The sluggish economy continues to take its toll on the research and development budgets and staffs of paint and coatings manufacturers. Smaller staffs and fewer resources, as well as the pressure to cut costs, meet environmental regulations and maintain quality and competitiveness make the challenge that much more difficult.
That's part of the research and development picture for 2003, according to the results of a survey sent by Industrial Paint & Powder to R&D managers of paint and powder coating producers that supply industrial original equipment manufacturers (OEMs) and custom coaters. The survey responses disclose current research efforts, detail research budgets and reveal where R&D is headed in the near future. Figures 1 and 2 summarize who responded to the survey.
Nearly 20% of respondents say they will increase their spending budgets. That's about the same as for last year (17% of last year's respondents said they planned to increase spending on R&D) but substantially less than the number of respondents planning increases for the several years preceding 2002. Likewise, the number of respondents planning to decrease their budgets, 9%, is nearly identical to last year. Nearly three out of four respondents say their budgets will remain the same.
Respondent Profile
R&D managers from 160 U.S. manufacturers of paint and coatings responded to Industrial Paint & Powder's annual R&D survey. OEM coatings represent an average of more than 62% of the business for the typical respondent's company. More than 36% say the OEM market accounts for 90 to 100% of their business, while nearly 64% say the OEM market accounts for 50% or more of their business.
For the last six years, more companies (nearly 75%) have manufactured waterborne coatings than any other type. Waterbornes are followed by conventional solventborne, high-solids, two-component, ultra-high solids, UV/EB-cure coatings and powder, in that order (Figure 1).
The percentage of manufacturers producing the various types of coatings hasn't changed much since Industrial Paint & Powder's survey in 1990. Then, 69% of respondents produced conventional solventborne coatings, 52% manufactured high-solids coatings and 47% produced two-component coatings. The biggest changes have occurred in powder coatings, which grew from 10% of respondents in 1990 to nearly 18% of respondents this year; waterborne coatings, which grew from 65% of respondents to nearly 75%; and UV/EB-cure coatings, which grew from 8% of respondents to more than 21%.
Annual sales in volume to the OEM market rose steadily and significantly (the value of those shipments has risen more slowly) in recent years, from 398 million gallons (data for powder coatings are collected in pounds and converted to gallons) in 1996 to 453 million gallons in 2000, according to U.S. Census Bureau figures. Shipments fell to 407 million gallons in 2001. For the first half of 2002, 202.8 million gallons of paint were shipped, compared to 212.6 million gallons in 2001 and 239 million gallons in 2000.
But the downward trend could be slowing. In the second quarter of 2002, estimated shipments of OEM coatings were 107.2 million gallons, which was not far off the 108.4 million gallons shipped in the second quarter of 2001. The value of OEM coatings shipments in 2001 was $5.56 billion, compared to $6.15 billion in 2000; the value of all coatings shipments in 2001 was $16.94 billion, compared to $17.72 billion in 2000.
Nearly 72% of respondents in the survey report their sales as less than $10 million; nearly 24%, less than $1 million; $10 million to $24.9 million, 11.8%; $25 million to $49.9 million, 2.7%; $50 million to $99.9 million, 7.3%; $100 million to $249.9 million, 2.7%; $250 million to $499.9 million, 0.9%; and $500 million or more, 2.7%.
The top OEM market served by respondents is general industrial (Figure 2). The percent of respondents with sales in the general industrial segment fell from 82% last year to 72.5% this year. The percentage of respondents with sales in each of the other categories was similar to the percentage in last year's survey, with the exception of general industrial; lawn and garden, which grew from 10% last year to 24.5% this year; and metal containers/closures, which fell from 31% to 22.5%.
Most respondents have small research staffs. More than 77% employ less than 10 chemists, engineers and scientists; nearly 63% have fewer than five.
Of those planning to increase their budgets, about one-third say the increase will be from 10% to 19%. Nearly another third of this group will raise their spending from 5% to 9%. The rest will either increase spending by less than 5% (25% of respondents) or by 20% to 29% (10% of respondents). Of those planning to decrease their budgets, about 38% say they will cut back from 10% to 19%. About 25% will shrink their budgets by 50% or more.
The percent of R&D budgets that companies will spend on general research categories closely resembles last year's spending. Efforts to formulate new products will receive about 43% of respondents' 2003 budget. About 33% of the funds will be spent on improving existing products. The rest of the budget will be nearly split between basic research and improving manufacturing processes.
Where's the money going?
In recent years, manufacturers have budgeted the bulk of their R&D funds-nearly 43% for 2003-for waterborne coatings. Respondents indicated that they would spend about the same percent of the budget as last year on the various types of waterborne coatings. Research on acrylic and acrylic-latex will account for more than half of the money spent on waterborne R&D. The two types of coatings represented about 40% of the budget for waterbornes in 2002.
Solventborne coatings are still in general use and will receive nearly the same percentage of respondents' R&D dollars as last year. Nearly two-thirds of all respondents are planning R&D of solventborne products, which will account for about 40% of all planned spending.
Research on two-component epoxy and acrylic solventbornes, which accounted for nearly 40% of the budget for solventborne spending last year, will account for less than 25% this year. Of all spending for solventborne research, alkyds will receive the most, more than one-sixth of the solventborne budget.
Nearly 80% of all coatings manufacturers are performing some research on waterborne coatings. Nearly 57% of respondents-up from 42% last year-are working on acrylic waterborne coatings, while about 34% are providing funds for research on acrylic-latex waterborne coatings. These two types of coatings account for more than 22% of manufacturers' total R&D budget.
The next two waterborne coatings garnering the most attention are alkyds and urethanes. More than 31% of respondents will fund alkyd R&D efforts, accounting for more than 5% of the total R&D budget, and nearly 28% will fund research for urethane coatings, with an average budget share of more than 4%. Figure 3 shows this year's plans for R&D development in all resin categories.
Reasoning behind R&D efforts
When companies assign portions of their budgets to various coating technology categories, they assign primary objectives to each category (Figure 4). For waterborne coatings, the most important objective is lowering costs, according to 76% of the respondents funding R&D efforts in this area. Improving performance is less important than in it had been in the past. Only about half of the respondents listed it as one of the primary R&D objectives, compared to 64% last year.
Though lowering solvent usage and HAP and VOC content is less important a priority than it had been in the past, it's still a major priority. For waterborne and high-solids coatings, lowering cosolvent usage is only less important to respondents than lowering costs. Lowering VOC and HAP content is still the most important priority in research in the two-component coatings category.
Lowering costs has become increasingly more important to formulators. It ranked as a very-high first priority in each research category except radiation cure, where it was about as important as improving performance properties.
In powder coatings, respondents say improving particle-size distribution is much more important than last year. They list improving photoinitiator effectiveness as a higher priority than in the past and list improving performance properties as less important. For high-solids coatings, respondents say shortening cure times and improving performance properties are less important now. The importance respondents are placing on improving performance characteristics has fallen for both two-component and waterborne coatings.
More time please
In the comments section of the survey, the two single largest issues or challenges respondents say they face involve the environment-lowering VOCs, meeting government regulations, etc.-or somehow feeling squeezed for time-having too many projects, responsibilities, etc. More than 44% of respondents listed one of these two concerns, about equally the same number of times, as their greatest challenge.
Last year, the main challenge cited revolved around cutting costs. It's still a major concern, but it was only cited about half as much as either one of the first two. Finding new business and developing new products with fewer resources while maintaining quality is also a major concern.
