Philippine Paint Market

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Philippine Paint Market

Post  Admin on Thu Jan 01, 2009 7:37 am

The Philippine Paint Market - Dutch Boy loses while other companies gain!
Date Published: 9 Jul 2003


By Shruti Gupta

Though the clouds of global and local uncertainties continued to hover over the Philippines in 2002, the country exhibited impressive growth of 4.6% in 2002, an increase of 1.4 percentage points over its 2001 performance.

In line with the economic recovery in the country, there came a ray of hope in the paints and coatings market in 2002. The market which faced a slow down in 2001 due to the slump in the construction sector reported impressive growth of almost 4% in 2002 and settled at an estimated $171 million. The growth in the market was mainly fueled by the recovery of the end-user industries like construction and automobiles in 2002.

Even with this wave of optimism in the paint market in 2002, the industry continues to face challenges with the ever-growing pressures from China.

In the Philippines, major international players operate through licensees and subsidiaries rather than operating directly. Charter Chemicals Company is a licensee of Japanese company Chugoku Paints for its heavy-duty coatings. Dutch Boy is also a Philippine subsidiary of Berger Paints International.

In the powder coatings segment, D&L and Diversys are licensees of Jotun and Oxyplast respectively. Some multinationals like Nippon and International Paints are operating directly but they hold only a negligible share of the market. Local paint company, Pacific Paints, is the only local company which has achieved great success in this market.

2002: A very dramatic competitive scenario

The competitive scenario in the Philippines went topsy-turvy in 2002 when several players exited the market and others gained a stronger hold. Dutch Boy, who was the market leader for heavy-duty paints and major player in other segments, underwent a great tragedy in 2002 when its production plant in Cavite caught fire, destroying all machinery, materials and final products. Their market shares nose-dived to near zero values. Other existing players filled up this void now made available in the market.

Charter Chemicals and Coatings grabbed market leadership in the heavy-duty market through increased sales. Pacific Paints also took advantage of the situation and increased its share substantially, especially in the solvent-based and water-based segment.

Multinational giant, ICI Paints has already moved out of the Philippine paint market almost completely, leaving only their ICI Devoe brand for heavy-duty paints. The reason for this move was brought about by falling profit margins. Fuller O’Brien also experienced reduced sales in 2002, giving way to other players in the market to capture their share.

China eyeing the market

Chinese paint manufacturers have been closely observing the Philippines market through the years and are slowly increasing their paint imports into the country. These Chinese manufacturers have an advantage of cheap local resin supply and thus can offer more competitive prices than local Philippine paints. This is being perceived as a long-term obstacle for the domestic Philippine market and local paint companies are taking strong efforts to build customer loyalties to avoid substitution by Chinese products.

Besides these direct paint imports, the Chinese are also encroaching the market by increasing their imports of finished goods into The Philippines. These finished goods, which mainly include electronic and computer appliances, are important end-use applications for paints and coatings, especially powder coatings. With the increase in imports of these finished goods, the demand for powder coatings for these products has reduced, crippling the powder coatings market.

Thankfully for the local Philippine producers, the quality of these Chinese imports, both in terms of paints and end-use products, still remains questionable, giving domestic Philippine players hope to compete in the market.

Last Word

With increasing imports from China, will the local players be able to sustain their market shares? The heat is on companies like Charter Chemicals and Pacific Paints who greatly benefited from the demise in Dutch Boy’s shares. If Dutch Boy makes a comeback and China increases its influence, Frost & Sullivan foresees a tough time ahead for these two companies.

It will be interesting to see how the drama of the competitive structure unfolds in the future. We’ll just have to wait and see.

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Re: Philippine Paint Market

Post  Admin on Thu Jan 01, 2009 2:39 pm

The Filipino journey towards environmentalism: the Philippines paint market is showing strong...
By Vantroyen, Tamara

Date: Thursday, December 1 2005

In an attempt to upgrade its products and make them a force to be reckoned with in the painting industry, Philippine Paint manufacturers are joining the drive towards environmentalism. According to the Philippine Association of Paint Manufacturers (PAPM), the quality of paints now produced in the Philippines is one of the best in Asia--not a bad record considering the paint sector in the Philippines was established in 1911-and the institute has been working with the country's Surface Coating Research Development Centre to upgrade product standards, product testing and certification, technical training as well as ensuring paints pass the five year exposure test.

PAPM's membership consists of 25 manufacturing members, 18 local suppliers and 18 independent suppliers. And to representing its paint and coatings industry on cross-border regional matters affecting industrial development in Asia, the PAPM is a member of the Asian Paint Industrial Council (APIC) formed in 1995.

The interest in 'green' manufacturing in the Philippines has been fostered by the recent signing of an agreement which is part of the Philippine Environmental Partnership Programme (PEPP) whereby member industries are given reward mechanisms as well as incentives in the form of technical support. The paint industry is one of these member industries. Under the Environmental Consent Agreement (ECONA), PAPM is preparing the Environmental Management Plan with assistance from the US-Asia Environmental Partnership (USAEP).

Developments promoted by these initiatives anticipate future expected trends in the paint industry, such as increased demands for lead-free paint and a greater use of water based paints the next ten years. Water based paints currently make up around 40% of the Philippine's paint production. The major products in this sector are 100% acrylic and vinyl acetate/acrylic. Dominating the solvent sector are the alkyl coatings, which are used primarily on wood and metal surfaces.

INCREASING NUMBER OF IMPORTS

Meanwhile, Filipino paint manufacturers are importing an increasing number of new materials. Around 90% of raw materials used in paint in this country are imported, with the exception of synthetic resins, which are produced locally. However, the monomers, which are used to produce these synthetic resins are purchased overseas. According to Victor Guevara, president of Samahan sa Pilipinas ng mga Industriyang kimika (the 64-member Chemical Industries Association of the Philippines or SPIK), producers and manufacturers of chemical processing based industries such as paint are continuously investing in research and development these days. 'R&D in the paint industry consists of the development of end products and not raw materials,' says Guevara, adding that

Philippine paint manufacturers spend on the average about one fifth of their budget on R&D. Philippine paint manufacturers are producing finished goods for domestic use as well as export. On a side note here, the Philippines makes no distinction between interior paint and exterior paint. Of the local manufacturers the major player is Add Research Paints and Chemicals Incorporated, a manufacturer of coatings and paints for the architectural, furniture and automotive industries, which has already obtained the International Organisation for Standardisation standard ISO 9002. In all, 67 of the Philippines' 100 plus manufacturers can be said to be significant in size, that is not a 'small business.'

And with scale, and decent profit margins, comes policy choices. As part of its green drive, the Philippine chemical industry, including the paint industry, is working to establish responsible management of chemicals and chemical production. This process has been ongoing since 1996 under the Responsible Care Programme (RCP), launched by SPIK at the time but it is being actively promoted now as part of the industry's move towards environmental good practice. 'It seems that the word chemicals leaves a bad taste in the public's mouth these days. This policy is one way of clearing anxieties on this matter, since we know that chemicals are not really bad if handled properly,' noted Mr Guevara.

In recent years the chemical industry as a whole, including the paint industry, has been one of the most heavily invested industries in the Philippines, according to PAPM. Since 1997, investments in chemical industries registered with the country's Board of Liquidators (BoL) and the Philippine Economic Zone Authority (PEZA) have so far amounted to US$1bn. The BoL, which redistributes and invests assets from abolished government agencies and failed businesses, is putting the emphasis on natural-based paints and chemicals and this is expected to lift industry possibilities in global trade. Full year GDP growth for the country's paint industry for 2005 is predicted to be 6-7%, according to the Philippine paint federation.

Despite all this, the paint industry in the Philippines is not without threat from the outside. Says Guevara, 'Even as technological advances suggest ever increasing ways of improving paint product performance, the continuing threat of paint substitutes should also be considered. Nowadays there is a trend to use glass, wall curtains, wall paper and cloth.' As a result, the move towards creating environmental added-value is maybe a sharp move in this country with a population of 76 million.

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