Cement Manufacturing: Opportunities and Challenges

India is the 2^nd largest cement producer in the world with a production capacity of 502 million tonnes per annum in 2018 & is expected to touch 550 million tonnes by 2020. However the per capacity consumption of cement in India is 195kg which is far less than the world average of 500kg & 1000kg of China. This certainly is a big opportunity for the cement companies in India to bridge the gap & in turn increase turnover.
However despite the overall outlook being positive, the cement industry is facing a situation of over-capacity. This is also coupled with the interventions by the Competition Commission of India & the populist State Governments, which has led to pressures of not increasing prices despite the increase in cost of raw material & process fuel. Shortage of domestic coal & increasing cost of imported coal is also adding to the overall increase in production cost. On the other hand cost of electricity in India is higher compared to any of the peer countries & captive power plant is not feasible for smaller companies. The logistics cost for cement is also high since a lot of the cement is still transported through road transport which pushes the cost of cement. The current Railways capacity is not adequate enough for transportation. All of these are clouding to a situation of higher costs & lower margins especially for the weaker players in the short term.
To increase the demand, cement prices have to be attractive for consumers. Higher prices always act as a disincentive & gives encouragement to substitute products to cement. However opportunity today for the cement manufacturers to reduce prices is low since by & large the cement industry is cost effective & profiteering is rare. One of the possible solutions to lower prices can be by reducing the current GST rates for cement which is quite amazingly clubbed with the luxury items slab. Cement being a mass consumable item & a product which is in sync with the progress of the nation through infrastructure & housing, the high rates may need a revisit.
Another unique situation for the cement brands have been the advent of numerous brands smaller or bigger which has led to an increase in competition & lower market shares for all players since it is the share of the same pie & the pie’s increase in size has been fairly slow. Hence for the numerous cement brands, branding & technical strategy becomes critical to get the share of mind of the consumers & the influencers. Cement being still a low involvement category for the consumers & no substantial product differentiation among various brands, TOMA or Top of the Mind Awareness becomes paramount. Hence to increase TOMA the cement brands are spending more on branding which is also increasing the overall cost for the manufacturers. With the advent of technology more & more consumers are today aware about the various brands available in the market. They have started to make their own brand choice decisions which have led to demanding the brand upfront to the retailers just like any other mass consumable brands, hence limiting the role of push strategy, the cost of which is lower than a pull strategy.
It should be a constant endeavor of Human Resource Department of any cement company to create a high performing organization. A structured and robust Performance Management System, building competencies, improving employee performance and development, and driving better business results. Cement industry can attract the best of people by designing & structuring Rewards, Accolades, and Flexible Compensation & Benefits. Creating the supportive culture in the organization wherein people are open to innovate. Performance Coaching & Counseling can trigger a growth mindset in the minds of the Employees. Employees are the biggest assets of the organization.
Overall despite the challenges being faced, the cement industry is here to grow with the growth story of the nation remaining intact. With the rise of income of the middle class, launch of various housing schemes by the government, easier home loans availability & infrastructure push by the government, the sun looks brighter for the industry & just like any other industry, the cement industry is also reinventing & innovating itself with newer technologies & processes to ride alongside the positive outlook of the nation.
About the Authors
Dibyajyoti Guha, DGM – Branding & Technical Services at Star Cement Limited has more than 15 years of experience in Brand Management
& Strategy. He is a PGDBM & Advanced Marketing degree holder from IIM Calcutta .
Debalina Roy, Sr. Manager – HR , Star Cement Limited has more than 11 years
of experience in the areas of talent Management , Recruitment , Training &
Development , Employee Engagement.