Uganda

War of paints erupts in Ugandan market

From left: Kansai Plascon East Africa Limited president Gary Van Der Merwe, managing director Jamil Virjee and managing director East Africa Wim Bramer during a press briefing  in Nairobi recently. PHOTO | FILE
From left: Kansai Plascon East Africa Limited president Gary Van Der Merwe, managing director Jamil Virjee and managing director East Africa Wim Bramer during a press briefing in Nairobi recently. PHOTO | FILE 

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 the latter.

Johann Smidt, managing director of AkzoNobel Decorative Paints in sub-Saharan 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, the Dutch firm 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.

“We are selling Plascon and we are saying Uganda’s biggest paint company is now Plascon. We have not mentioned Sadolin.”

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.

Widening rift

A stroll in Industrial Area, Mulago, downtown Kampala exposes you to the gaping rift between the two companies.

A giant billboard stands out on Luwum Street near Old Taxi park in downtown Kampala. It 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.

“I do not understand when they say it is only a change of name but the same paint quality remains,” says Peter, a Sadolin Paints customer.

Nada Andersen, 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.

In their adverts, 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, adding that the two slogans should be allowed to co-exist.

Unfortunately, she explains, self-regulation and regulation in Ugandan advertising industry is still too young to handle this matter decisively.

Customers like Peter wonder if Sadolin Paints products are in the market. Mr Smidt assures that Sadolin Paints products will continue to be traded in the market.

Consumers , he adds, will continue to use the Sadolin brand which they are used to 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 legal and that the Sadolin brand is free to trade in the market and communicate to that effect as well.

Paint dealers now have to shoulder the burden of creating awareness, a task some find challenging.

“People are 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,” Plascon paint agent Derick Tumusiime says.

Mr Tumusiime feels cheated. “We are doing a lot of work to promote them. They should pay us,” he says adding that customers are already reporting changes in the product.

Henry Murungi, a painter, has been using Sadolin for more than six years.

“There has been an improvement. Plascon paint dries quickly after painting. If quality declines, I will look for an alternative,” he says.

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

Kansain Plascon managing director Mr Chris Nugent says the paint is the same despite change in names.

“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 commenting on the old stock.

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. He says Plascon now has access to technology “in a way it did not have before”.

Brand change

Recently, Sadolin Paints 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.

If Sadolin Paints comes back to the market, observers say the industry will have to get used to their individual ‘cakes’ getting smaller at the moment. But this is likely to be a temporary situation.

“I have heard Sadolin will be back in the market but I doubt. If it returns, it will be a mixture of sorts,” Mr Tumusiime 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.
Dipil Waghani manages a Regal Paints depot nearNakasero 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 being sold 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.

Prashant Gupta, country manager of Basco Products Limited, the manufacturers of Duracoat paints, says his company continues its operations unaffected.

“We have not experienced too much variation in our operations. We are working on how to grow our market and make our customers aware of our products. Construction is growing and hopefully, the market for paint will also grow because the biggest market is the construction sector,” he says.

In an attempt to sway their licensee, AkzoNobel issued a notice to Sadolin, a move Sadolin thought would frustrate their transaction.

The 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 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.

Plasconlater mounted an aggressive campaign advertising the new name change.

This also meant that the Sadolin trademark now had no local manufacturer and distributor.

AkzoNobel are in the final stages of negotiation with a local partner in the region. Reports indicate that the company is about to reach 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.