Domestic paint makers are struggling to keep up with their foreign counterparts in a fiercely competitive environment.
When talking to VET about key factors in selecting the best type of paint, Mr. Pham Truong Lam, an experienced builder, said that although he’s been in construction for 20 years he’s still not able to identify the best type because of the sheer number of brands in the market. Most people, he said, buy paint based on price and brand, with little attention paid to quality. While Vietnamese consumers may be just as confused as Mr. Lam when confronted by thousands of paints, increasing numbers of foreign paint makes have flocked to the country and joined the already large presence staked out by domestic suppliers, in what amounts to a “War of Colors”.
According to figures from the Vietnam Paint and Printing Ink Association (VPIA), from 2000 to 2012 the paint sector saw substantial growth, averaging 20 per cent a year. With favorable policies from the government, many foreign groups have come to Vietnam, carrying with them famous brands such as 4Orange, Dulux, Jotun and Nippon. Paint is used in almost every industrial sector and has played a role in Vietnam’s economic development over recent years, given the size of its growth.
Although 2014 was a year of recovery for the real estate market, purchasing power remains weak. This has had a major influence on the paint market, with 2014 production not differing greatly compared to 2013. A report from VPIA showed that Vietnam’s construction paint market has about 60 manufacturers, both domestic and foreign. Of these, only 10 per cent are high-end brands but they have a market share of 65 per cent. Foreign players such as AkzoNobel, with Dulux, 4Oranges and its Mykolor, Boss, Spec, and Expo brands, and Jotun, Nippon and joint ventures like AlphaNam - Kansai Paint, are leading the market and continually investing to maintain their positions. Domestic paint makers have been overshadowed by their foreign counterparts, even though both produce their paint in Vietnam.
Mr. David Teng, General Director of AkzoNobel Paint Vietnam, said that the company has invested $14.197 million to expand production lines at its plant in southern Binh Duong province. The expansion is expected to be completed in 2016, making it the most modern paint plant in the country and the region, with a capacity three times higher than the original design.
Meanwhile, corporate social responsibility is a key focus of Kansai Paint, which offers products with the Singapore Green Label and Sirim Eco Label certification. “The goal of developing environmentally-friendly products does not stop at achieving Green certification,” said Mr. Nguyen Minh Nhat, Northern Sales Director and Chief Financial Officer at Kansai Paint. “It is also about conducting practical activities to provide a safe and healthy environment to consumers.”
Jotun Vietnam has increased its investment to $16.1 million, to expand and increase its capacity to meet market demand. It recently invested $1 million in implementing ERP resource management models, so it may operate more effectively in Vietnam.
With a capacity of 100 million liters per year, 4Oranges now has its eyes on the retail market and major constructions, while investing in services, distribution systems, and color mixing centers. It aims to increase the number of its color mixing centers to 2,000 throughout the country.
Expanding, though, is not enough, and foreign paint companies also work on innovating their product lines. With the business becoming more and more competitive, enterprises need to differentiate their products to help them keep their counterparts at bay and continue their smooth business operations. Color and function - two factors creating the success of a paint product - are therefore being improved constantly.
“Maxilite, AkzoNobel’s product line for the intermediate segment, recorded growth in 2014,” said Mr. Teng. “Meanwhile, Dulux - our premium product - has retained its leading position due to the prestige of the brand name and its quality and diverse colors.” AkzoNobel also conducts ongoing market research, he added, to identify any changes in trends and consumer preferences regarding decoration and color selection. “Around the Lunar New Year (Tet), we launched new color designs in accordance with the principles of ‘feng shui’, to provide optimism and confidence to customers in the new year,” he said. With Dulux Weathershield, AkzoNobel has also developed cooling technology that reflects heat away from exterior walls, reducing temperatures by 5 per cent.
Kansai Paint aims to launch product lines with high durability to reduce maintenance costs and maintenance work and to meet rigorous demands for quality, most notably its Weathercoat DC10. It has protective capacity and lasting color retention, for ten years. With this aim, Kansai has made a name for itself at large constructions such as VSIP Bac Ninh, Green Bay Towers in Ha Long city, and AEON mall.
In response, Jotun recently launched Jotashield, for exterior use. It features color fade resistance, bringing long-term economic efficiency and contributing to cost savings even as a premium paint product.
Ms. Nguyen Thi Lac Huyen, Vice President and General Secretary of VPIA, said that foreign paint brands have had a positive impact, bringing modern technology and international management standards to Vietnam. “But, on the other hand, they also bring competitive pressure to domestic companies,” she said.
Over recent years, local interior paint brands like Kova, Dong Tam, and Hoa Binh have entered the market, though their competitive ability is lacking compared with foreign brands. Aware of this, they have attempted to launch unique product lines.
Nero has offered a new waterproof decoration paint, Nero Cement Paint, with a quality equivalent to foreign products but at a price 30 per cent to 50 per cent lower. Hoa Binh Paint has chosen to focus on stone paint for the premium segment, with its Hodastone paint. Despite having an average price two to three times higher than water-based paint, it is still popular due to its high aesthetic and durability for coastal structures, where the weather is sunny and windy with salty air, and also for cold climates.
However, interior brands have to focus mainly on rural areas by distributing through dealer channels, with high discounts. This is because the market share in major cities is difficult to occupy and the ability to consult on and supply large construction projects is yet to be fully exploited. Interior brands also pay little attention to branding activities, so customer awareness lags behind that of foreign brands. The domestic market isn’t everything, however, and Kova, for example, primarily concentrates on exports, even though it makes high-end products.
Ms. Huyen said that Vietnamese paint makers should invest in their core products and production management in a professional and sustainable manner. She recommends they focus on research and development to create good products and generate customer trust through reasonable product development strategies, marketing strategies, and product distribution systems.
Vietnam’s paint market will continue to be an attractive investment destination for investors. According to a population report for 2009-2049 from the General Statistics Office, Vietnam’s population stood at about 88.8 million people in 2012 and is forecast to hit 95.4 million in 2020 and then 102.7 million in 2030. With average annual per capita consumption now at 6 liters, Vietnam’s paint market will reach at least 572 million liters per year by 2020, worth approximately $2 billion.
Believing in the development of domestic paint companies, Ms. Huyen said that their quality must compete with their foreign competitors. She added that although they account for 80 per cent of makers, domestic enterprises only have a market share of 20-30 per cent. Foreign-invested enterprises lead the market now and may continue to do so in the future. “Vietnam’s paint products can compete with foreign brands and imported products due to their lower price,” she said. “However, without long-term strategies, domestic paint brands will face problems from the tough competition.”
For his part, Mr. Teng said that Vietnam has rapid growth and is at the center of AkzoNobel’s development plans for now and the future. “Although the real estate market has experienced a lot of difficulties over recent years, we have seen many signs of improvement, albeit slow,” he said. “With a young population, Vietnam still has huge demand for home ownership, especially mid-end apartments. Reasonable house prices as well as support packages from the government have prompted young people to try and own their own home. The increasing demand has contributed to the paint market becoming more active.”
“In 2015 we expect Vietnam’s paint market will recover steadily, in parallel with the recovery of real estate market and the retail market. Housing demand among young people is on the increase, which has stimulated us to constantly change the colors as well as the features of our paint, to meet their needs. Young people believe that color is a way of expressing their individuality. Color choices in recent years have shifted from dark to bright and warm colors. We hope that by meeting the requirements of customers, AkzoNobel will continue to maintain its leading position in the decorative paint market and contribute to the future development of Vietnam.”
Mr. David Teng, General Director, AkzoNobel Vietnam
“In all markets, every paint company must attempt to find a production method that is suitable with the local culture. Besides producing paint in beautiful and diverse colors, we are also aware that the production of green products that are friendly on the environment is very important. Therefore, we do not just focus on price but also on creating products that are safe.”
Mr. Nguyen Minh Nhat, Northern Sales Director and Chief Financial Officer, Kansai Paint