Home Brands Paint wars: Budget paint makers threaten big operators’ dominance

Paint wars: Budget paint makers threaten big operators’ dominance

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By AYOOLA OLAOLUWA

The local paint and coating market has continued to grow in leaps and bounds amidst fierce competition among players for supremacy in the market place.
For over 50 years, and prior to the entrance of other brands, most of the big brands which are listed on the Nigerian Stock Exchange (NSE), including Berger, manufactured by Berger Paints PLC; Dulux and Caplux, produced the Chemical and Allied Products (CAP) Plc, a subsidiary of UAC of Nigeria (UACN); Sandtex by Portland Paints Nigeria; Glamour by International Paints for West Africa and Ultimate, Gladiator and Meyerflex by Meyer Paints Nigeria PLC, among others, dominated the market.

These manufacturers, who started as importers of paint products but later moved to local production, laid the foundation of indigenous paint manufacturing in Nigeria.
However, the Nigerian paint market has witnessed the emergence of new, small and medium-scale brands battling for market share with the big brands in the industry. With surprising ease, scores of these medium and small brands have popped up over the past twenty-five years, successfully nibbling market share away from better-known brands.

An industry source said that many of the new entrants get attracted to the paint market primarily due to inefficient regulatory practices.

“This has inevitably led to the lowering of standards as most of the fringe players produce sub-standard paints, albeit at a relatively cheaper cost which enables them to sell at a lower price”, said ToluwaniAdediji, a building consultant..
According to a 2017 data from the Standards Organisation of Nigeria (SON) obtained by Business Hallmark, there are 68 registered paint producers in the country that meet the organisation’s requirements. There are also several unregistred mixers operating in the market.

BH investigations revealed that the refusal of the big brands like Meyer, Berger and Dulux to compromise the quality of their products is impacting negatively on their bottom line, as the new and much cheaper brands are daily encroaching into their previously impenetrable territories.
Checks indicate that owing to the fierce competition in the market, the manufactures, especially the small ones, have continuously push the boundaries through innovations in order to gain market share. And it seems they are making much success of it.Some of the newer entrants include Chemstar Industry Nigeria Limited, manufacturer of Fine Coat and Shield, President Paints, African Paints Nigeria Plc, Value Paints, Prestige Paints, among several others.

Players in the paint industry are categorised into three groups: Top quality, medium quality and basic quality. In the top quality class are Dulux, Caplux and Berger, followed by Meyer, Portland and Sandtex. Dulux, Berger and Portland also have imported variants.

Due to sufficient capital adequacy, the quality level of their products surpasses minimum standards set by the regulatory bodies. The SON ISO 9001 certification which is the most revered has been received by just a few companies, most of who belong to this category of producers.
In the Medium category is IPWA, President and Eagle. President seems to stand out in this category.In the Basic quality category is Finecoat, Prestige, Precious and Value. There are no clear leaders in this category. Their products meet up with certain minimum requirements, but do not have the capacities to attain higher levels attained by their counterparts.

Despite their experience in the market, lack of adequate distributive capacities makes it difficult for them to transform into premium manufacturers.
There are other local and small brands that continue to play on the fringes in the paint market space. This grade of manufacturers comprise companies when combined, have a significant market share but cannot compete with any of their more established peers due to several inherent restrictions.
While the lower tier companies have a sizeable market share, they are undone by the low standards of their products and their quest for success without financial sacrifice. Intense competition therefore exists mainly within the various tiers.

BIG PLAYERS

Chemical and Allied Products

Chemical and Allied Products (CAP) Plc was established originally as Imperial Chemical Industries, but later became ICI Nigeria Limited in 1965. Following the promulgation of the Indigenisation Decree in 1972 and 1977, ICI Nigeria Limited sold 40%, and then 60% of the company to the Nigerian public and changed its name to Chemical and Allied Products Limited.

In 1992, ICI Nigeria Limited finally disposed of off its minority 40% shareholding in CAP Plc, when it sold 35.7% of its equity to UAC of Nigeria Plc and the rest to the Nigerian public on the floor of the Nigeria Stock Exchange (NSE). Currently, UAC of Nigeria Plc holds about 50.09% of the company’s issued share capital.

It has grown over the years to become one of Nigeria’s leading paint manufacturers. It has a wide range of paint variants that have continued to meet the various painting needs of Nigerians. Its major brand includes the popular Dulux and Caplux brands.
Berger Paints

Berger Paints was formerly known as British Paints (W.A.) Limited. It is the first paint manufacturing company to be quoted on the floor of the Nigerian Stock Exchange (1973).
The company has brands in different segments, ranging from the Luxol Emulsion, Fire Resistant Texcote, and the Luxol Gloss.

Meyer Plc

Meyer Plc is an offshoot of former Hagemeyer Nigeria Limited, the manufacturer of Sigma Paints and Cosmetics. In 1994, Hagemeyer was bought over by Dunlop Nigeria Plc, which led to the change of both the corporate and brand names to DN Meyer Plc and Meyer Paints respectively.

In July 2003, Dunlop Nigeria Plc divested its controlling shares from DN Meyer Plc to ACIMS Limited and DN Meyer Plc ceased to be a subsidiary of Dunlop Nigeria Plc.
Meyer Plc currently has brands doing well in the Decorative, Auto Refinishes, Industrial and Wood Finishes.

Medium/small players
IPWA

Incorporated in 1961 and listed on the NSE in 1978, the company is also one of the largest companies in the paints sector. Although the company sustained losses in its most recent financial year, it has continued to leverage on its vast experience as well as budding customer base to remain one of the top rated manufacturers of paints with main focus on marine paints and allied products in the country.
Chemstar Industry Nigeria Limited
Chemstar Industry Nigeria Limited has grown from a small beginning in 1995 to a huge player in the market. Her two major products are Fine Coat and Shield.

Winning Strategies

According to findings, budget paint manufactures seems to have an edge in the area of pricing. Their products are much cheaper than those produced by the market leaders.
It was discovered that the new brands have been inducing customers to switch brand loyalty by lowering the price of their products, without necessarily reducing the content.
While they seem to be winning over more customers, their more bigger and prosperous competitors are daily losing theirs. Top brands have not adopted these practices quickly enough, leaving the door open for challenger brands that continue to capture significant traffic and sales.
For most of the big brands, it can take 48 hours to roll out a single product, with all its attendant protocols like quality control checks, among several others, pushing up cost.

While smaller competitors rolled out their products rapidly, bigger brands move slowly, stacking their cards carefully before releasing to the market to ensure that their products meet required standards. All these come at a cost.
Also, while the bigger brands spend huge resources on advetising, the smaller brands rarely do. This helps in lowering their cost and the pricing of their products.
Likewise, budget paint manufactures appeal to all demography, by relentlessly churning out specialised products for every segment of the society as well as aggressive competition by way of discounts and promotions.

The large brand spends time and billions of naira developing their products after patterned success, while their challengers invest less overall time and money. Because they are more willing to adjust and capitalize on market opportunities, the smaller brands produce many niche and cheap products that capture the market the larger brand overlooks.

The paints variants can be classified into the decorative paints segment and industrial paints segment. While decorative paints are used for interior and exterior house paintings, industrial paints are used for industrial paintings. Variants in the decorative paint segment include emulsion, gloss, silk/satin, while variants of industrial paints include auto paints, marine paints, wood, road markings, bright aluminium, bituminous.

They also come in different prices. BH went to town to compare the prices of these brands. Markets visited include the ones in Ikeja, Agege, Ogba, Iju, Odo-Eran, Abule-Egba, Ijaiye, Dopemu, Meiran and Kola.
At the Odo-Eran building materials market, it was observed that a 20-litre bucket of emulsion (white and other colours) of Fine Coat, Shield, Eagle, Billand and Prestige sell for between N4,300 and N5,000.
President and Eagle brands (20Ltrs) sell start from N8,600 to N11,500, depending on the colour and texture.

However, the same 20-litre bucket of Berger Luxol Emulsion – off white goes for N26,550. Berger Paints Luxol Gloss (4Ltr) goes for N9,500. Berger Paints Autolux used for painting cars is N1,800 per liter.

The same goes for Dulux and Caplux brands produced by CAP PLC. While Dulux Emulsion variants (20Ltr) sell for between N33,200 and 44,000, her Weathershield Textures (20Ltr) in the market is N31,350, and her Gloss brilliant (5Litres) goes for N11,400.
At the same Odo-Eran market in Agege, a 20Ltr Imperial Emulsion by Meyer Paint sells for between N17,900 and N21,000, depending on the colour.
Checks in other building materials visited by BH indicate that the price-tag on the brands sighted at the Odo-Eran Market are almost the same, with a slight difference of between N50 and N200.
A painter, Mr KehindeGbolahan, noted that Finecoat and Berger brands are well patronised because of their quality. He was also quick to mention the impact of some small brands that are also doing very well in the market.
Some paint dealers who spoke with our correspondent in the course of compiling this story, tapped Dulux and Fine Coat brands as buyers favourite. While high end customers prefer Dulux because of its fine qualities, Nigerians within the medium and lower class range prefer Fine Coat because of it lower price.

“The super rich still prefer Dulux to any other paints, with Berger Paints trailing Dulux. If you are not leaving in Banana Island, Ikeja GRA, Magodo, Ikoyi, Victoria Island and other upscale neighbourhoods, I don’t think you need to go for Dulux and Berger. It takes a fortune to buy these brands of paints. We have not even talked of the Satin variant which is now the vogue among the rich.

“To paint a 3-bedroom apartment, you will need over N1million naira just to buy paints if you go for Dulux or Berger Paints. The upper middle class go for the slightly cheaper Portland, Sandtex and Meyer brands. While the lower middle class now go for President, Eagle and IPWA brands.
“In the same, Nigerians within the lower class category patronise Fine Coat, Prestige, Value Shield, as well as other low budget brands. The lower class go for brands mixed by local paint makers. A 4Ltr bucket of locally made paints goes for as little as N700”, said BolajiAzeez, a paint dealer located besides the Agidingbi Central Mosque on LateefJakande Road, Lagos.
Despite increasing competition, BH findings revealed that Tier-1 paint makers, also referred to as the big-5, Dulux, Caplux, Berger, Meyer and Portland still hold tenaciously to their leadership position in the paint market, having successfully shrugged off challenge from competitors with a combination of product quality, relentless consumer engagement and aggressive advertising.
However, one major factor seems to be working in favour of the big paint makers. The super rich and those in the upper middle class who often repaint their homes and offices every year are still very loyal to the brands, not minding the cost.
“Unlike lower class Nigerians who hardly repaint their houses after applying the first coat of paint, well to do Nigerians cant tolorate dirt. I have a client who repaint his houses and office every six months. The walls of his homes always shine and glitter through constant renovation. By keeping their offices and and abode well maintained, they keep the big brands in business”, said a Ghanian-born painter based in Lagos, Collins Kwame.

Some paint manufactures who spoke to BH, gave reasons why quality paints are very costly to produce, thus encouraging the rise in the numbers of budget manufatures. They disclosed that about 70 per cent of raw materials used in the paint industry are imported.
“With the slide in exchange rate of the naira, coupled with lack of infrastructure, local paints manufacturers are in a quandry. Many firms in the sector are nor making profits and may be forced to fold up” said JobiAdefele, the quality control manager of a paint company in Oregun, Lagos.
A marketing expert, Mrs ToyinOgunbanjo, attributed the incursion of budget paint manufactures into the territories of major big brands economic recession.
“The poor economic conditions in the country has diminished growth prospects for most paint manufactures in the country. It has further eroded the purchasing power of many Nigerians. Many parents are busy battling with how to put food on their childrens’ table, put shelter on their heads and pay school fees. They dont have the time to make their houses look good. To them, it is sheer luzury”, declared Ogunbanjo.
The Managing Consultant, Kirsten Turner Consulting, Chris Kiwamu, however said there is hope for the paint industry, projecting that local paints consumption should grow from 391.75 million litres in 2020 to an all-time high of 1,002.63 million litres by 2025, under an ideal operating environment.
Kiwamu, a consultant for Bank of Industry (BoI), noted that the drivers of growth of the paint industry were high demand for real estate properties and growing construction market and industrial production. Others, he said, are increase in nationality population, rising per capital income and higher disposable income of paints consumers as the economy transitions from the last recession.
According to him, if the paint consumption in Nigeria can rise to 3kg per capita in the medium term perspective from its present one kilogram, it will positively impact fortunes of all market players.
“This certainly is not a very ambitious projection, as that is the level already attained by relatively poor South American countries like Bolivia and Paraguay.
“Interestingly, Venezuela, a fellow oil producing country as Nigeria, has a per capital paint consumption of 6.5kg. Therefore, I assert that a per capital consumption of 3kg is an attainable state to aim for by Nigerian paints industry in the medium-term perspective.”
He noted that the currently low per capital consumption of paints in Nigeria offers tremendous opportunities for paint practitioners in the country.
“As one drives through the streets of Lagos, Ibadan or any provincial city and looks at the many unpainted houses along the streets, the feeling that the future of the paints industry is fully assured is unmistakable,” he said.
He said that addressing challenges of the paint industry and collaborative efforts of manufacturers, consumers and regulatory agencies would assist the industry achieve its growth potential.

The Group Managing Director, Fine Coat Paints, Aderemi Emmanuel Alawode, said that most of the raw materials used in the paint industry are imported.
“About 70 per cent of our raw materials are imported, while payment for the raw materials is done in dollars. Import duties or tariff are on the high side. These and other challenges are confronting the growth of paints industry,” he lamented.
Chairman of DN Meyer Plc, Sir RemiOmotosho, decried the trend where over 70 per cent of raw materials for paints and other products’ manufacturing are sourced from abroad despite the fact that some of the raw materials for paints are available locally.
He regretted that the drive for local substitution embarked upon in the country in the 1980s was abandoned and replaced in the 1990s by the import syndrome, with people relying heavily on imports.
Sir Omotosho recalled that the Raw Materials Research and Development Council (RMRDC)was set up to explore alternative sources of raw materials for the local industries, regretting that all of a sudden, RMRDC disappeared from the radar. “That agency ought to be revived,” he said.

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