Report: Architectural Coatings Sales Up
A recent industry analysis report from The ChemQuest Group Inc. shows that the architectural coatings market grew in both sales and volumes in 2015, and predicts continued growth this year.
ChemQuest’s 2016 Wells Fargo Industry Analysis Report, “Paints, Coatings and Adhesives,” addresses the state of the industry in the United States and globally in three main areas: architectural coatings; original equipment manufacturer coatings, including auto finishes and powder coatings; and specialty coatings, mostly comprising protective coatings, auto refinish, traffic paints and marine paints.
According to the report, the architectural coatings market in the U.S. represents about half of the $22 billion overall U.S. paints and coatings market. ChemQuest says that in 2015, the architectural segment saw $11.2 billion in sales, up 5 percent over 2014, bolstered by both greater volumes (by about 4 percent) and greater margins due to price increases (by about 1 percent).
Interior Paints Most Prevalent
Interior paints make up about 75 percent of the architectural coatings market, according to the report, followed by exterior paints (13 percent), stains (7 percent), clears (2 percent), lacquers and varnishes (1 percent) and others (2 percent).
Architectural coatings are overwhelmingly driven by the residential market, the report notes, especially in the U.S. In 2015, the largest market for the U.S. industry was do-it-yourself home paint, making up 41 percent of the architectural market. Professional home repainting made up 26 percent, with new residential painting representing 11 percent of the market.
Nonresidential new construction (6 percent) and repainting (16 percent) made up a smaller part of the U.S. market.
Globally, the numbers are slightly different: nonresidential makes up about 35 percent of the overall architectural coatings market, with 65 percent devoted to residential applications.
Contractors vs. DIY Jobs
In recent years, ChemQuest notes, the world market has slowly turned more toward contractors taking on paint jobs, versus do-it-yourself jobs, which in 1988 represented more than half of the market. Today, contractor jobs make up 59 percent of the market, holding steady in relation to 2014 numbers.
|Charts: ChemQuest/Wells Fargo|
Today, contractor jobs make up 59 percent of the market, holding steady in relation to 2014 numbers.
Contractors in the U.S. purchase paints overwhelmingly at specialty stores, the report notes—90 percent of contractor purchases take place at paint stores. Home centers (6 percent), hardware stores (2 percent) and other retailers capture very little of the market for professional painters.
The do-it-yourselfer, on the other hand, is most likely to purchase paint at a home center, with 60 percent of U.S. DIYer paint purchases taking place there. Paint stores make up 15 percent of that market, mass merchants 14 percent, hardware stores 9 percent and lumber/building supply stores 2 percent.
PPG Largest by Sales
The report notes that, globally, PPG remains the largest coatings manufacturer, with $15.3 billion in sales in 2015. The Sherwin-Williams Company enters in at second place, with $11.3 billion in sales, and AkzoNobel is close behind, with $11.1 billion in sales last year. In 2014, AkzoNobel did more sales than Sherwin-Williams.
Barring any major acquisitions by PPG, ChemQuest notes that Sherwin-Williams, if its proposed merger with Valspar is completed, will likely take over the position of largest coatings supplier in the world next year. Valspar did $4.4 billion in sales globally in 2015.
In terms of architectural coatings only, Sherwin-Williams is the largest manufacturer, according to the report, with PPG ranking second and AkzoNobel third. AkzoNobel sold its North American architectural coatings business to PPG in 2012.
Sherwin-Williams, according to the report, has the highest brand awareness among suppliers of architectural coatings, with PPG second, led by its Glidden brand.
Manufacturer Costs Flat
For manufacturers of paints and coatings of all types, the ChemQuest report points out that costs and profits have remained largely the same over the past several years. Raw materials accounted for slightly more spending in 2015—about 1 percent more, according to the report—and labor, energy and overhead remained the same, leading to a slight drop in margins.
Resins and latex accounted for about 38 percent of raw-materials costs for manufacturers in 2015, according to the report. Pigments accounted for 25 percent, with the remaining costs going to packaging, additives and solvents.
The report notes that pigment costs dropped in 2015, a result partly of a moderation in the price of titanium dioxide, a pigment used widely, especially in architectural coatings.
The report also examines trends in OEM coatings, specialty coatings and adhesives and sealants.
The OEM market saw increases in both sales (up 5 percent) and volumes (up 4.7 percent) in 2015. That’s due in part, the report says, to another increase in light vehicle sales, which ChemQuest expects to continue in 2016.
Henkel is the world’s largest producer of adhesives, with $10.3 billion in sales in 2015.
Specialty coatings took a hit in 2015, according to the report, with volumes down about 6 percent; ChemQuest predicts another drop of 1 to 2 percent in that segment in terms of volume in 2016, though with prices slightly up, the company foresees overall sales remaining flat. The report attributes the drop to a sluggish American oil and gas industry and a lull in shipbuilding worldwide.
ChemQuest predicts growth in overall value for both adhesives (2.5 percent) and sealants (4 percent) in 2016. Henkel is the world’s largest producer of adhesives, with $10.3 billion in sales in 2015, according to the report.
The report, put together with Wells Fargo Securities, can be downloaded for free here.
Editor's Note: This report was updated at 3:23 EST, Sept. 28, to remove a chart.