advertising efforts in the market forcing AkzoNobel to make a U-turn.

“In accordance with the contractual agreement, Kansai Plascon was obliged to sell, market and advertise the Sadolin brand until the end of January 2018. This responsibility has not been upheld and actions by Kansai Plascon indicate deliberate breaches of the contract as evident in the over-labelling of Sadolin packs with Plascon labels. This behaviour, amongst other activities, has left us with no choice but to cancel the agreement,” Mr Smidt says.
A quick stroll in Industrial Area, Mulago, downtown Kampala exposes you to the gaping fracture between the companies.

A giant billboard stands out below Luwum Street near Old Taxi park in downtown Kampala and reads, “Uganda’s biggest paint company is now called Plascon.” On the opposite side, just above Royal Complex, a new billboard reads, “Sadolin, Bring color to your world.”

Other broadcast billboards erected by Alliance Media bearing the brand AkzoNobel are visible along Entebbe Road.
These adverts have left a portion of the market confused. Mr Peter, a Sadolin Paints customer, says: “I do not understand when they say it is only a change of name but the same paint quality remains,” he says about Plascon’s adverts.

Ms Nada Andersen, the chairperson of the Uganda Advertisers Association, says Plascon adverts are, however, misleading in guiding the consumer to believe that only the name has changed.
“The whole set of manufacturing formulas has changed and the new product is unique to Plascon brand. We don’t bottle Pepsi into Coca-Cola bottles and vice-versa, for a reason. Consumers have to be given the right brand in the right packaging and also have to be truthfully informed,” She says.

Plascon has maintained “Color your world” while AkzoNobel is using “Bring colour to your world,” Ms Anderson says there is only so many ways of talking about paint without using the same words and would allow both slogans to co-exist.
Unfortunately, she explains, self-regulation and regulation in Ugandan advertising industry is still too young to handle this matter decisively.

Impact on customers
Customers like Peter wonder if Sadolin paints is on the market.
Mr Smidt says Sadolin Paints products will continue to be traded in the market, consumers will continue to use the Sadolin brand which they are used and that with the new industrial plant AkzoNobel is looking to set up, the market should expect better quality paint and competitive pricing.
Mr Smidt says AkzoNobel’s actions are very legal and that the Sadolin brand is free to trade in the market and communicate to that effect as well.

Impact on dealers
Paint dealers now have to shoulder the burden of creating awareness, a task some find challenging.
Plascon paint agent Derick Tumusiime says: “People were used to Sadolin and when you give them Plascon, they say no. If you explain the sale of Sadolin, they take long to understand because they think you are conning them,” Mr Tumusiime says.

Mr Tumusiime feels cheated. “We are doing a lot of work to promote them, if they were wise, they would pay us,” he says. He adds that customers are already reporting changes in the product.

Mr Henry Murungi, a painter, has been using Sadolin paint for more than six years. He says: “There has been an improvement. Plascon paint dries quickly after painting. If quality declines, I will look for an alternative.”

Other dealers are maintaining Sadolin branding. Mr Robert Mukasa, a manager of JLK Hardware on Market Road believes customers will buy it slowly.

Any difference in products?
Kansain Plascon managing director Mr Chris Nugent says the paint is the same despite change in names.
Commenting on the old stock, he says: “Currently, it is not our property but that of the shops. It’s their property to sell off and if at some stage we decide that it’s something we can help people with, we are looking at possibly rebranding it to Plascon stock,” he says.

Mr Nugent says Plascon’s 60 per cent market share remains unaffected because customers have understood the change and the reason behind it.
He feels AkzoNobel is taking advantage of popularity created over the years but insists consumers are set to benefit from new products and colours it intends to introduce. As a company, he says Plascon now has access to technology in a way it did not have before.

Birth of divide
Sadolin Paints Uganda recently announced new owners and a change of the paint brand from Sadolin paint to Plascon paint. Mr Nugent, while speaking during the announcement said the new changes were only affecting the name but the processes would stay the same.
Kansai bought Plascon from South Africa in 2011 to increase its foot print in the African market. The Japanese company which is big in industrial paints, seeks to increase its decorative coatings division by buying out existing companies in India, Saudi Arabi and Africa.

Industry shake up

If Sadolin Paints comes back to the market, observers say the paints industry will have to get used to their individual ‘cakes’ getting smaller at the moment.
But this is likely to be a temporary situation.
Mr Tumusiime says, “I have heard Sadolin will be back on market but I doubt. If it returns, it will be a mixture of sorts,” he says.

The paint industry is currently a tough place to run business, with some dealers saying customers have channeled their money to other expenses such as school fees.
Mr Dipil Waghani manages a Regal Paints depot slightly below Nakasero market.

He describes himself as a spectator in the battle.
“We are not taking advantage of this confusion. Each of us has our clients. It is hard to convince a customer to leave Sadolin for Regal paints,” he says.

Ms Robinah Maniriho, an agent for Global Paints in Hardware City mall, knows nothing beyond Sadolin selling the company to Plascon. “We are just working to remain with our customers. It would be our wish for their customers to run from them to us,” Ms Maniriho says.

Mr Prashant Gupta, the country manager Basco Products Limited, the manufacturers of Duracoat Paint and Basco Paints, says his company is continuing to do its routine advertising.
“We have not experienced too much variation in our operations. We are working on how to grow our market and make our customers aware. Construction is growing and hopefully, the market for paint will also grow because the biggest market for paint is the construction sector,” he says.

Legal battles

In an attempt to sway their licensee, AkzoNobel issued a notice to Sadolin, a move Sadolin thought would frustrate their transaction.
Business Daily, Daily Monitor’s sister paper in Kenya, reported that the Dutch firm had set up shop in Kenya, and had incorporated a Kenyan subsidiary to take over the manufacture and sale of Sadolin Paints in the region.

The Kenyan subsidiary christened Akzo Nobel Kenya was to be issued with a licence for the use of its trademarks to manufacture, distribute and sell similar products in East Africa just like Sadolin Paints East Africa Limited, a move that could further have frustrated the transaction.

Sadolin Paints East Africa rushed to courts in Kenya and Uganda to file an injunction. In Uganda, according to the case that was filed by Muwema and Co, Advocates and Solicitors on behalf of Sadolin Uganda Limited, the applicant applied for an interim measure of protection restraining Akzo Nobel Coatings International BV ( the respondent), its agents, assigns or licensees from directly or indirectly selling any Sadolin paint products to the distribution network or customer base developed by the applicant, the use or intended use of the weather guard trademark in Uganda.

The injunction was thrown out when the transaction between Sadolin East Africa and Kansai Plascon was concluded setting the stage for new changes in the local manufacturer’s brand name and ownership change. The latter later mounted an aggressive campaign advertising the new name change.

This also meant that the Sadolin trademark now had no local manufacturer and distributor.
New Sadolin manufacturer and distributor identified
AkzoNobel are in the final stages of negotiation with a local partner in the region. Reports indicate that the company is in the final stage of reaching an agreement with Regal Paints, a local paints manufacturer.

Mr Schmidt says they want to have Sadolin brand locally manufactured and available in the market place supported through AkzoNobel technology and innovation which it has got globally in more than 80 countries in which they operate in.
He said the negotiations were private and as such could not delve any into details. But as soon as the contract is finalised, they will announce.

“We look to invest in the market in a number of areas specifically in a manufacturing plant and legally in a relationship with our distribution network. This is all part of the agreement that is in the final stages of being finalised and the investment numbers and details will be agreed on in the final phase,” he said.

Recent developments

Mr Chris Nugent claims Kansai Plascon continues to retain 60 per cent of the market share. Besides, Sadolin Uganda Limited and Kansai Plascon, other players include: Global Paints Limited, Ritver Paints, Peacock Paints, Basco Products Uganda Limited (Dura Coat and Basco Paints) Crown Buildings & Product Ltd (Regal Paints), Crown Berger Uganda Limited (Robialac Paint), BPC Chemicals Limited (Neptune and Luxor Paint) and Royal Paints from Revonia Enterprises Limited.
The cost of paint varies from one player to another. For instance, Plascon paints costs between Shs6,000 and Shs425,000 according to Robert, a dealer in downtown Kampala.

Termination of contract

Last week, Dutch global paints and coatings company, AkzoNobel cancelled its licensee agreement with Sadolin Paints East Africa which is currently operating as Kansai Plascon.
The Sadolin brand is owned by AkzoNobel and was previously manufactured through a licensee agreement with Sadolin Paints East Africa Limited in the region. AkzoNobel made the announcement over what it deemeds as “numerous breaches” by Kansai Plascon, the new owner of Sadolin Paints East Africa. This means that Kansai Plascon who acquired the Sadolin East Africa paints brand will no longer trade, manufacture, sell and market Sadolin Paints as they were earlier contractually obligated to do until January 2018.

Behind the scenes

Sadolin Paints East Africa entered into an agreement with Dutch company Akzo Nobel Coatings International BV, which owns the Sadolin trademark, to sell and manufacture seven types of Sadolin paints in the region.
The relationship between both companies spanning more than 50 years, was recently constrained when Sadolin Paints East Africa started negotiating Kansai, a Japanese global brand and competitor of AkzoNobel in February 2017.

Kansai paints, through its South African Subsidiary Kansai Plascon, in July, completed a buyout agreement with Sadolin paints East Africa Limited who have been operating in Uganda, Kenya and Tanzania for a fee estimated at about $125 million (Sh450 billion).

Mr Johann Shmidt, the managing director AkzoNobel decorative paints -Sub-Saharan Africa, in a telephone interview with Daily Monitor, said Sadolin Paints E.A Limited signed a contract with AkzoNobel obtaining a licence to sell and distribute the Sadolin Paints brand in Kenya, Uganda and Tanzania until February 2019. But when the news broke, AkzoNobel put notice to Sadolin Paints E.A that the licence would be terminated according to the contract with a 12-month notice period on February 2018.