Water-based paint systems aid market recovery

Citation

(1998), "Water-based paint systems aid market recovery", Pigment & Resin Technology, Vol. 27 No. 6. https://doi.org/10.1108/prt.1998.12927faf.001

Water-based paint systems aid market recovery

Water-based paint systems aid market recovery

Keywords Building, Paints, Solvents

Difficult market conditions in the building paints industry have forced manufacturers to take decisive action, according to Frost & Sullivan's latest study of this sector. A new report from the international marketing consulting company finds that changes which initially threatened the industry have become the key driving force behind the latest technical developments, which now contribute to recovering overall revenue growth rates of 2.6 per cent.

The emergence and growth of new paint systems, such as water-borne paints, high solids, radiation cured and powder coatings, mean that manufacturers can offer the stability, application and performance end-users demand while lowering solvent content.

In the decorative paints industry, water-based paints have been very successful as a cleaner alternative to solvent-based paints. Powder coatings have also enjoyed rising popularity, particularly as façade coverings. Waterborne paints are particularly popular in the DIY market, largely because consumers tend to like to be seen using "green" products while industries are far more concerned about performance and price.

Alternative technologies have had considerably less success in making inroads in the market for industrial paints, primarily because there remains scepticism over the performance they can deliver.

Of the solvents for paints currently on the market, active solvents provide the best performance but at a high price, while diluents are cheaper and often selected for this reason. Oxygenated solvents offer the best answer to environmental and performance demands.

In fact, virtually all alternatives to solvent-based technology do still contain solvents, however, at lower levels. As the trend towards higher solid and lower solvent content continues, so the choice of solvents will become an increasingly important issue.

In the paints market generally the greatest growth is forecast in acrylic resins, saturated polyesters, polyurethane and epoxy coatings. Powder coatings are also set to increase their share of the paints market.

Although overall revenue growth rates are still not particularly high, they show a marked improvement over the last seven years, during which the industry hit lean times, with volumes stagnant or declining in many areas of Western Europe. High and erratic raw material prices, particularly in the titanium dioxide market, coupled with the emergence of the environmental debate, left manufacturers with little room for manoeuvre.

Some companies have responded with the divestment of non-core activities and by focusing efforts on more specific markets in which they feel they have competitive advantage. Industry analyst Ali Shah reports: "In Western Europe, organic growth has been hard to achieve but the larger players have shown it possible to increase their market position through mergers and acquisitions". Notable examples of this strategy in action include the acquisition of the coatings operations of the Swedish company Nobel by the Dutch group Akzo, and the merger of the British Kalon company with the Total Chemie subsidiary Euridep, which has propelled them into third place in the decorative paints sector.

Outside of Western Europe there is considerable market potential, with Poland, the Czech Republic and Hungary attracting the multinationals alongside Russia and the Baltic National, to a lesser extent. A number of companies have forged relations with foreign partners in order to gain a foothold in these new markets.

Frost & Sullivan concludes that market conditions are improving and that, by 2004, the European Building Paints market could be as much as 2.38 billion litres in size and worth over US$10.0 billion (Figure 1). So long as manufacturers continue to focus their efforts divesting non-core activities and cutting overheads, whilst investing in complementary concerns, the future looks promising

Figure 1 The European market for building paints (per cent of revenue by geographic region ­ forecast for the year 2004)

For further details contact Frost & Sullivan Tel: +44 (0) 171 915 7824; Fax: +44 (0) 171 730 3343; E-mail: kristina.menzefricke@fs-europe.com