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New Zealand’s economy seems to be continuing its slow but steady resurgence with many businesses I spoke to reporting that 2013 was a fairly unremarkable year for the painting and decorating category with fair revenues from increased DIY activity and the steady chugging of the Christchurch rebuild a good source of revenue for those involved. Auckland’s much talked about housing developments are still at a fairly early stage but this has also had moderate benefits on some of the players I talked to.
Holdfast’s Sarah Hamilton reports a generally buoyant market based on the above factors while Five Star Paint’s Terry Dalton has seen “good activity, with very positive feeling in the last month” with interest in the brand’s stain products and test pots continuing to grow.
Selleys’ Neil Watkins was also happy to report that no news was good news for its painting and decorating market.
“There were no big surprises in the year as it’s a fairly tried and true category. Many of our products are recommended in the Christchurch rebuild so that has been relatively strong for us and we have a lot of support from trade painters in Auckland and around the country for a number of our brushes, rollers and fillers – so when they are busy we are as well,” Watkins says.
Henkel’s Callum Fraser has seen plenty of promising growth, particularly in high end masking tapes for painting which he is confident will continue into 2014, and Winstone Wallboards’ Edwin Zijderveld also reports a good business year with new products in the residential renovation segment generating growth on top of their steady business in the rebuild.
“The last six months has been steady for us and we were surprised at that and thought the year was going to be a bit tougher particularly with the Government bringing in the procurement programme”
BREAKING AWAY FROM THE PACK
It wasn’t just business as usual for some players however. Many smaller businesses have been seeking new avenues in the market to generate growth, stay competitive with larger players, or become leaders in niche areas.
Coating Technologies Ltd (COTEC) is an example of a smaller player in the New Zealand paint market that has done well through taking a different approach to the business rather than competing on price.
Cotec’s Hylton Jones says 2013 proved to be a good year for the Auckland-based paint manufacturer, despite some ups and downs.
“The last six months has been steady for us and we were surprised at that and thought the year was going to be a bit tougher, particularly with the Government bringing in the procurement programme that many small businesses aren’t happy about. Having said that, we trucked on and had a really good year which was down to a lot of very hard work as well as developing new products in new markets,” Jones says.
That hard work has definitely paid off, with Cotec becoming accepted as a core supplier to ITM and BuildLink, relationships that Jones feels could pay off with the company able to tap into future building projects, particularly in Auckland.
“We feel we can quietly compete in those areas because they are all new builds and because we are finding that the paint market is quietly changing from price to quality,” he explains.
But Cotec and Hylton Jones aren’t content to just wait for housing consents to role in, feeling that years of price competition in the paint market have created opportunities for more niche markets to pop up.
“The average consumer is starting to ask questions about what they are buying and how well it works, so we have spent a lot of time and resources getting our formulations to perform better.
“The larger players have their contracts in place and we understand that, so our market is starting to develop into more of these niche areas where there are unique requirements where we can put some technologies together that work quite well.”
COVERING SOME NEW DIRECTIONS
For smaller countries like New Zealand, innovation and specialisation into niche markets is seen by many as a key component to gaining a competitive edge internationally. The recent decision by the Government to award an $8 million ferry contract to a Bangladesh firm rather than a local one painfully illustrates that competing on price alone isn’t our best strategy.
So for a price-locked category like paint, innovation and niche markets could be just the ticket and some of the smaller players I talked to seem to be exemplifying this.
Although a relatively small player, Brendan Talbot from South Pacific Supplies describes its business as “forever growing”, with particular success from the firm’s Aervo Turf Marking Paint which offers unique benefits for green keepers.
“Being in the paint industry is very price competitive, and being a little guy we are always up against that. We know we have good products of good quality so it’s just down to changing the habits of purchasers and letting them know we have some good products to offer them,” Talbot says.
“Many turf paints leave a big yellow line where they have killed the grass, where ours has a patent for not leaving any marks. So the green keepers at golf courses really jumped on that because they can’t afford to have big yellow lines down their greens and fairways. We have one guy who deals with all of the golf courses who used to go with another brand but completely switched over within a couple of months to our product. So if you can prove you have good products that can benefit people it does play a big part.”
“Making colour and making paint are two very different skill sets, one is more science and one is more art”
ABOUT LOOKING FURTHER AFIELD
For Cotec’s Hylton Jones, pursuing niche markets means actively seeking unique problems, here or abroad, and offering solutions. While Jones is not at liberty to explain the full details, it sounds like Cotec’s R&D department has been extremely busy in this area recently.
“We are doing some work at the moment in a field that no-one around the globe has yet been able to come up with a bullet proof solution for and at the moment it’s looking like we will be able to come up with a solution better than anything currently available and that’s the sort of areas we have had to concentrate on.”
When the subject of Government funding for R&D is brought up Jones is clearly frustrated: “People don’t realise that the terminology for R&D doesn’t cover formulation of paint. We don’t do the R&D to develop the individual hardeners but we try to make the systems work by formulating – but you get no support for any of that.”
Cotec has also been looking overseas for business, with Australia proving a lucrative market for specialist concrete paints and growing potential for water-based polyurethanes. Cotec has also joined several other New Zealand companies in pursuing the emerging economies.
“We now have an agent in Thailand who is starting to market our product through the Asian market and we picked up our first big commercial project last year for one of the new leisure parks that are being built there.”
COLOUR AND ONLY COLOUR
One paint company that has had significant investment from the Government is D’Arcy Polychrome, whose innovative and award winning Drikolor process delivers colour through to paint and a range of building materials, with dry, easily dispersed granulated pigments that require no mechanical mixing.
D’Arcy Polychrome’s CEO, Rachel Lacy, explains that the catalyst for the Drikolor idea came from a simple need – to separate colour as a product from paint.
“When my mother owned Aalto Colour she wanted to sell colour separately from paint because she felt that paint manufacturers are very good at paint but that the colour field was quite specialised and not all those manufacturers had that expertise. Making colour and making paint are two very different skill sets, one is more science and one is more art.”
With the Drikolor technology perfected and patented, and selected paint partners in place, D’Arcy Polychrome offers a range of exclusive colours “crafted from the highest quality natural pigments, sourced from across the globe”.
Lacy explains that while the firm can also make any colour a client might like, the key service they offer is a “limited, curated colour palette” of extremely high quality. “It’s about making very good colours and I think people want a smaller selection of better chosen colours. I just don’t think anyone needs 3,000 colours!”
While the Drikolor patent has allowed D’Arcy Polychrome to take colour specialisation to new heights, it has also opened up other options that have implications for the whole industry.
“The option is there for us to supply our technology and we can apply the Drikolor process to whatever pigment we like,” Lacy explains. “Drikolor dissolves very quickly and easily and you get rapid, even colour development so you don’t need paint shop tinting wheels and all the legacy and incumbent systems you have now to tint paint and that means you can sell through a completely different range of distribution channels.”
The Drikolor system also offers very attractive benefits for end users: “Instead of going into a big store waiting for a guy to mix it, you can just grab your colour, grab your base paint and go, so there’s no tint error and no waiting. We also think the idea of being able to grab a couple of packets of colour then get home and decide there eliminates that awful pressure of having to decide right there in the paint shop,” Lacy says.
So rather than waiting to reap the rewards of a general uplift in the New Zealand economy, taking a more proactive approach and meeting the market head on with new ideas can pay dividends. As we head into 2014 this sort of thing may be just what the category needs.