Cement industry of Pakistan is experiencing consistent growth since 2011. This growth is attributed mainly to increase in national consumption, thanks to various infrastructure projects including CPEC. National Compound Annual Growth Rate of cement has been 7% in the last 5 years and 10.5% from the year 2014 to the year 2017. This trend of growth in the local consumption is expected to continue with an expected growth rate of 10% during the current year and 3 years CAGR of 8 to 10% up to the year 2021.
Exports of cement had a steep decline and touched rock bottom of 4.5 million tons in 2016-17 as compared to about 11 million in 2008-09 and 2009-10. Export market does not present a lucrative scope due to comparatively low international market prices coupled with tariff and non-tariff barriers imposed by various countries.
Increase in local consumption of cement is due to housing, provincial infrastructure and big projects associated with CPEC. About 50% of this growth is indebted to infrastructure projects and CPEC related construction work. As such, this demand is time specific and can slow down after 2 to 3 years with the completion of major ongoing and upcoming projects. Therefore, the demand is expected to be stagnant after it reaches about 53-55 million tons per annum in the year 2021.
Per capita consumption of cement in Pakistan stands around 200 kg, which is low as compared to 250 kg in India and global per capita consumption of cement of 500 kg. We expect cement demand to touch 250 kg by the year 2021 making it 54 million tons per annum. However, if the Gwadar Port project goes successful as per the expectations, the local demand can climb up to 60 million tons per annum.
Cement industry is also going through various expansion projects and if all the expansion plans go practical, production capacity will increase to 70 million tons per annum by the year 2021.
This is good market scenario for the industry and everything seems going hunky-dory for the sales teams. However, even smoothest of the sailing in a well-designed and efficient ship can have unexpected jolts, I am sure everybody knows about Titanic and iceberg story. Hence, the success lies in staying attentive with contingency plans to cope with sudden unexpected market icebergs. Moreover, the good demand market scenario can be useful in improving your current market position to strengthen your company and product image contributing to the overall profits of the company.
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Soft markets having consistent market demand provides an excellent opportunity for the sales people to redefine and strengthen their brand by correcting shortcomings and inadequacies of the sales strategy. These shortcomings may have developed throughoutthe unstable market during uncertain and low demand, severe competition and/or price war periods. Stable market now provides you an opportunity to redress all those wrongs that haveineptly or inevitably inflicted your brand and prepare for the future more aptly. For this, I would suggest the following to the sales teams, which I refer to as Sales Review and Evaluation Process (SREPS) making it easy to remember these points:
- Strengthen the Image of your brand and the company: As branding pioneer Walter Landor put it “Products are made in the factory, but brands are created in the mind.” You should use this time to capture additional share of the mind of the customers. Go for networking, meet people from the different industries, participate in industry related exhibitions and conferences. The objective should be to inculcate your brand in the minds of the people.
- Reposition your brand: Good demand for the product puts you in a comfortable position as to meeting sales targets. Customers rarely bargain on price and as such, price cuts/rebates can easily be avoided. This is ideal situation to reposition your brand, or recover its lost market standing. Decide on the markets where your brand should be number one in terms of price and/or sales. It would be an opportunity lost if you cannot make your brand fetch premium price in at least top three of your markets and establish your brand among top three in all the available markets.
- Eliminate price discounts: Use this good market demand as an opportunity to eliminate price discounts. No sales person can deny the importance of giving incentives to the dealers but this should be given in a way that does not reflect on the market price of the product. Incentives, if any, are meant for dealers and they should not use these incentives to discount the market price. It is sales persons are duty bound to ensure incentives are not taken as price discounts to be passed on to the retailers and end users. Price discounts may spike the sales but would damage the market standing of the brand in the long term. If inevitable, use non-cash incentives like foreign tour, Hajj/Umra package, car for best distributor etc. I need not mention here that in soft market conditions having good demand the best incentive is to give right quantities at the right time to your dealers.
- Prepare for new capacities: If your company has planned adding new quantities by expansion and/or BMR, use this time to do spade work in the existing and untapped markets creating space for your brand and upcoming quantities. Sales team should be ready for the mock sales at least 6 months before the launching of the new plant and sales team should develop thorough knowledge of all the potential markets and customers. During Mock Sales, start selling at least 10% of existing capacities in these new markets targeting all the markets and potential customers alternatively during the month. This would help you to understand market response and logistics bottlenecks.
- Sharpen your sales skills: Customers need products. What do sales people need? It is sales skills undoubtedly. Smooth soft market provides an excellent lab environment to sharpen your skills and even experiment new sales techniques. Do not miss this opportunity to enhance your sales expertise. Sales people may get away with this during booming markets but things will always change if market tightens. Sales will go to a sales person who better understands the market and the customer behavior. Read sales training books, listen to sales training audios, attend training seminars etc.
Promising market situation for a product is always a boon for the company and for the sales people as well. However, remember only constant in this universe is change and market situation is not an exception to this. Efficient use of the market opportunities and ability to plan and prepare for the upcoming challenges by developing contingency plans would dictate the success in tight market situation. There will be winners and there will be losers in the tough market, which one you going to be? Points mentioned above might help you take the challenges with more confidence.