Nipsea bets on China's low-income housing plans

Nipsea Group, Asia's leading paint manufacturer, is planning to target China's low-income house building program, hoping the mammoth government-backed project could provide new momentum to its business.

After experiencing rapid growth since its entry into China in 1992, the Singapore-based group, known for its household brand Nippon Paint, came to an unexpected standstill in China last year, failing for the first time in 20 years to see any sales increase.

Goh Hup Jin, its chairman, said he blames China's efforts to prevent the real estate market from overheating, but adds that the government's speeding-up of plans to build homes for low-income families offers Nipsea huge potential.

"Yes, we are trying to break into the supplier market for the low-income housing," said Goh whose group just celebrated its 50th anniversary.

During the 12th Five-Year Plan (2011-15), China plans to build 36 million affordable housing units. Of those, 10 million will be completed in 2011 and 2012 respectively, and the remaining 16 million, between 2013 and 2015.

"China remains one of the biggest and fastest-growing markets in the world," Goh said.

"There has been a lot of talking of recession in other parts of the world. But you can still expect growth in China."

Thanks to huge infrastructure projects and more spending on interior decoration by increasingly-wealthy consumers, China has grown into the world's largest wall coatings market, which was worth approximately $18.9 billion in 2011. Of that, 54 percent was on decorative coating.

Nipsea, which first introduced water-based paint into China in the early 1990s, is one of the biggest earners.

Last year, its paints accounted for a quarter of China's retail market, and 10 percent of its supplier market.

Its industrial products, such as power and automobile coatings, have an 8 percent share in China, while across Asia it leads the industry, having sales of $2.8 billion last year.

Despite its market-leading positions, Goh noted the company is still facing fierce competition in China's coatings market.

Dulux, produced by the Dutch multinational AkzoNobel, has remained a close rival for many years while other international and domestic brands are pushing hard behind the two top names.

"There is no market as competitive as China," Goh added.

Meanwhile, Nipsea has started to devote resources to developing its online sales business, which was started in China in October 2010 with an online store on Asia's biggest e-commerce website Tmall, as well as its own official online shopping site.

So far this year, sales on Tmall have exceeded 30 million yuan ($4.75 million) and are expected to double by the end of this year, said Wee Siew Kim, Nipsea CEO.

Its online revenue still only accounts for barely 1 percent of Nippon's annual sales in China, but Wee foresees huge potential, having plans being considered to launch stores on other leading Chinese platforms such as 360buy.com and Sina.com.

"E-commerce is a very special channel. It grows very fast and opens big opportunities for us. We are eying more platforms, even mobiles," he said.

Founded in 1881 in Japan, Nippon Paint is one of the oldest paint makers in the world.

In 1962, Nipsea Holdings was incorporated to manage all of Nippon Paint's business activities of in Southeast Asia, now covering 15 Asian countries. It has over 30 manufacturing plants and more than 15,000 employees.

Amid the recent tension between China and Japan over the Diaoyu Islands, that has led to the boycotting of Japanese goods in China, Goh hopes that won't damage the business.

"I sincerely hope our Chinese customers will put politics aside and judge the product by its cost and quality," he said.

Goh says he feels particularly connected to China because his family is originally from Fujian province.

His father, Goh Cheng Liang, the founder of the group and now an active philanthropist, said: "I've always had a passion for China."

Born in 1927 in Singapore in a poor Chinese migrant family, the 86-year-old started his paint business with a small factory.

Now it has turned into a multinational company generating close to 1 billion liters of paints and coats annually.