Indonesian Paint & Coatings Market - Growth Consulting - Frost ...
Indonesian Paint & Coatings Market - Growth Consulting - Frost ...
Indonesian Paint & Coatings Market - Growth Consulting - Frost ...
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Robust Economic <strong>Growth</strong> and<br />
an Under Penetrated <strong>Market</strong><br />
Keeps Demand Strong in the<br />
<strong>Indonesian</strong> <strong>Paint</strong> &<br />
<strong>Coatings</strong> <strong>Market</strong><br />
<br />
<br />
by Sheila Senathirajah<br />
31<br />
Economy<br />
Industry<br />
THE ASIA PAINT INDUSTRY BENEFITS<br />
greatly from industrial migration from<br />
the West. With mature markets like<br />
Japan, South Korea and Australia<br />
showing minimal growth, focus has<br />
now shifted to rapidly developing<br />
and emerging markets. The key focus<br />
countries in Asia are now India and<br />
China due to low cost and sheer size<br />
followed by ASEAN countries with<br />
high growth potential and low capacity<br />
utilization such as Vietnam, Indonesia<br />
and Thailand.<br />
<br />
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<br />
Indonesia is the world’s fourth most<br />
populous country and its involvement in<br />
the paint and coatings industry dates back<br />
some 40 years. With its large population<br />
and low paint consumption per capita,<br />
there is still much room for growth in<br />
this country. Over the course of the next<br />
few years, Indonesia is forecasted to be<br />
one of the key focal high growth markets<br />
Developed<br />
<strong>Market</strong><br />
Rapidly developing markets for paints.<br />
Low -end <strong>Coatings</strong><br />
China<br />
India<br />
Vietnam<br />
Thailand<br />
Indonesia<br />
Emerging <strong>Market</strong>s<br />
Underdeveloped<br />
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<br />
South<br />
Korea<br />
Australia<br />
<br />
<br />
Japan<br />
Mature <strong>Market</strong>s<br />
High-End <strong>Coatings</strong><br />
Source: <strong>Frost</strong> & Sullivan<br />
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JUNE 2010 | ASIAN TIGERS INVESTOR REPORT
32<br />
Industry<br />
within the Asia Pacific region. The largest<br />
segment within the industry currently<br />
receiving the bulk of the spotlight is the<br />
decorative coatings market.<br />
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The paint industry as a whole in<br />
Indonesia was valued at $1,024 million in<br />
2008 and is expected to grow to $1,444<br />
million by 2013, largely attributed to<br />
a robust economic growth, an underpenetrated<br />
market, as well as a growing<br />
construction sector. With an increase<br />
in purchasing power and a gradual shift<br />
of focus to more functional and higher<br />
aesthetic products, there has been a<br />
definite boost in the domestic paint<br />
industry. Moreover, a mushrooming urban<br />
population drives demand for quality<br />
products, consequently triggering the<br />
demand for paints. <strong>Paint</strong> consumption<br />
per capita in Indonesia currently<br />
approximates 2.8 kg/person, which is well<br />
below the total Asia level at 4-4.5 kg/<br />
person.<br />
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Many paint manufacturing<br />
multinational corporations have set up<br />
their manufacturing base in Indonesia<br />
and source their raw material needs<br />
1600<br />
1400<br />
1200<br />
1000<br />
800<br />
600<br />
400<br />
200<br />
0<br />
<strong>Indonesian</strong> <strong>Paint</strong> <strong>Market</strong>: Total <strong>Paint</strong> <strong>Market</strong> Value<br />
and Forecast <strong>Growth</strong> (Indonesia), 2008<br />
<br />
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013<br />
Value ($ Mill) 722.7 819.9 841.7 968.4 1023.5 1037.9 1088.6 1188.7 1302.8 1443.5<br />
<br />
Value ($ Mill) 722.7 819.9 841.7 968.4 1023.5 1037.9 1088.6 1188.7 1302.8 1443.5<br />
locally, which further aids the growth of<br />
the paint and coatings industry.<br />
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The highly volatile price of raw<br />
materials is a primary concern for paint<br />
manufacturers. When the price of raw<br />
materials escalate, the resultant higher<br />
cost cannot be completely passed on to<br />
consumers due to growing competition<br />
within the paint market. As a result,<br />
margin squeeze becomes a key challenge<br />
to overcome for paint manufacturers,<br />
particularly for the smaller local<br />
companies.<br />
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The Decorative paint market makes<br />
up 60% and 79% respectively by value<br />
and volume of the overall paint industry<br />
in Indonesia. It is a high growth market<br />
segment that is dominated by 5 key<br />
competitors that collectively take up<br />
close to 70% of the market value. The<br />
top 2 players are Nippon and ICI, having<br />
existed in the market for over 30 years.<br />
Their focus is in the water base segment<br />
and their key success factors can be<br />
attributed to high brand awareness,<br />
competitive pricing, extensive reach, and<br />
Source: <strong>Frost</strong> & Sullivan<br />
good dealer networks.<br />
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Some of the key industry trends<br />
within the decorative paint market<br />
ASIAN TIGERS INVESTOR REPORT | JUNE 2010
Economy Industry 33<br />
<strong>Indonesian</strong> <strong>Paint</strong> <strong>Market</strong>: Decorative <strong>Paint</strong> MArket Value<br />
By Competitor <strong>Market</strong> Share (Indonesia), 2008<br />
Others 27%<br />
Mowilex 4-5%<br />
Akzo (ICI)<br />
25-26%<br />
Jotun 2%<br />
Danapaints<br />
1-2%<br />
Avian 10%<br />
Pacific <strong>Paint</strong>s 5-6%<br />
Nippon 26-28%<br />
Source: <strong>Frost</strong> & Sullivan<br />
include expansion of output by paint<br />
manufacturers, consolidation of smaller<br />
players, higher quality and diversification<br />
of product functionalities, growing<br />
awareness of green products and the<br />
growth of ‘Point Of Sale Tinting’<br />
(POST).within the decorative paint<br />
market include expansion of output<br />
by paint manufacturers, consolidation<br />
of smaller players, higher quality and<br />
diversification of product functionalities,<br />
growing awareness of green products and<br />
the growth of ‘Point Of Sale Tinting’<br />
(POST).<br />
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POST, although currently still a<br />
relatively small segment, is projected<br />
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to witness high growth in the coming<br />
years compared to the traditional route<br />
of ready mix. <strong>Growth</strong> rate of tinting in<br />
Indonesia is high, as this is a relatively new<br />
distribution route. The larger prominent<br />
paint manufacturers are already laying<br />
their foundations through the addition<br />
of tinting machines in the market, in an<br />
effort to block out future competition via<br />
this channel. POST predominantly applies<br />
to premium segment products. Low tier<br />
products are not sold via this route, as the<br />
cost involved is too high. POST products<br />
are typically 10% higher in cost than the<br />
typical ready mix products. Approximately<br />
20% of sales in the premium category are<br />
via POST tinting.<br />
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|AT|<br />
This article was authored by: Sheila<br />
Senathirajah, Program Manager, Chemicals<br />
& Material Asia Pacific, <strong>Frost</strong> & Sullivan.<br />
<br />
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For any enquiries or comments about this<br />
article please send to: feedback@asiantir.com<br />
<br />
feedback@asiantir.com<br />
JUNE 2010 | ASIAN TIGERS INVESTOR REPORT