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Decorative paints
market overview


End-user segment and market sector analysis

The decorative paints market is roughly 45 percent of the €75 billion global paints and coatings market. Decorative Paints differs from our other Business Areas in that all revenues come from just one end-user segment – Buildings and Infrastructure. All revenues also come from only two of the three sub-segments – New build projects, and Maintenance, renovation and repair.

Buildings and Infrastructure

All three sub-segments of the Buildings and Infrastructure end-user segment were negatively affected by the recent economic slump. This was due not only to normal economic cycles, but also resulted from the global boom within the Buildings and Infrastructure sector prior to the recession. The crisis prompted both a normal cyclical downturn and a massive global correction in property and property-related markets. For our Decorative Paints Business Area, the Maintenance, renovation and repair sub-segment is more important than the New build projects sub-segment. This is positive news in terms of the relevant market growth for our business, as the recovery in New build projects has been even weaker than in Maintenance, renovation and repair. Taking each of the sub-segments in turn:

Maintenance, renovation and repair

For the important residential component of this sub-segment, the market is strongly correlated to house moves, as people often renovate both before and after moving home. House moves are, in turn, related to house sales, which are connected to factors such as mortgage availability and general consumer confidence. Due to the recent recession, issues involving the housing market have been considerable and some geographic regions have yet to recover. We are seeing signs of a recovery in North America, but given the divestment of our North American Decorative Paints business to PPG Industries, Inc., we are expecting modest growth in this sub-segment. This modest recovery is reflected in the outlook for our Business Area, as is the buoyant forecast for this sub-segment in high growth markets. In these regions, growth reflects both the underlying general economic outlook and an emerging cultural shift towards maintenance and renovation. It is also worth noting that, for Decorative Paints, while residential markets have been badly affected by the recession, the impact on commmercial and infrastructure markets has been somewhat different. Commercial markets experienced a negative impact, but often late in the cycle, as this market takes longer to adjust than the residential sector. The Infrastructure market (for example, airports, stadia, railway stations) is often somewhat counter-cyclical, as governments invest to support economic development. The outlook for these markets also assumes modest growth going forward.

New build projects

Although the vast majority of our revenues in Decorative Paints come from the Maintenance, renovation and repair sub-segment, this sub-segment represents a significant proportion of the Business Area. This is important because the New build projects end-user sub-segment has been badly affected by the recent recession. Some question whether a full recovery is underway, particularly in the residential component of the sub-segment, with analysts forecasting flat growth at best, evidenced by projections for residential housing units completion. The outlook for non-residential sections of this market is better, but only in high growth markets.

Strategic direction

The vision for our Decorative Paints Business Area is to be the leading decorative paints company globally by inspiring consumers and customers around the world to transform dull grey spaces into colorful environments, lifting people’s spirits and satisfying their need for constant renewal.

Achieving this will require us to have strong processes and capabilities in terms of:

  • Branding
  • Distribution, wholesale retail management
  • Understanding and serving professional painters
  • Consumer inspiration
  • Quality management, including product portfolio management

We have five strategic priorities for the Decorative Paints Business Area. These are:

  1. We will continue to restructure and grow market share in Europe. Since the ICI acquistion in 2008, we have extensively restructured our Decorative Paints business in Europe, both to capture synergies and to adjust our business model to reflect difficult market conditions. Given the very modest growth outlook, we must continue to restructure, but also need to ensure that we build our market share for the future.
  2. We will continue to grow our market share in the high growth markets of China, India, South East Asia and Latin America. We have been building aggressively in all aspects of our business, from manufacturing, to distribution, to sales force, to advertising and promotion and our market share is increasing as a result. We will accelerate this drive going forward.
  3. To support our continued transformation from multi-local to global – allowing us to benefit from our global scale – we will continue to build people, brands and competencies. We made a substantial step forward with the global roll-out of our Let’s Colour flourish, but there is still more to do.
  4. In line with the company’s sustainability strategy, we will continue to reduce resource intensity across the full decorative paints value chain, incorporating suppliers, our own operations, customers, consumers and end-of-life. It is essential that we take a broad view in decorative paints, where resource intensity challenges/opportunities lie mostly outside our own operations.
  5. As part of the multi-local to global transformation, we need to build a collaborative, interdependent culture within the Business Area. We have made great strides in this respect, based on our leadership journey approach.

Key actions going forward

  • Manufacturing capacity expansion in China and India
  • Expand market presence in emerging Europe and the Middle East
  • Complete the divestment of the North American business
  • Launch new products for high growth markets
  • Deliver on European realignment of the organization

Key raw materials

  • Binders/resins
  • Titanium dioxide
  • Packaging materials

Price drivers

  • Energy, oil and raw material prices
  • Steel prices

Market leadership positions

 

 

Decorative Paints Europe

1st

Continental Europe

 

Northern and Eastern Europe

 

UK, Ireland and South Africa

 

 

Decorative Paints Latin America

2nd

Latin America

 

 

Decorative Paints Asia

1st

South East Asia and Pacific

2nd

China and North Asia

3rd

India and South Asia

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