Decorative Paints strategy
Having improved considerably since 2012, we continued to make progress in 2016. Both our return on sales (ROS) of 9.3 percent and return on investment (ROI) of 12.8 percent were in line with our performance range 2016-2018 (between 8-10 percent and more than 11.5 percent, respectively). As a result, we are moving closer to the company’s vision of leading market positions delivering leading performance.
We updated our strategy in 2015 to better reflect our new organization, market approach and growth ambitions. The current strategy is based on winning locally, supported by selected global initiatives to leverage our scale.
We have a unique portfolio of businesses in that we are one of only three very large players in decorative paints and the only one that serves a geographically diverse portfolio of countries, with a substantial proportion of our business outside mature markets. Our portfolio, therefore, has the potential for higher growth levels, while allowing for diversification of individual country risk. It also means we have to compete successfully and win in markets that are very different in terms of value chain, competitive environment and customer and consumer behavior.
In order to win in these markets, we will continue to develop relevant and specific plans. Of particular importance to our overall success are the local plans. Listed below is a snapshot from four countries:
- The UK is one of Europe’s largest markets and we are market leader. The UK referendum vote resulted in more economic uncertainty, and while the paint market is still expected to grow, it is likely to do so at a slower rate. Our focus is on inspiring and enabling people to decorate more often by improving the decorating experience for consumers and increasing loyalty with professional painters. One way we aim to achieve this is through the in-store experience with the Dulux MixLab and the Dulux Academy to train and accredit professionals. We are also continuing our strong focus on innovation, introducing new products with clear customer benefits in terms of energy savings and well-being and enhanced digital tools and services such as the highly successful Visualizer app
- China is a large market where the growth rate has been high. Although growth in China has slowed, we accelerated our own growth in the region compared with last year. We have a strong position and are growing our business in traditional trade and e-commerce. We have strengthened our product and services in the premium and mid-tier range. This included launching Dulux Forest Breath and repositioning the Easy Paint Service as a premium Renewal Service with a total solution
- South Africa is a vital market for success in Africa and we have a strong position. The market has been growing, despite some political unrest and currency fluctuations, and most analysts predict continued growth in the coming years. We intend to continue building our Dulux brand and be the best category partner with our large-scale outlet (LSO) customers, while expanding our assortment and increasing our physical availability in the small-scale outlet (SSO) channel
- Indonesia is the largest market in South-East Asia with good growth potential. We are market leader and continued to grow our share in 2016. We are focused on building the Dulux brand with innovations such as Dulux Weathershield Powerflexx and Dulux Ambiance, as well as increasing our distribution and leveraging global capabilities in the growing LSO channel
UK Minister of State for Employment Priti Patel (pictured left), opened the Dulux Academy at our Slough site in the UK in March. The world’s first academy for painters and decorators, the facility will give more than 4,000 professionals the chance to upskill every year. Also pictured are Dulux Academy instructor Matt Gray (center) and Matt Pullen, Managing Director of AkzoNobel UK and Ireland.
Leveraging our scale
We are one of only three large players within decorative paints globally. Our size provides us with a considerable strategic advantage. It allows us to make the kind of investments in brands, innovation and sustainability that smaller players would find difficult to emulate. We carefully select initiatives where scale advantage exists and focus our efforts on activities that support our approach of winning locally. We have defined eight areas where leveraging our scale makes sense. Examples include:
Our global innovation agenda is focused on addressing key end-user, consumer and/or customer needs, including mass market growth, increased need for well-being, regulatory compliance, differentiation in large-scale outlets, energy efficient solutions and distinctive color offers. These needs translate into an innovation agenda which has a very strong sustainability orientation.
With investments across multiple digital platforms, the star performer in our global digital agenda is our award-winning Visualizer app. Launched in 2014, it has been downloaded more than 13 million times to date, in over 40 markets. In May 2016, we launched version 3.0, which includes additional features such as video visualization and social sharing. Linked with the improved user experience on our website and detailed analytics, we are now able to further commercialize these digital assets.
We have considerable experience of successfully selling to professional painters around the world. Given their importance to our business, we make it a top priority to better understand painters while also providing support and inspiration. We work closely with painters to optimize our product offer in so-called “best-by-test” validation and then focus on marketing the “hero” products, which have strong and credible attributes relevant to painters. We also leverage global best practices to upskill and train existing painters and new apprentices, aiming to develop a strong partnership and loyalty. Some Dulux Academies, such as our new flagship facility in the UK, also give accreditation to further enhance the position of our partner, the professional painter. We also place an emphasis on building pride and a common sense of purpose.
Our Integrated Supply Chain agenda has been firmly linked to our commercial strategy for some time now. The main focus areas include building operational excellence through deployment and activation of our company-wide AkzoNobel Leading Performance System (ALPS); care for our customers with superior service and quality; and our advanced technology program looking at breakthrough possibilities in the areas of process, packing and digitization.
We continue to drive our brands with consumer tested communication and improved claims. At the same time, we are continuing to build and strengthen our regional professional brands, with a more clearly defined product offer, improved packaging and clear benefit claims. Our brands are fully in line with, and actively promote, the company’s Planet Possible sustainability agenda. We also leverage our scale by aligning our “Let’s Colour” programs with the company’s Human Cities initiative.
We are recognized around the world for our commitment to sustainability, which is a key driver in all our plans to win locally as part of the overall AkzoNobel Planet Possible agenda. We are continuing to drive this in our product portfolio through three key areas:
- Low impact – products with lower environmental impact
- More durable – products that last longer and need repainting less frequently
- Positive impact – products that positively contribute to sustainability, such as providing energy-saving benefits
We continue to reduce VOC levels in our products and are accelerating the adoption of low VOC water-based trim and woodcare products in all our regions. We continue to invest in order to offer the best performing water-based technologies in the market and ensure an attractive product offer.
We are working hard with our suppliers on responsible sourcing and reducing the environmental footprint of the raw materials we procure through Together for Sustainability and our own supplier dashboards. In the UK, AkzoNobel has become the first paint company globally to achieve the coveted BES 6001 Responsible Sourcing accreditation. We have continued to play a leading role in the EU Product Environmental Footprint pilot, along with the European Paint Association. We have also now integrated carbon footprint data into our formulating system so our chemists can more easily select low carbon options as part of the work they do every day.
This is a key profitability measure and is calculated as EBIT as a percentage of revenue.
This is a key profitability measure and is calculated as EBIT as a percentage of average invested capital.
Mature markets are comprised of Western Europe, the US, Canada, Japan and Oceania.
AkzoNobel Leading Performance System.
Everything we do for and with society is channeled through our Human Cities initiative. This incorporates AkzoNobel’s Community Program, which encourages and gives financial support for employees to get involved, hands-on, in their local communities; and our “Let’s Colour” program, which uses the power of color to improve people’s lives.
Volatile organic compounds.
The carbon footprint of a product is the total amount of greenhouse gas (GHG) emissions caused during a defined period, of the product lifecycle. It is expressed in terms of the amount of carbon dioxide equivalents CO2(e) emitted.