Strong Brands in Dynamic Markets: The Coatings Industry and Its Goals

Some one hundred coatings decision makers from Asia, America and Europe with a “total economic weight” of some €20 billion made their way to the Coatings Summit in Vienna, the Austrian capital. Many of them were already attending this meeting of the top names in the global coatings industry for the third time. This was the first time it took place in Europe, having been held in 2003 and 2005 in Nassau, Bahamas. Ten top-ranking speakers presented, analyzed and prognosticated, always supported by delegates who were keen to join in the discussions and who, moreover, took the opportunity during every break in the programme for intensive group discussions. The hosts were once again the world coatings association IPPIC and Vincentz Network.

The objectives presented differed widely, but had the same level of ambition: small or large, American, Asian or European coatings firms want to go far and reach high.

• Japan wants to reduce its solvents emissions within a few years by a whopping 50% and is developing thermo-reflecting road surfaces, which should bring relief to highly overburdened large cities.
• Valspar is working on improving still further its “wonderful” balance of 1.24 industrial accidents per 200,000 man-hours.
• SigmaKalon would like to become the most popular coatings producer in Europe, Africa and Asia. (Valspar also has claims to holding the title “best coatings manufacturer.”)
• Comex says: “We must reinvent the business.”
• Meffert is highly successfully rolling its way through the Eastern European markets and is beating its drums in Turkey (a commercial for the firm shows a percussion concert on paint tins!) for its brands.
• Adler is staying with wood paint and is hoping to capitalize on the ever-stricter environmental stipulations.
• Goodlass sees enormous potential in its home country India and will continue to improve its IT structure dramatically.
• Jotun is avoiding acquisitions and is forever achieving new synergies from the segment group “deco + protective/marine + powder.”
• Raw materials producer Rohm and Haas has knowledge of 80% of the world’s population with low coatings consumption – and of regions that purchase a lot but are not (yet) willing to pay high prices.
• DuPont is making itself “resistant” – to tidal waves, epidemics and other catastrophic influences.

Paths to Growth

The strategies presented, which the delegates typically considered with particular attention, revealed the desired interdependencies.

Japan, represented at the Summit by Nippon Paint, is reformulating innovatively and is making special effort to educate consumers.

Valspar is relying on its immense size and tough financing to be with the top of the field in every segment. Furthermore the company is relying on its “balanced” mix of cyclical business (wood paint, coil and industrial coatings: altogether 40%) and segments relatively independent of the economic situation (decorative paints, automotive paints and can coating lacquers: the other 60%). If necessary business is done unorthodoxly: the Huaran acquisition (a U.S. $200 million manufacturer in China) led to a “reverse” integration, namely of the, for them, “old” Valspar structure into their new purchase. Brands policy is right at the top of the agenda. Together with the retail chain Lowe’s, their newly acquired “Samuel Cabot” wood stains (that was a brand acquisition) will be systematically raised into the premium segment.

SigmaKalon is consistently spreading its business model into Europe and the rest of the world. In Hungary, Poland, the Czech Republic and Slovakia successful subsidiaries are working in union. These lead to “clusters” and synergies; meanwhile the head office of the industrial coatings division has moved to Poland. Slowly but surely the production belonging to it is shifting from Western to Eastern Europe. It is true that productivity is (still) lower there, but R&D expenditure is considerably lower. Marine paints? The costs for “moving” to Asia were recouped almost immediately, because logistics are much less expensive there.

Comex made an impression with a remark from the sidelines. In 2006 they put on 89 big events for painters, including an event in Mexico City with 20,000 participants. At the firm’s own points of sale all of the Comex products are always available and these all uniformly carry the name of their origin. These paint shops were all systematically given a “feminine” look: a friendly atmosphere instead of smelling of toolboxes.

Meffert is concentrating exclusively on its premium products. The brand communication involved is bearing fruit; “düfa” is the magnet in Moscow. New factories are springing up fast, and the never-ending stream of the company’s lorries is noticeably reduced.

Adler is co-operating closely and purposefully with European research institutes to flexibly and innovatively change environment guidelines into jumps in turnover. Nano paints, which have not yet really arrived everywhere, have belonged to everyday life at Adler for quite some time.

Goodlass can see a “one”, namely the one single litre the Indian population uses per head; and they know that perspective is almost unlimited if one is well positioned. They have already categorically reduced expensive inventories and are working under great pressure to make further enormous leaps in productivity. Apart from decorative paints they are increasingly setting their sights on coil, marine paints, aircraft coatings and other high-tech segments, which are on a low footing today but which are bound to soar the day after tomorrow.

Like Comex, Jotun too, has a dominant position in its own country; the path to the world was very quickly plotted. They made just a few acquisitions, with only modest success. Meanwhile their maxim is: grow organically. The company remains steadfastly focussed on decorative paints, marine paints/corrosion protection as well as powder coatings. Apart from the Middle East – a Jotun theme at the Coatings Summit 2005 – Asia is also coming up with success stories. In practically all important states production is being carried out; all the company’s products are being marketed worldwide under the firm’s name. Further strategic cornerstones are: highest competence in and maximum use of tinting technology; local proximity to global shipbuilding; and the ability to “think long term”.

Rohm and Haas is occupied with the “dichotomy between established and emerging markets.” With the former the company recommends concentrating one’s attention even more than previously on the efficient use of key raw materials. In the “new” markets the products should take the diminished purchasing power into account more.

DuPont, despite all the challenges, still sees good opportunities for the coatings industry. They claimed that new potential would arise, amongst other things from more intensive cooperation between the producers of raw materials, the formulators and the end-users. High productivity in “old” markets, dynamic perspectives in “new” ones, and, added to those, innovative products and a “proactive” approach to environmental stipulations offered a wide field of activity.

Quality and Innovation

Our sights are set on quality and innovation just as much as China, India and Eastern Europe, but strong brands and “savvy” markets are moving into the limelight. Communication is the key to customer groups whose demand, particularly in the “old” markets, only increases when “I must re-paint” gives way to the more emotional “I want to refresh.” It is imperative to align technological advances to the needs of the market with much clearer consistency than previously. And these advances vary from region to region.

Gain local knowledge rapidly through acquisitions or sit it out and grow organically? Place one’s stakes on relatively stable segments or set one’s sights on expansive, yet at the same time cyclically sensitive niches? Where is the right mix? The third “Coatings Summit” (4th–6th February, Vienna) provided a platform for high-ranking names and vigorous discussion among the decision makers in the coatings industry.