The European Building Paints Market - a new study by frost & Sullivan

02.05.2001

With the explosion of home decoration and DIY features in all sectors of the media, fashion has now become a major driver in the growth of the European building paints market. This has prompted the entry of top fashion brands such as Ralph Lauren and Benetton into the paint market. However, a new study by Frost & Sullivan predicts that even this new-found interest will not be enough to maintain the steady growth rate experienced by the European building paint market over the past 7 years. The report predicts that by 2007 the market will be worth some $9billion compared with $8.75billion today. The 2.6 billion litres of buildings paints sold in Europe are divided into three main product types: water-based paint, solvent-based paint and stains & varnishes. The water-based paint sector is forecast to achieve the strongest growth over the period 2000 ? 2007 to reach a market value of around $5.6 Billion whilst at the same time there will be a reduction in the volume of solvent based paints sold. This move towards water-based products is mainly due to the implementation of tighter regulations governing VOC (volatile organic compound) emissions that has forced the building paints industry to develop increasingly environmentally compliant products. However, the switch away from solvent-based products has not been as marked as predicted since many professional painters are reluctant to take up the new products fearing a compromise in performance. These perceptions are beginning to change as product quality improvements and manufacturers' advertising efforts begin to pay off. To date the main losses in the solvent-based sector have been in the low-cost end of the market where the buying process is governed by price rather than quality. Richard Stephens, Frost & Sullivan Paints Programme Manager explains: "As manufacturers strive to meet the EU directive which by 2010 will slash emissions of VOCs by 70%, their R&D is focused on developing an alternative to solvent based technology". And Stephens goes on to predict a mixed impact on the solvents market. "The demand for lower cost solvents which are used as diluents will be reduced. But, the demand for active solvents used to improve application, flow and finish is set to grow. It is going to be important for manufacturers to choose the right solvent so they can provide the performance expected by their customers at the lowest total solvent content." In Europe, building paints make up around half of the total paints market by volume and it is an important component of the wider chemicals industry. High raw material costs (especially Titanium dioxide TiO2) combined with the relatively low prices of finished paints have hampered the industry in recent years. It looks likely that consumers will continue to resist large price increases and that TiO2 will remain the favoured pigment raw material - so the manufacturers will have to examine other avenues to retain profitability. One way the major players have increased their market share in recent years in this low growth market is through mergers and acquisitions. For some companies, the pursuit of market share is the driving ambition for expansion, while for others, it is the potential cost savings to be gained from an acquisition and the impact of this upon profit margin and the company's own strategies. Another area critical to the success of all players in the European Building paints market is distribution strategy. Manufacturers will have to balance the cost Vs benefit of different distribution approaches in an effort to compete with specialist distributors. Finally, manufacturers will have to work hard at product differentiation beyond simply price and colour range, to capitalise on the increased interest in paints from the consumer. R&D will not only have to work to comply with legislation but also to attract the new fashion conscious buyer by developing tangible end us

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