Paint and Varnish Wholesalers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 9700 paint, varnish, and supply wholesalers in the US act as middlemen between manufacturers and a variety of end users, including retailers, other wholesalers, collision repair centers, OEMs, and building contractors. Special purpose coatings, which include automotive paints, account for over 40% of industry sales. Architectural coatings account for one third of industry sales. Other products include architectural coatings, enamels, primers, stains, solvents, and lacquers; paint supplies (brushes and rollers); OEM coatings; and wallpaper and wallpaper supplies.

Dependence on Automotive Collision Repair Business

Because automotive paint and coating sales account for a significant percentage of the market, the industry is influenced by demand from the vehicle collision repair market, which consists primarily of small independent businesses.

Dependence on Construction Industry and Economy

Demand for architectural paint and coatings is dependent on the health of the construction industry, which is cyclical and influenced by economic conditions.

Industry size & Structure

The average paint, varnish, and supply wholesaler employs 16 workers and generates $7-8 million annually.

    • The paint, varnish, and supply wholesale industry consists of about 970 firms that employ 16,000 workers and generate $7 billion annually.
    • The industry is concentrated; the top 50 companies account for about 84% of industry revenue.
    • Large automotive paint, body, and equipment (PBE) wholesalers include LKQ Corporation and FinishMaster (Uni-Select). Large manufacturers of paints and coatings include PPG, Sherwin-Williams, and RPM. Sherwin-Williams is one of the largest wallpaper distributors in the US.
                                  Industry Forecast
                                  Paint and Varnish Wholesalers Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Mar 21, 2023 - Remodelers’ Profits Trend Downward
                                  • Residential remodelers’ average gross and net profit margins declined in 2021, according to the 2023 edition of the Remodelers’ Cost of Doing Business Study released in March by the National Association of Home Builders (NAHB). Remodelers’ average gross profit margin grew steadily from 26.8% in 2011 to 30.1% in 2018, but in 2021 fell to 24.9%. The drop in gross margins was primarily due to higher trade contractor and homebuilding costs. However, remodelers’ average net margins were more resilient, dropping to 4.7% in 2021 from 5.2% in 2018. Steadily falling operating expenses between 2018 and 2021 held back a steeper decline in average net margins. The study also showed that residential remodeler participation in the single-family homebuilding market is rising. In 2018, 6% of total remodeler revenue came from single-family construction; in 2021, the share rose to 11%.
                                  • February US new car sales - a demand driver for automotive paints, coatings, and adhesives - were up 3.9% in February compared to January, according to a forecast by Cox Automotive. New car sales were up 4% year over year. Affordability remains a challenge for the US light vehicle market, but Cox says used, and new car markets are being affected differently. New car prices remain elevated while used car retail prices are dropping. Cox expects this dynamic could flip in the spring buying season. If more affordability-minded consumers look to used cars, pre-owned inventory could drop, pushing prices higher. If this scenario plays out, OEMs could find themselves with too much inventory and resort to incentives to boost new car sales.
                                  • The Dodge Momentum Index (DMI) increased 1.9% in February 2023 to 203.0 (2000=100), up from the revised January reading of 199.3. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which has been shown to lead construction spending for nonresidential buildings by a full year. On a monthly basis, the commercial planning component rose by 1.4%, and institutional increased by 2.9%. Commercial planning got a boost from an almost 20% rise in office planning and stronger data center project planning. In the institutional sector, education and healthcare planning saw gains, with research laboratories being a noted bright spot. Dodge’s associate director of forecasting said, “The continued elevation in the DMI should provide hope that construction activity will grow in 2024. Owners and developers tend to put projects into planning until well after economic conditions weaken. During the Great Recession, for example, the DMI did not substantially decline until 2009. Therefore, the anticipated mild economic growth in 2023 could cause the DMI to moderate over the year, but it is unlikely to fall below historical norms.”
                                  • In a recent interview by Coatings World magazine, PPG’s President and CEO Tim Knavish outlined key challenges and opportunities the paint, coatings, and specialty materials manufacturer faces for 2023. Headwinds in 2022 included unprecedented inflation, shutdowns in China, geopolitical tensions in Europe, a stronger dollar, and higher interest rates. While Knavish expects that the challenging conditions seen in Q4 2022 will persist in early 2023, supply chain improvements should lead to lower raw materials prices later in the year. PPG expects key regional market conditions to improve by the second quarter, including China’s reopening, a stabilization of European coatings demand, and continued recovery of the US automotive and aircraft refinish market.
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