Serve the needs of the mid-markets

Beyond growth opportunities that draw on our traditional strengths and value propositions, we see a significant additional opportunity in the mid-market. Traditionally, we have entered high growth markets with a premium positioning (as we did, for example, with our Dulux brand in India) and/or on the basis of existing mature market relationships (our Wood Finishes and Adhesives business in China, for instance).

India market relevant for AkzoNobel, 2009

India market relevant for AkzoNobel, 2009 (bar chart)

Given the fact that the large and growing markets in these high growth economies still have a different profile in terms of absolute level of income, we recognize that we need to think differently with regard to mid-market value propositions. In particular, we need to ensure that we are able to provide product/service combinations that provide appropriate price and quality levels for our customers and reasonable margins for AkzoNobel. This goes beyond the specific product – in many cases it also means that we need to think differently about distribution and technical service levels.

This mid-market is hotly contested, with multinational competitors moving “down” and local competition moving “up” into this space. However, we recognize that in many of the high growth markets the mid-market is the market and ignoring it is not an option.

We will be pursuing the mid-market opportunity through both organic growth and small to medium bolt-on acquisitions. For example, we are currently aggressively pursuing the mid-market in Decorative Paints in China. We are doing this by extending our Dulux brand and building our controlled stores network by approximately 700 stores per year in tier two and tier three cities to support this growth. Our position in the Chinese mid-market will be further strengthened through small to medium acquisitions, such as the Changzhou Prime Automotive Paint Co., Ltd deal which we completed in 2010 (see separate case study).

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