Argentine Market Strains Under Hyperinflation

Argentina is once again suffering under the crushing weight of hyperinflation, which topped an annual rate of 104% in March as a result of the 7.7% rise during that month. It has been 20 years since inflation has been so high, but such economic pressure is not new to Argentina. From 1944 to 2015, Argentina averaged a 204 percent inflation rate, according to one study at Ohio State University.

Coping with such inflation is no easy task, but paint and coatings manufacturers in Argentina are battling market conditions on multiple fronts. AkzoNobel Argentina, for example, has a broad plan to continue growth, at least in volume, over the near term, said Fernando Domingues, the general business director for AkzoNobel Decorative Paints South Cone countries, Latin America.

“We at AkzoNobel see big opportunities to grow the category in Argentina, even in inflationary periods like these days. The expectation is that the market will remain tough for the next few years in terms of macro-economic drivers, but with the plans that we have to grow the category and our brands, we expect to do better than GDP [gross domestic product] by 2 to 4 percent in terms of volume,” said Domingues, in an email to Coatings World.

Product Innovation Key to Growth

“Our strategy for the country, which is aligned with our regional strategy for Latin America, is based on important pillars such as innovation,” said Domingues. “Innovation helps our consumers to use more color in their decoration jobs, but also offers better protection for exteriors.

“Our Design Premium Wall Paint line – the Ambiance line – launched in 2021, together with our Acotone Pigment Technology launched in 2022 – HD Colours – last longer and provide superior coverage,” says Domingues.

“Another good example of ways that we leverage our global innovation was the introduction of concentrated paint – Albacryl Rinde Mas – in the Argentinean market, making the brand even more accessible for those who look for monetary savings but still value quality,” said Domingues.

Brand Availability Enhanced by Shopping Experience

The second pillar of AkzoNobel Argentina’s growth strategy is based on enhancing customers’ shopping experience to facilitate brand availability. “Greater brand availability and an improved shopping experience can help our consumers and professional painters to find our brands in every city in the country,” Domingues said.

“In order to sell the best solution for every paint job, we have been opening new stores and upgrading existing ones: over 200 stores have been opened or transformed, applying our best knowledge in terms of category management,” Domingues said. “As a result, regardless of whether they are independent stores or franchise stores, sales value has increased 10% on average per store.”

Improved Communication Facilitates Sales Growth

The third pillar of AkzoNobel Argentina is “Communication that inspires and motivates people to paint,” said Domingues. “Our new brand campaign for our Premium line guarantees the delivery of the dreamt color, a uniform finish and ideal coverage, or we modify the paint for the consumer or painter,” he said.

“This message is very strong and helps move people from consideration to purchase, as well as to buy quality while stimulating the use of color. As a result to this campaign we already see important growth in the sales volume of colors for interior wall paint and for exterior wall paint,” observed Domingues.

His company’s communication program is fueled by well developed research. “We are very engaged in inspiring people to paint with color leveraging our Global Color Trend Study – Color Futures – which completed it’s 25th version this year,” explained Domingues.

“Every year we use the results of this global study, conduced by our Global Aesthetic Center, for our work with architects to bring colors to life at the annual — and most important — decoration exposition in the country, Casa FOA,” Domingues noted. “It inspires architects and consumers to transform their living spaces with color and special effects.”

Investing in Efficiency For Future Growth

During this inflationary challenge, AkzoNobel Argentina also is making new investments in its technology.    “Important investments were made as a consequence of the introduction of our Acotone technology, not only in terms of production facilities and equipment, but also in terms of upgrading our tinting machines. The new system includes 13 pigments versus the previous one with 11,” Domingues said.

“We are also investing in order to improve productivity and to increase our production capacity at the Garin site in Argentina,” Domingues noted.
Market Growth Expectations
The Argentina architectural coatings market size is estimated to reach a value of $649 million by the end of 2027 after growing at a compound annual growth rate (CAGR) of around 4.5% during the five-year period between 2022 and 2027, according to a new study by IndustryARC.

“Economic expansion, increased infrastructure investment, stringent environmental regulations, rising purchasing power and rising demand for green and ecologically friendly coatings are all driving the market growth of Argentina’s architectural coatings,” the analysts said.

Among factors that should contribute to market growth in Argentina is the increase in the number of construction projects, IndustryARC noted. Similarly, “market size is expected to rise due to an increase in the use of a coating to prevent corrosion and rusting of metal sections of fences, metal furniture, tanks and radiators, as well as high demand for ecologically friendly coating systems,” they observe.

Water-Based Coatings Demand Rising

“The water-based segment held the largest share in the Argentina architectural coatings market share in 2021 and is forecast to grow at a CAGR of 5.6% during the forecast period 2022-2027,” said IndustryARC.

“The market demand for water-borne coatings is increasing due to their low VOC emissions and environmentally friendly characteristics. Furthermore, the growing use of water-soluble paints in the building and construction sector, owing to their superior corrosion protection, polytetrafluoroethylene (PTFE) coating and high gloss qualities, is driving the market,” the analysts said.

Construction Programs To Boost Demand

An increase in federal and state financing for public works and institutional buildings is helping drive demand for architectural segment paints and coatings. “Argentina has proposed a commercial building [program] of $428 million. The plan includes the construction of 5,500 dwellings and the renovation of 42,900 units, as well as the distribution of 204,000 micro-loans for the purchase of materials and the establishment of 1,250 health centers around the country,” IndustryARC reported.

As part of the Plan Argentina Hace, launched in 2020, the Ministerio de Obras Públicas (MOP), the ministry of public works, said in January 2022 that it would complete 3,131 new infrastructure projects around the country. A total of 434 projects were finished by January 2022, while 1,192 were in the works and 1,505 were in the planning stages, the analysts noted.

Another market analyst, GlobalData, “expects Argentina’s construction industry to grow by 2.3% in real terms in 2023, following a growth of 3.2% in 2022, supported by the execution of major infrastructure projects.”

According to El Instituto Nacional de Estadística y Censos de la República Argentina, the national institute of statistics and censuses (INDEC), the construction industry’s value rose by 6.9% year over year in the first three quarters of 2022, GlobalData reports. “However, in the short term, the industry is expected to be affected by downside risks related to a weak peso and high inflation, as a result foreign investment has lagged,” they concluded.