Sean Milmo, European Correspondent05.08.13
A growing trend among industrial companies is to develop strategies for giving priority to specific customer sectors rather than types of products.
European companies offering both coatings and speciality chemicals have been becoming more inclined to bundle products together to provide broad solutions for particular categories of customers.
This shift in objectives could lead to long-term changes in the way coatings are marketed and the primacy they are given in areas like capital investment and allocation of R&D funds.
Coatings are becoming part of a systems approach to the market with products being grouped by the ability of their technologies and functions to complement each other. The branding of the coating is being based on its identity within a total solution rather than as a stand-along item.
As part of an objective to focus more intensely on customer industries, BASF has been reshaping its strategy in the construction sector where is already selling coatings in packages with construction chemicals.
At the European Coatings Show in Nuremberg, Germany, in March, which now also covers construction chemicals, adhesives and sealants, it launched a global brand called Master Builders Solutions. Its main aim will be promote the company’s construction chemicals portfolio but the solutions being marketed under the brand will also include coatings products.
In April it introduced a website on sustainability in construction which features not just insulation materials, concrete admixtures, waterproofing systems and other chemical products but also decorative paints and architectural and coil coatings.
This is in line with the company’s policy of linking its expertise in chemistry with the tackling of key challenges like sustainability, which Tilman Krauch, president of BASF’s construction chemicals division, points out is “a crucial issue for the construction industry.”
The construction sector, which accounted for €5.2 billion ($6.8 billion) in sales last year, or approximately 10 percent of total group revenue, also presents big opportunities for growth in coatings applications.
The global roll-out of the new brand has started in Asia. But Master Builders Solutions is already registered in the European Union as a trade mark embracing chemicals, paints and coatings and non-metallic building materials.
BASF currently has a number of brands for coatings products with the ‘Master’ tag, including some marketed by the construction chemicals business.
One of these is the industrial coatings and waterproofing range called Masterseal which is mainly used for the protection and repair of concrete and masonry structures.
The range was featured on the BASF stand at the Turkeybuild exhibition in Istanbul in April as providing solutions for restoring “the structures and infrastructure of industrial facilities where damage has been caused by physical, chemical, or biological means,” says the company.
AkzoNobel is another European coatings and speciality chemicals multinational which has been modifying its strategy so that it concentrates less on products per se and more on specific segments.
The company has decided to focus on four key end-user segments – buildings and infrastructure, transportation, consumer goods and industrial sectors like oil and gas.
Of the four, transportation, covering OEM and auto refinishing, marine and aerospace, is a sector in which AkzoNobel’s sales predominantly comprise coatings. But in the other three there is a more of an even mix between coatings and speciality chemicals. For the company, building and infrastructure is its biggest segment, representing 43 percent of revenue last year.
The segmentation strategy will provide a basis for improvements in the company’s financial performance, particularly with returns on sales and investment. It will help marketing and R&D planning.
“A clear end-user segment focus provides forward-looking indicators and direction for our market initiatives and innovation spend,” Keith Nichols, AkzoNobel’s chief financial officer, told a recent analysts meeting.
The company sees it as being particularly useful in the way it plans its expansion in the high-growth regional markets, especially in China and the rest of developing Asia.
Out of the company’s three business areas of decorative paints, performance coatings and speciality coatings, which last year accounted for 27 percent, 37 percent and 36 percent respectively of total revenue of €15.billion ($19.5 billion), the new segmented approach would appear to favour performance coatings and speciality chemicals. Their sales are fairly equally spread between the four segments.
With transportation, performance coatings has automotive, aerospace and marine coatings while speciality chemicals has chlor-akali derivatives, organic peroxides and metal alkyls. In consumer goods, the performance business offers powder and packaging coatings and wood and plastic finishes and speciality chemicals provide surfactants, polymers and silicas.
In the industrial sector protective coatings supplies protective and powder coatings, which can complement the company’s surface chemicals and speciality polymers. The protective coatings operation provides to the buildings and infrastructure segment protective, coil and powder coatings and wood finishes while speciality chemicals offers redispersable powders, cellulosic derivatives and surfactants.
However, with decorative paints, buildings and infrastructure is the only one of the segment it supplies, although two key parts of it—new build projects and maintenance, renovation and repair.
Furthermore, decorative paints, whose restructuring in Europe necessitated an impairment payment of €2.1 billion in the third quarter of last year, is under the greatest pressure to raise its financial performance. Excluding the recently divested North American decorative paints operation, the business recorded in 2012 a return on sales of 2.2 percent and a return on investment of 3 percent.
Under the AkzoNobel’s new financial targets, decorative paints is expected to achieve by 2015 a returns on sales and investment of 7.5 percent and 12 percent respectively. With performance coatings the targets are 12 percent and 25 percent respectively against 9.5 percent 22 percent last year while with speciality chemicals they are 12 percent and 15 percent against 9 percent and 14 percent last year.
Underpinning AkzoNobel’s new strategy is a drive toward sustainability across all customers sectors. “Sustainability is business (and) business is sustainability.” said Nichols, explaining that by 2020 approximately 20 percent of the company’s revenues are expected to come from downstream eco-premium solutions.
Inevitably when helping customers meet sustainability objectives is a top priority, multinationals like AkzoNobel and BASF will want to combine the strengths of the whole portfolio of their chemicals and coatings and other products to meet their objectives.
European companies offering both coatings and speciality chemicals have been becoming more inclined to bundle products together to provide broad solutions for particular categories of customers.
This shift in objectives could lead to long-term changes in the way coatings are marketed and the primacy they are given in areas like capital investment and allocation of R&D funds.
Coatings are becoming part of a systems approach to the market with products being grouped by the ability of their technologies and functions to complement each other. The branding of the coating is being based on its identity within a total solution rather than as a stand-along item.
As part of an objective to focus more intensely on customer industries, BASF has been reshaping its strategy in the construction sector where is already selling coatings in packages with construction chemicals.
At the European Coatings Show in Nuremberg, Germany, in March, which now also covers construction chemicals, adhesives and sealants, it launched a global brand called Master Builders Solutions. Its main aim will be promote the company’s construction chemicals portfolio but the solutions being marketed under the brand will also include coatings products.
In April it introduced a website on sustainability in construction which features not just insulation materials, concrete admixtures, waterproofing systems and other chemical products but also decorative paints and architectural and coil coatings.
This is in line with the company’s policy of linking its expertise in chemistry with the tackling of key challenges like sustainability, which Tilman Krauch, president of BASF’s construction chemicals division, points out is “a crucial issue for the construction industry.”
The construction sector, which accounted for €5.2 billion ($6.8 billion) in sales last year, or approximately 10 percent of total group revenue, also presents big opportunities for growth in coatings applications.
The global roll-out of the new brand has started in Asia. But Master Builders Solutions is already registered in the European Union as a trade mark embracing chemicals, paints and coatings and non-metallic building materials.
BASF currently has a number of brands for coatings products with the ‘Master’ tag, including some marketed by the construction chemicals business.
One of these is the industrial coatings and waterproofing range called Masterseal which is mainly used for the protection and repair of concrete and masonry structures.
The range was featured on the BASF stand at the Turkeybuild exhibition in Istanbul in April as providing solutions for restoring “the structures and infrastructure of industrial facilities where damage has been caused by physical, chemical, or biological means,” says the company.
AkzoNobel is another European coatings and speciality chemicals multinational which has been modifying its strategy so that it concentrates less on products per se and more on specific segments.
The company has decided to focus on four key end-user segments – buildings and infrastructure, transportation, consumer goods and industrial sectors like oil and gas.
Of the four, transportation, covering OEM and auto refinishing, marine and aerospace, is a sector in which AkzoNobel’s sales predominantly comprise coatings. But in the other three there is a more of an even mix between coatings and speciality chemicals. For the company, building and infrastructure is its biggest segment, representing 43 percent of revenue last year.
The segmentation strategy will provide a basis for improvements in the company’s financial performance, particularly with returns on sales and investment. It will help marketing and R&D planning.
“A clear end-user segment focus provides forward-looking indicators and direction for our market initiatives and innovation spend,” Keith Nichols, AkzoNobel’s chief financial officer, told a recent analysts meeting.
The company sees it as being particularly useful in the way it plans its expansion in the high-growth regional markets, especially in China and the rest of developing Asia.
Out of the company’s three business areas of decorative paints, performance coatings and speciality coatings, which last year accounted for 27 percent, 37 percent and 36 percent respectively of total revenue of €15.billion ($19.5 billion), the new segmented approach would appear to favour performance coatings and speciality chemicals. Their sales are fairly equally spread between the four segments.
With transportation, performance coatings has automotive, aerospace and marine coatings while speciality chemicals has chlor-akali derivatives, organic peroxides and metal alkyls. In consumer goods, the performance business offers powder and packaging coatings and wood and plastic finishes and speciality chemicals provide surfactants, polymers and silicas.
In the industrial sector protective coatings supplies protective and powder coatings, which can complement the company’s surface chemicals and speciality polymers. The protective coatings operation provides to the buildings and infrastructure segment protective, coil and powder coatings and wood finishes while speciality chemicals offers redispersable powders, cellulosic derivatives and surfactants.
However, with decorative paints, buildings and infrastructure is the only one of the segment it supplies, although two key parts of it—new build projects and maintenance, renovation and repair.
Furthermore, decorative paints, whose restructuring in Europe necessitated an impairment payment of €2.1 billion in the third quarter of last year, is under the greatest pressure to raise its financial performance. Excluding the recently divested North American decorative paints operation, the business recorded in 2012 a return on sales of 2.2 percent and a return on investment of 3 percent.
Under the AkzoNobel’s new financial targets, decorative paints is expected to achieve by 2015 a returns on sales and investment of 7.5 percent and 12 percent respectively. With performance coatings the targets are 12 percent and 25 percent respectively against 9.5 percent 22 percent last year while with speciality chemicals they are 12 percent and 15 percent against 9 percent and 14 percent last year.
Underpinning AkzoNobel’s new strategy is a drive toward sustainability across all customers sectors. “Sustainability is business (and) business is sustainability.” said Nichols, explaining that by 2020 approximately 20 percent of the company’s revenues are expected to come from downstream eco-premium solutions.
Inevitably when helping customers meet sustainability objectives is a top priority, multinationals like AkzoNobel and BASF will want to combine the strengths of the whole portfolio of their chemicals and coatings and other products to meet their objectives.
