The paint market - Portugal

1.2 Global Market

The global paint market is a market that has been quietly growing for the past * years. If we look at it at a first glance in terms of volume, after hovering around * billion gallons sold worldwide in **** and ****, we’ve seen those numbers grow every year since then, reaching *.* billions gallons in ****, for a total value of *** billion dollars. [***]

Market Size of Paint (***) World, ****-****, in billion gallons Source: ****

1.3 The Portuguese Market

The Portuguese paints and varnishes market has been having its up and downs ever since the beginning of the **st century. It had its first big drop after the financial crisis in ****, when it dropped from over *** million euros to just *** only a year after.

Sales of product : manufacture of paints (***) varnishes, mastics and related products Portugal, **** - ****, in millions of euros Source: ****

The naitonal market relies heavily on construction (***) whereas the remaining *% are split between other products.

1.4 International Trade

To analyse Portugal's international trade ofr paints and varnishes, the following UN Comtrade commodity codes were used : 

**** : Paints, varnishes; (***) based on synthetic polymers or chemically modified natural polymers, dispersed or dissolved in a non-aqueous medium **** : Paints and varnishes (***) based on synthetic or chemically modified natural polymers, dispersed or dissolved in an aqueous medium **** : Paints and varnishes (***), excludinf those of heading no.****, prepared water pigments of a kind used for finishing leather

Portugal is a country that imports more goods in terms of paints and varnishes than it exports. If we look at their coverage rate (***), they were at **,**% in **** meaning they had more than twice as many imports than exports in terms of value. That number has remained relatively stable for the past * years, never falling below **% and never cracking **%. 

Source: ****

If we take a look at their trade partners on the exports side, Spain is by far their biggest buyer, accounting for **,**% of their exports. They're followed by France (***). Behind the top *, their partners are pretty well balanced, with * countries weighing between *,* and *% of Portugal's international demand.

International Buyers in the Paints and Varnishes Market Portugal, ****, by % Source: ****

On the other hand, their import partners are very less balanced. ...

2.1 The Construction Market

As we saw in our analysis of the Portuguese paints and varnishes market, construction plays a huge role on this sector's demand. After ** years of stagnation and sometimes even recession, the Portuguese construction market has had a good last few years. **** marked the year where Portuguese construction started turning the page. After getting their feet back under them in ****, **** marked a great year. The construction sector reached a total value of **.* billion euros, increasing *% compared to the year prior, the biggets jump in the past ** years. 

The residencial construction sector had a **% increase, totalling *.* billion euros whereas the new construction segment had the biggest jump of all with a growth of **% in that period. Finnaly the biggest subsector was civil engeneering, accounting for *.* billion euros (***), equating to **% of total Portuguese construction. 

Construction Market Sectors Portugal, ****-****, in % and billion euros Source: ****

Things were also looking good heading forward, in their projections for the near future, at least untill ****. The initial projections were for a growth of *,*% and a total value reaching ** billion euros. Unfortunately, these projections were all made before **** and the COVID-** crisis that had a considerable hit on the construction market. This sector was affected by all the lockdowns ...

2.2 Industrial Production

The other big key driver in the national demand for paint is industrial production. This, along with construction is also why it is reasonable to believe that covid-** had a big impact on this market. Contrary to construciton though, industrial production in Portugal wasn't really on a upwards trajectory. Taking **** as a base year, tehere was some progress in **** and ****, where the industrial production index grew form *** (***), meaning this was the worst year for this sector in at least * years if not more. 

Industrial Production Index Portugal, ****-****, base *** (***)

This situation could be even worst than it seems when we look at the numbers more in detail. Still taking **** as a base year, industrial production for consumer goods had an index of **.*, intermeidate goods of **.**, capital goods of **.** and the national average was only brought up by the energy sector which had an index of ***.** but which is also the sector that demands less paint than the others. So if we weighed each group by what they mean towards the paint market, the **** industrial production index of **.** would be even lower.

2.3 Individual Demand

Even though most of the demand in the paint market comes from professionals and groups in the private sector, some of it still does come from individuals. Ranging from people that want to repaint their houses or cars to others that just need paint for their personal projects, there is still a part of the market that is occupied by smaller entities. This might be the only postive effect the crornavirus had on the market, since we have seen an increzse of people wanting to remodel their homes or to give time to long term projects they've had of building of making things from scratch (***)

Olhares de Lisboa, in a study made in the beginning of July showed that only in the first half of this year, **% of Portuguese people renovated a space in their house with the intention of making it more confortable, more appropriate for working from distance or even just to swicth up their immeidate environment. The average cost of each renovation was of ****€. The same study revealed that **% of respondants had intentions of renovating their homes in the near future with average budgets of ****€. 

3.1 Market Structure Overview

The Portuguese paint market is made up essentially of little or meidum business. Novertheless, the top ** companies account for **% of the total turnover and the top * comapanies hold **% of that number, showing an unbalanced share of the market. **% of the companies have an annual turnover of under * million euros and another **% have a turnover anywhere between * and ** million euros. 

Percentage of Companies With Similar Turnover Portugal, ****, by % Source: ****

If we look at the number of employees these companies have, **% of them have under ** staff, with **% of them having a number between ** and **. Big groups of more than *** employees only make up for *% of total companies in this field, with only *% having that number above ***.

Companies with similar number of employees Portugal, ****, by % Source: ****

If we look at where these companies are in Portugal, we see that the most part are in Porto (***). 

Geographical distribution of companies operating in the manufacturing of paint Portugal, ****, in % Source: ****

Finally, if we look at the number of companies registered as "active" in the industry over the past * years, the slow concentration of the market is made clear.

Number of active companies registered in the manufacturing of paint Portugal, **** - ****, in % Source: ****

3.2 Production

Companies in the paint and varnishes sector have to take in different raw materials to make their product, which is why they are considered to be a transformative industry. Paints are generally made of a dry extract (***) and a volatile liquid which interact chemically and physically to make the paint have the properties we want, whether it be adhesion, opacity, color, durability but also more and more we see technical paints made for particular ends such as fire resistent or film formation paint. Paint are less and less just a decorative product but are also used for protection/security, improvement of environmental conditions, lighting and hygiene among others. 

To make their product, companies in the paint market are in lijnk with their raw material, equipement and packaging suppliers. Most of their solvents are petrol derivatives which make the market depend a little on oil prices, even though more and more new components are being found and used to avoid that dependance. In Portugal, the suppliers often aren't those who produce or collect the raw material but are importers and resellers, driving prices up from what they could be if the material came straight from the source. 

One last point on production ...

3.3 Competition

As we've touched on the subject before, competition is fierce in the paint market. Even though there are thousands of companies worlwide, the top ** global suppliers hold **% of market shares, with no Portuguese companies and * Europeans cracking that list. These giants are headlined by Sherwin-Willimams, PPG and Akzo Nobel.

If we look at competition on a continental scale, Akzo Nobel from the Netherlands dominate the scene with over * *** million euros in sales in ****, followed by the German BASF and Jotun from Norway that respectfully had * *** million and * *** million in sales last year. the first Portuguese company was CIN, with *** million euros which allowed to reach the **th place in Europe for this market. They were also the only Portuguese company in the top **. [***]

4.1 Prices

Given that there are so many different types of paint, with different qualities and properties, it is difficult to give an average price for this market. Thta being siad, we compared price points from a few portuguese players for a select number of products to give an idea of how much they can go for, depending on their quality, reputation and durability : 

Source: ****

'.2 Research and Development

Being a market where products can quickly be copied by the competition, paints and varnishes rely heavily on research and development to make the best available product but also products with new properties that rival companies can't offer quite yet. The best way to make a name for yourself in this field is bringing something new, and with paint this can be tackled through mulitple angles : quality/durability, being environmentally friendly, fire/heat resistant, better/ more natural color,... there are endless possibilities to be found.

It comes without a surprise to see that the national leader for paint takes R&D so seriously. CIN have labs accross * different countries (***) and employ over *** scientists. This all acocunts for over * million euros of investments every year on research and development. These studies gravitate around * pillars : product, color; composition and durability. [***]

These investments pay off and today CIN has a range of unique award winning products thanks to all their work, such as : 

Cinaqua :  an extra matt paint for interior wall painting, which disguises small imperfections and presents a good opacity and performance, having obtained the highest rating (***) in interior air quality. AC-THANE : an acrylic enamel with innovative technology that, through its new formula ...

5.1 Legislation

Portugal mostly follows European directives to make sure that their paints and varnishes are safe for the consumer and for the environment. Amongst other things, they check for 

Residues : Residue from products and their packaging must be classified and listed along the lines of the European List of Residues. Portuguese companies must declare all residues that their products might have. Volatile Organic Compounds (***) : they are the result of the use of certain organic solvents in paint and need to be throughly controiled. This is problem relavant to air quality control and different laws limit VOC emission coming from paints and varnishes Biocides : the sale and biocide products is heavily controled, in the goal of protecting human animal and environmental health. Many paints can be found in this category, most notably including paint for wood.  Registration, Evaluation and Authorization of Chemicals (***) : the aim of this regulation is to make sure companies are responsible for chemical risk management but also of communicating the risk their products might have if they are enhaled for example. 

More information involvong the regulation of the paints and varnishes market in Portugal can be found on APT's website.

6.1 Market Leaders

In Europe : 

• Corporação Industrial do Norte (CIN)