Market trends provide opportunities

Paints and coatings are used for a variety of applications, including the protection and decoration of structures, buildings and different kinds of products. Painted surfaces have good

resistance to climatic stress and can also have special features, such as fire retardation. Paints also have a positive impact on the built environment by decorating homes, offices and production facilities as well as in enlivening urban areas.

 

The paint market can be divided into two main categories, decorative paints and industrial coatings, based on the end-use of the products. In addition to segmentation based on the end use of the product, the paint markets can also be divided based on the price and quality of the product. Paints are usually divided into three quality and price categories: premium, medium and economy. The size of each category varies by country and market area, depending on the standard of living, local painting traditions, construction styles and available materials, decorating trends and the general construction, renovation and industrial activity. A considerable share of Tikkurila’s products consist of premium and medium products.

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The main factors and market trends affecting the demand of paints and coatings are:

  • general economic development (GDP)

  • activity on construction and renovation markets

  • home sales activity level

  • employment situation and consumer confidence

  • improving standard of living and rise of middle class

  • increasing environmental awareness

  • importance of home interior decoration and refurbishing

  • industrial activity level (industrial coatings)

 

Increasing paint consumption per capita

The paint market structure and consumption patterns vary between geographical areas. The growth in paint consumption has historically correlated with an increase in the standard of living. The market in Western Europe is relatively mature and sales will increase moderately. In Central Eastern Europe as well as in the CIS countries, the current decorative paint consumption per capita is significantly lower than in Western Europe. The consumption is expected to pick up in Central Eastern Europe and the CIS area as the standard of living increases.

 

General economic development

The global economic recession in the past years particularly affected e.g. Western Europe; however, recovery is expected over the next few years. In terms of Russia, the oil price has a considerable effect on general economic development and purchasing power.


Construction and renovation

The construction and renovation of buildings and structures is an important end-use of paints and coatings. During slower new construction periods, renovation activities have often picked up. The recession seen in the past years clearly decreased the activity of new construction, particularly in Europe and the United States. The share of new construction in decorative paints’ overall demand is approximately 20–25 percent. For Tikkurila, renovation construction also plays a larger role than new construction. In the future, construction is expected to grow most in emerging markets, such as Russia and its neighboring areas.


Increasing demand for premium and medium products

The paints produced and sold in Western Europe are almost exclusively medium or premium products. Economy products have traditionally been popular in Russia, other CIS countries and Central Eastern Europe. The preferences regarding the quality of paint will change towards medium and premium products in the long-term as the standard of living improves in the emerging economies.


Increasing interest towards home decoration

Consumer interest towards home decoration has increased. In the Nordic countries in particular, home product and interior design markets have grown in the past years, although the recession was also visible in the interior design markets. The importance of quality is also emphasized in home decoration materials and products. Tikkurila’s strong focus on beautifying the home and its surroundings is for instance visible through active participation in trade fairs and other events.


Increasing regulation

The regulation of paint production, product safety, handling and marketing of paints and coatings is increasing as a result of the implementation of new safety and environmental rules. One major legislative change that affects the manufacturing and sale of paints and coatings is the REACH regulation (the EU regulation concerning the registration, evaluation, authorization and restriction of chemicals), which obligates chemical manufacturers and importers to assess the risks related to product use and provide end-users with instructions on how to use them safely. Paints themselves are not substances referred to in the regulation, but paint manufacturers must ensure that all substances used in their paints meet REACH requirements. The REACH regulation may decrease the number of paint manufacturers in Europe and reduce the importing of paints and raw materials to the EU.


Other important legislation projects related to paints involve for instance the amount of emissions of organic solvents into the air.


Environmental awareness among consumers

In addition to the regulation regarding content and safety of paints, the environmental awareness of end-users in relation to both products and their packaging has increased. The share of water-borne paints is approximately 80 percent of the world’s decorative paint volume, and the share is estimated to grow in the future, particularly in emerging countries, most likely, however, at a moderate rate.



Paint consumption