Sherwin Williams & Valspar: Creating a US Paint Powerhouse

In 2007, Valspar launched Valspar paints at Lowe’s, replacing its best-selling American Tradition brand and kicking off a series of memorable marketing campaigns aimed at DIY customers. Perhaps the most iconic of these campaigns features a pair of loveable chameleons -- Val and Jon -- who, in one ad, turn vivid shades of sunburst yellow, aqua blue, and magenta as they compare Valspar color swatches for their home.

The history of Valspar paint tells the story of a company that is itself a sort of chameleon. As competitors lost ground during the Great Recession, Valspar boldly revamped its branding. As the housing industry struggled to recover from historic lows, Valspar -- with the help of Val and Jon -- promoted flexible initiatives like the Love Your Color Guarantee, appealing to cash-strapped consumers who were taking on painting projects themselves instead of hiring professionals.

And in just a few short years, these effective marketing and distribution tactics made Valspar one of the most popular DIY paint brands.

It came as a surprise in 2015, then, when Valspar reported falling decorative paint sales in North America, a market that by all accounts is healthy and growing. Even more surprisingly, after a particularly difficult first quarter in 2016, Valspar announced that it would be acquired by US market leader Sherwin-Williams.

The Acquisition: What You Need to Know…

At first glance, Sherwin-Williams’ pending acquisition of Valspar has less to do with the US architectural paint market -- where Sherwin-Williams is already the market leader -- and more to do with expanding Sherwin-Williams’ industrial coatings business and global reach. The merger will extend Sherwin-Williams’ operations to promising industrial products like packaging and coil coatings. When the deal is booked, Sherwin-Williams will be the world’s largest paint and coatings company, with 2015 pro forma revenues of $15.6 billion.

…And Why It Matters

Valspar’s sudden decline and Sherwin-Williams’ eagerness to scoop up the company may reveal more about changes in who is buying architectural paint in the US, where they’re buying it, and how paint suppliers can best tap into new opportunities.

Valspar’s 2015 annual report attributes struggling paint sales in North America to “a change in our product line offering” at an unidentified home improvement customer. It’s probably not a coincidence that this announcement followed the release of Sherwin-Williams’ HGTV HOME collection at Lowe’s in early 2015.

Home center paint sales can be fiercely competitive, and companies that conduct most of their business through this channel, like Valspar, must accept a relatively high degree of risk. Challenges include not just product line changes but also price concessions and fickle DIY consumers, who tend to be less loyal to certain brands than professionals.

During the recession, when DIY activity spiked, that risk proved profitable. Behr Process and Valspar -- two market leaders that have built decorative paint businesses on home center distribution -- have among the best reputations with DIY customers.  

But consumption patterns are changing. According to the Freedonia Group’s study Architectural Paint Market in the US, professional painting activity is growing faster than the DIY segment again, and contractors buy the majority of their paint in paint stores, not home centers.

So will Sherwin-Williams face setbacks similar to those Valspar faced in home centers? Probably not. Sherwin-Williams is better positioned to adapt to current market trends, just as Valspar adapted to recessionary conditions in the past:

• For one, Sherwin-Williams specializes in serving an expanding market of paint contractors in its own paint stores, where it has greater control of pricing, quality, and service. This core strength should offset the riskier business of serving DIY consumers through home centers.
• Also, combining Valspar’s extensive assets at Lowe’s with the HGTV HOME brand will bolster Sherwin-Williams’ capacity to negotiate favorable prices.

The acquisition is expected to close within the next month, almost a decade to the day since Valspar released its namesake paint brand. In this post-recession era, Sherwin-Williams is proving itself a chameleon even in a familiar market, finding the perfect match for its professional-oriented paint stores in Valspar’s reputable DIY brands.  

Additional Resources

Interested to learn more?  The Freedonia Group's industry study Architectural Paint Market in the US provides US architectural paint supply & demand data, including historical demand and forecasts. It also offers in-depth analysis of industry structure, leading paint manufacturers, and more. Related Freedonia reports include Manufacturing (OEM) Coatings, Protective & Specialty Coatings, and the Paint & Coatings: US Market Forecasts overview. 

About the Author:

Ellen Kriz is an Industry Analyst at the Freedonia Group where she covers US polymers & materials markets.