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...

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