800% Growth in 20 Years: What’s Next?

Eric Chung, CEO of Nippon Paint China, recently outlined the company’s strategic direction for navigating a tough market environment. As the leading paint manufacturer in the country, the firm has experienced over twenty years of steady growth, with revenues increasing eightfold, but now faces new challenges as market dynamics shift.

In an exclusive interview, Chung provided a detailed breakdown of the company’s business segments, highlighting current obstacles, upcoming opportunities, and how Nippon Paint China aims to reinvent itself once again.

This was his first direct commentary on growth pressures since taking the helm and transforming Nippon Paint from a paint supplier with annual revenues around CNY3 billion (USD 428.2 million) into a comprehensive solutions platform generating over CNY25 billion (USD 3.6 billion).

Understanding the Drop in Earnings

Chung explained that the main factor behind Nippon Paint China’s recent performance decline stems from its decorative coatings division, which makes up over 80% of total revenue. The segment is divided into retail, termed TUC (Trade Use Consumer), and industrial, known as TUB (Trade Use Business). While retail sales have remained relatively stable, the industrial sector has seen a significant decrease.

“For years, the TUB segment overly relied on residential real estate and neglected industrial real estate,” Chung said.

The decorative coatings market is highly cyclical and tied to the property market. Data from China’s National Bureau of Statistics shows that new residential construction fell 18% in the nine months ending September 30, to 332.73 million square meters, following a 23% drop last year. This has sharply reduced demand for residential coatings, exposing even industry giants to decline.

Meanwhile, China’s industrial real estate sector continues to grow, with new construction expected to reach 700 million square meters next year. This shift toward industrial projects presents a crucial opportunity for Nippon Paint China’s TUB division, which is aggressively pursuing industrial markets by providing comprehensive solutions for new and renovated factories.

Chung emphasized that Nippon Paint’s products and services support all aspects of industrial construction and upgrades.

Despite retail sales remaining stable, Chung remains pragmatic about future growth. He recognizes that the company must undergo a significant transformation, as recent focus has been too heavily on top-tier cities and latex paints, leaving other segments underinvested.

“We need to innovate and shift our approach,” he said, stressing the importance of rethinking product development and market strategy.

Strategic Transformation

Chung drew on prior experience, recalling his decisive leadership in 2014 when the company launched the “More Than Paint” strategy, shifting focus from just coatings to comprehensive solutions. The campaign’s slogan, “Refresh Your Life,” was rolled out alongside new services, catapulting the company to become the fourth-largest global paint manufacturer by 2020 in the Asia-Pacific region.

Today, Chung is driving another transformation, moving away from a channel and brand-centric model toward one emphasizing innovation and service. The focus is on not just selling products but delivering solutions tailored to customer needs, exemplified by Nippon Paint’s Magic Paint line, introduced in 2022.

Magic Paint is an artistic coating that mimics textures and visual effects of natural materials, like stone, leather, and fabric. Its development responded to trends among younger consumers demanding high-end products, rising environmental awareness, and the industry’s need for standardized applications. Unlike earlier imports or artisanal projects, Magic Paint has been standardized and certified for professional application, ensuring consistent quality and effects.

To achieve this, Nippon Paint partnered with industry associations and government bodies to establish training and certification programs across more than 40 regions, now certifying over 6,000 skilled “magicians” capable of applying the product with precision and consistency.

This shift marks a move from simply providing coatings to offering integrated product-and-service solutions, aiming to create a competitive advantage through proprietary standards and trained professionals. The company’s goal is to lead the emerging artistic coatings segment and build a sustainable growth engine amid fierce market competition.

“Transitioning from product sales to service-driven models is challenging,” Chung acknowledged, “but training and technology, including AI, will accelerate this process, aiming for around 60,000 certified applicators next year.”

Nippon Paint has also obtained Shanghai’s first foreign-owned vocational training license under new regulations, with similar licenses pending in other regions. The strategy emphasizes centralized distribution centers to achieve cost efficiencies while decentralizing local operations for agility and responsiveness.

Future Growth Factors

Despite revenue pressures, Nippon Paint China maintains double-digit profit margins, highlighting its resilient business model. Chung pointed out that, globally, few companies sustain high margins amid price wars, attributing their resilience to ongoing internal optimization rather than market stagnation.

While decorative paints face contracting demand, the industrial coatings sector shows promising growth, including automotive, marine, containers, solar panels, and packaging. China’s industrial coatings market reached over CNY 302 billion (USD 43 billion) last year, with significant contributions from automotive, marine, wind power, and container segments.

Nippon Paint’s automotive coatings division is experiencing double-digit growth and is developing a “three-electric ecosystem” around electric vehicles, including motor and energy storage solutions.

At recent industry expos, the company introduced innovations in sectors such as low-altitude aviation, new energy vehicles, and advanced manufacturing. Notably, the “Low-Altitude Aviation Coating Solution” was showcased for aircraft and landing facilities, and new solutions for batteries and energy-efficient coatings were also revealed.

Nippon Paint has formed joint research collaborations with top universities and partnered with industry players like Zhanxin Paint, Covestro, and Clariant to foster innovation.

“Many are surprised by what we are doing—they wonder if this is still Nippon Paint,” Chung said. “But these efforts have been in progress for years.”

Nippon Paint’s expansion into industrial coatings aligns with China’s broader industrial transformation plans. The country’s 14th Five-Year Plan emphasizes emerging sectors such as new energy, advanced materials, aerospace, and low-altitude economy, potentially creating markets worth trillions of yuan.

To support these new growth areas, Nippon Paint opened its largest automotive coatings manufacturing facility in Tianjin in May, investing over CNY 700 million (USD 100 million) for an annual capacity of 133,000 tons—boosting China’s automotive paint output by 30%. Additionally, its R&D center in Shanghai’s Pudong district broke ground in August of last year.

“We used to focus solely on vehicle coatings,” Chung explained. “Now, we’re also addressing wall and floor coatings in factories, breaking down silos and expanding our entire business model.”

He anticipates modest growth in the coming year with more significant progress projected by 2027. “The global trend is toward B2B, which will outpace B2C in our industry. With our expanding B2B segment, opportunities are abundant.”

Chung reaffirmed that China remains the company’s most vital and promising market. “Without the competitive environment here, Nippon Paint China wouldn’t be moving so quickly or pushing for such proactive transformation. That’s just how the Chinese market operates.”