Overview of the Vietnamese Paint & Coatings Industry
Estimated to be approximately $620 million at the end of 2017, the Vietnamese paint and coatings industry has registered steady growth in recent years on account of vibrant growth in the architectural segment.
Catered by leading multinational paints and coatings producer such as AkzoNobel, Jotun, Nippon Paints and regional players – 4 Oranges Company Limited and Toa Paints from Thailand – the Vietnamese paint and coatings industry has seen huge investments in capacity expansions in recent years. Over the last few years, some of the domestic companies have become very competitive, particularly in the economy sub-segment of the industry. These include Kova, Dong Tam, Alphanam, Hoa Binh and Tison. These domestic companies dominate the market in smaller cities and rural areas, while MNC producers dominate in the larger cities.
Steady economic growth in the current year and next few years are expected to give the Vietnamese paint and coatings industry a much-needed boost in the short and medium term. Vietnam’s economy is expected to grow nearly 6.8 percent during the current year, accompanied by broad macroeconomic stability before decelerating incrementally to 6.6 percent in 2019 and 6.5 percent in 2020, largely reflecting weaker external demand, the World Bank (WB) stated in a report released during the second week of December 2018. According to Taking Stock, the WB’s biannual economic report on Vietnam, the economic growth in the country has proven resilient despite weakening external conditions, driven mainly by strong domestic demand and a dynamic export-oriented manufacturing sector.
Architectural Paint Segment
Architectural paints account for about 62 percent of the Vietnamese paints and coatings market on a volume basis. The retail market for decorative paint and coatings in Vietnam is expected to grow from the current (approximately) VND 8.9 trillion in 2018 (about $382 million) to approximately VND 10.7 trillion ($459 million) by 2021 as macroeconomic conditions continue to drive construction activity in the country.
While the country currently has more than 800 cities nationwide, there are only two mega-cities – Hanoi and Ho Chi Minh City, home to some 30 percent of the total population.
“Despite these two cities being the capital and the largest commercial city in Vietnam, the current development of these two cities is unable to accommodate the actual growth of their population and the economic expansion. Tremendous pressure has been placed on the infrastructure system and living spaces of those cities. The infrastructure system, in particular, has yet to meet the community’s demand for basic utilities and economic activities,” Tran Quoc Thai, deputy director of the Urban Development Department under the Ministry of Construction, noted at a conference entitled “Smart city, Sustainable City” held by Dulux Professional, the paint and coating brand of AkzoNobel, earlier this year.
Automotive coatings don’t have a huge share of the total paint and coatings market in Vietnam, due to a vibrant automotive industry in neighboring Thailand, Indonesia and China. Current low base of automotive production and significant imports of automobiles in the country have deprived the Vietnamese paints and coatings producers of the growth from second most important sub-segment of paint industry.
November’s automobile sales continued the October growth momentum, according to a recent report by the Vietnam Automobile Manufacturers Association (VAMA), which listed November sales at 30,540 units, marking a month-on-month rise of six percent after a decline in the first three quarters of the year. Meanwhile, the total number of autos sold in January-September was about 186,400 units, down two percent over the same period last year. Of these, locally assembled automobiles posted a year-on-year decline of 11 percent and imported autos a decline of 34 percent.
AkzoNobel is one of the largest paint and coatings company in Vietnam, with four manufacturing locations producing both decorative paints and performance coatings. AkzoNobel has been producing and selling architectural paint in Vietnam since 1992. In 2015, AkzoNobel further invested in its performance coatings business in Vietnam and doubled the capacity at its powder coatings facility in Dong Nai.
According to Pamela Phua, general director of AkzoNobel Vietnam, “Over the past 20 years, we have developed numerous new and exciting products and innovations that are commercially successful, environmentally friendly, and sustainable. Some examples include the popular Dulux Weathershield, Powerflexx, and Easyclean which are high-performance products using environmentally friendly ingredients.”
Nippon Paint Vietnam
Japanese company, Nippon Paint entered the Vietnamese paint and coatings market in 1994 by commencing production at its production facility in Bien Hoa Industrial Zone II in Dong Nai Province. In 2006, Nippon Paints started its second plant, Nippon Paint Vietnam Hanoi. Dedicated to automotive coatings, this facility supplied automotive coating products to major automotive producers in the country.
In late 2014, Nippon Paint inaugurated its third production plant in the northern province of Vinh Phuc, the third of the Japanese paint manufacturer in the country. The facility, which cost the company about $14 million has an annual production capacity of 15,000 tons. The third plant has been set up to cater to domestic automobile and motorcycle manufacturing industry and enlarge production to encompass coil coating, general industrial-use coating, heavy-duty coating and other coating fields.
Jotun entered the Vietnamese market in 1994 and its first plant was put into operation four years later. In 2004, Jotun expanded the plant by investing in advanced technology and increasing its capacity to 13 million liters of paint a year. In 2013, it injected an extra $8 million into its Vietnam operations, increasing its total investment pledge in the country to $16.1 million. In 2016, it further increased its yearly capacity to the current 45 million liters.
Jotun Paints (Vietnam) will invest $70 billion to build its second plant in Vietnam. The company signed a contract in April 2018 with the Vietnamese authorities at the Hiep Phuoc Industrial Park in Nha Be District, to develop the new facility.
According to a statement made at the ceremony by GM Johnny Kolding: “The new plant will cover 10 hectares and produce decorative, electrostatic, industrial, and marine paints and that the size of the new facility will be 10 times bigger than the current factory in neighboring Binh Duong Province. In its early years, the new factory will be able to turn out 80 million liters of liquid paint and 10 million liters of powdered paint a year.”
The subsidiary of leading Thai paints and coatings producer, Toa is among the top three paints and coatings producers in Vietnam. The company, which started catering to the Vietnamese market in 1985 through exports from Thailand, set up its first production plant in 1998 in Vietnam. The company commenced production from its second plant at Binh Duong province in 2006 with an outlay of $6 million.
With sales of 1.223 billion baht ($37 million) in 2017 in Vietnam, company’s sales decreased by 8.1 percent in the year as compared to 1.332 billion Baht ($40.7 million) in 2016.
4 Oranges, which operates a state of the art production facility in Long An Province (adjacent to Ho Chi Minh City) is among the leading paints and coatings producers in Vietnam. The company entered into paint industry in 2004 and operate through four distinct brands: Mykolor, Spec, Boss and Expo, catering to architectural and industrial segments. With a total sales of VND 1.73 trillion in 2017, the company claims to have more than 25 percent share of the domestic market. 4 Oranges has an installed capacity to produce 100 million liters of paintsand coatings and 60,000 tons of plastic powder per year.