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Akzo Nobel Chairman Says ‘Value Addition’ Holds Key to Industry Growth

BRUSSELS — Akzo Nobel Chairman Cees van Lede called on the coatings industry to do a better job of promoting the value added by coatings products in comments at the annual conference of CEPE – the European Council of the Paint, Printing Ink, and Artists’ Colours Industries. Van Lede said coatings sales growth is limited in mature markets, but he said growth potential exists in developing markets, technology innovations, and “the added value with which we support our customers. We don’t just sell cans of paint, but we provide training, services, process and supply integration, and so on.”

Van Lede also said acquisition remains a growth option for companies in an industry still viewed as being highly fragmented. “We have the impression that consolidation in the industry is far advanced. However, if we look at the mergers and acquisitions of recent years, we find that this was primarily consolidation among the top 15 companies. In total, the number of coatings companies has not changed very much,” he said. Even with its rank as the top coatings producer worldwide, Akzo Nobel’s market share is a relatively modest 8%. “This means that the consolidation process has really just started,” he said.

Van Lede also warned of stiff challenges facing coatings manufacturers, including “increased customer and supplier power” and the threat that coatings companies can “get squeezed between the two.”

“Increasingly, our customers operate on a global scale and demand world-wide supply,” he said. The result is demands for higher-quality services, increased liability, and pressure for lower prices from customers. At the same time, suppliers are increasingly global in reach and are seeking greater muscle with joint marketing and branding activities. “All this makes it difficult to increase the profitability of our industry which is, in general, comparatively low at 8 to 12% of sales,” van Lede said. “This means that the real value of our products is still insufficiently paid for.”

Van Lede said companies “have to be creative and look at all areas” to boost profitability with improvements in cost structure by concentrating manufacturing, streamlining logistics or supply-chain management, and simplifying the manufacturing process.

Van Lede noted that the cost of the paint represents a small percentage of the total applied cost of a product, meaning the product is often undervalued. But coatings increase the life span and maintain the value of assets, and provide decoration and functionality. “We have every reason not to sell our paints under value. Rather we need to find ways to enhance what I’d call the ‘total coatings package.’ We don’t just sell paint, we sell style, service, technology, experience, problem solving,” and other intangibles.