Work activity at a construction site in Beijing, China. New houses are continuously built in China's big cities. The Forgotten Market for the coatings producers in China is a genuine understanding of the true drivers that will keep them successful with their future strategies.
All of this less than ethical behavior
by the contract painter could be avoided
if the average homeowner was more involved in the process and more educated
about architectural coatings. Several of
the larger, international coatings producers have attempted to solve this
problem by offering their paints through
in-house paint contractors. Unfortunately, the outcome achieved has not
been as hoped.
Mature markets by comparison
In the U.S. and Europe the architectural
coatings market has undergone significant
changes over the years. The U.S., like
China, used contractors to both produce
and apply coatings for many years. With
the advent of water-based coatings there
was a conscious effort on the part of the
paint producers to bring the individual
homeowner into the process.
Admittedly, most of this desire to get
the homeowner involved was based on a
belief that the coatings producer could extract more profit from the homeowner
than working through a contractor. That
assumption proved to be correct. There is
still a contractor painting market in the
U.S. but it is small compared to the total
DIY market.
China’s architectural market appears
to be driven by a combination of new
home construction and government policies regarding the need to paint a given
structure. Unfortunately, neither of these
two drivers are long-term sustainable. As
we have seen in the U.S., economic conditions have reduced new home construction by a considerable amount. What has
saved the U.S. architectural coatings market is the fact that there exists a strong
DIY market and that over the years homeowners have been educated as to the need
to protect and improve the appearance of
their single largest investment.
If a homeowner cannot acquire a new
home they often invest in the renovation
of their existing home. In addition,
through several years of intense education
and development of the DIY market the
U.S, homeowners today are provided with
a wide variety of highly crafted products
that make it easy for them to carry out the
actual painting activity themselves and removes the added cost of a contractor.
In addition, through working closely
with these homeowners over the years, the
coatings manufacturers have been able to
develop formulations that meet the real
demand of the ultimate user such as issues
involving odor, ease of clean up, resistance
to various products, touch up ability, non-flammability and no lead levels. The same
situation has happened in Europe.
However, in China, the development of
the architectural coatings market has not
progressed along the same line as in the
U.S. and Europe. Mostly this is due to the
fact that this market is in many ways still
new to the Chinese consumer. In China
the architectural coatings market is comprised of a large amount of solvent-based
coatings and in some areas toxic lead is
still used as a pigment.
What needs to happen in China is for
the coatings producers to cultivate a different route to market rather than
through traditional contract painters. As
mentioned earlier, the objective and strategies of contract painters are not in sync
with the coatings producers or the homeowners, yet they are the primary route to
market for coatings producers.
AkzoNobel, through its acquisition of
ICI, has done a remarkable job in an attempt to bridge the gap between the coatings producer and the ultimate customer,
the homeowner. Still, even with numerous
outlets a large amount of architectural
coatings provided by most producers still
flow through contract painters rather than
be purchased by the homeowner.
