Paint and Coating Industry
The retail market for decorative paints and coatings in Thailand increased from approximately THB13,727.2 million in 2011 to approximately THB19,201.3 million in 2016 driven by construction activities, repainting, retail spending and changing consumer preferences. There were several major setbacks in the market during this period as a result of political instability which in turn had an adverse impact on the overall economy. Frost & Sullivan expects the retail market for decorative paints and coatings in Thailand to reach approximately THB24,603.2 million in 2021 on the back of increased repainting activities, higher demand for premium paint and coating products, and greater consumer purchasing power.
The retail market for non-decorative paints and coatings (wood coatings, waterproofing and protective coatings combined) increased from approximately THB4,780.0 million in 2011 to approximately THB6,376.9 million in 2016 primarily driven by greater retail spending and urbanization. Frost & Sullivan forecasts the retail market for non-decorative paints and coatings in Thailand to reach approximately THB8,852.7 million by 2021 due to increasing consumer awareness, robust tourism activity and shorter renovation cycles for furniture and industrialization.
Rising exports to other regions, especially ASEAN countries, is also expanding the paint and coating industry in Thailand. Thai paint and coating exports to ASEAN countries accounted for 67.8% of the total paint and coating exports in 2015, with Myanmar being the largest market (share of 13.5% of total paint and coating exports in 2015). The other large export markets for the Thai paint and coating industry were India (8.3%), Australia (3.4%), and China (2.7%). From 2011 to 2015, the export of paints and related products from Thailand recorded a CAGR of 6.5% from USD100.2 million in 2011 to USD120.8 million in 2015.
Decorative Paints and Coatings
Retail sales of decorative paints and coatings in Thailand are significantly influenced by the housing market. These include repainting of existing houses that consume approximately 75.0%-80.0% of total decorative paint and coating sales and new housing constructions that make up the rest of the sales (approximately 20.0%-25.0%)22 . Increased awareness and consumer knowledge about decorative paints and coatings, consumer preferences for premium decorative paint and coating products and decrease in average repainting cycles of private household from 7-10 years in 2011 to 5-7 years in 2016 are other factors driving retail sales growth. However, for new commercial and large-scale residential projects, repainting for the first time is done after an average of 9-10 years, while subsequent repainting activities are conducted after every 5-7 years. The rapid pace of urbanization giving rise to the number of urban households, growth in the number of apartments, retail spending, government spending on infrastructure, the flow of FDI into the country are also some of the driving factors behind the growth in retail sales of decorative paints and coatings. Both new housing constructions and permission for land development in Thailand declined considerably between 2014 and 2016. However, its impact on retail sales in the decorative paint and coating market were partially offset by an increase in repainting activities, urbanization, and higher demand of premium decorative paint and coating products, resulting in lower growth rate from 2014 to 2016, rather than a decline in absolute market size. Growth in the decorative paint and coating market is expected to pick up pace from 2017 onward on the back of repainting cycles in private households which are expected to reduce from 5-7 years in 2016 to 3-5 years by 2021. Consequently, repainting and the sale of premium decorative paint and coating products are likely to be key growth drivers for the retail decorative paint and coating market in the forecast period.
Non-decorative Paints and Coatings
Growth in the retail sales of non-decorative paints and coatings is contingent on several factors such as domestic sales of wooden furniture, industrialization, natural disasters, extreme weather conditions, consumer awareness about the structural integrity of houses, sales of metallic consumer products such as furniture, hardware equipment, as well as overall economic activity. The retail market for non-decorative wood coatings is mainly related to the wooden furniture industry and furniture repainting activities which are mainly DIY in nature; whereas sales of nondecorative protective coatings such as concrete protective coatings and waterproofing depend mainly on repainting activities and consumer awareness about housing protection (protection of floors from damage and walls from dampness). The manufacturing sector led by the automotive, electronics, and consumer goods segment are also set to drive demand in the paint and coating industry, primarily in the non-decorative segment. Automotive production in Thailand is likely to get a much-needed boost from falling production costs and favorable macroeconomic indicators in the forecast period.
Large companies such as TOA Paint (Thailand) Public Company Limited, Jotun Thailand Limited, Beger Co., Ltd, Nippon Paint (Thailand) Co., Ltd and Akzo Nobel Paints (Thailand) Co., Ltd dominate the paint and coating industry in Thailand, supplying the market with decorative and non-decorative paints and coatings used on metal, concrete, wood and for waterproofing. Most of these manufacturers use state-of-the-art production systems that include material mixing machines, filling machines as well as tinting and dosing systems. Use of automated software to control and monitor production is a common practice among Thailand paint manufacturers. Continued investments in research and development are also likely to enable manufacturers to develop new product formulations and cost-effective alternatives in the forecast period.
In Thailand, large paint and coating manufacturers have extensive reach in the country through traditional distributor-retail dealers, modern trade distributors and company-owned or franchised retail dealers. Most of the retail dealers are located in urban areas such as Bangkok and the Bangkok Metropolitan region. Major paint and coating companies such as Nippon Paint (Thailand) Co., Ltd. and TOA Paint (Thailand) Public Company Limited also have paint mixing machines installed with many of their associated retail dealers and modern trade distributors.
The paint and coating industry in Thailand sources raw materials from large multinational as well as domestic chemical companies. Consequently, production costs are highly sensitive to price fluctuations of raw materials used in the production of pigments, binders, extenders, solvents, and additives which are procured from both domestic and international suppliers. Approximately 15.0%-20.0% of raw material costs are attributed to oil derivatives, costs of which are based on global crude oil prices and susceptible to foreign exchange rates.
Any increase in raw materials costs is likely to be passed on to the end consumer. For example, titanium dioxide, a naturally occurring mineral sourced mainly from the ilmenite ore is also a key ingredient to enhance the brightness and opacity of paint and coating products, with China being one of the biggest producers of this chemical. Global titanium dioxide prices spiked in 2010, forcing Sherwin-Williams, a major paint and coating manufacturer, to revise its‟ decorative paint pricing three times resulting in an overall increase of 16.0%. However, prices declined in 2015, providing some respite to the paint and coating industry. The chemical also attracts significant demand from the solar power generation industry for use in photovoltaic devices, owing to growing interest globally in renewable energy sources. The Energy Regulatory Commission of Thailand reported an installed capacity of 2,021 MW as of 2017. The latest Alternative Development Plan 2015-2036 by the same agency aims at increasing the solar output to 6,000 MW by 2036, heightening demand for photovoltaic cells. Competition for titanium oxide sources from the solar power generation industry is likely to put pressure on its availability for the paint and coating industry, placing a cap on production quantities for paint and coating manufacturers.
Per Capita Paint and Coating Consumption
Per capita paint and coating consumption can also be used to compare market maturities of the paint and coating industry across different countries. As seen from the chart below, the average per capita paint and coating consumption in the Asia Pacific region in 2015 was 4.7 liters whereas the same for Thailand in 2016 was almost double at 8.0 liters. However it was less as compared to other countries in the Asia-Pacific region such as Singapore (15.0 liters), Japan (10.5 liters) and Malaysia (9.0 liters). It was also less than half of that of Norway which had consumption per capita of paints and coatings of 20.0 liters in 2016. Frost & Sullivan believes that the current pace of residential and commercial developments in the country including the opening up of trade channels on the backdrop of AEC is likely to drive paint and coating consumption in the forecast period.
Market Sizing and Forecasts
The retail market for decorative paints and coatings in Thailand recorded a CAGR of approximately 6.9% between 2011 and 2016, from approximately THB13.7 billion in 2011 to approximately THB19.2 billion in 2016. Extensive growth was observed between 2011 and 2012 owing to the stimulus package provided by the Thai Government for low-income housing projects. However, growth rates in the later years gradually decreased as a result of political uncertainties leading to a slowdown in the overall economy, decline in the number of new housing constructions and decrease in issuing permission for land development (number of fresh permissions for land development nationwide declined by approximately 27.4%, falling from 120,657 units in 2011 to 87,570 units in 2016), among many others.
Despite a slowdown resulting from the factors discussed above, growth in sales of decorative paints and coatings remained positive as the imminent decline was offset by the demand generated from repainting activities. The 2015 government stimulus package for low cost housings and higher revenues generated from sales of premium decorative paints and coatings mainly driven by improvement in spending capabilities as evinced by rising disposable incomes and greater awareness of quality. The future for decorative paint and coating market is expected to be promising as it is likely to register relatively strong growth rates on the backdrop of changing political environment (possible withdrawal of military rule and shift to a civilian run government), increased repainting activities resulting from a continuously increasing housing stock, shorter repainting cycles, greater shift in consumer preferences towards premium decorative paint and coating products and existing government subsidies towards the housing sector, among many others. Driven by the various factors as discussed, the retail market for decorative paints and coatings is expected to grow at a CAGR of 5.1% between 2016 and 2021, increasing from THB19.2 billion in 2016 to THB24.6 billion in 2021.
The retail market for non-decorative paints and coatings in Thailand is comprised of three segments, non-decorative wood coatings, non-decorative waterproofing and non-decorative protective coatings (comprising non-decorative concrete protective coatings and non-decorative metal protective coatings). Between 2011 and 2016, the total retail market for non-decorative paints and coatings registered a CAGR of approximately 5.9%, growing from THB4,780.0 million in 2011 to THB6,376.9 million in 2016. The market is expected to grow at a higher CAGR of 6.8% between 2016 and 2021, growing from THB6,376.9 million in 2016 to THB8,852.7 million in 2021.
Among the three segments, highest growth was observed in the retail market for non-decorative protective coatings mainly due to its demand in both construction and industrial activities. Sales in this segment grew at a CAGR of 8.4% between 2011 and 2016, growing from THB987.8 million in 2011 to THB1,475.1 million in 2016. Growth between 2011 and 2013 was primarily driven by increased number of housing constructions. However, post-2013, growth rates declined gradually between 2014 and 2016 due to a slowdown in overall economic activity. Going forward, the market is expected to grow at a CAGR of 8.8%, growing from THB1,475.1 million in 2016 to THB2,249.8 million in 2021. Increased FDI inflow, growth in the number of medium and small scale industries, government spending on transport related infrastructures, increased consumer awareness about protective coatings as well as house repainting and renovating activities are expected to drive growth in the forecast period.
The retail market for non-decorative wood coatings in Thailand increased at a CAGR of 5.3%, growing from THB3,010.6 million in 2011 to THB3,901.6 million in 2016. The YOY growth rate between 2011 and 2012 was as high as 10.7% mainly due to a surge in retail spending. However, the growth rates declined gradually between 2013 and 2016 owing to a decline in domestic furniture consumption as well as reduced overall economic activity nationwide (also reflected in a dip in the retail sales index). However, the retail market for non-decorative wood coatings is expected to grow at a CAGR of 6.1% between 2016 and 2021, growing from THB3,901.6 million in 2016 to THB5,244.3 million in 2021. Increased growth in the retail market for non-decorative wood coatings are likely to be driven by increased renovation and repainting of wooden furniture, shorter renovation cycles, use of cement fiber, growth in tourism and demand for high-end, luxury condominiums.
The retail non-decorative waterproofing market in Thailand grew at a CAGR of 5.1% between 2011 and 2016, growing from THB781.7 million in 2011 to THB1,000.1 million in 2016. A slightly lower growth in the retail market for non-decorative waterproofing was due to its negligible connection to the wooden furniture industry. Also, due to its links with the construction sector and repainting, the market growth declined gradually between 2012 and 2016. However, Frost & Sullivan expects the retail market for non-decorative waterproofing in Thailand to grow at a CAGR of 6.3% between 2016 and 2021, growing from THB1,000.1 million in 2016 to THB1,358.6 million in 2021. Growth in the forecast period is likely to be primarily driven by repainting activities and increased consumer awareness about housing structure protection. Industrialization due to FDI inflows is also expected to contribute to the growth in this market.
Growth Rates of Retail Market for Non-Decorative Paint and Coating segments in Thailand, (THB), 2011-2021F
Price Band Analysis
For the purpose of this report, paints and coatings sold in Thailand is defined to comprise three segments based on their prices. The segments are Premium (paints and coatings approximately priced above THB2,015.1 (USD57.1) per 5 gallons and Medium to Economy (paints and coatings approximately priced below THB2,015.1 (USD57.1) per 5 gallons.
With increased brand awareness and wider exposure to prevailing paint and coating technologies, affluent customers are demanding customizations and greater utility value from the paints and coatings used in their residences or office spaces. Features such as Ultra-violet (UV) protection, washable paints and low odor are gaining prominence when making a purchase decision. In addition to recommendations from painters on the value-addition provided by the premium paints and coatings, the manufacturers of these paints and coatings also engage in marketing activities promoting the unique-selling-proposition (USP) of these categories of paints and coatings. This market is also driven by an increase in condominium sales which are the typical retail residential end-consumers while the hospitality industry, comprising resorts, beach-villas, luxury hotels are also drivers of sales in this category.
For several large paint and coating manufacturers in Thailand, sales of the Premium category of paints and coatings in 2016 were recorded at approximately 34.0%-42.0% of their total sales. The highest proportion of sales was observed in the Medium to Economy category of paints and coatings amounting to approximately 52.0% -70.0% of total sales in 2016.
Competitive Landscape Analysis
The retail decorative paint and coating market in Thailand was dominated by TOA Paint (Thailand) Public Company Limited. Other leading companies having a significant presence in this market are the subsidiaries of larger foreign paint and coating manufacturers such as Beger Co., Ltd, Akzo Nobel (Netherlands), Jotun (Norway) and Nippon (Japan). A large number of other smaller Thailand based paint and coating manufacturers (both decorative and non-decorative) such as Thai D.N.T. Paint Co., Ltd, Eason Paint Public Co., Ltd, Sinclair Pant (Thailand) Co., Ltd, Hartford Paint Co., Ltd occupy rest of market. Most of these companies are inclined towards industrial paint and coating manufacturing and have less presence in the retail decorative paint and coating market.
The retail non-decorative paint and coating market, on the other hand, has both domestic as well as international paint and coating manufacturers as market leaders in different categories. Beger Co., Ltd and TOA Paint (Thailand) Public Company Limited dominated the retail non-decorative wood coatings market in 2016 while Sika (Thailand) Ltd., a subsidiary of the Swiss based Sika AG, led the retail non-decorative waterproofing market. Jotun, closely followed by TOA Paint (Thailand) Public Company Limited were the market leaders for the retail non-decorative protective coatings market in Thailand in 2016. Other large Thailand based companies in the retail non-decorative paint and coating market are Precision Engineering Co., Ltd also known as Woodtect (for protective wood coating), and ParexGroup (Thailand) Co., Ltd (for waterproofing).
Market Share Estimates and Profiles of Retail Decorative and Retail Non-Decorative Paint and Coating companies in Thailand
In 2016, TOA Paint (Thailand) Public Company Limited dominated the retail channel of decorative paint and coating market holding a share of approximately 48.7% of the total market. The other market participants were Akzo Nobel Paints (Thailand) Limited with a market share of approximately 13.8%, Beger Co., Ltd with a market share of approximately 13.3%, Jotun Thailand Limited (Jotun), the Thai subsidiary of the Norwegian chemicals company Jotun Group with a share of approximately 8.1% and Nippon Paints Thailand Co., Ltd. a subsidiary of Japan based Nippon Group, with a market share of approximately 5.2% in 2016 in Thailand‟s retail market for decorative paints and coatings.
Estimated Retail Market Share of Decorative Paints and Coatings, (THB), Thailand, 2016
The non-decorative retail wood coating market in Thailand, in 2016, was dominated by Beger Co., Ltd with a market share of approximately 32.8% closely followed by TOA Paint (Thailand) Public Company Limited with a market share of approximately 28.2%.
Estimated Retail Market Share of Non-Decorative Wood Coatings, (THB), Thailand, 2016
Three major market participants for the Non-decorative retail waterproofing market in Thailand in 2016 were Sika (Thailand) Ltd. (Sika), TOA Paint (Thailand) Public Company Limited, and ParexGroup (Thailand) Co., Ltd (Parex). Sika was the market leader with a share of approximately 28.0% followed by TOA Paint (Thailand) Public Company Limited with a market share of approximately 20.0%. Parex had the third highest market share of approximately 10.0%.
Estimated Retail Market Share in Non-Decorative Waterproofing, (THB), Thailand, 2016
Jotun Thailand Limited and TOA Paint (Thailand) Public Company Limited jointly accounted for over 50.0% of the market for retail non-decorative protective coatings in Thailand in 2016. Jotun Thailand Limited was marginally ahead of TOA Paint (Thailand) Public Company Limited with approximately 30.0% market share while TOA Paint (Thailand) Public Company Limited was a close second at approximately 28.0% market share.
Estimated Retail Market Share of Non-Decorative Protective (Concrete and Metal) Coatings, (THB), Thailand, 2016
Source: Frost & Sullivan, Independent Research on the Paint and Coating Industry in Southeast Asian Country