Cement industry analysis

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CHAPTER 2
CEMENT INDUSTRY ANALYSIS
2.1 Cement overview
2.2 History of cement Industry
2.3 Stages of Industrial growth of cemet industry.
2.4 Statistical snapshot of cement industry
2.5 Present Scenario of Cement industry
2.6 Recent trends of cement industry
2.7 Four “P’s” of cement industry
2.8 Cchallenges & problems of cement industry
2.9 SWOT analysis of cement industry

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CHAPTER 2
CEMENT INDUSTRY ANALYSIS
2.1 Cement Overview
Cement is one of the core industries which plays a vital role in the growth and
expansion of a nation. It is basically a mixture of compounds, consisting
mainly of silicates and aluminates of calcium, formed out of calcium oxide,
silica, aluminium oxide and iron oxide. The demand for cement depends
primarily on the pace of activities in the business, financial, real estate and
infrastructure sectors of the economy. Cement is considered preferred
building material and is used worldwide for all construction works such as
housing and industrial construction, as well as for creation of infrastructures
like ports, roads, power plants, etc. Indian cement industry is globally
competitive because the industry has witnessed healthy trends such as cost
control and continuous technology upgradation.
The Indian cement industry is extremely energy intensive and is the third
largest user of coal in the country. It is modern and uses latest technology,
which is among the best in the world. Also, the industry has tremendous
potential for development as limestone of excellent quality is found almost
throughout the country.
2.2 HISTORY OF CEMENT INDUSTRY
In 1914, Indian Cement Industry began its journey with a single plant of 1000
tonnes per annum at Porbandar in Gujarat. Since then, India has emerged as
the world’s second largest cement producing country after China. At present,
there are 81 cement companies with around 206 major cement plants and a
total capacity of about 358.64 million tonnes. Besides, there are mini and tiny
cement plants, which have an estimated capacity of about 10 million tonnes.
The Indian cement industry’s existence for the last 98 years is marked by the
roller coaster ride it underwent ever since its inception in 1914. From the days
of scarcity, rigid controls, and imports, the cement industry today has come a
long way from a seller’s market to a buyer’s market.

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At present, the Indian cement industry has 81 large companies, which have
about 206 major plants with an aggregate capacity of about 358.64 million
tonnes. The 206 major plants comprises of about 146 integrated plants and
60 grinding units. This does not include mini and tiny cement plants, which
have an estimated capacity of about 10 million tonnes. Further, there are
about 50 companies making efforts to set up their cement plants. This
phenomenal growth is a result of 98 years of anomalous and grueling
transition.
2.2.1 Origin
The first ever reference of cement production in India is recorded in
George Watt’s Directory of ‘Economic Products of India’, published in 1889,
which stated:
“Portland cement was being made in Calcutta from argillaceous Kanker”.
However, the first organised attempt to manufacture the cement was made in
1904 by the Madras-based South India Industries Limited but this venture
failed. It was in October 1914 that the cement produced at Porbandar in
Gujarat by Indian Cement Corporation Limited saw the light of the day. It had
an installed capacity of 1000 tonnes per annum.
In the next two years, couple of more cement plants came up, one at
Katni in Madhya Pradesh and other at Lakheri in Rajasthan. By 1918, these
three cement plants together churned out 85,000 tonnes of cement per
annum.

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Table -1
India’s 24 growing Cement Companies at a glance
Sr.
No.
Companies
Capacity MTPA
2012
No. of Cement
Plants
1. Ultratech Cement Ltd 48.75 22
2. ACC Ltd. 30.08 14
3. Ambuja Cements Ltd 27.00 13
4. Jaiprakash Associates Ltd. 24.50 14
5. India Cements Ltd. (The) 15.33 09
6. Madras Cement Ltd 14.44 08
7. Shree Cement Ltd. 13.50 06
8. Chettinad Cement Corporation Ltd. 11.50 03
9. Dalmia Bharat Enterprises Ltd. 9.00 03
10. Century Textiles and Industries Ltd. 7.80 03
11. Lafarge India Pvt. Ltd. 7.75 04
12. J.K. Cement Ltd. 7.47 04
13. Kesoram Industries Ltd. 7.25 02
14. Penna Cement Industries Ltd. 7.00 04
15. Birla Corporation Ltd. 6.46 07
16. Binani Cement Ltd. 6.25 02
17. Zuari Cement Ltd. 6.20 03
18. Prism Cement Limited 6.10 02
19. OCL India Ltd. 5.35 02
20. JK Lakshmi Cement Ltd. 5.30 03
21. My Home Industries 5.20 02
22. JSW Cement 5.20 02
23. Orient Cement 5.00 02
24. Bharathi Cement 5.00 01
Total 287.43 135
Source : Labour and Industrial Chronical, Survey of Cement Industry &
Directory 2012 : 3rd
Edition

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Between 1919 and 1924, six more plants were setup and the
capacities of three old plants were also expanded. By end of 1924, the
strength of cement plants rose to 10 with a total installed capacity of 0.56
million tonnes per annum.
In early 20’s, the actual production was well below 50 percent of
capacity, which ironically, still surpassed the demand. This resulted in selling
of cement below the production cost. Further, the skepticism of quality of
indigenous cement only compounded the problems of the industry. This led to
liquidation of some companies.
At this point of time, the government referred the functioning of cement
industry to Tariff Board, which in turn recommended the urgent need for co-
operation among the existing units. This culminated in the birth of ‘Indian
Cement Manufacturers Association’ (ICMA) in 1925. Its aim was to regulate
prices and limit the supplies by mutual consent. In 1927, the members of
ICMA formed ‘Concrete Association of India’ (CAI) to popularise the use of
indigenous cement as the new building material.
Three years after, in 1930, ‘Cement Marketing Company of India’ (CMI)
was launched to promote the sales and distribution of cement at regulated
prices.

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Table – 2
Five Year Planwise Install Capacity and Production of Cement
Five Year
Plants
Plans’
Period
Terminal
Year
Capacity
MTPA
Production
MTPA
Pre Plan 1950-51 1951 3.28 2.20
I Plan 1951-56 1956 5.02 4.60
II Plan 1956-61 1961 9.30 7.97
III Plan 1961-66 1966 12.00 10.97
IV Plan 1969-74 1974 19.76 14.66
VPlan 1974-79 1979 22.58 19.42
VI Plan 1980-85 1985 42.40 30.13
VII Plan 1985-90 1990 61.31 45.41
VIII Plan 1992-97 1997 105.26 76.22
IX Plan 1997-02 2002 146.13 108.40
X Plan 2002-07 2007 202.64 165.56
XI Plan
XI Plan
2007-12
2007-12
2012
2012
298.00
(Estimated)
Directory 2012 : 3rd
Edition
Note: By January 2012, the Cement Industry has already achieved an
installed capacity of about 360 million tonnes.
The 70's saw a phenomenal rise in the capacity and production. In
1970-71, the installed capacity was 17.6 million tonnes and the production
14.4 million tonnes, which by end of the decade, 1979-80, increased to 24.3
million tonnes and 17.7 million tonnes, respectively. This period also saw a
serious set-back to the industry. Heavy inflation skyrocketed costs of inputs
and eroded profits. The 17 companies that made a profit of Rs 10.98 crores in
1971-72, suffered a loss of Rs 1.5 crores in 1973-74. Many companies,
including well-known ACC skipped dividends. In 1974, a study of Fourth Tariff
Commission commented: "Cement industry is at present in a bad shape."

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In September 1977, the Janata Government took the first positive step
by assuring a 12 per cent post-tax return to cement companies on their net
worth and it brought a resolution. It, inter alia, read: "Government had also
been examining the question of fixation of price for controlled commodities
and it had accordingly been decided that the ex-works price of new cement
units should be fixed on the basis of a net post tax return of 12 per cent on net
worth". The government's step for 12 per cent post-tax return attracted big
industrial houses to the field of cement and L&T and Chowgule were among
the first few entrants.
In late 70's, for the first time, the Janata Government encouraged
setting up of mini and tiny cement plants. The main objective was to avail the
scattered limestone deposits in small quantities and meet the local demands.
The Cement Research Institute of India (CRJ), now known as National
Council for Cement and Building Materials (NCB), came out with its VSK
technology for mini and tiny cement plants. The Jorhat based Regional
Research Laboratory (RRL) also offered its VSK technology, particularly for
tiny plants with capacity ranging from 20 TPD to 35 TPD. Interestingly, tiny
cement plants came under the category of small scale sector.
In 1981, CRJ successfully commissioning two VSK technology plants
in Karnataka- Veda Cement with 60 TPD and Lokapur Cement with 30 TPD.
A year later, the Hyderabad based Deccan Cements, promoted by MB Raju,
commissioned the country's first 200 TPD rotary kiln plant in Andhra Pradesh,
followed by Kakatiya Cements, Someswara Cements, NCL, Coromandal
Cements (now Bheema Cements), Parthasarthy Cements (now Sri Chakra
Cements), Sagar Cements, Shez Cements (now Anjani Cement), Devi
Cement (now My Home Industries) and few others.

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Table-3
State-wise Major Cement Plants and Capacities at a glance
Sr.
No.
States
No. of
Plants
2010
Capacity
MTPA
2010
No. of
Plants
2012
Capacity
MTPA
2012
1 Andhra Pradesh 33 55.92 44 79.45
2 Assam 01 0.20 04 2.73
3 Bihar 01 1.15 01 1.00
4 Chhattisgarh 09 12.81 10 16.11
5 Delhi 01 0.50 01 0.50
6 Gujarat 15 27.37 14 27.49
7 Haryana 03 2.97 04 3.52
8 Himachal 06 11.20 07 13.04
9 Jammu &
Kashmir
01 0.40 02 0.76
10 Jharkhand 03 5.18 04 8.6
11 Karnataka 13 23.61 13 24.4
12 Kerala 02 0.62 02 0.62
13 Madhya Pradesh 11 21.88 10 26.16
14 Maharashtra 09 16.40 10 23.00
15 Meghalaya 04 1.86 08 6.77
16 Odhisa 04 7.55 05 7.79
17 Punjab 03 4.75 03 4.75
18 Rajasthan 20 41.45 21 45.62
19 Tamil Nadu 19 32.88 20 38.89
20 Uttar Pradesh 09 12.14 11 13.83
21 Uttarakhand 03 4.00 03 4.00
22 West Bengal 08 7.73 09 9.61
Total 178 292.57 206 358.64
Directory 2012 :3rd
Edition

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The success stories of the first three mini plants and few others,
coupled with government's policy and attractive incentives, over 300 mini and
tiny cement plants mushroomed all over the country. But later, about 80 per
cent of them have gone out of operations owing to various reasons.
In 2003, there were only about 60 mini and tiny plants in operation with
an installed capacity of 6.3 million tonnes. Incidentally, Andhra Pradesh was
the only State where about a dozen mini cement plants were in operation,
mostly rotary kiln plants. In recent years, seven of them have stepped up their
capacities and have become major plants.
2.2.2 Watershed
The 80's came to be the 'watershed' of the cement industry. The partial
de-control policy announced on February 28th 1982 was instrumental in
phenomenal growth of the cement industry. Under this policy, the levy cement
quota was fixed at 56.6 per cent of capacity for existing units and 50 per cent
for sick units. For new units, starting commercial production after January 1,
1982, levy quota was fued at 37.5 per cent in the first year; 42.5 per cent for
the second year, and 50 per cent thereafter. Production in excess of the levy
cement quota was allowed for sale in free market outside price and
distribution controls. The country's hopes of self-sufficiency in cement
production were realized within a short span of five years from partial
decontrol in 1982.
This decade had been unique in the history of cement industry in more
than one way. During this period, the industry had not only made quantitative
and qualitative jumps in matter of addition of capacity and adoption of new
technologies but also experienced a totally free market after lapse of almost
50 years, i.e. after total decontrol of cement from March 1989.

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2.3 STAGES OF INDUSTRIAL GROWTH OF CEMENT INDUSTRY
2.3.1 Pre – Independence Growth
In 1936, eleven existing cement companies merged to form the
Associated Cement Companies Limited (ACC) with a clear philosophy of not
attaining a monopolistic position but to make and deliver cement as cheaply
as possible. A year later of ACC’s formation, the Dalmia – Jain Group decided
to enter the cement sector with five new plants having an aggregate capacity
of 0.58 million tonnes per year.
In 1938, Mysore Iron & Steel Works, later renamed as Visvesvaraya
Iron & Steel Ltd., set up the first public sector cement unit with 60 TPD
capacity at Bhadrawati in Karnataka. Later in 1952, this capacity was
increased to 200 TPD. In 1939, Andhra Cement Company came into being at
Vijayawada in coastal Andhra, then a part of Madras State. Promoted by late
DC Narsimha Raju, incidentally, Andhra Cements was the first cement
company in Andhra Pradesh.
For the first time, during the World War II, the control was imposed on
price and distribution of cement and in August 1942 as it was declared as
essential commodity under the Defence of India Rules. About 90 per cent of
the total production was acquired for defence use. The price was fixed on cost
plus basis. As government needs decreased towards end of the War, surplus
stocks were released for civilian consumption at fixed prices.
2.3.2 Post – Independence Growth
At the time of India’s partition, there were 23 cement plants in operation
with a total capacity of 2.2 million tonnes. With the partition in 1947, 18 plants
remained in India and 5 plants went to Pakistan. The plants with India had an
aggregate capacity of 1.47 million tonnes. The British Standards for cement
were replaced by Indian Standard specifications.
Based upon the task of rendering better standards of living for its
people, the new government gave top priority to food and shelter
programmes. Cement was needed the most. As a sequel, in the first five year

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plan, 1951-56, the government fixed the capacity and production targets for
cement at 5.02 million tonnes and 4.60 million tonnes, respectively. By the
end of this plan in 1956, there were 27 units with a capacity of 5 million
tonnes. The production touched a level of 4.6 million tonnes.
During the second five-year plan, 1956-61, the capacity was increased
from 5 million to 9.3 million tonnes and the actual production soared from 4.6
million to 8 million tonnes. The number of units went up from 27 to 34. New
types of cements like white cement and Portland blast cement were also
manufactured during this plan period.
In 1961, Cement Manufacturers’ Association (CMA) was formed to
represent the industry and Dharamsey M. Khatau had a privilege of becoming
the first President. During its 51 years of existence, CMA has played a
significant role in assisting government in formulating policies relating to the
cement industry. It had considerable impact on the constitution of Lavraj
Kumar Committee in 1979 and Dr. A K Ghosh Committee in 1981.
In 1965, the Cement Corporation of India (CCI) was incorporated as a
public sector company to set up cement plants on a massive scale throughout
the country. It commissioned its first plant in July 1970 at Mandhar in Madhya
Pradesh and since then set up a total of 11 cement plants. In January 1998,
CCI sold its Yerraguntla plant to India Cements. Now it has 10 plants under its
fold and only three of them are in operation.
2.3.3 The Decade of Growth
The decade of 90's was a decade of growth in capacity and
consolidation through maximum acquisitions and mergers. The years between
1994 and 1999 saw a 40 million tonnes new capacity addition. This rash
growth led to supplies being much in excess of demand, leading to prices
being constantly beaten down. The fact that this imbalance took place even
while demand grew at a healthy 8 per cent illustrated the seriousness of the
problem. Not surprisingly, bottom lines throughout the industry were affected.
Financially weak companies sold out their units to those looking to

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consolidate, including cement multinationals who were keen to set up base in
India. In contrast, the years of 1999-2000 offered much to cheer about. The
demand grew by a whopping 15 per cent and a mere 2 million tonnes were
added to capacity.
This decade witnessed consolidation of cement industry as about 20
companies were acquired and merged. It was also a mute witness to the entry
of cement multinationals in India starting with Lafarge in 1999.
The first decade of the new millennium, from 2001-2010, witnessed an
allround growth in the cement industry, which was never seen before in the
nine decades of its existence. Buoyed by the governments ambitious plans
for infrastructure and large budgetary allocations for development of roads,
ports, airports, power plants, rural housing, special economic zones, etc, the
cement companies planned ambitious expansions through both – green field
and brown field projects. They have expanded their capacities by about 200
per cent, from 111 million tonnes in 2000 to around 300 million tonnes by the
year 2010. Even companies, which were sick, on the verge of closure got a
new lease of life, and have opted for capacity expansions.
Besides this, the cement companies have gone in for setting up high
capacity integrated plants, more number of grinding units, increased use of fly
ash, opted for the world's best and latest technologies, established coal based
captive power plants and waste heat recovery plants. During the decade, the
industry has also attracted six cement multinationals, namely - Cimpor of
Portugal, CRH of Ireland, Heidelberg of Germany, Holcim. of Switzerland,
Italcementi of Italy, and Vicat SA of France to invest in India's cement sector.
These companies made initial investment of about Rs 5600 crores. Now,
there are seven cement MNCs in India and they control a capacity of about 86
million tonnes, which is about 24 per cent of the country's total capacity.
In fact, the year 2007, which had started with momentous expansion
plans, also coincided with the commencement of the XIth Five year plan
(2007-12)

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2.4 STATISTICAL SNAPSHOT OF CEMENT INDUSTRY
 There total 200 large Cement plants having total capacity of 360 MTPA
 There are total 365 small Cemant plants including white Cement Plants
having total installed Capacity of 11.1 MTPA
 Market size of Cement Industry is 550 MTPA is estimated for 2020.
 India is the world’s second largest cement producer after China
 Total turnover of the Indian cement industry is estimated at US$25
billion in FY11
 Major players contributed about 97 per cent to the installed capacity
during FY11
 The Indian cement industry is the second largest producer in the world
comprising of 183 large cement plants and 365 mini cement plants
 The production of cement increased at a CAGR of 10.0 per cent over
FY07-11
 Production is expected to reach 247 MT in FY12 as per the 11th Five
Year Plan
2.4.1 WESTERN REGION CEMENT STATSTICS
 Western region of the country contains two states Gujarat and
Maharastra
 Total installed capacity of Western Region is 44.1 MTPA in 2012
 Gujarat is accounted for 55% share in total Western Region Capacity.
 The growth rate of Cement Industry in the Western India is 9%.
 During the year 2011-12 total production in the Western region was
45.4 MTPA
 Expected production is 49.6 MTPA in the year 2012-13
 In the western Region market share of various brands are as follows:
o Ambuja Cement 48%
o Ultratech Cement 29%
o Jaypee Cement 11%
o Other Brands 12%

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2.5 Present Scenario of cement Industry
The Indian cement industry is the second largest producer of quality cement.
Indian Cement Industry is engaged in the production of several varieties of
cement such as Ordinary Portland Cement (OPC), Portland Pozzolana
Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well
Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland
Cement, White Cement, etc. They are produced strictly as per the Bureau of
Indian Standards (BIS) specifications and their quality is comparable with the
best in the world.
The industry occupies an important place in the national economy because of
its strong linkages to other sectors such as construction, transportation, coal
and power. The cement industry is also one of the major contributors to the
exchequer by way of indirect taxes.
2.5.1 Facts of Indian Cement Industry
 The Industry recorded an exponential growth with the introduction of
partial decontrol in 1982 culminating in total decontrol in 1989.
 India ranks second in world cement producing countries.
 It contributes to environmental cleanliness by consuming hazardous
wastes like Fly Ash (around 30 Mn.t) from thermal power plants and
the entire 8 Mn.t of slag produced by steel manufacturing units.
 As a part of Corporate Social Responsibility (CSR), the cement
Industry employs around 0.1 million people and takes care of the social
needs not only of the employees but also adopts several villages
around the factories providing free drinking water, electricity, medical
and educational facilities.
 The cement Industry produces a variety of cement to suit a host of
applications matching the world's best in quality.
 Exports Cement/Clinker to around 30 countries across the globe and
earns precious foreign exchange.

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2.5.2 Statistics
According to Ministry of Commerce & Industry data for November
2012,cement production registered a negative growth of (-) 0.2 per cent in
November 2012 against its 17.0 per cent growth in November 2011. The
cumulative growth of cement production was 6.7 per cent during April-
November 2012-13 compared to its 4.8 per cent growth during the same
period of 2011-12
.
2.5.3 Key Drivers of Cement Industry
 Buoyant real estate market
 Increase in infrastructure spending
 Various governmental programmes like National Rural Employment
Guarantee
 Low-cost housing in urban and rural areas under schemes like
Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and
Indira Aawas Yojana
2.5.4 Technological Advancements
Modernization and technology up-gradation is a continuous process for any
growing industry and is equally true for the cement industry. At present, the
quality of cement and building materials produced in India meets international
standards and benchmarks and can compete in international markets. The
productivity parameters are now nearing the theoretical bests and alternate
means. Substantial technological improvements have been brought about and
today, the industry can legitimately be proud of its state-of-the-art technology
and processes incorporated in most of its cement plants. This technology up
gradation is resulting in increased capacity, reduction in cost of production of
cement.
2.5.5 Major Players
 Ultratech Cement
 Century Cements
 Madras Cements
 ACC
 Gujarat Ambuja Cement Limited

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 Grasim Industries
 India Cements Limited
 Jaiprakash Associates and
 JK Cements.
 Holcim
 Lafarge
 Heidelberg Cemex
2.5.6 Foreign Direct Investment
The cement sector has been gradually liberalized. 100 per cent FDI is
permitted in the cement industry.
2.5.7 Future Outlook
A recent report has been published by research company RNCOS has found
that, even in the tough conditions of economic turbulence, Indian cement
industry sustained its growth rate. It further stated that, in the backdrop of the
government backed construction projects almost every cement major
expanded their installed capacity as; these projects have created strong
demand for cement in the country.
The report stated that production capacity of cement industry has grown by
almost 20% in 2011-12. The research report has also anticipated that the
industry players will continue to increase their annual cement output in coming
years and the country’s cement production will grow at a CAGR of around 12
per cent during 2013-14.
2.6 Recent Trends in Cement Industry
2.6.1 Product
Traditionally only one product was avalaible in cement that was 33 Grade but
due to increase in competition cement companies were forced to improvise on
the quality of the product and hence they introduced 43 Grade and moving
further they introduced 53 Grade which is the highest Grade available as per
BIS. (Buero of Indian Standards) Moreover to meet demand the
manufacturers had to increase their capacity, so most of the manufacturers
expanded their capacity upto the best possible level. Cement is a capital

37

intensive industry which means that in order to produce the product huge
capital investment is required and once it has reached its optimum production
capacity in order to increase its production new investment have to be
made.In the span of last ten years companies have expanded their production
and have reached to a level where they were forced to find another option to
expand their capacity then incurring additional cost. So the companies came
up with PPC (Portland Pozolana Cement) which is prepared by mixing fly ash,
volcanic product etc., which helped manufacturers to increase their production
by 25 to 30 % from the existing set up. Switching to PPC was not just to
increase production but the government had made it mandatory for the
companies located in the 100 Km radius of any thermal power station to use
fly ash in cement production as an environment protection constraint.
2.6.2 Packaging
Unlike other consumer products packaging doesn’t play major role in
marketing of cement as cement is generally used at construction site where
fancy packing isn’t required .Initially cement was packed in Jute bags but the
packing had to be changed to HDPE bags because there was a heavy loss to
companies because of damage caused by packing. There was heavy transit
loss because of leakage of cement from the jute bags during the transit and
moreover the product got damaged due to moisture content. So in order to
protect the product from seapage and moisture HDPE bags were used. In big
cities there are huge construction projects going on in which cement is
required in big quantities and so the builders have come up with the concept
of Ready Mix Concrete commonly known as RMC in cement industry. The
builders prefer to buy loose cement in huge quantity so they can save on time
and labour. This concept has helped cement companies on saving a huge
amount on packing and reduction in transit cost as bulk quantity of loose
cement is transported in bulkers directly to the place of production.
2.6.3 Technical Guidance
With the increase in competition in cement industry companies were not only
forced to improve on the quality but were also forced to improve on marketing
techniques. As a value addition to product companies started providing

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technical guidance to the cement users. They started separate department
known as technical cell/ technical department which consisted of team of
qualified civil engineers.Customer facing any problem related to construction
called up the technical cell and the team of engineers was always ready to
provide guidance to the customer at their door step.Some companies took a
revolutionary step by introducing “Mobile testing laboratories” to provide
concrete testing facility to customers at their construction site.Mobile testing
laboratories consisted of latest concrete strength testing equipments. This
facility was started with a view to provide satisfaction to the customer
regarding the quality of the product. Moreover looking at the marketing aspect
civil engineers from the technical cell keep on visiting construction sites to
promote their product by providing them knowledge about their product and
latest construction practices.
2.6.4 SalesPromotion
In order to survive competition companies had adopted all possible marketing
techniques and only place where they could improvise more was sales
promotion activities. As cement traders and masons are biggest influencers in
purchase of cement, cement manufacturing companies started giving various
incentive schemes to these influencers to ensure their inclination towards their
brand. They gave various schemes to traders ranging from small household
item to foreign tours. These schemes were based on sale of targeted quantity
for short term as well as long term. For short term schemes gifts like
household items like air conditioners, refrigerator, television and other home
appliances were provided; even schemes for gold and silver coins were
announced and for long term schemes,tours were announced which included
domestic as well as foreign tours depending on the quantity sold. Few
companies also offered kind scheme of cars and two wheelers on
achievement of specific quantity in the long term. To attract masons
companies arranged masons meets on regular basis which consisted of
presentation on companies’ products and activities followed by dinner and
distribution of various gifts. Companies also offer them annual calendar and
diaries and other small gifts and give aways at regular intervals to be in touch
with them on regular basis.

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2.7 Four P’s of Cement Industry
Category Definition
Product
A product is seen as an item that satisfies what a
consumer needs or wants. It is a tangible good or an
intangible service.
Every product is subject to a life-cycle including a growth
phase followed by a maturity phase and finally an eventual
period of decline as sales falls. Marketers must do careful
research on how long the life cycle of the product they are
marketing is likely to be and focus their attention on
different challenges that arise as the product moves
through each stage.
The marketer must also consider the product mix.
Marketers can expand the current product mix by
increasing a certain product line's depth or by increasing
the number of product lines. Marketers should consider
how to position the product, how to exploit the brand, how
to exploit the company's resources and how to configure
the product mix so that each product complements the
other. The marketer must also consider product
development strategies.
Price
The amount a customer pays for the product. The price is
very important as it determines the company's profit and
hence, survival. Adjusting the price has a profound impact
on the marketing strategy, and depending on the price
elasticity of the product, often it will affect the demand and
sales as well. The marketer should set a price that
complements the other elements of the marketing mix.
When setting a price, the marketer must be aware of
the customer perceived value for the product. Three basic
pricing strategies are: market skimming pricing,

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market penetration pricing and neutral pricing. The
'reference value' (where the consumer refers to the prices
of competing products) and the 'differential value' (the
consumer's view of this product's attributes versus the
attributes of other products) must be taken into account.
Promotion
Promotion is all of the methods of communication that a
marketer may use to provide information to different
parties about the product. Promotion comprises elements
such as: advertising, public relations, personal
selling and sales promotion.
Advertising covers any communication that is paid for,
from cinema commercials, radio and Internet
advertisements through print media and billboards. Public
relations is where the communication is not directly paid
for and includes press releases, sponsorship deals,
exhibitions, conferences, seminars or trade fairs and
events. Word-of-mouth is any apparently informal
communication about the product by ordinary individuals,
satisfied customers or people specifically engaged to
create word of mouth momentum. Sales staff often plays
an important role in word of mouth and public relations
(see 'product' above).
Distribution(Place)
Place refers to providing the product at a place which is
convenient for consumers to access.
Various strategies such as intensive distribution, selective
distribution, exclusive distribution and franchising can be
used by the marketer to complement the other aspects of
the marketing mix.

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2.7.1 PRICE
For all the commodities Prices are generally decided by demand supply gap,
which largely prevails in cement industry too. Cement as a product doesn’t
has much differentiation. The cement provided by various companies is more
or less the same, so there is not much difference in the pricing of cement by
various companies. Due to various advertising and marketing strategy the
cement companies have been able to categorize themselves into three
categories i.e A, B & C. The price difference between various categories is 2
Rs to 4 Rs Per bag.
Prices of cement are decided not only on the basis of manufacturing cost but
it also includes logistic cost & government levies. Cement companies are
offering cement at FOR basis (Supplying at doorstep), so logistic cost plays a
vital role and in order to reduce the logistic cost cement companies prefer to
supply cement to nearby regions or they keep higher prices in far off places.
Cement price fluctuation are cyclic in nature. According to the demand prices
generally fall into four categories.
Apr- June (High demand High price) – During the period of April to June the
demand is generally higher as compared to other months, as no festivals fall
during this period. As this is prefix period to monsoon season, pre-monsoon
demand also picks up the demand during this period. Due to greater demand
the prices are also higher as compared to other months. Prices during this
period generally fall in range of 250 Rs per bag to 280 Rs per bag.
July – Sept (Low demand Low price) – During the period of July to
September the demand is relatively low due to monsoon season and festivals
like Janmashtami. Major construction activities is at hold due to monsoon and
retail demand is also low as farmers are busy with farming activities & labours
are also diverted towards farming activities. As the demand is low, prices
remains under pressure during this period. Prices generally range from 220
Rs per bag to 240 Rs per bag.

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Oct – Dec ( Moderate demand Moderate price) – Period from October to
December is the period of moderate demand as the demand picks up a little
after monsoon season but due to Major festival of Diwali demand again slows
down. Due to moderate demand the prices also remain in mid range. The
prices range from 240 Rs per bag to 260 Rs per bag.
Jan – March (High demand High price) – Period from January to March is
period of high demand as this is the last quarter of financial year and there is
no major festival other than holi which normally falls during last fortnight of
March. Due to financial year end all government contractors’ speed up their
activities to ensure the completion of work before year end. Due to high
demand the prices generally remain high. Prices fall in the range of 250 Rs
per bag to 280 Rs per bag.
2.7.2 PLACE
Place plays an integral role in cement industry as logistic cost is 3% to 5% of
the total cost for retail customer, so it is very important for cement companies
to have a well planned and wide spread network. For this purpose cement
companies opens dumps at strategic locations so they can ensure timely and
cost effective delivery to the network and customers. Dumps are the store
houses owned by company where they transfer their stock from
manufacturing unit. Companies also appoint efficient C & F agents to provide
best services. Companies appoint big distributor and dealers which in turn
appoint small retailers to increase reach upto each and every corner of the
center. By using this well planned distribution system the companies distribute
their product form the manufacturing unit to the dumps, where according to
customer’s/ dealer’s need order are placed and such orders are executed
promptly. In certain cases, where the requirement is huge or order is from
nearby place companies execute the orders from the manufacturing unit itself.
To ensure customers delight and to have competitive edge over competitors,
companies try to have best distribution system in place.

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2.7.3 PROMOTION
As cement was a commodity there was not much differentiation between
brands but after decontrolling of cement industry, cement companies started
building brand image. In order to create brand image, promotion played a very
important role. Initially they started by creating specific logos and design for
their bags. Gradually they moved to advertising means like wall painting,
newspaper advertisement, television and radio. As these medium were used
by all the cement companies, so in order to differentiate their product a need
for other innovative means of promotion was also required.
They stared distributing gift articles like pens, key chains, pocket diaries, tea
coasters, wall clock, table pieces, pen stands, calendars, annual diaries for
dealers and customers. They started offering gold scheme, domestic and
foreign tours, scholarship programme for dealer’s kids etc.
In order to increase brand’s visibility and to attract customer’s attention
companies started various activities by decorating dealer’s shop with various
posters, stickers, danglers, dealer board, and decorative gates outside
dealers shop during festivals etc.
Companies also arranged meetings and conferences for influencers like
engineers and masons and provided them various gift articles after the
meeting and also after regular intervals to ensure continuous recall of their
brand.
Few companies have started increasing their presence at national level, so to
increase their visibility at national level they started sponsoring various events
like Indian Premier League, television reality shows and other television
programs.
With help of such intensive promotional activities companies have been able
to create a unique identity for themselves, which in turn helped them to
increase their market share and gain a competitive edge over the competitors.

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As a result of this the customers also became aware about cement as a brand
rather than a commodity.
2.7.4 Product:-
“CEMENT” in itself is not just one product. It has sub categorized itself in sub
products to cater various needs of customers. Following are the various types
of cement.
OPC 53 Grade:
 Its full form is 53 Grade Ordinary Portland cement.
 It gives minimum 53 Newton per square millimeter compressive
strength at 28 days of curing.
 Bureau of Indian Standard has specified it under IS: 12269:1987.
 It is the second most commonly available type of cement in the open
market of India.
 It may be used in all types of multistoried buildings like Industrial-
Institutional, Residential as well as commercial.
 It is also widely used in infrastructure works like Highways, Bridge Fly
Over, Foundations of TV/Radio Towers-Electric sub stations, etc.
 Specifically it is used in Pre stressed structures like Perlins, Precast
Slabs, Fencing Poles/Posts, Electric Line Poles, etc.
 RCC Hume Pipes for Storm Water Drainage, Water Supply etc of
diameter up to 2600mm diameter are manufactured by using this
cement.
 The leading companies in India manufacturing this product are Binani
Cement, ACC Cement, Ultratech Cement, Ambuja Cement, etc.
OPC 43 Grade:
 Its full form is 43 Grade Ordinary Portland cement.
 Bureau of Indian Standard has specified it under IS: 8112:1989.
 It is commonly available type of cement in the open market of India.

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 Many of the engineers/architects are now suggest this type of OPC
cement for Residential/Commercial high rise buildings.
 Many of Indian Central Government institutes like BSNL, Airport
Authority of India, and Indian Coast Guard etc. have approved only this
type of OPC cement in their structures.
 It is also used in Pre stressed structures like Perlins, Precast Slabs,
Fencing Poles/Posts, Electric Line Poles, etc.
 This grade of Cement is also used in manufacturing of RCC pipes
across all sizes.
 Instead of 53 Grade OPC, it is preferred due to comparatively less heat
of hydration which is one of the reasons for shrinkage cracks in
construction.
 The leading companies in India manufacturing this product are Binani
Cement, Ultratech Cement, Ambuja Cement, etc.
PPC:
 Its full form is Portland Pozolana Cement
 Bureau of Indian Standard has specified it under IS: 1489 (Part-I for Fly
Ash Based) (Part-II for Calcined Clay Based).
 It is the most commonly available type of cement in the open market of
India.
 It is used in RCC works like Column, Beam, Slab, Foundation in
Residential and Commercial Buildings.
 It is also used where mass concreting is done for example Dams,
Bridges, etc.
 It is commonly manufactured by intergrading Portland Clinker and
Pozzolanic material like fly ash, volcanic powder, etc.
 Proportion of Pozzolana may vary from 15% to 35% by weight of
Cement.
 This is cement has higher resistance to chemical agents present in
surrounding atmosphere.

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 Possibility of crack formation is negligible, due to low heat of Hydration
of PPC. This is one of the main reasons for the acceptance of this
cement in open market.
 It also imparts more durability to the structure.
 Due to secondary hydration process it makes the structure more
resistant to Sulphate & Chloride attacks.
 Almost all the companies manufacture this type of cement in India.
Portland Slag Cement:
 It is manufactured by intergrinding Portland Clinker and Blast Furnace
Slag.
 Bureau of Indian Standard has specified it under IS: 455-1989.
 Proportion of slag may vary from 25% to 65% by weight of cement.
 It improves the workability, finishability, Lower permeability, resistance
to aggressive chemicals, etc. of the concrete.
 Modern Structure Designers have found that improved durability
characteristics of this cement help the structure to reduce life-cycle
costs and maintenance costs.
 It is specially used in marine structures, dams, bridges, etc.
 It is manufactured by Binani Cement, Lafarge Cement, Bharathi
Cement, etc.
Sulphate Resisting Cement:
 A Sulfate Resisting Cement is blended cement designed to improve the
performance of concrete where the risk of sulfate attack may be
present.

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 It also provides improved durability for concrete in most aggressive
environments, reducing the risk of deterioration of the structure and
structural failure.
 It is used at Geothermal Areas, Sewerage treatment plants, Mines and
other acidic soil environments.
 It is also suitable for Dairying, forestry, fishing and other environments
with structures susceptible to chemical attack.
 Underground Structures in Sulphate-salts Abounding Environment,
Effluent Treatment Plants, Coastal Construction, Off-shore platforms,
Sugar & other Chemical Plants.
Masonry Cement:
 It gives minimum 5 Newton per square millimeter compressive strength
at 28 days of curing.
 Masonry Cement generally contains Portland Cement for early
strength, plasticizers for water retention & plasticity and air entraining
agents to make it more workable and suitable for brick and block lying.
 This cement is used to make masonry mortar for use in brick, block,
and stone masonry construction.
 This cement is not at all for making concrete.
Rapid Hardening Cement:
 Rapid Hardening Portland Cement (RHPC) is a type of cement that is
used for special purposes when a faster rate of early high strength is
required.
 Rapid-hardening hydraulic cement offers reduced shrinkage and
superior resistance to chemical attack.
 It achieves strength much faster than Ordinary Portland Cement and
many installations can be put into service in as little time as one hour
by using this cement.

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 Formwork can be removed earlier and the structure can be used very
soon by using this cement.
 Rapid-hardening hydraulic cement has been used for both concrete
repair and new construction
 During the production process, rapid-hardening hydraulic cement
reduces CO2 emissions by 32% to 36% over conventional Portland
cement manufacturing procedures.
Oil Well Cement:
 Oil well cement is used in the production and exploration of oil and gas
onshore as well as deep water offshore wells.
 Designed for basic cementing jobs especially specified for deeper to
depths of up to 2100 meters, hot and high pressure well condition.
 Oil well cement slurries are designed for many purposes, from the
establishment of the well's safety and structural integrity during drilling,
to the isolation of the zone of interest and the production of oil and gas
upon completion.
 Lafarge, Holcim, Heidelberg, etc are the global manufacturers of this
cement.
High Alumina Cement:
 It is produced by grinding clinkers formed by chalk and bauxite, which
is special clay of high alumina.
 Imparts high early strength, high heat of hydration and resistance to
chemical attack.
 High-alumina cement gains a high proportion of its ultimate strength
within 24 hours and has a high resistance to chemical attack.
 It also can be used in refractory linings for furnaces as it can withstand
high temperatures.

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Low Heat Cement:
 This cement is made to use in the construction of the structures where
the heat evolved during the cement hydration process is required to
reduce.
 The temperature gradient in mass concrete is always significant, this
result in thermal cracks development. The use of this cement
minimizes such effect.
 It is used in Mass Concreting Structures like Dams, Bridges, large raft
slabs, etc. to control Heat of Hydration
 Concrete produced with Low Heat Cement may require less water to
achieve a specified level of workability when compared to a concrete
produced with OPC.
 Setting times of Low Heat Cement significantly extended.
2.8 Challenges and problems of cement industry
Cement is generally considered as commodity and has little scope of
differentiation, so like other commodities cement industry also has its own
challenges.
2.8.1 Distribution System
Distribution system is heart of cement companies. Effective distribution
is the only means through which a company can get a competitive edge over
other players in the market. Effective distribution not only increases
companies profit but also helps in increasing customer satisfaction.
Normally cement companies use two modes of transportation i.e road
and rail but few companies also use sea transportation for distribution.

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Fig 1 .Distribution of Cement from Plant to the Customer
Distributor, Dealer, retailers and the C&F agents play most important role in
distribution channel. Companies identify reputed traders preferably dealing in
building materials or allied products and appoint them as a distributor/ Dealer.
These distributor/ dealer sell cement to consumer as well as small retailers.
Dealers sell it directly to the builders who are big customers. Retailers are
small traders who have set up retail counters in various corner of the city and
sell directly to the consumers. Retailers have two type of customer base
which are builders who are large customers as well as small consumers which
includes contractors, individual house builders etc. Companies higher godown
nearby big markets and stock huge amount of material in those godowns.
C&F agents are appointed to redistribute material from the godown to dealers,
distributors, retailers & customers. This is a traditional means of distribution
wherein the material is transferred from plant to Godowns with C&F, from
where it is redistributed to dealers & retailers which in turn is sold to the
customer.
To expand their market reach apart from the traditional means companies
have also started setting up separate grinding and packing units at strategic
locations.

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Grinding unit: - Companies transfer their clinker in bulk from plant to
grinding units. At these units the clinker is grinded and distributed to nearby
market. Companies distribute the product through the same channel of C&F,
Dealer and retailer or at times even cater it directly to customer.
Packing plants: - Companies transfer loose cement from plant to
packing units. At these units the loose cement is packed into proper bags and
distributed to nearby market. Companies distribute the product through the
same channel of C&F, Dealer and retailer or at times even cater it directly to
customer.
Generally companies use two means to distribute their product which is
road and rail, but few companies also use sea to distribute their product.
Depending on the distance and quantity of cement to be transported suitable
mode of transport is adopted. Say for instance road transport is preferred for
shorter distance and transportation by rail is preferred for longer distance as it
becomes more economical. Companies having manufacturing facilities nearby
ports use Sea as a mode of transportation to distribute their products.
As a product, cement offered by various companies is more or less
similar so the companies can differentiate their product by providing prompt
deliveries through effective distribution system. Effective distribution channel
not only gives competitive edge over others but also helps to reduce damage
and transit loss. Distribution strategy followed would in turn determine
segmentation, pricing, customer behavior and customer decisions. Thus
having an effective distribution system is one of the biggest challenges for the
cement industry.
2.8.2 Price and pricing decisions
Majorly cement market is divided into two segments- Trade and Non
trade. Prices in both the segment are decided differently.
Trade Segment: Trade segment is the segment where requirement of
small contractors, individual house builders is catered through dealers &

52

retailers. In this segment companies decide a landing FOR (Free on road)
rate for the dealers, who in turn sell it to customer adding their profit margin.
Prices for different customer may vary depending upon the payment terms
and quantity required. Invoice price offered by all companies to the network i.e
distributor or dealers is more or less same, but companies offer various
discounts like cash discounts, Rate difference, Quantity discount, Quarterly
discounts, and Annual discounts to push more volumes. Companies also
declare short term schemes to push volumes during lean demand period.
Non Trade segment: Non trade segment is the segment where
requirement of big contractors, builders, government- semi government
projects, RMC units are catered directly by companies. In this segment
companies directly decide the price depending upon the quantity, size of
project and payment terms. However companies give fix commission to
distributors and third party agents who liaison on behalf of companies with the
bulk buyers.
The prices in this segment are lower by 25 Rs to 45 Rs as compared to
trade segment and are fixed at the start of the month, which are valid till end
on the month.
Pricing in the cement industry is mainly driven by demand, due to
which it is observed that cement companies earn good profits during high
demand months and also incur heavy losses when production capacity is
higher than market demand.
Cement production is continuous manufacturing process carrying a high fixed
cost, so companies are forced to continue their production even in the times
of low demand, which forces them to sell their product at lower price than their
cost during such times.
Due to fluctuating demand scenario the prices of cement keeps on
fluctuating, so price decision is one most challenging decision as companies

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have to be proactive and vigilant in deciding the prices in order to get the best
price and best volume.
2.8.3 Perceived image about quality
Quality is a very important element of a product, so in cement too the
manufacturers have done lot of Research & development and have improved
the quality to a great extent. Initially cement manufacturing quality was 33
Grade which has been upgraded to 43 Grade & then 53 Grade, which is the
top grade available in cement as per BIS (Bureau of Indian Standard). At the
same time all major players have introduced PPC (Pozzolona Portland
Cement) which is blended cement manufactured by adding Fly ash in a
permissible limit. It helps the companies to increase their production and
control their manufacturing cost.
During this era of Quality improvement manufacturers realized that quality
offered by one manufacturer can easily be imitated by others as there was not
much scope of differentiation available in this product. After recognizing the
fact some smart players started investing in the process of building different
image of their brand in the mind of consumer. They not only used the
traditional means of advertising like television, radio, newspaper, hoardings,
etc but also used unconventional means of advertising like wall painting,
event sponsorship etc for mass publicity. They also brought in new concept
like mason meet, Individual house builder’s meet, CGC (Consumer guidance
camp), engineers/ Architect meet etc to create a superior quality image in the
eyes of consumer.
All these additional efforts put in by some players did pay them by
establishing their brand image as a “Superior Quality” in mind of consumers.
Such “perceived image of quality” has become a big challenge for the
industry.
Thus we can say that there is two type of quality in the industry
1. Actual quality of the product
2. Quality of product perceived by customer.

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Although quality of product offered by all manufacturers is more or less
similar, customer prefer the brand which they perceive as a better brand and
are even ready to pay premium price for their preferred brand.
Thus in the present era it becomes equally important for companies to
build a superior brand image of their product in the mind of customer as well
as to ensure the same quality product hence promised.
2.8.4. Establishing cement as a brand
Cement is a bonding material manufactured with fairly uncomplicated
manufacturing process. More than 90% raw material of cement is lime stone
and balance 10% are also very common additives like gypsum, (plays role of
retarder which helps regulate initial setting time of cement) clay, silica etc
which are used to balance quality requirement of lime stone. This has resulted
in a very similar or comparable quality in all available products in the market.
Till late 80’s cement was available only as a commodity and the production
and distribution of cement was controlled by government. During late 80’s
cement was decontrolled and many players entered into cement production
which triggered competition into cement industry. Many such companies
which entered into cement production identified the need of the hour and
started building their cement as a brand rather than selling it as a commodity.
These players started using all possible means of advertising like electronic,
print, radio to advertise their product. They also started low cost high impact
activities like wall painting, distribution of hand bills, sending mailers and small
gifts to masons & engineers. They also started separate department known as
technical cell/ technical department which consisted of team of qualified civil
engineers to provide guidance on construction at the door step of customer.
Some companies took a revolutionary step by introducing “Mobile testing
laboratories” to provide concrete testing facility to customers at their
construction site.
Companies also introduced various kind schemes to attract customer like
getting a coupon on purchase of cement bag to win exiting prices like cars,
scooter, home appliances etc.

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All these aggressive efforts made by few companies to build their brand
posed a challenge for all the companies, not only to provide good quality
product but also to carry out various advertising tactics to build their brand.
Due to this all the cement companies were forced to follow the league and
had to adopt various means of promotion already adopted by many
companies and were also forced to introduce many new means of promotion
in order to differentiate their product from others.
2.8.5 Intense competition to minimize logistic cost
As tradition cement is sold on FOR (Free on road) basis i.e cement price
offered to customer is the price inclusive of transportation cost.
It has been almost 28 years since cement has been decontrolled, since then
industry has witnessed high level of competition which has forced all the
players to create their brand image in the minds of customer so they can fetch
premium prices over competitors. But slowly all the companies started
replicating the activities undertaken by any pioneer company and so the
companies were forced to control their cost in order to ensure reasonable
profits during the lean period i.e. when the demand is low and prices are
under pressure.
Three major factors affect the cost of cement which are logistic (18 to
20%), excise (12.36%), and VAT (15%), of which excise and VAT are
government duties and thus cannot be controlled by manufacturer, so the only
cost that is in the hands of manufacturer is the logistic cost and in order to
reduce the logistic cost the companies try to sell their production in the nearby
areas. This strategy is clearly visible in the cluster wise market share of some
companies, like few companies of Gujarat are having 20% to 30% market
share in the areas near to their plant but while considering the market share of
entire state their share falls below 10%.
Moreover as the cement plant has to be installed near to lime stone
deposits, plants of various companies are located very near to each other.
This creates an intense competition in the nearby areas as all the companies

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try to sell their product with minimal logistic cost. Largely this is applicable to
all the cement plants but as the big companies have huge production capacity
at the single plant they have low cost of production and so they can afford to
distribute their product at far off places at a slightly higher price. But the small
players have limited production capacity so they try to increase their profits by
saving on the logistic cost by selling in a limited area, and this technique of
saving on logistic cost is shrinking their area of operation.
Thus intense competition is experienced in local areas as big players
have to sell some part of their production in local area to get higher realization
and the local companies have to sell in local areas as they cannot afford to
sell in far off places due to increasing logistic cost. Moreover the
transportation cost always has an increasing trend because of regular hike in
prices of fuel, so every company prefers to sell their maximum possible
production in the nearby area which increases competition to a great extent.
2.8.6 Cost effective Advertising & Sales Promotion strategy
Advertising & Sales promotion plays an important role in every industry and
same is the case with cement industry too. Top cement brands have thus
appointed famous personalities as their brand ambassador like Amitabh
Bachchan (Binani), Sachin Tendulkar (JP), Mahendra singh Dhoni (India
cement), Om Puri (J K Laxmi) etc to create a positive image among its
customer. These famous personalities have great influence on common man
and they easily get convinced to buy the product due to influence of brand
ambassador. At local level, companies strive to enter the minds of consumer
through bill boards/ sign boards placed at strategic location of gain maximum
eye balls. Attractive dealer boards are provided by all the cement companies
to their dealers so that the dealer can benefit from it as it increases his
visibility.
The above mentioned tactics are generally costly and are effective only if it
does not impact the overall profitability of a company. Companies which have
operations all over India or which cover a major part of India can afford to
have jazzy Advertisement and glossy sign boards but it becomes difficult for

57

regional companies which operate on a small scale to match up with the big
players. These companies rather spend on POP material and local activities
like Grahak Mela, Kadiya Naka etc which helps them to stay afloat in the
market and have a small but significant share in the overall cement sale.
One point which is perhaps important and possibly unique to cement
industry is that the actual consumers (whose house is being constructed/
repaired) are not as important as the local contractor/ kadiya as these people
are the influencers. They have a big role in deciding which cement is to be
used and so companies organize contractor meet, kadiya meet etc so that
they can influence them and in turn increase their sales. Companies even
distribute free gifts like hats, rough pads, pens, measuring tapes etc to these
influencers either through dealers or through local promotional activity
conducted regularly.
Hence it becomes very important for a company to identify its position
and place in the concerned region and have cost effective sales and
promotion activities. A small company can organize a local IPL like cricket
tournament whereas a big company might sponsor an actual IPL team. In the
above example both the companies can meet their respective goals; the
larger company can get international leverage while the smaller company can
create a place for itself in the local market.
It is very essential for a company to have an effective advertising and
sales and promotion activity but it is equally important for a company to
determine the best cost effective advertising sales and promotion technique in
order to get the maximum benefit.
2.8.7 Network – An important influencer
During the last three decades cement industry has witnessed two extreme
scenarios ranging from black market to intense competition to sell the product.
This changing scenario forced all companies to improve on all front starting
from providing best quality at minimum cost, mass branding activities, pre and
after sales service, relationship building with influencers and above all

58

identifying and retaining of channel partners i.e. distributors/ dealers &
retailers commonly known as “Network”.
During the late 80’s to mid 90’s cement network was by and large
exclusive for one company which means traders of cement were mainly
dealing with single brand. But with the passage of time and due to increased
competition in the market major cement companies started increasing their
reach to all available cement counters in the market which gave birth to multi
brand counters.
Cement companies had put in very hard effort to build their brand at
consumer level but they realized that it was equally important to have loyal
and motivated network. Cement merchants are the local traders who possess
good reputation in the town/village. They had a great influence on the minds
of consumers, such that even when a customer came with a pre determined
mind regarding the cement brand to be bought these merchants had the
ability to influence their decision and change their mind. So in such scenario it
became very important for every cement company to keep their network
happy and motivated to ensure their loyalty and get maximum share from
multi brand counters. In order to lure the network companies offered various
scheme other than routine discounts like cash discount, Quality discounts etc.
Such offers/ Discounts can broadly be categorized in following parts.
Loyalty buying offer
Companies offer special discounts to the traders who exclusively deal in their
brand. Such discounts are given annually so the dealers don’t switch their
loyalty. Some companies also add some amount to their security deposit
which can boost their loyalty. As a part of Loyalty buying offers few companies
also give some discounts to the traders on their past performance which
forces them to continue working with the same brand for long duration.
Motivational Offers
Companies also give annual domestic and foreign tours to dealers based on
their sales quantity. Other than such tours companies also give annual kind

59

scheme (mostly gold) on the quantity sold by them. Moreover few companies
also give long term scheme (2 to 3 years) in which they reward few points on
every purchase which can be redeemed by dealers against the purchase of
various items like cars, bikes or other house hold appliances.
Hidden discounts
Companies also give some hidden discount in form of credit notes on the
basis of past performance. This keeps the dealers motivated to stick to a
particular company as switching over to another company may make them
lose their hidden discount on quantity sold during past years.
All such various schemes provided to the networks proves that network
is a very important influencer in cement industry and companies keeps on
providing various incentive and scheme not only to keep their network intact
but also to convert other dealers into selling their product.
2.9 SWOT ANALYSIS OF CEMENT INDUSTRY
SWOT ANALYSIS
2.9.1 Strengths:
 Second largest in the world in terms of capacity: In India there are
approximately 200 large and 300 mini plants with installed capacity of
360 million tonnes.
 Low cost of production: due to the easy availability of raw materials and
cheap labour.
2.9.2 Weakness:
 Effect of global recession on real estate: The real estate prices are
stabilizing and facing steady slowdown especially in metros. There are
approximately twenty thousand completed flats without occupancy in
Ahmedabad. There has been drastic reduction in property prices due to
reduced demand and increased supply.
 Demand-Supply gap, overcapacity: The capacity additions distort the
demand-supply equilibrium in the industry thereby affecting profitability.

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 Increasing cost of production due to increase in coal prices.
 High Interest rates on housing: The re-pricing of the interest rates in
the last four years from 7% to 12% has resulted in the slowdown in
residential property market.
2.9.3 Opportunities:
 Strong growth of economy in the long run: Indian economy has been
one of the stars of global economics in the recent years
 Increase in infrastructure projects: Infrastructure accounts for 35% of
cement consumption in India. And with increase in government focus
on infrastructure spending, such as roads, highways and airports, the
cement demand is likely to grow in future.
 Growing middle class: There has been increase in the purchasing
power of emerging middle-class with rise in salaries and wages, which
results in rising demand for better quality of life that further
necessitates infrastructure development and hence increases the
demand for cement.
 Technological changes: The Cement industry has made tremendous
strides in technological up gradation and assimilation of latest
technology. At present ninety three per cent of the total capacity in the
industry is based on modern and environment-friendly dry process
technology and only seven per cent of the capacity is based on old wet
and semi-dry process technology. The induction of advanced
technology has helped the industry immensely to conserve energy and
fuel and to save materials substantially and hence reduce the cost of
production.
 Government’s emphasis on the Infrastructure.
 Heavy demand of housing and other sectors in which Cement is to be
treated as raw material
 Foreign direct Investment in the Retail and other Sector may surge
demand of Cement in coming years.

61

2.9.4 Threats:
 Imports from Pakistan affecting markets in Northern India: In 2007,
130000 tonnes in 2008, 173000 Metric tonnes of cement was exported
to India. This was done to keep the price of cement under check.
 Excess overcapacity can hurt margins, as well as prices.
 Government’s Foreign Direct Investment Policy in favour of investment
in the industry by foreign giants.
 The demand supply mismatch arising out of burst of new capacity
additions (and not majorly out of lack of normal demand growth) has
constricted the capacity utilization levels of the industry for the last two
years in particular. Given the resilient nature of the economy, India has
been able to achieve reasonable GDP growth of 5 % in FY 12 which is
expected to increase to 6 % to 6.5 % in FY 13 is expected to translate
into a demand growth of 8% to 10% over the next few years. While
demand for cement grew by 6.6% in FY 12, there are already
encouraging signs of a pick-up in demand with demand spurting by
over 10% in the last quarter of FY 12. It is therefore expected capacity
utilization to gradually increase over the next 3 years with parity
between supply and demand being restored by then. While this being
the overall scenario, there are still pockets of high demand growth in
certain regions of the country and Industry is already moving significant
quantities of cement to the Eastern markets as far as Assam & Nepal
to optimize capacity utilization, given the overall surplus.Industry's
attempts in the short run will be towards striking an optimum balance
between volumes and profitability and achieve best results.
 The availability of power from the State Electricity Boards is another
area of concern with acute shortages in power availability in Tamil
Nadu and Andhra Pradesh.
 Availability of indigenous coal from the nationalized coal companies
and the quality of supplies is another area of concern. This problem
has however been mitigated to a large extent due to the coal linkages
obtained during the last two years to cater to the requirements of the
recent capacity expansions in Andhra Pradesh. The Industry imports

62

coal to meet its cement plants' requirements thereby adequately
addressing the quantity, quality and cost aspects. Mining rights
obtained in Indonesia should fructify with infrastructure of roads and
bridges under completion to ensure timely coal supplies.
 The ever-rising cost of energy in the form of petroleum products will
also have its impact on the power and transportation costs.

Cement industry analysis

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