In the concept of stockholder Warren Buffett, the level of income determines whether the company's days are good or bad, but the cost determines whether most companies are living or dying. The competition in most industries is not brand competition but cost competition. Only if the cost of the company is low enough can it be profitable and survive longer.
This is a very real problem, many companies enjoy the wind all year round. Annual sales have risen in a straight line, and it is not so optimistic to examine its profitability. At the end of 2010, when Yue Wangkun, the then Secretary-General of the China Coatings Industry Association, inspected the coated enterprises in Guangdong, he pointed out this rather severe problem: The profit space of paint companies is being repeatedly compressed, in other words, the survival environment of Chinese paint companies is further Deteriorated, the Chinese paint industry ushered in the transition period.
Indeed, it is no wonder that entrepreneurs have said: My product sells the price of Chinese cabbage, and it is selling the "white powder" heart!
In a word, the predicament that today's Chinese companies are facing is that the costs are getting higher and higher and the profits are getting lower and lower; more and more worrying, the income is getting thinner and thinner. A simple accounting problem has become "the mystery of the Sfinks." As a result, under the current economic situation, how coatings companies cope with the surging waves of price increases has become the most important proposition for people in the industry to think deeply.
The surge of price surges is the cost pressure or profitability?
Prices have risen, consumers have been hard-pressed, and even worse are businesses. Because of the majority of them, the area, magnitude and pressure of cost increase are even greater than the increase in prices of products and services. Chen Guangguang, Chairman of Chenguang Coatings, disclosed to the reporter the current situation: “The continuous increase in raw material prices, increase in workers’ wages due to labor shortage, and other increases in production costs are the main manifestations of corporate cost pressures. In particular, fierce market competition and product market prices. The transparency is high and the selling price cannot be upgraded, which seriously affects the economic efficiency of the company."
In fact, in the past month, China Coatings made an in-depth investigation into the cost pressures of Chinese large and medium-sized paint companies. The survey involved a number of important cost investigation projects: raw materials, marketing expenses, wages, rents and utilities, taxes, bad debt losses, social costs, and other costs.
First, the raw material market is very crazy. From the survey point of view, the most obvious cost indicator for paint companies rose was the increase in raw material prices.
Some experts pointed out: “After experiencing the international financial crisis in 2008, the world economy is still in a recovery phase. The pace of economic recovery progress is still the main factor affecting the trend of international oil prices in 2011, while the international crude oil major demand countries’ economic development status is Determine the key to the global economic recovery process.†The economic conditions of the United States, China and other countries are relatively optimistic. In particular, the future recovery of the United States will increase, and economic recovery will certainly drive up oil prices. The raw materials of many paints and coatings are petrochemical products. The most obvious is that the prices of solvents, synthetic resins, titanium dioxide and other major materials have risen significantly, which has a direct impact on the production costs of the products.
In an interview with this newspaper, talking about the rise in raw materials, Ye Yihao, general manager of marketing at Yacheng Chemicals, could not suppress the excitement in his heart and said three “very†in one breath. He mentioned: “Raw materials are now rising quite badly. The raw material market is crazy, very perverted, and horrible. Now crude oil has risen to 120 US dollars/barrel, and it is estimated that it will rise. Titanium dioxide is also madly rising in price, toluene and xylene. The rise was even more exaggerated. On the 6th of this month, I discovered raw materials and came back. Only after one day, I went up 6% to 7%. As a company, we are under considerable pressure."
In the past two years, the paint industry has been in the "guide-up" of rising oil prices. The prices of raw materials such as benzene, xylene, styrene, and phenol are just like the spring bamboo shoots after the rain—the height of the paint is rising. The price of paint products is like the danger of dancers on the tip of a knife. Since 2004, the prices of paint products have gradually increased in various risks. When ** and others climbed from 4,600 yuan/ton at the beginning of last year to 8,800 yuan/ton at the end of the year, the prices of various raw materials have been refreshed. A large number of companies have had to start tentatively rising product prices. As a result, some far-sighted paint companies started hoarding raw materials as early as in 2008 and 2009. Such as Changjiang Coatings, according to insiders, as early as two years ago, Changjiang Paint began to store raw materials in response to rising tides. Up till now, the difference between the current purchase price and the current market price will be a few million dollars.
Second, the gradual increase in marketing costs In 2009, after withstand the test of the financial crisis, the Chinese coatings industry has further intensified competition. All companies have increased their marketing expenses, hired celebrity endorsements, and introduced incentive policies for various distributors. In 2010, this trend slowed down significantly, and companies spent more carefully. More than 40% of the surveyed companies have no significant increase in the proportion of this indicator in the total cost, but 55% still believe that the market promotion The cost is rising. It is worth mentioning that in 2010, in the coatings industry, Sankeshu was the most advertised company in China's paint industry. In 2010, three trees invested 150 million yuan in CCTV and channeled 100 million yuan.
Although other paint companies do not have such a wealthy tree, they are still increasing their investment in marketing.
Third, the cost of labor and then go up from the beginning of 2008, more than 75% of the surveyed companies in this indicator in the proportion of the total cost of steadily increased. Especially in the Pearl River Delta where cheap labor is known, there are many places where the "labor shortage" is difficult. With the increase in the price level and the promotion of relevant state policies, companies have to increase their own labor costs.
Take Shunde, the hometown of Chinese paint, as an example. According to surveys, 80% of Shunde enterprises believe that this year's talent market situation is not the most severe. After years of experience, companies generally choose to announce before the Spring Festival. Corresponding salary arrangement plan, make corresponding salary increase promise to attract workers back to Shunde. It is understood that the turnover rate of workers in a number of paint companies is between 10% and 25%, and some large enterprises are controlled below 5%.
In addition, since the Spring Festival this year, Shunde Dayang intellectual talent market, there have often been a lot of paint companies. The types of jobs recruited are mainly based on coating technology and marketing talents, and the proportion of production workers is also large. In such a special chemical industry, paint companies use existing employees to bring hometowns, go abroad to participate in job fairs, and increase wages to attract workers. Due to proper control, the current employment gap of paint companies in Shunde is still in the normal range, which mostly reflects ordinary workers on the first line. The industry averages between 5% and 10% of the employment gap, that is, there are ten people who are in demand for jobs. Personal to one person.
Even so, the wages of the workers in Shunde coated enterprises have increased substantially. According to estimates of a number of companies, compared with 2008, there was a growth of more than 20%. This is mainly reflected in the significant increase in wages for the first-line employees who have the most employment. Coupled with the technical training for workers, and the hidden labor costs for marketing personnel training, the company's labor costs have also reached a new level.
Fourth, the cost of logistics to a record high As the national price rise in the context of the background, the coating company's survival costs have risen. Such as paint logistics pressure. According to some coated enterprises, since the beginning of this year, Tianjin and Linfen lines have seen prices increase at different levels, and merchants have generally reflected relatively strong levels. The average freight rate of the shipping department of the Linfen line was about RMB 110/m3, and this time the price was increased by RMB 15-20/m3; Tianjin’s business “roughness†was heavier, both because the freight per cubic meter was 100-110 yuan. Raised to 150-180 yuan, an increase of 50%. Controversy over the interests of the people, the opinions of the public were divergent at one time, and the businesses complained naturally, and the logistics was also constant.
Due to the combined effects of current imbalances in supply and demand, rising fuel prices, rising labor costs, and rising rents, logistics costs are likely to increase to a new historical high.
V. Other aspects In addition, in order to remain invincible in the competition, China's large and medium-sized paint companies have increased investment in scientific research, joined the public interest, and actively pay taxes, which together constitute a thick cost. In addition to taxes, the costs of labor, property, and raw materials, plus the appreciation of ***, environmental costs, land costs, and cost of capital, and the cost of enterprises, are doomed to draw an inverted parabola - the rise is not the only but the only trend .
Then, with the continuous increase in the cost of survival for coating companies, the net profit directly related to it will show a downward trend. From the feedback from the coating companies, many companies above designated size achieved continuous sales breakthroughs in the past year. On the contrary, its net profit is far behind the increase in sales, or even negative growth.
The reporter discovered from the 2010 annual report released by Northwest Chemicals that last year the company realized operating income of 289 million yuan, while operating income in 2009 was 239 million, and its operating income has clearly increased by a certain margin. The annual report shows that in 2010 the company achieved a profit of 0.0404 yuan per share, and realized a net profit of 764.12 million yuan, a decrease of 33.25% compared with the same period of last year.
Ruan Guoyuan also stated clearly: "In the company's more than ten years of development, Chenguang's operating income has grown at an annual rate of 20%, and its net profit has also been relatively stable. However, the increase in net profit in 2010 is commensurate with that in 2009. The increase was slightly lower."
Is the cost rising, "to withstand" or pass?
Today, for coatings companies, rising costs and falling profits are very normal. According to the data analysis of the national statistical department in recent years, the average profit rate of the industry has been declining year by year under the circumstances that the output and sales revenue of the paint industry have increased year after year. This shows that the coating company's living space this year is not optimistic, and many companies have fallen into the trap of producing more and earning less. The fundamental reason is the continuous rise of raw material costs, transportation costs and energy costs. It can be said with certainty that after the high-cost operation of oil, the paint industry has also entered a high-cost orbit. All this means that the profits of the paint companies will be further diluted, and the losses will increase. Even strong companies will inevitably escape the meager profits.
In general, the bottom line for paint business owners is that the profits of paint companies should at least maintain between 5% and 8%, otherwise, the normal development of the company cannot be maintained at all. So, the paint product is to comply with the tide of rising prices, or to push up the cost pressure, continue to set the price of sales? This reporter interviewed some of the paint companies for this, in the face of the soaring costs of paint production, how should companies choose?
From the overall understanding of the situation, in the process of rising raw material costs and rising operating costs, the companies that suffer the greatest impact are those that have a single product structure and walk through the market at low prices. And those companies with optimized product structure and clear market positioning can mostly ease the price pressure by adjusting the structure, increasing product prices, and optimizing service quality.
Ruan Guoyuan disclosed to reporters that since February 2011, Chenguang has only adjusted the prices of a few products by 8%-10%, and in order to ensure the interests of the company’s marketers, distributors, and consumers, most of the product prices have not yet been adjusted. Make up for it.
In addition, according to an exclusive survey conducted by the China Coating News, recently, the price of Shanghai Kailin paint products has been raised by 15%, Wuyang paint has been increased by 10%, and prices of Shuanghu, Changjiang, Xiangjiang, and Baotashan brands have also appeared 3%-8%. The rise. Some of the largest coating companies in the domestic coating industry, Shunde, Guangdong, have begun to increase the sales price of their products in order to minimize the impact of rising crude oil prices on companies. From China Resources, Garbo Li and other well-known brands, the price of the product is generally raised by 5% to 10%.
It is undeniable that the paint industry is carrying out a collective behavior of increasing prices. This price increase was not caused by the lack of supply in the paint market. Its "culprit" is still a sharp rise in costs associated with paint production and sales.
At the same time, many paint companies expressed their concern that the problem of increasing costs will be solved by increasing the price of the product terminals, so that the customer groups in the dealers, engineering, and retail sectors will be under greater pressure, coupled with fierce market competition and overcapacity. Consumers will not A series of problems such as buyouts and overstocked inventory eventually led to the failure of timely return of investment funds, resulting in poor capital turnover and the occurrence of cassettes in the operation of the industry chain. Therefore, it is difficult to absorb the rising cost of product terminals to absorb the rising cost.
As a result, companies began to seek new outlets. In order to ease the cost pressure brought about by the increase in raw material prices, Chenguang’s leadership plans to invest about 20 million yuan in the second half of 2011 to install an automatic production line. After the completion of the transformation project, it will change the traditional labor-intensive production status. The transformation of production equipment can reduce the labor wages and management costs in the workshop, reduce the pressure on labor demand, increase labor productivity, ensure product quality, and eliminate potential safety hazards in production.
In the face of the decline in net profit and the reduction of major shareholders, Northwest Chemicals announced on May 19 last year that the company and the National Wind Power Engineering Technology Research Center signed a cooperation agreement with the personnel of the company’s existing technology R&D institutions. Based on facilities, technologies, and the establishment of a national wind power engineering and technology center paint coating protection laboratory, and officially unveiled. Northwestern Chemicals Board Secretary Yuan Qinhui told reporters, “Northwest Chemicals set up the National Wind Power Engineering Technology Research Center Coatings and Painting Protection Research Office aims to find new profit growth points and better adapt to the national Twelfth Five-Year Plan. The direction of industrial development, the future of domestic wind power coating market and sand control areas will be the new growth point of Northwest Chemical Industry."
In addition to increasing the price of products and actively promoting products, the relevant person in charge of the China Tusilei Association mentioned in a conversation with the company's boss that the following measures can also be taken to deal with cost pressures: First, dig channels and open up the third and fourth tier cities. Increase the consumption of existing groups. The second is to develop new products, increase the added value of products, and increase product profits. The third is the use of new technologies and new processes to improve the company's production efficiency and reduce production costs. The fourth is to actively use new product marketing models such as online shopping platform to expand product sales and brand awareness through multiple channels.
Large dealers can cope with the policy of rising prices. It can be said that the mad tide of price increases is not only for enterprises, but also for a large number of tens of thousands of paint distributors in China. Because, with the adjustment of the price of each enterprise's products, the company will transfer some of the cost pressure to the end product. So, what do you think about paint distributors who have been rushing to the frontline market all the time? Do consumers understand the price increase of paint products?
In the past few days, paint distributors from all over the country have telephoned this newspaper and put forward their own opinions.
Jinguang Liaoxi Chemical Materials Co., Ltd. General Manager Chin Guangqing mentioned that “the increase in costs has a great impact on paint distributors. Now when the national market economy is chosen by civil enterprises, due to price fluctuations, the company’s The cost of production, so less emphasis on the decorative landscaping.Personal awareness of the concept of the decoration of low-carbon environment is weakening, the amount of personal use is also reduced." On the national point of view, in the face of rising prices of paint products, many owners decoration The room has been hesitant, and many people are waiting for the price cuts, such as the price reduction activities of the brands May 1st and 11th.
Indeed, it will have a transitional period for any kind of commodity price increase. This transitional period price will be similar to the original price, and the purpose is to allow consumers to adapt to the process of commodity price increase. If at this time our owners seize the opportunity to purchase in advance, we can still buy a very high cost performance product. According to industry insiders, the sharp increase in paint prices will be in the decoration and sales season, if consumers can complete the decoration season in the sales season, they can avoid the loss of building materials prices to their own losses. In the off-season, many businesses' activities are quite favorable. It's a good time to buy decoration materials at this time. Not only can they avoid the price increase risk, but they can also enjoy the various benefits of the business and serve two purposes.
Thousands of flowers painted Guangxi Yulin distributor Liu Zhi also expressed similar views. He said: "Rising raw material prices will inevitably lead to rising product prices, and ultimately only the market to break down, from the current overall situation, the short-term raw materials will continue to rise, can not determine the increase is how much, but this year there are some products, We have increased the retail price by nearly 10%. As consumers, most of them can't understand the price increase behavior from the outset, but after explaining it, they can basically understand and accept it. However, the rising tide of prices of building materials, There is no impact on sales."
In fact, we should not be too worried here. Zhan Guangqing followed its countermeasures - respond positively, strengthen after-sales service, strengthen the concept of honest service, and provide on-site technical guidance services to customers who use the product, so that the use of customers is more stable.
Editor's Note: China's coating industry usher in the transition period Today, China's paint industry is facing two major tests, the first is energy-saving emission reduction, in the production through technological progress will reduce energy consumption; also through innovation to produce energy-efficient paint products. To do a good job in energy conservation and emission reduction, the previous study requires increased investment, and product costs will increase.
The second is the rise in the price of raw materials. Due to the fierce market competition, it is difficult to digest through the price increase of the product terminal, which will lead to a decline in unit profit. The rise in product prices does not enter the white-hot stage. It is internal digestion, or the profit cannot be lowered and the price is increased. All these require the company's own control. Just as the paint industry has entered the reshuffle stage, the Chinese paint industry is facing a transitional period. The tide of price increases is a phenomenon in the paint market, and it also boosted the industry's reshuffle. Product price increases are also the trend of the industry. Low-price and low-level industry competition is not what we want to promote. The paint industry's production costs are still relatively high. If we still maintain the original level, it will be unfavorable to the development of the industry. Raising the technological content, cultural and artistic content of products, and increasing the added value of products should be used as the development goal of coating companies, instead of winning with scales or winning with low-level competition.
Therefore, paint companies should strive to innovate, research demand and create demand in order to stand on the forefront of the industry.
This is a very real problem, many companies enjoy the wind all year round. Annual sales have risen in a straight line, and it is not so optimistic to examine its profitability. At the end of 2010, when Yue Wangkun, the then Secretary-General of the China Coatings Industry Association, inspected the coated enterprises in Guangdong, he pointed out this rather severe problem: The profit space of paint companies is being repeatedly compressed, in other words, the survival environment of Chinese paint companies is further Deteriorated, the Chinese paint industry ushered in the transition period.
Indeed, it is no wonder that entrepreneurs have said: My product sells the price of Chinese cabbage, and it is selling the "white powder" heart!
In a word, the predicament that today's Chinese companies are facing is that the costs are getting higher and higher and the profits are getting lower and lower; more and more worrying, the income is getting thinner and thinner. A simple accounting problem has become "the mystery of the Sfinks." As a result, under the current economic situation, how coatings companies cope with the surging waves of price increases has become the most important proposition for people in the industry to think deeply.
The surge of price surges is the cost pressure or profitability?
Prices have risen, consumers have been hard-pressed, and even worse are businesses. Because of the majority of them, the area, magnitude and pressure of cost increase are even greater than the increase in prices of products and services. Chen Guangguang, Chairman of Chenguang Coatings, disclosed to the reporter the current situation: “The continuous increase in raw material prices, increase in workers’ wages due to labor shortage, and other increases in production costs are the main manifestations of corporate cost pressures. In particular, fierce market competition and product market prices. The transparency is high and the selling price cannot be upgraded, which seriously affects the economic efficiency of the company."
In fact, in the past month, China Coatings made an in-depth investigation into the cost pressures of Chinese large and medium-sized paint companies. The survey involved a number of important cost investigation projects: raw materials, marketing expenses, wages, rents and utilities, taxes, bad debt losses, social costs, and other costs.
First, the raw material market is very crazy. From the survey point of view, the most obvious cost indicator for paint companies rose was the increase in raw material prices.
Some experts pointed out: “After experiencing the international financial crisis in 2008, the world economy is still in a recovery phase. The pace of economic recovery progress is still the main factor affecting the trend of international oil prices in 2011, while the international crude oil major demand countries’ economic development status is Determine the key to the global economic recovery process.†The economic conditions of the United States, China and other countries are relatively optimistic. In particular, the future recovery of the United States will increase, and economic recovery will certainly drive up oil prices. The raw materials of many paints and coatings are petrochemical products. The most obvious is that the prices of solvents, synthetic resins, titanium dioxide and other major materials have risen significantly, which has a direct impact on the production costs of the products.
In an interview with this newspaper, talking about the rise in raw materials, Ye Yihao, general manager of marketing at Yacheng Chemicals, could not suppress the excitement in his heart and said three “very†in one breath. He mentioned: “Raw materials are now rising quite badly. The raw material market is crazy, very perverted, and horrible. Now crude oil has risen to 120 US dollars/barrel, and it is estimated that it will rise. Titanium dioxide is also madly rising in price, toluene and xylene. The rise was even more exaggerated. On the 6th of this month, I discovered raw materials and came back. Only after one day, I went up 6% to 7%. As a company, we are under considerable pressure."
In the past two years, the paint industry has been in the "guide-up" of rising oil prices. The prices of raw materials such as benzene, xylene, styrene, and phenol are just like the spring bamboo shoots after the rain—the height of the paint is rising. The price of paint products is like the danger of dancers on the tip of a knife. Since 2004, the prices of paint products have gradually increased in various risks. When ** and others climbed from 4,600 yuan/ton at the beginning of last year to 8,800 yuan/ton at the end of the year, the prices of various raw materials have been refreshed. A large number of companies have had to start tentatively rising product prices. As a result, some far-sighted paint companies started hoarding raw materials as early as in 2008 and 2009. Such as Changjiang Coatings, according to insiders, as early as two years ago, Changjiang Paint began to store raw materials in response to rising tides. Up till now, the difference between the current purchase price and the current market price will be a few million dollars.
Second, the gradual increase in marketing costs In 2009, after withstand the test of the financial crisis, the Chinese coatings industry has further intensified competition. All companies have increased their marketing expenses, hired celebrity endorsements, and introduced incentive policies for various distributors. In 2010, this trend slowed down significantly, and companies spent more carefully. More than 40% of the surveyed companies have no significant increase in the proportion of this indicator in the total cost, but 55% still believe that the market promotion The cost is rising. It is worth mentioning that in 2010, in the coatings industry, Sankeshu was the most advertised company in China's paint industry. In 2010, three trees invested 150 million yuan in CCTV and channeled 100 million yuan.
Although other paint companies do not have such a wealthy tree, they are still increasing their investment in marketing.
Third, the cost of labor and then go up from the beginning of 2008, more than 75% of the surveyed companies in this indicator in the proportion of the total cost of steadily increased. Especially in the Pearl River Delta where cheap labor is known, there are many places where the "labor shortage" is difficult. With the increase in the price level and the promotion of relevant state policies, companies have to increase their own labor costs.
Take Shunde, the hometown of Chinese paint, as an example. According to surveys, 80% of Shunde enterprises believe that this year's talent market situation is not the most severe. After years of experience, companies generally choose to announce before the Spring Festival. Corresponding salary arrangement plan, make corresponding salary increase promise to attract workers back to Shunde. It is understood that the turnover rate of workers in a number of paint companies is between 10% and 25%, and some large enterprises are controlled below 5%.
In addition, since the Spring Festival this year, Shunde Dayang intellectual talent market, there have often been a lot of paint companies. The types of jobs recruited are mainly based on coating technology and marketing talents, and the proportion of production workers is also large. In such a special chemical industry, paint companies use existing employees to bring hometowns, go abroad to participate in job fairs, and increase wages to attract workers. Due to proper control, the current employment gap of paint companies in Shunde is still in the normal range, which mostly reflects ordinary workers on the first line. The industry averages between 5% and 10% of the employment gap, that is, there are ten people who are in demand for jobs. Personal to one person.
Even so, the wages of the workers in Shunde coated enterprises have increased substantially. According to estimates of a number of companies, compared with 2008, there was a growth of more than 20%. This is mainly reflected in the significant increase in wages for the first-line employees who have the most employment. Coupled with the technical training for workers, and the hidden labor costs for marketing personnel training, the company's labor costs have also reached a new level.
Fourth, the cost of logistics to a record high As the national price rise in the context of the background, the coating company's survival costs have risen. Such as paint logistics pressure. According to some coated enterprises, since the beginning of this year, Tianjin and Linfen lines have seen prices increase at different levels, and merchants have generally reflected relatively strong levels. The average freight rate of the shipping department of the Linfen line was about RMB 110/m3, and this time the price was increased by RMB 15-20/m3; Tianjin’s business “roughness†was heavier, both because the freight per cubic meter was 100-110 yuan. Raised to 150-180 yuan, an increase of 50%. Controversy over the interests of the people, the opinions of the public were divergent at one time, and the businesses complained naturally, and the logistics was also constant.
Due to the combined effects of current imbalances in supply and demand, rising fuel prices, rising labor costs, and rising rents, logistics costs are likely to increase to a new historical high.
V. Other aspects In addition, in order to remain invincible in the competition, China's large and medium-sized paint companies have increased investment in scientific research, joined the public interest, and actively pay taxes, which together constitute a thick cost. In addition to taxes, the costs of labor, property, and raw materials, plus the appreciation of ***, environmental costs, land costs, and cost of capital, and the cost of enterprises, are doomed to draw an inverted parabola - the rise is not the only but the only trend .
Then, with the continuous increase in the cost of survival for coating companies, the net profit directly related to it will show a downward trend. From the feedback from the coating companies, many companies above designated size achieved continuous sales breakthroughs in the past year. On the contrary, its net profit is far behind the increase in sales, or even negative growth.
The reporter discovered from the 2010 annual report released by Northwest Chemicals that last year the company realized operating income of 289 million yuan, while operating income in 2009 was 239 million, and its operating income has clearly increased by a certain margin. The annual report shows that in 2010 the company achieved a profit of 0.0404 yuan per share, and realized a net profit of 764.12 million yuan, a decrease of 33.25% compared with the same period of last year.
Ruan Guoyuan also stated clearly: "In the company's more than ten years of development, Chenguang's operating income has grown at an annual rate of 20%, and its net profit has also been relatively stable. However, the increase in net profit in 2010 is commensurate with that in 2009. The increase was slightly lower."
Is the cost rising, "to withstand" or pass?
Today, for coatings companies, rising costs and falling profits are very normal. According to the data analysis of the national statistical department in recent years, the average profit rate of the industry has been declining year by year under the circumstances that the output and sales revenue of the paint industry have increased year after year. This shows that the coating company's living space this year is not optimistic, and many companies have fallen into the trap of producing more and earning less. The fundamental reason is the continuous rise of raw material costs, transportation costs and energy costs. It can be said with certainty that after the high-cost operation of oil, the paint industry has also entered a high-cost orbit. All this means that the profits of the paint companies will be further diluted, and the losses will increase. Even strong companies will inevitably escape the meager profits.
In general, the bottom line for paint business owners is that the profits of paint companies should at least maintain between 5% and 8%, otherwise, the normal development of the company cannot be maintained at all. So, the paint product is to comply with the tide of rising prices, or to push up the cost pressure, continue to set the price of sales? This reporter interviewed some of the paint companies for this, in the face of the soaring costs of paint production, how should companies choose?
From the overall understanding of the situation, in the process of rising raw material costs and rising operating costs, the companies that suffer the greatest impact are those that have a single product structure and walk through the market at low prices. And those companies with optimized product structure and clear market positioning can mostly ease the price pressure by adjusting the structure, increasing product prices, and optimizing service quality.
Ruan Guoyuan disclosed to reporters that since February 2011, Chenguang has only adjusted the prices of a few products by 8%-10%, and in order to ensure the interests of the company’s marketers, distributors, and consumers, most of the product prices have not yet been adjusted. Make up for it.
In addition, according to an exclusive survey conducted by the China Coating News, recently, the price of Shanghai Kailin paint products has been raised by 15%, Wuyang paint has been increased by 10%, and prices of Shuanghu, Changjiang, Xiangjiang, and Baotashan brands have also appeared 3%-8%. The rise. Some of the largest coating companies in the domestic coating industry, Shunde, Guangdong, have begun to increase the sales price of their products in order to minimize the impact of rising crude oil prices on companies. From China Resources, Garbo Li and other well-known brands, the price of the product is generally raised by 5% to 10%.
It is undeniable that the paint industry is carrying out a collective behavior of increasing prices. This price increase was not caused by the lack of supply in the paint market. Its "culprit" is still a sharp rise in costs associated with paint production and sales.
At the same time, many paint companies expressed their concern that the problem of increasing costs will be solved by increasing the price of the product terminals, so that the customer groups in the dealers, engineering, and retail sectors will be under greater pressure, coupled with fierce market competition and overcapacity. Consumers will not A series of problems such as buyouts and overstocked inventory eventually led to the failure of timely return of investment funds, resulting in poor capital turnover and the occurrence of cassettes in the operation of the industry chain. Therefore, it is difficult to absorb the rising cost of product terminals to absorb the rising cost.
As a result, companies began to seek new outlets. In order to ease the cost pressure brought about by the increase in raw material prices, Chenguang’s leadership plans to invest about 20 million yuan in the second half of 2011 to install an automatic production line. After the completion of the transformation project, it will change the traditional labor-intensive production status. The transformation of production equipment can reduce the labor wages and management costs in the workshop, reduce the pressure on labor demand, increase labor productivity, ensure product quality, and eliminate potential safety hazards in production.
In the face of the decline in net profit and the reduction of major shareholders, Northwest Chemicals announced on May 19 last year that the company and the National Wind Power Engineering Technology Research Center signed a cooperation agreement with the personnel of the company’s existing technology R&D institutions. Based on facilities, technologies, and the establishment of a national wind power engineering and technology center paint coating protection laboratory, and officially unveiled. Northwestern Chemicals Board Secretary Yuan Qinhui told reporters, “Northwest Chemicals set up the National Wind Power Engineering Technology Research Center Coatings and Painting Protection Research Office aims to find new profit growth points and better adapt to the national Twelfth Five-Year Plan. The direction of industrial development, the future of domestic wind power coating market and sand control areas will be the new growth point of Northwest Chemical Industry."
In addition to increasing the price of products and actively promoting products, the relevant person in charge of the China Tusilei Association mentioned in a conversation with the company's boss that the following measures can also be taken to deal with cost pressures: First, dig channels and open up the third and fourth tier cities. Increase the consumption of existing groups. The second is to develop new products, increase the added value of products, and increase product profits. The third is the use of new technologies and new processes to improve the company's production efficiency and reduce production costs. The fourth is to actively use new product marketing models such as online shopping platform to expand product sales and brand awareness through multiple channels.
Large dealers can cope with the policy of rising prices. It can be said that the mad tide of price increases is not only for enterprises, but also for a large number of tens of thousands of paint distributors in China. Because, with the adjustment of the price of each enterprise's products, the company will transfer some of the cost pressure to the end product. So, what do you think about paint distributors who have been rushing to the frontline market all the time? Do consumers understand the price increase of paint products?
In the past few days, paint distributors from all over the country have telephoned this newspaper and put forward their own opinions.
Jinguang Liaoxi Chemical Materials Co., Ltd. General Manager Chin Guangqing mentioned that “the increase in costs has a great impact on paint distributors. Now when the national market economy is chosen by civil enterprises, due to price fluctuations, the company’s The cost of production, so less emphasis on the decorative landscaping.Personal awareness of the concept of the decoration of low-carbon environment is weakening, the amount of personal use is also reduced." On the national point of view, in the face of rising prices of paint products, many owners decoration The room has been hesitant, and many people are waiting for the price cuts, such as the price reduction activities of the brands May 1st and 11th.
Indeed, it will have a transitional period for any kind of commodity price increase. This transitional period price will be similar to the original price, and the purpose is to allow consumers to adapt to the process of commodity price increase. If at this time our owners seize the opportunity to purchase in advance, we can still buy a very high cost performance product. According to industry insiders, the sharp increase in paint prices will be in the decoration and sales season, if consumers can complete the decoration season in the sales season, they can avoid the loss of building materials prices to their own losses. In the off-season, many businesses' activities are quite favorable. It's a good time to buy decoration materials at this time. Not only can they avoid the price increase risk, but they can also enjoy the various benefits of the business and serve two purposes.
Thousands of flowers painted Guangxi Yulin distributor Liu Zhi also expressed similar views. He said: "Rising raw material prices will inevitably lead to rising product prices, and ultimately only the market to break down, from the current overall situation, the short-term raw materials will continue to rise, can not determine the increase is how much, but this year there are some products, We have increased the retail price by nearly 10%. As consumers, most of them can't understand the price increase behavior from the outset, but after explaining it, they can basically understand and accept it. However, the rising tide of prices of building materials, There is no impact on sales."
In fact, we should not be too worried here. Zhan Guangqing followed its countermeasures - respond positively, strengthen after-sales service, strengthen the concept of honest service, and provide on-site technical guidance services to customers who use the product, so that the use of customers is more stable.
Editor's Note: China's coating industry usher in the transition period Today, China's paint industry is facing two major tests, the first is energy-saving emission reduction, in the production through technological progress will reduce energy consumption; also through innovation to produce energy-efficient paint products. To do a good job in energy conservation and emission reduction, the previous study requires increased investment, and product costs will increase.
The second is the rise in the price of raw materials. Due to the fierce market competition, it is difficult to digest through the price increase of the product terminal, which will lead to a decline in unit profit. The rise in product prices does not enter the white-hot stage. It is internal digestion, or the profit cannot be lowered and the price is increased. All these require the company's own control. Just as the paint industry has entered the reshuffle stage, the Chinese paint industry is facing a transitional period. The tide of price increases is a phenomenon in the paint market, and it also boosted the industry's reshuffle. Product price increases are also the trend of the industry. Low-price and low-level industry competition is not what we want to promote. The paint industry's production costs are still relatively high. If we still maintain the original level, it will be unfavorable to the development of the industry. Raising the technological content, cultural and artistic content of products, and increasing the added value of products should be used as the development goal of coating companies, instead of winning with scales or winning with low-level competition.
Therefore, paint companies should strive to innovate, research demand and create demand in order to stand on the forefront of the industry.
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