SIC 2851
PAINTS, VARNISHES, LACQUERS, ENAMELS, AND ALLIED PRODUCTS



This industry category includes establishments primarily engaged in manufacturing paints (in paste and ready-mixed form); varnishes; lacquers; enamels; shellac; dry powder coatings; putties, wood fillers, and sealers; paint and varnish removers; paintbrush cleaners; and allied paint products.

Establishments primarily engaged in manufacturing carbon black are classified in SIC 2895: Carbon Black; those manufacturing bone black, lamp black, and inorganic color pigments are classified in SIC 2816: Inorganic Pigments; those manufacturing organic color pigments are classified in SIC 2865: Cyclic Organic Crudes and Intermediates, and Organic Dyes and Pigments; those manufacturing plastics materials are classified in SIC 2821: Plastics Materials and Resins; those manufacturing printing ink are classified in SIC 2893: Printing Ink; those manufacturing caulking compounds and sealants are classified in SIC 2891: Adhesives and Sealants; those manufacturing artists' paints are classified in SIC 3952: Lead Pencils, Crayons, and Artists' Materials; and those manufacturing turpentine are classified in SIC 2861: Gum and Wood Chemicals.

NAICS Code(s)

325510 (Paint and Coating Manufacturing)

Industry Snapshot

According to the U.S. Census Bureau, U.S. manufacturers shipped 1.34 billion gallons of paint and coatings in 2001, valued at $16.9 billion, down from 1.47 billion gallons valued at $17.7 billion in 2000. The paint and coatings business was considered a mature industry, with growth projected at about 1 to 2 percent annually. Worldwide, the paint and coating industry generated $70.7 billion in 2001, similar to revenues of $70.6 billion in 2000.

Historically, paint is a comparatively small, yet influential industry. Despite its relatively minor revenues, the industry's products affected virtually every aspect of modern life. From cars and homes, to containers for food and beverages, to appliances and furniture, paints and coatings protected, personalized, and beautified our surroundings. Some economists consider it a leading economic indicator.

The paint industry has become essential to nine major manufacturing industries, including: automobiles, trucks and buses, metal cans, farm machinery and equipment, construction machinery and equipment, metal furniture and fixtures, wood furniture and fixtures, major appliances, and coil coating (high-speed application of industrial coatings to continuous sheets, strips, and coils of aluminum or steel). Additionally, paint manufacturers influence the wider chemicals industry via their purchase of billions of dollars worth of raw materials. Paint and coatings were also an integral contributor to the new and resale housing industry.

The paint industry underwent significant changes in the early 1990s, including a gradual expansion of specialized end-user markets, progressively stricter environmental regulations, an increase in foreign corporate ownership, and an accelerating pace of consolidation. But in the mid-1990s, as raw material prices eased and demand in two key markets (automotive and housing) surged, paint manufacturers experienced an increase in sales. In the early 2000s the paint and coating industry was suffering from the ill effects of a general downturn in the economy. Architectural paint remained a bright spot as the home building market bucked the downward trend due to extremely low interest rates.

Organization and Structure

The paint industry's first national professional organization, the National Paint, Oil, and Varnish Association, was founded in 1888 in Saratoga, New York. Industry associations proliferated in the early twentieth century until the Great Depression, when government officials and top paint company executives urged the creation of a single national organization. The National Paint, Varnish, and Lacquer Association was formed in 1933, and was later renamed the National Paint and Coatings Association (NPCA).

The NPCA's membership constituted over 75 percent of the entire paint industry in the 1990s. The organization existed to represent the industry to government regulators and the general public. Its public relations and educational programs focused primarily on the technical and aesthetic qualities of architectural paint. The group's annual "Clean-Up, Paint-Up, Fix-Up" campaign, which encouraged neighborhood pride through house painting, was first undertaken in 1912 and lasted through the early 1970s. In the 1990s campaigns countered paint's persistently bad image as a noxious, but necessary, maintenance product. Following the lead of such successful "category marketers" as the cotton and milk industries, the NPCA promoted paint as a versatile decorating tool.

Competitive Structure. Numerous mergers, the high cost of regulation, and increasingly expensive, complex manufacturing processes began to have a cumulative effect on industry composition in the mid-1990s. Mergers and acquisitions reduced the number of companies in the industry from more than 900 to about 700 over the course of the early 1990s. By that time, the top three producers accounted for about 45 percent of U.S. shipments, up from less than 30 percent in 1990. The 10 largest manufacturers comprised nearly two-thirds of the market. Industry observers expected consolidation to eliminate another 300 companies by the year 2000.

The geographic dispersal of paint manufacturers was historically dictated by the high transportation costs associated with paint distribution. The weight of prepared paint encouraged the development of a regionalized structure of small manufacturers by the end of the nineteenth century. Paint companies gravitated toward major population and industrial centers such as Cleveland, New York, St. Louis, and Chicago. This arrangement dominated the industry until the 1940s and 1950s, when the leading paint manufacturers began to consolidate paint plants and develop wider distribution networks.

By the early 1960s, however, that trend reversed, and smaller branch plants were built to lower freight costs, avoid some state taxes, and facilitate more personalized service. In 1967 about 66 percent of paint was consumed within 500 miles of its manufacture. Decentralization persisted through the 1990s, represented by the industry segment of tenacious small-to-medium-sized paint manufacturers who served limited regional markets.

Market Segments. Three basic segments existed within the industry: architectural coatings, original equipment manufacturer (OEM) product coatings, and special purpose coatings. Architectural coatings, known in the industry as trade sales paint and commonly referred to as house paint, comprised the largest segment, contributing 44 percent of annual gallonage and 38 percent of revenues in 1995. About 60 percent of the 617.5 million gallons of architectural coatings sold in 1995 were interior paints. Exterior paints contributed 36 percent (225.1 million gallons), and lacquers and all others accounted for the remainder of architectural paint shipped. Water-based, or latex, paints constituted 76 percent of trade sales in 1996, up slightly from 73 percent in 1990.

The bulk of architectural coatings were distributed through wholesale and retail outlets. Marketing these paints encompassed both formulation and aesthetic factors. Safety, durability, consistency, washability, and convenience were some common consumer concerns with regard to formulation. But color and appearance were also important, so paint manufacturers were often obliged to keep up with decorating trends.

Sales in this industry segment were keyed to weather (which could limit the application of exterior paints), new housing starts, sales of existing homes, and to a lesser degree, commercial and industrial construction. Architectural coatings were subject to competition from vinyl siding, wallpaper, wood paneling, and glass. Major producers for this segment included Sherwin-Williams Co.; PPG Industries, Inc.; Grow Group; Valspar Corp.; Glidden Co. (a subsidiary of Great Britain's ICI Paints); and Benjamin Moore and Co.

OEM paints constituted about 28 percent of industry gallonage in 1995. These products were often custom formulated in consultation with the end-user and applied during manufacturing. These coatings were used in such durable goods markets as automobiles, aircraft, appliances, furniture, metal containers, sheet and coil metals, and industrial equipment. Dollar shipments for this industry segment in 1995 were a record $5.3 billion, up more than 25 percent from 1990. Strong automobile and consumer durables markets helped fuel volume growth as well, which rose from 339 million gallons in 1990 to 389.6 million gallons in 1995.

One major challenge facing OEMs in the early 1990s was the increased use of plastics in automobiles and appliances, which created the need to match the paint finish of metal panels with plastic panels that were painted separately. Development of new applications technologies was another primary concern. Major companies with interests in OEM markets included E. I. DuPont de Nemours, PPG Industries, Grow Group, and Glidden.

Special purpose or industrial coatings, which developed largely after World War II, accounted for less than one-fourth of industry volume in 1994. While similar to architectural coatings in that they could be classified as stock or shelf goods, special purpose coatings were formulated for specific applications or environmental conditions, and were often sold directly to the end user. Primary markets for these products included automotive and machinery refinishing, industrial maintenance (including factories, equipment, tanks, utilities, and railroads), bridges, traffic markings, metallic coatings, and marine coatings. Having declined both in terms of volume and revenues in 1991 and 1992, this industry segment rebounded to sales of $3.1 billion in volume of 194 million gallons by 1994. DuPont; PPG Industries; Sherwin-Williams; RPM Inc.; Courtaulds Coatings, Inc.; Glidden; Akzo Coatings, Inc.; and Valspar Corp. were all important producers of specialty coatings.

Background and Development

Industry Origins. The first recorded paint mill in America was established in Boston in 1700 by Thomas Child, who had emigrated from England. His business manufactured the components of paint in a paste form. During most of the nineteenth century, professional painters mixed their own paints from linseed oil, white lead, turpentine, and pigments. Their formulas were inconsistent, and the paint they produced had virtually no shelf life.

In 1867, D. R. Averill, an Ohioan, patented ready-touse paint. But early factory-made paints were notorious for their poor quality and unreliable performance. It was not until the 1880s that quality ready-mixed paints were produced. By 1888 the paint industry generated about $45 million in annual revenues.

During World War I, paint and varnish were vital to the U.S. military effort for protection and camouflage of equipment and personnel. The war exposed the industry's dependence on imported raw materials, and frequent shortages encouraged the development of domestic and synthetic replacements. By 1922 annual industry volume neared $300 million.

Paint and coatings were vital to the Allied effort during World War II, as the products once again preserved and camouflaged virtually everything. The unique needs of the military spurred the development of specialized paints and coatings. There were acid-proof, corrosion-proof, and waterproof coatings; fire-retardant, ice-repellent, fungus-resistant, weather-resistant, and water-resistant compounds that enhanced fabrics; and phosphorescent and fluorescent paints that proved strategically vital. The NPCA's "Paint Protects America" slogan summed up the industry's wartime contributions.

A Maturing Industry. After more than quadrupling from 1933 to 1947, it took the paint industry 17 years to increase from $1.25 billion to $2 billion. The American market was nearing saturation, and the same high transportation costs that prevented the consolidation of paint plants impeded expansion into overseas markets.

Overcapacity, increased competition, and rising expenses also plagued the paint industry. The U.S. Department of Defense reported on overcapacity in the paint industry during World War II, noting that "only 100 of the then 1,400 paint manufacturers, working only one shift, could meet any emergency needs of the entire country." By the 1960s, such alternatives as aluminum siding, concrete, and stucco for exterior application, and vinyl, wood, and paper wall coverings for the interior, entered the already crowded market. Paint producers began to sacrifice their profit margins in an attempt to maintain market share.

At the same time, labor, packaging, and distribution costs rose dramatically. From 1965 to 1970, wage costs rose 33 percent, but the dollar value of industry-wide shipments rose only 26 percent and productivity increased only 2 percent—not enough to account for the difference. By 1970 the industry's average return fell to 6.2 percent, compared to a 10.1 percent average for all industries.

As the growth and profits of the paint industry trailed the rest of the economy, top paint manufacturers diversified into everything from fertilizer to foods to garner profits. But promotional sales exacerbated the profit squeeze during the 1970s. Many in the industry blamed mass merchandising of paint. Discounters could afford to slash margins and even take a loss to capture market share. Paint manufacturers were forced to follow suit to hang onto their share. Another factor that emerged during the 1970s was the oil crisis, which caused the price of many of the industry's raw materials to rise rapidly.

As the paint industry matured and profit margins decreased, many firms merged to consolidate their resources and achieve economies of scale. In 1960 there were about 2,000 companies in the industry. Between 1963 and 1968 alone, 71 paint companies changed hands, often merging several smaller businesses into one substantial company. The larger, more powerful companies sought increased market share and the higher sales.

Rebound. The paint industry endured a recession in the early 1980s along with the rest of America, but from 1983 to 1990 growth was buoyed by strong construction and durable goods markets. Volume increased dramatically, from less than 420 million gallons shipped in 1982 to over 1 billion gallons in 1990. The physical increase was accompanied by a leap in dollar sales, from about $3.1 billion in 1982 to about $9.3 billion in 1985 and over $11.7 billion in 1990. Consolidation of the paint companies continued during the 1980s. By the end of 1992, fewer than 900 companies remained, down from 1,100 in 1984. Manufacturers also sought to increase their profit margins through applied research and development directed at refining existing technologies.

After decades of practice, paint and coatings companies anticipated environmental regulation and tried to prepare for it in advance. So when the Environmental Protection Agency estimated that coatings solvents were responsible for 8 to 10 percent of all volatile organic compounds (VOCs) released in the United States, coatings formulators stepped up their efforts to produce high-performance, low-VOC paints before solvents were banned.

Sales volumes in the paint and coatings industry fell 4.9 percent to about $11.39 billion in 1991, largely due to the recession's impact on the architectural and special purpose segments. From 1988 to 1991 raw materials prices increased 24 percent, but paint prices increased only 12 percent.

The financial picture brightened in 1992 and 1993, as sales of existing homes increased due to low interest rates. Some analysts noted that owners of offices and light manufacturing buildings purchased more paint to maintain their properties as well. These factors kept the paint industry growing slowly at an annual rate of about 2.9 percent from 1987 to 1992.

In the 1990s the primary concerns of paint manufacturers centered on progressively stricter environmental regulations, increasing foreign ownership, greater likelihood of mergers and acquisitions, and accelerating technological advances.

Growth in manufacturing, especially automobiles and construction in the mid-1990s, fueled healthy expansion of the paint industry. Paced by double-digit volume gains in the water-based exterior coatings segment, dollar volume advanced 9 percent from 1993 to $15.9 billion in 1995. This trend accelerated into the first half of 1996, when volume increased 12.5 percent to 685 million gallons over the first half of 1995 and value jumped 16.4 percent to $8.3 billion in the period. The Freedonia Group forecast that domestic sales of paint and coatings would expand at an average annual rate of almost 2 percent, reaching $18.0 billion on volume of 1.3 billion gallons by the year 2000. Industrial coatings, especially powder and radiation-cured types, were expected to account for a significant portion of the growth.

In 1999 the expected growth for the industry was 2 to 3 percent, driven mostly by new housing starts. Other factors contributing to growth were better economic conditions in South America and Asia, and strong demand in Europe, as well as in the United States. Through June 1999, the industry produced 667,776,000 gallons of paints and coatings, up from 671,808,000 through June 1998. The value of the production in 1999 was $8.3 billion, up from $7.7 billion the year before.

While the architectural paint industry remained fragmented, with few national brands, the industry leaders were busy buying local retailers and regional distributors. PPG bought Wattyl Paint, an Atlanta-based retailer with 21 stores, in June 1999, to expand in the South. Benjamin Moore added $45 million a year in sales when it bought New York metro-area retailer Janovic in June 1998. The key to sales growth was to have outlets for the products in three areas: company-owned stores, independent stores, and home centers. Sherwin-Williams focused mainly on its company-owned stores, which provided over half of the company's sales. The division responsible for sales to the other channels declined in the late 1990s. Some analysts felt that Sherwin-Williams needed to have more of its sales coming from home centers—in the late 1990s the company sold only low-volume, high-end products through home centers.

Another trend in the architectural market was negotiating contracts with the large home centers to take advantage to the do-it-yourself market. The largest home centers, Lowe's and Home Depot, grew rapidly in the 1990s and showed no sign of slowing—Home Depot had plans to quickly double the number of stores it operated. Sales growth was slowing for the paint companies, however; as the home centers reduced their inventories from a six-week supply to two weeks worth of product. The bankruptcy of another home center chain, Hechinger's, particularly hurt Sherwin-Williams and to a lesser extent, PPG.

Due to higher raw materials costs, many companies raised prices in 1999. Most companies were keeping the increases as low as possible—5 percent or less—as competition kept them from raising prices any higher. In the paint industry, raw materials normally accounted for 65 to 70 percent of cost of goods sold. Most of the companies in the industry were trying to cut costs to raise profits and attached a higher price to new and high performance products. Since there was little difference in architectural paint products, companies had to differentiate themselves by advertising and price.

Trying to hold costs down, many industry leaders were shutting plants or had plans to reduce staff and plants in 1999. Once its acquisition of Herbet's was complete at the end of 1999, DuPont planned on closing six plants—in Italy, Germany, Mexico, and the United Kingdom—in addition to the plants already closed in Portugal and Brazil. With a targeted completion of March 2000, the closings were expected to eliminate 13,000 DuPont jobs and save the company $100 million per year.

The automotive OEM industry was much more specialized and not as fragmented—PPG, DuPont, and BASF had 29 percent of the market—yet prices for those products were also flat, in fact falling 2 percent. The trends for the automotive OEM market were for better inventory management. The companies had more of a say in the automakers' inventories, their orders, and warehouses. PPG went further, offering a "pay as you paint" plan. This way the automakers paid only for the number of cars painted. The OEMs were becoming more involved with their customers, extending their knowledge and research results. All of these policies made for lower administrative costs and reduced disputes between the paint companies and auto manufacturers.

Fresh from their success against the tobacco industry, the late 1990s saw lawyers and state attorneys general filing lawsuits against the paint and coatings industry. In late 1999 the state of Rhode Island filed suits against the Lead Industry Association (LIA) and eight paint industry leaders, including DuPont, Glidden, and Sherwin-Williams. Rhode Island claimed that the industry knew of the dangers of lead-based paints as early as the 1930s and that the LIA conspired with the industry to hide evidence that lead paint was a health hazard. The industry said they would vigorously defend themselves, noting that they had won similar cases in the past.

Current Conditions

As the economy slowed down during the early 2000s, so did the paint and coatings industry. Architectural paints benefited from a robust new housing market, but the industrial sector lagged. Following the terrorist attacks of September 11, 2001, U.S. automakers jump-started sales by offering zero-percent financing. This spurred auto sales, and consequently helped the auto paint segment of the industry.

In 2001 architectural coatings, including interior and exterior house paint, grew 4.4 percent year-on-year and accounted for 40 percent ($6.7 billion) of the industry's revenues. OEM coatings, which accounted for 33 percent of sales ($5.6 billon), saw 2001 revenues decline from the previous year. Special-purpose coatings fell 5.4 percent and accounted for 20 percent ($3.4 billion) of sales. Other miscellaneous allied products, which declined by 18.7 percent year-on-year, added $1.2 billion to revenues in 2001.

Factors that are driving the paints and coatings industry include development of high performance paints that are cost effective and environmentally compliant. Increasing environmental regulations in the United States and abroad are continuing to challenge the industry to develop new, high performing paints that are environmentally friendly and have pushed research and developers toward water-based paint systems. Bradley M. Richards, a BASF research and development manager, told Coatings World, "The continued proliferation of regulations on the global chemical industry, coupled with the increasing demands of performance of the end used coatings and decreasing market volume, in part due to increased performance, has required a change in attitude of suppliers and coatings manufacturers."

Industry Leaders

Mergers and acquisitions modified the upper ranks of the U.S. paint industry in the mid-1990s, bringing an end to longtime leader Sherwin-Williams' dominance and adding new names to the list. Ongoing industry consolidation guaranteed that the standings would continue to change in this close-run horse race.

PPG Industries, Inc. Formerly known as Pittsburgh Plate Glass, this company was founded in 1883. As its name implied, paint was historically not its primary product: in the late 1960s, coatings constituted less than 20 percent of PPG's annual sales. By the mid-1990s, however, PPG had expanded its paint interests to become its primary division with over $3.5 billion in annual revenues in 1999, with automotive OEM leading the way with $1.4 billion. PPG acquired business from 1997 to 1999 that added $2 billion in sales and 9 of the 10 purchases from 1998 to 1999 were of coating companies. About half of PPG's operating profit in 1999 came from the automotive industry. Its key brands of architectural coatings included Lucite house paint and Olympic wood stain, both acquired from Clorox in 1989. In 2002 PPG reported revenues of $8.1 billion and employed 34,100 people.

Sherwin-Williams Co. One of the founding firms of the American paint industry, Sherwin-Williams celebrated its 130th anniversary with estimated paint sales of $1.4 billion in 1995. The Cleveland-based company was America's largest paint manufacturer from 1905 until the early 1990s, when it relinquished its standing to PPG Industries. Its vertical integration, which extended from raw materials and packaging to retail stores, helped the company become a low-cost manufacturer and the broadest distributor of architectural coatings in the United States.

Sherwin-Williams always emphasized architectural coatings, offered under the company's namesake brand and its acquired Dutch-Boy label, but by the early 1990s also produced industrial finishes for the automotive after-market and painting accessories. In 1990 Sherwin-Williams acquired Krylon brand aerosol paint and DeSoto, a major producer of architectural paints. In 1995 it merged with Pratt & Lambert United Inc., formerly two mid-sized companies that merged in 1994.

By 2003 Sherwin-Williams was the second largest paint company in the world (behind The Netherland's Akzo Nobel), with a strong position in the North American markets and, with the acquisition of Herbet's, a leader in the European market. In 2002 Sherman-Williams reported revenues of $5.2 billion.

Other key players included Masco, Rohm and Haas, Glidden Co., RPM, Valspar Corp., and Benjamin Moore and Co.

Workforce

The paint and coatings industry employed an estimated 51,084 Americans in 2001. The industry was relatively stable but showed little growth. Production workers comprised just over half of the total workforce. Almost 25 percent of the industry's employees were managers and administrators, and 20 percent were professional chemists and sales representatives.

Production workers operated and fixed machinery, moved raw materials, and monitored the production process. High school graduates qualified for entry-level production jobs, and advancement into better-paying jobs requiring higher skills or more responsibility was possible through on-the-job experience or additional vocational training at a two-year technical college. Production-related occupations had a mean annual salary of $30,720 in 2001.

Most administrative and management positions required a bachelor's degree and experience in the industry. Support workers often held two-year technical degrees or had some college, but these were not required.

Research and development specialists in the paint industry included chemists and chemical engineers. They typically conducted research and experimented with new products and processes. Advanced degrees were often essential for these positions. Some senior chemists were promoted to management positions.

Marketing and sales representatives promoted sales of their companies' products by developing new products, creating plans to market them, and advertising them to retail and industrial customers. These positions often required a degree in marketing, chemistry, or chemical engineering.

Employment in the paint and coatings industry was projected to continue its steady decline through the year 2005, with machine operators bearing the brunt of the cuts. Those positions were expected to decline by 29 percent. In line with the industry's strong emphasis on research and development, the number of chemists employed was expected to increase by over one-fourth by 2005. More efficient production processes, increased plant automation, growth of environmental awareness, health and safety concerns, and rising foreign competition were all expected to influence paint and coatings employment significantly and negatively.

America and the World

Due to prohibitive shipping expenses, overseas trade historically did not contribute significantly to the U.S. paint market. Nevertheless, the United States dominated what global paint trade did exist after World War I, when Germany relinquished its top position in chemicals. But after World War II, foreign countries grew increasingly self-sufficient.

In 1960 the industry's total export business constituted less than 2 percent of total production. During this decade tariffs, quotas, licensing and exchange restrictions, and special import fees hamstrung U.S. coatings manufacturers' world trade. Trade barriers encouraged some paint producers to enter into joint ventures with their foreign competitors so that they could market their products overseas.

Trade liberalization and reductions in transportation costs in the 1990s encouraged international trade. By mid-decade, foreign sales represented a small, but growing percentage of total domestic revenue, with exports doubling from 1989 to 1993. More than half of the goods went to Canada and Mexico. While the U.S. paint industry maintained a positive balance of trade in the early 1990s, Canada, Germany, Japan, and Belgium had become the most significant importers.

In the first and second quarters of 1999 the industry exported $531.5 million of paints and coatings, while the United States imported $60.5 million. Architectural and OEM industrial segments accounted for about 40 percent each of that total, with 20 percent coming from special purpose coatings. Paintings and coatings are predicted to grow about 2 percent worldwide through 2003, with Europe growing about 1.5 percent and the Asia-Pacific Rim area about 2.5 percent.

Globalization. Globalization of the paint industry occurred as U.S. companies followed their primary OEM customers from America to the Far East and other lower-cost areas. Economic liberalization drew many of the world's leading paint manufacturers to China, where joint ventures promised a piece of double-digit sales growth. At the same time, foreign producers sought growth through acquisition of U.S. paint companies. These international movements enabled some large corporations to capitalize on their technological advantages in new markets.

Imperial Chemicals Industries (ICI) was an aggressive acquirer of U.S. paint companies, purchasing the Glidden paint operations of SCM Corp. in 1986 and both Grow Group and Fuller-O'Brien Paints in 1995. The Glidden acquisition marked ICI's entry into the U.S. paint industry and made the British conglomerate the world's largest paint company.

By 1995, 10 multinational companies held an estimated 60 percent of total world production, compared with one-fifth in 1980. By that time, the top five companies worldwide were ICI, Akzo-Nobel, PPG Industries, Sherwin-Williams, and Kansai. The Europeans and Japanese, historically the stiffest competitors of the United States, emerged in a particularly strong position internationally.

Research and Technology

At the end of the 1990s, paints and coatings incorporated a myriad of chemical compounds uniquely formulated to fulfill the varied requirements of hundreds of thousands of applications. The need for regulatory compliance helped make research and development a paramount concern—and a major budget item. But the industry was not always so technically inclined.

From its inception in 1700 until the mid-1900s, paint formulation remained relatively unchanged. The switch from paste to ready-mixed paint in the 1860s and the mechanization of the manufacturing process in the mid-1880s were two significant innovations. But for the first half of the twentieth century, the manufacture of paint was a relatively simple process of mixing and grinding oils and pigments using "secret" recipes usually concocted by trial and error.

As previously mentioned, World War II inspired many innovations in paint formulation. One observer noted that there was more technological progress in the paint industry from 1947 to 1967 than in the previous 1,000 years. Product developments occurred so quickly that an estimated 90 percent of 1960's trade sales consisted of items that did not exist a decade before.

Most of the raw materials used in the contemporary paint industry were developed during the postwar era. They were derived from petroleum, then mixed in varying proportions with specific chemical agents to produce such distinct characteristics as durability, elasticity, and chemical and thermal resistance. By the mid-1960s, the major industrial paint manufacturers offered as many as 20,000 different products.

The 1980s and 1990s brought the industry's most significant and rapid changes. As one industry executive told Industrial Paint & Powder in 1994, "Technology has changed more in the last eight years than in the previous 80 years of our coatings business." At the start of the twenty-first century, paint manufacturers were developing paints with fewer chemical compounds, moving from solvent-based to water-based products. The industry was also moving more toward powder coatings, as they were less harmful to the environment.

Color. During the late 1950s some manufacturers of architectural paint offered an increased selection of colors to consumers by shipping a white base paint to retailers with separate oil or powdered pigments. The desired paint color would be mixed at the point of sale upon the customer's request. This system gave the customer a wider choice of colors (more than 1,000 in some cases) and reduced the retailer's risk of overstocking an unpopular color. By 1960 these "custom" systems constituted about 5 percent of retail paint sales.

Latex Revolution. The architectural paint market, and eventually the entire industry, was revolutionized by the introduction of waterborne, or latex, paint. Unlike its oilbased predecessors, latex paint required no ventilation, was nonflammable and scrubbable, gave a good finish, was easy to remove from brushes, and dried in about 20 minutes.

Latex ascent began in the industry in the 1950s. Before that time, solvent-or oil-based products dominated gallonage consumption, while waterborne, high-solids, and powdered coatings constituted only 10 percent of industry volume. By the early 1990s water-based paints alone constituted over 75 percent of gallonage. Convenience was clearly a factor in the widespread commercial acceptance of water-based paints, but in the 1970s, another strong influence drove their industrial acceptance: government regulation.

Government Regulation Drives Innovation. Regulation of the industry accelerated dramatically during the environmentally conscious 1970s, when federal clean air regulations were adopted to encourage the production of less-polluting, less-toxic paints. By the beginning of the 1980s nearly every aspect of the paint business was regulated. The Occupational Safety and Health Administration monitored the workplace. The Environmental Protection Agency regulated the introduction, generation, transportation, treatment, and disposal of hazardous materials used in or produced by the coatings industry. The Consumer Product Safety Commission protected paint customers by controlling what could be bought and sold.

Although many in the paint industry resisted government efforts to monitor the business, state and federal regulation actually encouraged several technological advances. An early example of this phenomenon occurred just after the turn of the century, when legislation was enacted in North Dakota requiring formula labels on house paints. The idea gained popularity among consumers and members of Congress throughout the country. But paint manufacturers feared revealing their "secret formulas," and warned that the new law would inhibit research on new formulations. In hindsight, the rules encouraged the use of quality ingredients and fostered more scientific formulations.

Lead. Once a primary component of paint, lead ranked as the top environmental threat to children's health in the 1990s. Lead poisoning affected the nervous system, the gastrointestinal tract, and the blood-forming tissues, and was especially harmful to children. The deleterious effects of lead (which was also used in gasoline, ceramic finishes, plumbing, and many other products) were discovered in the 1930s. White lead pigments were essentially eliminated from architectural paints in the 1940s, but it was not until 1977 that the use of lead-based paints was outlawed in the United States.

Government and medical reports published in the late 1980s and early 1990s revealed evidence that lead poisoning could occur with much lower doses than was previously thought, so the lead problem was more pervasive than earlier believed. Some public health officials estimated that there could be accessible lead paint in up to 42 million homes and apartments housing 12 million children.

In the increasingly litigious American society, paint manufacturers rightly feared a wave of lawsuits. Some analysts predicted that lawsuits involving lead-paint poisoning could eventually eclipse asbestos suits. And in 1993, all paint manufacturers in California were assessed special fees under that state's Childhood Lead Poisoning Act of 1991. Paint industry spokespersons contended that the fees unfairly punished manufacturers and sellers who may not have been in business when the lead paint was sold, and that parents, contractors, and property managers should share the blame and the cost.

Superfund. In addition to the environmental concerns of producing and applying paints and coatings, manufacturers increasingly bore responsibility for disposal. Proposed in 1979, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (also known as Superfund) mandated the accumulation of a multimillion-dollar fund to pay for the cleanup of oil and hazardous waste spills and disposal sites. The fund would be amassed through fees assessed to businesses, municipalities, and individuals who were designated as "potentially responsible parties" in the pollution of the sites. Since the Resource Conservation and Recovery Act of 1976 had already classified paint wastes as hazardous materials, virtually all paint manufacturers found themselves subject to fee collection under Superfund. Representing the paint industry, the National Paint and Coatings Association (NPCA) argued that it was unfair to single out certain industries for problems created by the entire society.

Volatile Organic Compounds. Organic solvents, the oils that liquefied many paints, were blamed for some air pollution. As paint dried, the liquid portion evaporated. When the liquid was an organic solvent, volatile organic compounds (VOCs) were released in the drying process. VOCs reacted with sunlight to contribute to smog. State VOC regulations started to proliferate in the wake of 1977's Clean Air Act and subsequent amendments, which required states to regulate geographic areas that failed to meet ambient air quality standards. Control of VOCs was a significant aspect of compliance. California was one of the first, and most stringent, state-level regulators.

Rather than resisting these state laws, the NPCA called for uniform federal guidelines, as opposed to the confusing array of state and local initiatives that cropped up. The NPCA supported the "bubble concept" of plant compliance, which allowed individual factories to develop plant-wide emission reduction plans using an average emission level of VOCs. Some companies went further, aiming for "zero-waste generation:" the elimination of plant emissions and reuse and recycling of materials.

Four basic coatings designed to save energy and pollute less were developed. For the most part, they exemplified different strategies to achieve the same purpose: to reduce the proportion of toxic solvents in paint. One industry executive predicted the eventual eradication of solvents from coatings. The development of water-soluble paint, for example, reduced the use of petroleum-based solvent in paints by about 90 percent. High-solids paints contained more resins and pigments than solvents. Accelerated cure coatings were dried by ultraviolet light or an electron beam. Powdered coatings, which contained virtually no organic solvents, also sidestepped the VOC problem. New application processes also helped reduce the volume of paint required to perform a particular function. Most of these products were intended for industrial use.

The Glidden Co. became the first paint manufacturer to introduce major architectural paint lines containing no VOCs, in 1992. Although consumers in the 1990s were clearly interested in environmentally sound products, zero-VOC paints had several drawbacks, including a reduced range of colors and lower performance.

Polyurethane automotive coatings for OEM and refinishing application offered durability and enhanced beauty at the same time. These included water-based coatings for cans, prefinished wood, and flat board.

Powder and radiation-curable coatings were considered two of the more exciting new developments, with a growth rate of 12.5 percent from 1990 to 1992. Industry analysts pegged growth at 15 percent through 1999. Powder coatings were sprayed on dry and electrically adhered to the surface. Major markets for powder coatings in the mid-1990s were metal finishing, appliances, automobile applications, and architectural products. Radiation-curable coatings, intended for use on vinyl flooring, wood furniture and paneling, paper, and metals, were hardened by ultraviolet light or electronic-beam energy. Although the conversion to these new techniques was costly, such factors as increased material utilization, reduced energy and lab costs, and the elimination of solvent emissions promised to more than offset the initial cost disadvantages. Growth in the powder and radiation-curable coatings segments outstripped that of more traditional paints and coatings. These products were expected to eventually replace many conventional solvent-based coatings.

Further Reading

"Color and Convenience Top the Painter's List." Do-It-Yourself Retailing, February 2003, 43.

Donberg, Deborah. "Color Pigment Demand in U.S. Will Grow, Says Study." Paper, Film & Foil Converter, December 2001, 14.

"Economic Relief Coming Slowly But Surely." Industrial Paint & Powder, June 2002, 9-10.

Esposito, Christine Canning. "Upgrades are a Tough Sell in Today's Market." Coatings World, April 2003, 6.

Graff, Gordon. "Outlook Brightens." Purchasing, 10 October 2002, 32-35.

Greissel, Mike. "Coatings R&D 2002: Lower Costs, Improved Performance Top Priorities." Industrial Paint & Powder, February 2002, 12-15.

——. "2003 Finishing Market Survey: Taming the Bear." Industrial Paint & Powder, January 2003, 18-23.

Lerner, Ivan. "Paint Additives Growth Steady." Chemical Market Reporter, 17 March 2003, 16.

Minnis, Glenn. "LIA, Paint Makers Face R.I. Suit." American Metal Market, 2 November 1999.

National Paint & Coatings Association. Paint & Coatings Industry Facts, 15 December 1999. Available from http://www.paint.org .

Pianoforte, Kerry. "What's Driving R & D?" Coatings World, June 2002, 42-45.

Reilly, Christopher. "Moderate Growth, Rising Prices Forecast in MatureMarket." Purchasing, 7 October 1999.

Schmitt, Bill. "Raw Material Suppliers Target the Powder Coatings Market." Chemical Week, 6 November 2002, 37.

Sissell, Kara. "Ethyl, DuPont Named in Lead Poisoning Lawsuit." Chemical Week, 13 October 1999.

U.S. Census Bureau. "Current Industrial Reports, Paint, Varnish and Lacquer—Second Quarter 1999." Available from http://www.census.gov .

Van Arnum, Patricia. "High-Value Deals Mark Coatings Industry." Chemical Market Reporter, 11 October 1999.

Walsh, Kerri. "Sherwin-Williams Names Connor CEO; Earnings BeatsEstimates." Chemical Week, 3 November 1999.

Walsh, Kerri, and Rick Mullin. "Paints and Coatings: A Whole Lot of Shakin' Going On." Chemical Week, 20 October 1999.



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