Where Will Coatings Technologies be in 2015?
The third oldest
profession in the
world, the paint
and coatings
industry is
underappreciated
and undervalued
in the dynamics of
its current value
chain activities.
by Phil Phillips, PhD
Contributing Editor
phillips@chemarkconsulting.net
The paint and coatings industry has evolvedovermanyyearsinamarketing culture that has failed to protect it
against product value loss. Valued at more than
$21.2 billion in North America, it is a slow
growth industry with low growth numbers that
track gross domestic product (GDP) rates.
Consolidation has dramatically shrunken the
supplier and formulator base of the industry,
which has also witnessed a staggering loss of
business in North America due to the offshore
movement of OEMs. Compared to the Consumer Price Index the paint and coatings industry lost 38 percent of its value in liquid coatings
and 72 percent of its value in powder coatings
over the past 35 years. This loss of value has occurred primarily at the formulator position in
the supply chain.
When gathering intelligence throughout the
industry value chain, accuracy loss during the
product development stage is more than 80 percent, which means that as an industry we are
grossly inefficient in building the right product.
There have been some bright spots on the
new product development front over the years
where, along with significant sales increases,
However, with paint being
such a ubiquitous product that
is virtually everywhere one
looks and often times is a key
driving force when it comes to
consumer purchasing deci-
sions, paints and coatings are
grossly undervalued.
Winners and losers
The $21.2 billion paint and
coatings industry in North
America is divided into three sectors— Architectural, Product OEM and Special Products.
The architectural and special products sectors,
which combined total $14 billion, are relatively
safe from offshore penetration. However, the
same cannot be said for the $7.21 billion product OEM sector, which is totally vulnerable
(see Chart 1 below, “North America Coatings
Consuption 2010”).
The three major sectors of the paint and coatings industry can be further broken down into 33
sub-segments. Of these, three industries influence
the North American paint market most—
Housing Starts and New Construction; Transportation;
and Communications.
When housing starts shrink and transportation
industry sales fall off, all of the coated products
that go in them diminish as well. Chemark knows
from our research that the business sectors with
the largest capitalization tend to win. That is,
when push-comes-to-shove it’s the oil, chemical
feedstock and big box retail companies that have
more power than paint manufacturers. Paint
makers are squeezed between cost and price pressures from all sides (see Chart 2 on the next page,
“Power Position in the Value Chain”).
There exists an anomaly of power differences
in the paint and coatings industry with regard to
regional comparisons. In the architectural sector
there is a great difference in profit pools between
Western Europe and the U.S. In W. Europe the
paint retailers and the paint manufacturers share
