Summary
• The construction downturn has had an impact on the coatings sector.
• The self-build sector is a welcome source of business.
• The shopfitting sector is also placing orders.
• Durability and sustainability are more important than ever.

It’s difficult to describe the performance of – and indeed the prospects – for the coatings and finishes market without using words such as ‘downturn’, ‘tough’ and ‘recession’. Linked as it is to the fortunes of the construction industry, and given the current economic slump, it’s not surprising that official figures for the market have been going south.

“In 2008 overall the trade market for wood finishes declined by around 9%, with the second half showing significant decline as the recession took hold,” said Dr Steve Snaith, marketing director for ICI AkzoNobel’s Dulux Trade. “The first two months of 2009 have seen a further contraction.”

Suppliers would admit that the prospects for the rest of the year and beyond are unlikely to change. Due to the shortage of house building and commercial developments, the market at its best is likely to be relatively flat this year, Steve Grimwood, managing director of Osmo UK, told TTJ: “The prospects for 2010 are not much better, because the lead times for such projects are quite long, and even if economic conditions improve this year, it will take around six months for any new-starts to filter through to the ‘finishing’ products such as internal flooring systems.”

However, he added, that the government still has high targets for homebuilding, and this, coupled with strong media pressure to act on “the recession and the causes of recession”, could potentially see recovery come swiftly.

And it’s not all doom and gloom currently either. Not only are there bright spots in the industry, but manufacturers are also being proactive, launching new products, investing in plant and machinery and initiating marketing campaigns to stem the market contraction.

Osmo, for example, has invested in new warehousing facilities, to enable it to hold more stock and be able to respond as quickly as possible to orders. It has also invested in new machinery to factory-apply its Polyx Oil, for customers wanting to use colours on their floors. “Pre-finished flooring is in high demand as it cuts time on site,” said Mr Grimwood. “Today’s customers are waiting to the last minute to order stock, so those companies with the range and supply in stock will fair better in these competitive times.

“However, careful control on stock levels must be maintained. We are also taking this as an opportunity to introduce new products that will offer cost-saving solutions or an alternative to reduce the high maintenance that some floors need.”

Self-build hope

There are also glimmers of hope from some market sectors. Self-build, for example, is one of the construction areas that’s doing well – and is a vital outlet for the coatings and finishes market. “There are a lot more people wanting to do their own self-build,” said Liz Hickson, marketing director for Crown Paints. “In fact, last year, self-build made up around 25% of new detached homes, so this is a potentially good avenue for coatings and finishes.”

Meanwhile, those involved in work funded directly or indirectly by the government, such as social housing, education and health are surviving better than those with a high dependance on the private sector.

“Education is a key area for us,” said Ms Hickson. “There’s a lot of building work going on in educational establishments such as primary and secondary schools, colleges, universities, so it remains a strong market.”

Meanwhile, Becker Acroma, whose product range Covers all sectors from furniture and kitchens to joinery and flooring, says that, despite the downturn, it is gaining a lot of orders from the shopfitting sector. “We serve these customers via our Syntema distributor network, due to the speed, pack size variations and colour requirements,” said John Woolmore, managing director. “We are also seeing huge interest from architects and specifiers in our PyroLac fire protection lacquers.” Recently PyroLac has been used in more than 20 Frankie and Benny’s restaurants, plus Costa Coffee, Wetherspoons, Paddy Powers and numerous UK airports.

‘Durability’ and ‘sustainability’ are two watchwords when it comes to the coatings and finishes market. “People are moving away from the days of a ‘slap it on and go back in two years’ way of thinking,” said Crown’s Liz Hickson. “We’re seeing an increase in the basket spend for more durable products as people want to make the maintenance cycle work longer and harder. There seems to be something of a mission for applicators to ‘get it right first time’.”

Ms Hickson also believes the coatings and finishes market is cyclical and, to some extent, reflects the weather. “When we have a good summer we tend to have a good woodcare market, so while I accept that there is a lot of the economic impact in the marketplace I think overall, if the weather is on our side, then that will really help sales,” she said.

The coatings and finishes market is also moving increasingly towards more environmentally-friendly, ‘sustainable’ products. EU legislation is in place which calls for a reduction in the VOC content of decorative coatings and this is driving significant changes in formulations, particularly solvent-based coatings. The next phase of this legislation impacts from January 1, 2010 and will mean that merchants will not be able to sell non-compliant products from December 31 this year.

“Clearly a reduction in the amount of VOCs emitted to the atmosphere will reduce the environmental impact of coatings,” said Steve Snaith. AkzoNobel has launched its Dulux Trade Ecosure range of products that are said to have significantly lower levels of embedded carbon and VOCs than conventional products.

Liz Hickson agrees that this move is driving the market. “Sustainability is definitely a key thing for us,” she said. “Local authorities and architects are demanding increasingly sustainable products, and that’s why we’ve invested a lot in our formulations to make sure that they are the lowest VOC level that we can possibly bring into the marketplace.

“All our products now are 2010 compliant, well ahead of the game. With our Sadolin Ultra range, launched last summer, we really wanted to provide the trade market with a translucent product that would give them up to seven years in terms of maintenance – as well as being 2010 compliant.”

Energy efficiency

And it’s not just about the products. Energy efficiency remains a top priority for Crown Paints. “Utilising the efficiencies in manufacturing processes will be a real key requirement and mission for us going forward,” said Ms Hickson. “But we’ll also be looking at things like distribution routes, lorries with efficient engines, double-deckered delivery vehicles and so on, so that we’re maximising fuel consumption.

“It’s not just about what we put in the product – it’s about how we make the product and how we’re more sustainable as a business. I think that’s also an important part of product development.”

The general consensus from manufacturers is that the coatings and finishes market is unlikely to see a broad-based sustained upturn until 2010, even early 2011. In the interim they believe their fortunes and those of their customers will be on their own hands; cue aggressive marketing, keen pricing, more product innovation and, above all, strategies to enhance value for money and tailor service to the individual end user.

Akzo’s Dr Snaith said winners will be companies who understand customers’ needs and “meet them most effectively”. The outcome of this understanding will be products that “turn quickly and boost sales”. That, in turn, will help the overall market.

“Innovation in service and product offer generates more sales – and wins new customers,” he said.