Paint Industry Review 2023

Paints and Coatings Sector Assessment M. Akın Akçalı Chairman of the Board Bosad (Paints Manufacturers Association) The slowdown in global economic growth, high inflation rates, and the Russia-Ukraine war triggering an energy crisis have caused serious problems. These uncertainties point to fragility in economic recovery. Our paints sector, in the shadow of international developments, has experienced 2022 as a year marked by high inflation, dramatically rising energy costs, supply shortages, increases in commodity prices, and currency fluctuations, among other economic difficulties. On the other hand, supply chain disruptions caused by the Russia-Ukraine crisis and the resulting increase in inflation have also been reflected in raw material prices used in our industry's production. As a sector, we are dependent on raw material imports and are therefore directly affected by crises occurring worldwide. Despite all these setbacks, we have worked with all our efforts to improve our current situation and increase our production. In summary, we can say that 2022 was relatively more stagnant compared to previous years. According to Bosad reports, the first three quarters combined saw a 6% volume contraction, and we anticipate year-end closure at around 10%. We estimate the size of the Turkish paints sector in 2022 to be approximately 950,000 tonnes. Construction paints constitute 60% of total sector volume, while industrial paints make up 40%. In 2023, we expect sector size to be in line with this year. Through investments and incentives for our industry in line with the Turkish paints sector's global growth strategy, and by ensuring production of high-value-added domestic substitute raw materials, we will develop our country's economy, increase the volume of our high-value-added export products, and strengthen our representation in global markets. In 2023, when we will celebrate our Republic's 100th anniversary and Bosad's 20th year, we as Bosad are hosting an event where the global paints sector will come together. As a member of the World Coatings Council, we will host the annual evaluation meeting in March. As our Republic enters its second century, I wish this event we will host to be auspicious for our country and our sector.   Mehmet Hacıkamiloğlu CEO Polisan Holding 2022 was generally a year of economic contraction. While factors such as the Russia-Ukraine crisis, cost increases, and currency fluctuations affected sectors, the paints sector focused on its targets to increase its share in the global market. As Polisan Kansai Boya, we concluded 2022 in line with our targets in terms of turnover and profitability. We export to 26 countries including Austria, Azerbaijan, Bulgaria, Egypt, France, Georgia, Russia, Israel, Turkmenistan, the Netherlands and Romania, and increased our exports by 79% in 2022 compared to the first nine months of the previous year. We increased our number of overseas showrooms to 127 with the showroom we opened in London. We launched our e-commerce platform this year and our promotional activities continue. Today, digital and green transformation occupy the centre of the global agenda. There is significant growth, particularly in demand for environmentally friendly paints. We are very strong in high-performance, environmentally friendly (low VOC, etc.) paint products. We can reach almost every point in Turkey through dealers, retail outlets, chain stores and e-commerce. In addition to 5,000 sales points, we provide service with our products in a total of 345 stores of two chain markets. In 2023, we will focus on strategies to increase our market share in foreign markets and expand our store count. We will also launch projects we have targeted in new markets. In 2023, we will also work to increase our e-commerce share by deepening our online activities. We have focused on online growth. "More exports" is high on our agenda. We plan to increase brand awareness in foreign markets and open new stores. By expanding our high-value-added product portfolio, we will continue to provide quality solutions with innovative, creative and high-performance products to help consumers achieve the living spaces of their dreams. Mehmet Mutlu Uysal General Manager DYO As DYO, in 2022 we were affected by the logistics crisis triggered and deepened by the global pandemic, producers declaring force majeure, inflation on all countries' agendas, and the currency exchange rate increase we experienced in our country. The increase in energy costs starting with the Russia-Ukraine war, the continued high level of transportation costs in 2022, inflation and currency increases are expected to continue producer cost increases. Despite all these developments, together with our employees, dealers, suppliers and stakeholders, we work on stable and sustainable growth targets, and formulate all our strategies accordingly. With our strong ecosystem, we closely monitor all market conditions in real time, and by taking quick decisions and actions with our agile management approach, we have continued on our path with confident steps despite all challenges. At our Izmir and Kocaeli plants, we produce paints for a full 11 main sectors and dozens of sub-sectors related to these sectors. With our business partners abroad, we have exported to more than 50 countries in Asian, European and African markets. As DYO, by developing sustainability and climate-focused approaches in our value chain, we have identified creating social, environmental and social value as the main focuses for the next 3 years. In our environmental priorities, we have actions against climate change and plans to reduce resource use. We continue our efforts to increase environmentally friendly products in our product range. We use plastic packaging made from 30% recycled materials in our products. We define our management targets as prioritising digitalisation investments, strengthening our portfolio with innovation and sustainability-focused products, and most importantly, managing all our processes with collective intelligence. However, during this process, we were shaken by the earthquake disaster that occurred in Kahramanmaraş and deeply affected 11 provinces. Therefore, while work continues on our medium-term targets, our priority today will be healing the wounds of the earthquake disaster. As a brand of the Yaşar Group, we supported and continue to support cash and in-kind aid, and are also participating in coordination with all civil society organisations we are members of to provide support and medium-term planning for the region.   Pınar Adabağ Marketing Manager Marshall In the Turkish paints market, the third quarter of 2022 recorded 99% growth in terms of turnover. As Marshall, we achieved growth above the market in the same period. In decorative paints, we are a sector dependent on foreign raw material supply, so we experienced problems stemming from both raw material procurement and high production costs. Rising energy costs and upward fluctuations in exchange rate policy affected the entire sector. One of the important developments for Marshall in 2022 was the launch of our FIT brand products, which began production at our solvent-based production facility, which we invested in in previous years. Thus FIT was added to our Luxe, Enamel, and Pastel sub-brands, for which we received very positive feedback. In 2022, we continued our Let's Colour project and provided paint support for the Bilecik Gölpazarı Municipality Taşhan Conservation Area Environmental Arrangement Project. Under the cooperation protocol we signed with the Ministry of National Education, we continued our paint grants for school painting projects. In 2023, as in world economies, inflation, energy, logistics and many other sectors in Turkey will continue to face challenges. In the paints sector, we believe volume contraction will continue as it did in 2022. Along with significant price increases, switches to products in the economic segment are increasing substantially. We expect the share of products with price-quality balance that can meet demand in this segment to increase. We anticipate an increase in the trend towards digitalisation through applications such as GÖR-BOYA. We also foresee that platform usage such as ustamburada.com, which brings consumers and craftspeople together, will increase, both meeting consumer needs and providing new business opportunities for craftspeople.