Research and Markets has reported in Frost & Sullivan's "Strategic Analysis of the Paint and Coatings Market" that the $43.52 billion paints and coatings market in the Asia Pacific region will to grow at a steady compound annual growth rate (CAGR) of 11 percent to reach $53.55 billion in 2011.
The report says the paints and coatings market in the Asia Pacific has struck a purple patch due to the impressive growth in the end-user segments of construction, commercial, public buildings and residential real estate. The buoyant economic conditions in most Asia Pacific countries, especially in China and India, have had a bearing on the fortunes of these sectors and thereby on the paints and coatings market. The high inflow of foreign investments in these two countries and their reduced operating costs are greatly helping to increase the profit margins of operators in those countries. However, in countries such as Vietnam, Indonesia and the Philippines that have lower purchasing power, there is insubstantial demand for premium-grade and high-performance paints. Paint manufacturers' margins will also feel the pinch of the rising prices of raw materials.
Stringent environmental regulations have a role to play in limiting global paint trade, as the restriction on the use of hazardous materials in the paint composition limits product innovation, the report also says. Foreign investors will also be deterred by the unstable social, economic and political situation in a country. Domestic participants will have to find a way around investors' hesitation, as they will be eager for higher spending on brand development and management of products as Asians prefer well-recognised brands. One way to engage foreign companies is through merger and acquisitions with the local companies, says the analyst of this research. Such alliances will reduce foreign investors' cost of setting up a distribution hub in the country and enhance their product penetration in the local market. Companies could collaborate with national research centres to reduce the cost of R&D and ensure that product quality meets international standards.
Manufacturers in the more affluent countries have a more optimistic outlook, as consumers are highly appreciative of product innovations. Rising environmental awareness and the demand from the middle class population have popularised eco-friendly paints and coatings. Most of the decorative products available in the market are water-based and have low or almost zero levels of volatile organic compound (VOC) emissions. Dirt-resistant paints that are more durable are proving to be significant revenue generators, as are innovative heat-reflective paints in the tropical countries. Manufacturers will be looking to create a type of OEM coating product that can withstand various temperature and humidity conditions, notes the analyst. This will save manufacturers time and costs on the production of customized industrial products.