How can profit space be further squeezed by paint companies?

In the past two years, the prices of domestic paints and coatings have continued to rise, and the main reason for their price increase is the rise in crude oil prices. It is understood that the raw materials for paints and coating products are all derived from crude oil products, which are greatly affected by fluctuations in international crude oil prices. The rise in oil prices has forced the prices of paint raw materials to increase immediately, which has dealt a great blow to paint companies that are already struggling.

Since January 2011, coating raw material companies have blew up the horn of price increase, and many domestic and foreign raw material giants have announced the increase in product prices. Of course, the reasons for the rise in prices of raw materials for coatings are also different. It is understood that the raw material coating prices are mainly due to the following two factors, one is that due to rising raw material prices, increased costs, leading to insufficient earnings; Second, the recent paint market demand to pick up, leading to a marked increase in the demand for some paint raw materials market, came into being The price increase. It is understood that the world's giant DuPont titanium dioxide in its 2010 titanium dioxide product prices for five times, from 2011 to now, also carried out two price increases, respectively, in January and April. In addition, Huntsman, Connors, Coste and other coating materials companies also made corresponding price increases in 2011. It can be seen that, in order to maintain the company's competitiveness and sustained growth momentum, each raw material company seems to have become a must-go for many raw material companies. Behind the heavy pressure, the paint industry silently bought a single price for raw material products. In the fourth quarter of 2010 and the first quarter of 2011, some paint companies also chose price increases as a means of releasing pressure.

How to Cope with the Pressure of Coatings under a Huge Cost of Logistics

In addition to the pressure from the price increase of raw materials, paint companies are also facing pressure from logistics costs. It is reported that since April 7, 2011, gasoline and diesel prices have risen by 500 yuan and 400 yuan per ton respectively, and 93 gasoline has risen by about 0.39 yuan per litre. Along with another round of rising oil prices, it is undoubtedly putting great pressure on the increasingly fiercely competitive paint industry because it means that the transportation costs of paint companies will rise again. The products of many domestic paint companies need to be transported by land to local dealers. The increase in logistics costs will increase the cost of paint companies and distributors, or eventually pass this part of the price to consumers. Under the double pressure of raw materials and capacity, the profit margin of paint companies will be further squeezed.

At present, with the continuous rise in oil prices, the logistics pressure of coating companies is also increasing. Because of the cost of China's coating companies, logistics plays an important role. Therefore, the rise in oil prices has forced coating companies to face huge logistics costs. pressure. The author believes that in the face of huge logistics pressure, paint companies should combine their own advantages and try to reduce logistics costs.

First of all, integrate logistics resources and carry out self-adjustment of costs in terms of transportation. The direct increase in oil prices is caused by rising logistics costs of coating companies and rising operating costs of companies. If they cannot be digested internally, this part of the increased cost pressure will directly translate into the increase in the price of paint, which will adversely affect the market sales of paint products. .

Second, the development of high-end products will reduce the proportion of logistics costs. Developing high-end products and increasing the added value of products are the best way to digest internal operating costs and product production costs. At the same time, it is also a way for companies to independently innovate and enhance their market competitiveness.

Thirdly, companies with potential for development can consider re-building of factories in areas where the coating market is concentrated, serve local markets, and save transportation costs. This method is more effective for small-scale paint companies in the region. If a large-scale paint company is faced with a national or even global market, this method is not desirable. For coating companies, reducing the scope of business areas is a way to reduce corporate risks, but at the same time it is also a constraint to suppress the development of enterprises. Xiao Bian believes that developing high-end products, optimizing the company's operating industry chain, reducing the proportion of logistics costs, and increasing the added value of products are the best way for paint companies to respond to market development.

According to industry sources, at present, the profits of some small and medium-sized paint companies in China are only enough to maintain daily operations. Under the great pressure of rising oil prices, it is no longer possible for paint companies to invest in R&D and other fields. The vicious circle of paint industry will be renewed. . In this case, the paint companies will face no small challenge whether they insist on increasing prices or continue to choose low-cost operations.

Since 2010, the domestic gasoline and diesel prices have been raised four times. In addition, domestic refined oil prices have been raised twice in 2011. There are also significant increases in raw material and labor costs, logistics costs are bound to increase, and paint companies only have to integrate logistics. Resources, development of high-end products, paint market concentration in areas such as construction of the plant to digest the pressure brought about by the three aspects is the best policy, try not to convert the pressure on consumers, "price increase" is not the preferred choice for paint companies decompression .