It was truly a who's who in the paint industry. The European paint and coatings industry's biggest leaders and representatives met in Lyon, France May 30-June 1 to celebrate the 50th anniversary of Conseil Europ en de l'Industrie des Peintures, des Encres d'Imprimerie et des Couleurs d'Art-better known as CEPE (the European council of the paint, printing ink and artists colors industry). While there was much reflection on the past successes of the organization, the main focus of this special event was the future of the coatings industry.
Industry leaders from Akzo Nobel, DuPont, SigmaKalon, ICI, PPG, BASF, Tikkurila, Ameron, Jotun, Hempel, Dyrup and more, as well representatives of CEPE's Member Associations were on hand. U.S. representatives Andy Doyle and E. Kears Pollock of NPCA and Jim Coleman and William Rimel of NAPIM, the printing ink association, were also present in Lyon.
Following a meeting of the general assembly, Neville Petersen, CEPE's president, opened the June 1 business conference by inviting Georges Biva, the first secretary general of CEPE, to speak about the organization and how the paint industry differs today.
Mr. Biva, who attended 29 general assemblies during his tenure with CEPE, said "Times were different then. Around the table, delegates were sole owners and founders of the firms...At that time it was a real craft."
The coatings industry has changed a lot since he left CEPE however, Mr. Biva said today's leaders are doing well even in the face of momentous changes in formulation, commercialization and globalization. "We let a flame and I see that flame is in good hands and is still glowing bright."
Industry's Top Men Speak
Among the personnel at the event were two of the global paint industry's biggest stars-Cees J.A. van Lede of Akzo Nobel and Klaus Peter Lobbe of BASF. Both men made presentations during the industry's one-day conference which was held after meetings of the CEPE executive board, working groups and the general assembly.
Mr. van Lede, chairman of Akzo Nobel, said, "The future is uncertain. The industry has an impressive past, but if we look at the future, there are two key questions that must be answered: where's growth and where's profitability?"
According to Mr. van Lede, globalization and consolidation will continue and pressure will come from industrial and retail customers that are consolidating and getting bigger. "Our industry faces increased customer and supplier pressure and we have to take care that we do not get squeezed between the two." He also noted that suppliers are going global and are "attempting to widen their role and influence our customers with joint marketing and branding activities. All this makes it difficult to increase the profitability of our industry, which is, in general, comparatively low at eight to 12 percent of sales. This means that the real value of our products is still insufficiently paid for."
According to Mr. van Lede, when it comes to growth, the industry should explore value-added services. To improve performance, coatings companies need to "concentrate on profitability for the customer, not just on selling paint." Growth will come through mergers for some, while for others growth will stem from expansion into emerging markets. "That is the battleground," Mr. van Lede said, "but not for everyone."
Speaking about consolidation within the industry, Mr. van Lede predicted that we are only now at the beginning of a cycle. "We have the impression that consolidation in the industry is far advanced. However, if we look at the mergers and acquisitions of recent years, we find that this was primarily consolidation among the top 15 companies. In total, the number of coatings company has not changed very much. The industry as a whole is still very fragmented. Akzo Nobel, as the biggest player for example, still has only a marketshare of about eight percent. This means the consolidation process has really just started."
BASF Coatings president Klaus-Peter L�bbe also addressed the audience with a presentation entitled "Coatings innovation for sustainable success." Mr. L�bbe voiced opinions similar to those of Mr. van Lede in regard to how the industry needs to communicate its attributes and look for new ways to insure growth in the future.
"As we all know, we are getting more pressure in the coatings industry from our key accounts, and manufacturers of OEM coatings are facing greater pressure of margins. How do we face this challenge and compensate for this request?"
His answer was "communicate the value we add to the industry." Mr. L�bbe said that in addition to improving processes, BASF's automotive coatings business is concentrating on developing partnerships with a variety of product and service suppliers. "Coatings manufacturers must escape the vicious cycle-don't let coatings become commodities. Coatings are specialties." He said the industry must "communicate this to the market."
On the technology side, Mr. c said there is still room for innovation, such as in scratch resistance of automotive coatings. "We haven't fixed this. We must be honest." Mr. L�bbe said. He also noted that improvements in chemical resistance and adding functionality to decorative coatings could offer ways to help sustain future growth in the industry.
However, Mr L�bbe warned that the industry can sometimes allow itself to to get too focused on chemistry. "When you are focused on technology, you tend to forget emotion. Remember, just don't sell technology, sell emotion. Coatings are key to design and beauty."
Mr. L�bbe explored ways coatings companies could expand their offerings to help keep their profit levels up to par. One example would be to expand a company's stable to include all types of coatings used in automotive manufacture. "For the OEM, this means the car makers can concentrate on the car. It gives the OEM one-stop shopping. "He also suggested providing packages that include service and products.
OEM car makers believe it is good to have strong and innovative suppliers," Mr. L�bbe said. "This gives us an opportunity to play more intelligently in the future."
Forecasting the Future
Selling paint today is vital to success, and so is being able to predict who will be buying your paint tomorrow. Attendees at CEPE's conference were given a glimpse into the psyches of their future customer base by Carl Rohde of Utrecht University and Joseph Coates, a noted expert on forecasting future trends.
Dr. Rohde, who is also a principal in Signs of the Time, a consumer research and trend company, focused on the tiny people who will be (hopefully!) buying your paint in 10 to 20 years-kids. His presentation examined two specific groups, Generation Y (teenagers) and Generation Search (six to 12 years old). According to Dr. Rohde, we are currently in an "experience economy," meaning if company can provide a consumer with a memorable experience, they will pay more for it. He mentioned Nike's creation of Nike Town, a retail environment that allows consumers to experience the Nike brand and a similar set-up created by Sony. "Maybe it's time for paint to create something like this," he said.
According to Dr. Rohde, Generation Search "demands interactivity in all media." He said that children have been born into a culture of excitement and interactivity. "How can we make paint more exciting and interactive? You better reckon with that," he added.
Dr. Rohde praised some paint companies for efforts they have made that make paint more interactive, such as naming colors Nordic blue, Havana yellow and Amazon green. "These add emotion. They are strategies to make it more exciting and add value," he said.
According to Dr. Rohde, Generation Search is very brand-oriented and looks to "aspirational" and trust-worthy brands. There might be room for more designer paint brands-maybe from unlikely sources like Gucci, he said. "Consumers say 'I trust you with clothes and colors, why not with paint?'"
Dr. Rohde ended his presentation with some advice for coatings manufacturers. "Bring product marketing and technical staff together earlier in the process. You can be successful when you do that, or your competitors will."
Dr. Coates spoke about many aspects of the future including e-commerce and education. According to his speech, the "full information" provided by the Internet and e-commerce will lead to the "commoditization of products." The only way out of this, he said, "is to deliver customers value at little or no cost to you, but high value to them."
In regard to education, Dr. Coates suggested companies provide life-long training and education to the "fifth and sixth tier, those who make your business work." He said that on-going education given at the top level is often unaccountable, but when you provide learning to the "sixth level, you�ll know by Monday what it did for your organization."
The final speaker of the conference was Christian Saint-Etienne, a university professor and president of the l'Institute France Strat�gie. Dr. Saint-Etienne spoke about issues affecting European integration. He said that there are "different mentalities" behind globalization and that all parties involved should exercise caution when deciding upon the language being used as words have different meanings from country to country. For example, in Germany, the word federation is positive, while in France it can have a negative connotation.
CEPE's next general assembly will be held in Lisbon, Portugal in 2002.