Decorative Paints strategy

Our vision is to become the leading global decorative paints company in size and performance. We are on track to achieve our expected 2015 financial outcomes of 7.5 percent return on sales and 12 percent return on investment, as evidenced by our 2014 performance, which was a significant improvement over 2013 levels. In addition, we have also successfully “gone live” with our new operating model in Europe, which includes a comprehensive and disciplined process-based approach designed to improve both efficiency and effectiveness. We also continue to make progress in our five main action areas:

Decorative Paints – Strategic performance – Actions (graphic)Decorative Paints – Strategic performance – Actions (graphic)
Actions

Fix Europe

Given the structural issues in the Buildings and Infrastructure end-user segment in Europe, optimizing our cost base is fundamental. The starting point for this is our new operating model, which refocuses our country organizations on our core business. Implementation of this operating model has resulted in fewer management layers, reduced production costs, standardized processes, restructuring in Marketing and Sales, and outsourcing of transactional Finance.

In parallel with this, we also continue to make progress in the market. For example, in the UK consumer market, 2014 marked the launch of a major new marketing campaign for our Dulux consumer range, called “Change Your Story”. In trade, the heartland of our business, we began the roll-out of our Sikkens 5051 color collection. This collection, combined with related services, emphasizes our dedication to color, a fundamental part of our professional value proposition. We are also continuing to innovate, particularly in products with sustainability benefits, such as Herbol Protectro Aqua, a water-based product with longer gloss retention.

Grow profitably in high growth markets

Growth in high growth countries is a key component of our plan and we continue to build our brands in these areas as a result. For example, in 2014, we successfully launched a new blockbuster exterior walls proposition (Coral Acrílico Total) in Brazil. The launch was supported by a fully-fledged marketing campaign, including a TV commercial with three-time Roland Garros winner and former world number one tennis player, Gustavo Kuerten. We also introduced our Colors of the World concept – a significant part of our “flourish” brand architecture – in Tunisia, South Africa and Indonesia. In addition, we continue to develop and market appropriate value propositions for the mid-market segment. A good example is the recent successful launch of the Fit by Marshall brand in Turkey. This brand offers an economic solution for frequently painted areas.

We are supporting our vital market-facing efforts with an even clearer focus on productivity. For example:

  • In South East and South Asia, we are rolling out consistent value propositions and supporting campaigns across the full region. We have taken this approach with the launches of Dulux Weathershield Powerflexx – which offers strong protection on exterior walls against wear and tear caused by harsh weather conditions with its crack-proof elastomeric features – and Dulux EasyClean – which effectively resists stains on interior walls and enables easier cleaning – and it has proven to be effective as well as efficient
  • In China, we are further optimizing our logistics service providers
  • In Latin America, we increased our operational leverage significantly by reducing the fixed cost base and improving the product mix

Leverage investments in marketing, sales and innovation

Branding and consumer inspiration are core capabilities in Decorative Paints. In 2014, we completed global implementation of our “flourish” identity, successfully uniting our premium consumer brands.

With this consistent brand identity aligned to a new global brand architecture, we are able to facilitate stronger consumer propositions and more powerful, rapid and efficient communication through the value chain. For example, we expanded the distribution of our annual trend book ColourFutures to cover 45 countries and we now support our “flourish” identity with a consistent digital platform.

We are continuing to roll out regional or global concepts where relevant, including Ambiance, Colors of the World and Weathershield. We are also continuing to invest in our global “Let’s Colour” brand, both commercially and through our community programs. In Brazil, for example, we have now staged around 1,250 successful “Tudo de Cor” (“Let’s Colour”) events, supporting our Human Cities agenda.

Improve supply chain performance

We have made considerable changes to our supply chain footprint as a result of the ICI acquisition and the structural changes in the Buildings and Infrastructure end-user segment. The changes that we are currently making are based on ensuring a future-proof supply chain. Specifically, we are currently investing in state-of-the-art facilities in Ashington in the UK and Chengdu in China. The Ashington plant is intended to replace our Slough and Prudhoe facilities and offers state-of-the-art technology and resource efficiency (energy and waste) performance. The Chengdu plant is needed from a capacity and logistics perspective, as it will supply Western China.

As we move towards a steady state, our focus is shifting towards operational excellence based on the company-wide AkzoNobel Leading Performance System (ALPS). Our efforts are based on engaging our people in continuous improvement activities that improve safety and customer service, while reducing inventory and cost. These efforts are, of course, a key part of our plan for the next level of improvement in mature Europe, but they are also fundamental to the future of our supply chains in high growth regions.

Generate more value from fewer resources

As is the case with all Business Areas, our focus in terms of embedded sustainability is on generating more value from fewer resources as part of our Planet Possible agenda. We are engaging with our employees to do this, but are also working with customers to help them make better choices. Some examples of the kind of work we are doing include:

  • Volatile organic compound (VOC) reduction
    We continue to have success in developing lower VOC products, but one of our key activities is to educate the market about the benefits of lower VOC paint. For example, lower VOC products dry more quickly, offering improved productivity, and we consider it an important part of our role to get this message across. We are carrying out this education process in mature markets, such as Spain, where our Painter-to-Painter program is based on videos of real painters talking about the benefits of waterborne technology. We are also educating outside of Europe, in Argentina for example, where our Mythbusters program is aimed at dispelling myths about waterborne products
  • Eco-premium solutions
    We continue to win business from products and services that have sustainability benefits. An excellent example of this is Nordjsö One Supertech. This product is based on a collaboration with our Specialty Chemicals Business Area – it uses our specialty silica to create a self-cleaning exterior wood care paint. The product is yet another example of products that provide functional benefits in addition to great aesthetics
  • Packaging and end-of-life
    We continue to look for ways to reduce packaging and better utilize leftover paint through the value chain. For instance, in France, we demonstrate our commitment to helping professional customers do more with less through our “Opération Recyclage” in our Sikkens Solutions trade network. This program enables account holders to dispose of their waste paint, cans and other equipment, and to obtain official certification for having done so. This eliminates special trips to recycling centers while encouraging them to use Sikkens products
  • Own operations
    Although our plants and distribution process are not resource intensive, we continue to look for ways to minimize resource use, which generally also results in cost savings. This, of course, covers energy use, but also other natural resources such as water
  • Engaging our employees and helping our customers
    We are engaging our employees to help us improve sustainability. Externally, we are using Planet Possible labelling on websites and cans to help consumers understand the level of sustainability of their choices. Finally, we run a number of initiatives around the world, such as our Painter for Life scheme in Indonesia and our Ilm-o-Hunar scheme in Pakistan. As part of this training, we educate painters in safety and environmental practices