2023-02-01 18:32
With the full liberalization of domestic epidemic situation, paint enterprises and distributors have more expectations for the operation in 2023? What is the recovery of coatings market in 2023? Which paint markets will have more opportunities?
01
Domestic coating market demand is suppressed first and then promoted.
The market demand of coatings is synchronized with the domestic economic recovery. With the country entering the post-epidemic era, all parts of the country are fully open, and people have changed from "not allowed to go out" to "afraid to go out". The infection of employees has affected factory production and delayed logistics, and the domestic economic development is facing tremendous pressure.
According to the prediction of Zhong Nanshan's team, it is expected that the first wave of infection peak in Guangzhou will come from the first half of January to the middle of February next year, and it will enter a stable stage in the first half of March. It is optimistic that it will return to its pre-epidemic life in the first half of next year.
Therefore, the domestic economy will still face the short-term impact of the epidemic in the first half of 2023, and the demand for coatings market will continue to be sluggish. In the second quarter of next year at the earliest, and in the second half of the year at the latest, China can return to its pre-epidemic life, and the market demand for coatings will greatly increase.
02
Corporate profits have been restored to varying degrees.
In 2022, due to factors such as currency overshoot and global supply chain disturbance, the price of raw materials continued to be high, and the domestic continuous prevention and control isolation led to the sluggish demand in the paint market. Paint companies had to endure high costs and "lose money" to sell paints, and many paint companies' profit statements were terrible.
In 2023, two unfavorable factors affecting the profits of coating enterprises will be weakened. First of all, overseas interest rate hikes and monetary tightening policies will curb the price speculation of bulk raw materials, and the cost of coating enterprises will be greatly reduced; On the other hand, with the liberalization of domestic epidemic and economic recovery, the market demand for coatings will be greatly improved. Under the double benefits, the profits of most domestic coating enterprises will be restored compared with 2022.
In addition, with the continuous interest rate increase in the United States, the dollar returns to the United States, and the global economy is weak. At the same time, the impact of the Russian-Ukrainian war on the global supply chain will be repaired. Therefore, the global speculation of bulk raw materials will be curbed, and the cost of coating enterprises will also be reduced. With the recovery of domestic economy, the price of coating products will be stable for some time. In the second half of 2023, the production capacity of domestic coating enterprises will be released, and some coating enterprises may take measures to reduce prices and promote sales in order to seize the market.
03
The recovery of real estate market promotes the recovery of construction and coating demand
In recent years, with the rapid development of the real estate market and the rapid promotion of the whole decoration policy, the market of engineering architectural coatings has developed rapidly. However, since the second half of 2020, the "three red lines" and centralized mortgage management have been launched one after another, China's real estate industry has begun to enter the downward channel.
Especially in 2022, the real estate market sales were in a downward trend almost all year round. As an important link in the post-cycle industrial chain of real estate, architectural coatings are closely related to the investment and development of real estate. At present, the downward pressure on the real estate industry is increasing, which makes the architectural coatings market face severe challenges. A research report issued by some institutions predicts that the scale of China's architectural coatings market will be greatly reduced by 24.5% in 2022.
However, as the external financing channels of credit, bonds and equity are fully opened, and banks are allowed to carry out the business of replacing pre-sale funds with letters of guarantee, the policy focuses on resolving the risks of existing projects and solving the pain point of incremental funding sources of "Baojiaolou". Under the "three arrows" financing of housing enterprises, it is expected to continue to promote the process of "guaranteeing the delivery of buildings". Then the epidemic prevention and control will be fully liberalized, and the macro economy will pick up. In 2023, the market demand for architectural coatings is expected to pick up.
Some institutions predict that the completed housing area will be about 940 million ㎡ in 2023, up about 19.5% year-on-year, and the data at the completion end in 2023 is expected to show a bottoming out trend. With the arrival of the delivery cycle and the guarantee of delivery, new construction is expected to accelerate the transmission to completion and support the demand of real estate chain, which will drive the demand for building materials such as downstream building coatings, floor coatings, thermal insulation materials, waterproof materials and Kiev materials to pick up.
04
Small and medium-sized paint enterprises are facing survival crisis.
Under the background of high-quality development, supply-side reform and "double carbon" strategy, China's small and medium-sized paint enterprises are facing two major challenges. On the one hand, the government vigorously eliminated backward production capacity, and some small and medium-sized paint enterprises that failed to update environmental protection equipment in time due to financial problems will also face survival crisis; On the other hand, large domestic paint enterprises have expanded their new production capacity, and outsiders have poured into the paint industry, which will also greatly squeeze the market space of small and medium-sized paint enterprises, so the survival status of small and medium-sized paint enterprises in 2023 will remain grim.
Even a screw, to the extreme, can be the first in the world and cannot be copied. Similarly, for the coating market with a scale of nearly 500 billion, no matter whether it is a large enterprise or a small enterprise, as long as it takes root in this industry, even if it only grasps the segmentation demand, it can go on steadily. Therefore, some suggestions for small enterprises are as follows: First, small enterprises have no platform, so they lack the strength to integrate resources across industries, but they can be deep and refined in the segmentation field, just like a needle; Second, small enterprises lack strength, so it is impossible to do everything and be strong, but they can focus on different markets, channels and users and tap market demand through continuous deep cultivation.
At the same time, small enterprises need differentiated upgrades of functions and applications that meet the needs of users in terms of products; The development of small and medium-sized enterprises can't compete with large enterprises for scale and strength, but they can compete with them for users' familiarity, trust, service, experience and perfection. Of course, there are also many challenges in market segmentation: First, the market size is relatively small; Second, the input-output ratio is longer than the cycle; Third, consumer demand is changeable and difficult to grasp. In this case, SMEs need more strategic determination, as well as flexibility and variability of strategies. This requires small and medium-sized paint manufacturers to land and try and make mistakes in the first-line market.
05
Market demand for commercial vehicle coatings has been repaired.
In 2022, among the major coatings categories in China, the worst is commercial vehicle coatings. Due to the continuous decline in commercial vehicle sales and the policy of large-scale epidemic isolation, logistics stopped and freight demand decreased, and the demand for commercial vehicle coatings continued to be sluggish. At the same time, two important industries of commercial vehicle transportation, the real estate market downturn and the heavily polluted industries rectified by the state, the market demand for commercial vehicles has also been very suppressed, which has further affected the market demand for commercial vehicle coatings.
According to the statistical analysis of China Automobile Industry Association, in November, 2022, the downward pressure on the economy continued to increase and the epidemic situation affected commercial vehicles. From January to November 2022, the production and sales of commercial vehicles in China were 2.927 million and 3.01 million respectively, down by 31.9% and 32.1% respectively, and continued to show a double-digit decline. Affected by the sluggish demand in the commercial vehicle market, the demand for commercial vehicle coatings continues to be sluggish.
However, by 2023, the market demand for commercial vehicle coatings will be restored, mainly due to: 1. Prevention and control of epidemic situation and rapid recovery of logistics system; 2. Commercial vehicle sales bottomed out. According to the forecast of China Automobile Industry Association, China's commercial vehicle market will usher in a bottoming out in 2023, and the total sales volume in 2023 is expected to reach 3.8 million units, a year-on-year increase of 15%; 3. The China Municipal Government launched the "Sixteen Financial Articles" and began to rescue the real estate industry vigorously.
However, in the long run, it is difficult for the market demand of commercial vehicle coatings in China to increase at a higher level. This is mainly because it is difficult to maintain a higher growth rate as China's economic development enters a new stage. At the same time, with the industrial upgrading, a large number of heavily polluting enterprises are eliminated and new infrastructure replaces old infrastructure, and the demand for commercial vehicles is also difficult to improve.
06
New energy automobile coatings continue to be hot.
In 2022, the global automobile industry ushered in a comprehensive electrification transformation, and the sales of new energy vehicles continued to climb. According to the latest data of China Automobile Industry Association, from January to November 2022, China's automobile production and sales reached 24.628 million and 24.302 million respectively, up by 6.1% and 3.3% respectively. Among them, the production and sales of new energy vehicles were 6.253 million and 6.067 million respectively, both of which doubled year-on-year, and the market share reached 25%.
The Central Economic Work Conference held a few days ago proposed to support housing improvement, new energy vehicles and other consumption. Industry analysts pointed out that at present, the penetration rate of new energy vehicles is gradually rising, and consumers' recognition of new energy vehicles is still improving, and future demand is expected to further increase. According to China Association of Automobile Manufacturers, it is estimated that the sales of new energy vehicles will reach 9 million in 2023, up 35% year-on-year. This means that the market demand for new energy automotive coatings will remain strong in 2023.
With the explosive growth of sales of new energy vehicles, the OEM coating business of passenger cars of foreign-funded coating enterprises showed good growth in 2022. However, due to various factors such as the epidemic situation in COVID-19, the market demand for automotive refinishing paint is sluggish. In addition, domestic and foreign coating companies have developed special coatings for new energy batteries, opening up a new coating track with a market space of about 20 billion yuan.
However, despite the rapid rise of new energy vehicles, it also means that the sales volume of the fuel vehicle market will further shrink in the future. Therefore, the production and sales volume of automobiles in China will not increase substantially, and the demand growth of automobile coatings market will slow down. China Association of Automobile Manufacturers predicts that the total sales volume of China automobile market will be 26.8 million in 2022, up by 2% year-on-year. In 2023, China's automobile will maintain a growth level of about 3%, and the total annual sales volume is expected to be about 27.6 million.
07
Paint enterprises accelerate business and category diversification.
In 2022, affected by various factors, such as the increasing downward pressure on the macro-economy, repeated epidemics in the whole country, and the downturn of the real estate market, the sales performance of many paint enterprises is not ideal, especially there is no room for the growth of a large number of enterprises in the traditional paint business, and the scale and quality of operation have declined, which is an indisputable fact. In this context, the pace of diversified expansion of business and categories of many coating companies has suddenly accelerated, and they are no longer satisfied with the existing traditional coating business, but actively expand to other coating categories, and even some coating companies have led other industries to expand their living space across borders. It can be predicted that in 2023, coating enterprises will accelerate the diversification of business and categories, which will not only enhance their ability to resist risks, but also create new growth points of performance.
For example, while stabilizing traditional businesses such as architectural coatings, ASHI plans to lay out the industrial coatings market with a market scale of over 300 billion; On the basis of stabilizing the traditional business of furniture paint and architectural paint, Taiho Paint is laying out the automotive paint business. While stabilizing the traditional commercial vehicle coatings business, Jinlitai accelerates the layout of passenger car coatings, 3C coatings, military coatings and other businesses; Yatu Gaoxin continues to consolidate the traditional business of automotive refinishing paint, and at the same time, it is laying out the business of passenger car body paint and auto parts paint; While stabilizing the traditional business of wind turbine blade coatings and container coatings, Mecca Core Color is also actively deploying new businesses such as wind turbine tower coatings and ship coatings. Dewei Coatings extends the traditional container coating business to automobile coatings, marine coatings, wind power coatings and cross-border entry into new energy materials industry.
However, for many paint enterprises, the biggest test of diversified business and category exploration is not only external competition such as external market operation, brand positioning and commercial competition, but the upgrading of internal business philosophy, organizational structure and management innovation strategy. To put it simply, how to ensure that enterprises can be endowed with new connotations under the professional label after diversification and acceleration, which requires user-oriented reengineering and more organizational transformation and remodeling within enterprises. Entering a new field has brought many enterprises problems in the allocation of resources such as manpower, material resources and capital, that is, how to seek the "input-output ratio" in new business while ensuring the competitiveness of traditional business, and how to avoid the situation of "paying attention to one thing and losing the other". This test is not only the people and money of the enterprise, but also the management pattern and management ideas, and the ability to innovate by means.
08
The market layout of high-end coatings is expected to accelerate.
In 2022, China's economic development is faced with triple pressures of shrinking demand, supply shock and expected weakening, and then superimposed with the recurrence of epidemics in many places in China, the real estate market continues to decline, and the demand for coatings market has dropped significantly; At the same time, the price fluctuation of main raw materials used by coating enterprises has intensified, and the pressure on raw materials has become more prominent, facing huge profit pressure.
Due to the rising price of upstream raw materials and the repeated impact of epidemic situation, coating enterprises began to raise product prices, and even most enterprises carried out several rounds of price increases. In the face of fierce market competition and sluggish market demand, although product prices have been raised, most enterprises still can't completely control the cost pressure brought by rising raw material prices. Not only are revenues declining, but profits are also being compressed.
On the one hand, the coating market is in a downturn, and on the other hand, the comprehensive operating cost is rising day by day. At the same time, it is difficult for coating enterprises to make a breakthrough in the low-end market, while the high-end market can obtain brand premium and higher profits. Therefore, it is expected that in 2023, coating enterprises will compete to lay out high-end markets, which can not only obtain higher profits, but also resist unfavorable factors such as rising raw materials and labor costs.
The key to the rise of independent brands is to achieve high-end breakthroughs. By broadening the product line and developing high-end products, it has become a clear strategy for many independent brand paint enterprises in China. Through high-end products, coating enterprises can not only improve product profits, but also gain further recognition from consumers by reshaping brand image. In the complex and changeable market environment, high-end is not only a breakthrough for independent brands to achieve brand upward, but also a shortcut to achieve profitability in the future.
The introduction of a series of policies such as supply-side reform has provided opportunities for high-end independent brands. In terms of market, the reform and opening up has accumulated a large number of talents, technologies and resources for decades, which has provided support for the high-end of independent brands. In recent years, Chinese consumers have become more pragmatic, forcing foreign brands to come up with more cost-effective products. In this environment, the prices of foreign brands are constantly dropping. Self-owned brands are under great pressure in the downward exploration of foreign brand prices. Self-owned brands have only two choices, either to continue to go down or to go head-on, but more coating enterprises have chosen to go up.
09
Adjustment of channel structure to cope with changes in market demand structure
In recent years, with the rapid development of the real estate market and the rapid promotion of the whole decoration policy, the market of engineering architectural coatings has developed rapidly. However, since the "three red lines" and centralized mortgage management were introduced in the second half of 2020, China's real estate industry began to enter the downward channel, especially in 2022, the real estate market demand fell sharply, which made the architectural coatings market face severe challenges.
However, the performance of different paint companies is different. Enterprises with perfect C-end channel layout and wide channel coverage, such as Nippon and Sanshu, achieved contrarian growth in the first three quarters of this year, which was mainly due to the substantial growth of the core business retail sector, which offset the decline of engineering business. However, enterprises that rely heavily on B-side channels, such as Yashi and other enterprises, have seen a sharp decline in sales performance.
According to the different types of customers covered, the main sales channels of architectural coatings are divided into "direct sales+engineering distribution+retail sales", which are aimed at big B, small B and C customers respectively. However, the trend of housing construction market switching from increment to stock or changing the demand structure of architectural coatings market makes its customers tend to be fragmented. Therefore, coating enterprises are also accelerating the optimization and adjustment of channel structure, such as reducing the proportion of B channel business, accelerating the layout and improving the construction of retail channels, and seizing the C-end market, which has become the main line of new competition in the industry.
The decline in the growth rate of real estate construction has weakened the incremental demand for housing construction, and the tightening of financing supervision of housing enterprises and the slowdown of hardcover penetration rate have further increased the difficulty of expanding the centralized purchasing market. In the long run, the moderns of B-end centralized purchasing business may never return, and the traditional competitive advantage of coating enterprises in big B-strategy centralized purchasing tends to weaken. However, the potential space of the small B market is large, coupled with the advantages of short account period and strong bargaining power for the small B business, and the tightening of environmental protection policies has brought about an increase in the concentration of industries such as construction and home improvement companies. The small B business may develop rapidly and become an important driving force for the next round of growth of coating enterprises.
In particular, the release of individual owners' demand for self-occupied housing and second-hand housing renovation will bring a broad space for C-end business, and the importance of retail distribution channels is increasingly apparent. Therefore, coating enterprises need to speed up the layout of C-end channels. Challenges and opportunities coexist in the C-end market, and its competition is relatively fierce. It is difficult to enter the market at the beginning, but 1) after perfecting the retail distribution channels and blocking the local market in advance, higher barriers can often be created; 2) The good cash flow of C-end business can smooth the real estate cycle and maintain the stability of operation; 3) The value realization of architectural coatings products is highly dependent on services such as distribution and painting. Enterprises can create differentiation, enhance added value and enhance profitability through a perfect service system. Especially for paint enterprises with less C-end retail business in the past, the opening of retail channels has become an important profit growth point.
10
Accelerate the sinking of channels and seek market growth.
Promoting rural revitalization in an all-round way, the rural market with about 500 million permanent residents has great potential and is an important starting point for expanding domestic demand and stabilizing growth in the future. Large and medium-sized cities have become saturated after the coating industry has gone through the stage of barbaric growth and staking. At the same time, today's sinking markets such as third-and fourth-tier cities, county towns and rural areas have very strong consumption potential; Moreover, with the support of national policies such as new rural construction and rural revitalization strategy, the consumer demand in the sinking market will be further released. It can be predicted that the vast county and township markets will become the next market competition point for coating enterprises and distributors.
Under the background of China's sustained economic development, the third-and fourth-tier cities, counties and vast rural markets in China have given birth to huge potential consumption capacity. However, the consumer demand of this main group has not been paid attention to for a long time, and it is still in a conscious state of lacking mature commercial order. The commercial penetration of coating enterprises and distributors into the whole sinking market is far from the level of first-and second-tier cities. Therefore, the vast third-and fourth-tier towns and rural sinking markets are still a blue ocean.
Recently, Sanshu completed a strategic investment in Shenzhen Meizhi Xiangshu Technology Co., Ltd., a leader in rural villas, which is precisely because of the huge paint consumption potential in the township market. At the same time, Nippon said that "it will focus on market penetration and efforts in low-tier cities and rural areas, and we have seen stronger growth in these markets". It can be predicted that in 2023, coating enterprises will accelerate the channel sinking, improve the business system, and strive to gain growth by seizing the bottom line market.
After the epidemic entered the post-era, many people in the industry are optimistic about 2023, but the painting industry believes that the market in 2023 is not as easy as everyone imagined. There are three main factors:
Short-term factors, the large-scale spread of the epidemic has not yet ended, and everyone has changed from "not allowed to go out" to "dare not go out", resulting in a more deserted paint market in December. In the first half of next year, the epidemic will be repeated, and consumption will still be suppressed; In the medium term, the global economy continues to slump, and the probability of a global economic crisis in 2023 is greatly increased. The global economic turmoil will inevitably have an impact on the domestic market.
Long-term factors, China's economy is difficult to maintain a high growth rate, three-year epidemic+years of overdraft of residents' consumption power, recovery of consumer confidence, change of residents' consumption concept and other unfavorable factors, so the rapid recovery of the paint market in 2023 needs to be questioned. Return to Sohu to see more.
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Published in: Anhui Province