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PURCHASE April 2010 160
R
emember the Fevicol advertisement
showing a young girl sporting a
moustache? The Moonchwali which
is the story of a village belle in the various
stages of her life childhood, teenage,
marriage, childbirth and eventually death is
a trendsetter in the advertising industry and
shows the power of adhesives. The glue like
substances are capable of forming and
maintaining a bond between two surfaces
and sealants (caulks) are substances used to
fill gaps or joints between two materials to
prevent the passage of liquids, solids or
gases.
The size of the adhesives market in the
country is around 5,000 tonnes per month. In
India and across the world, the industry is
fragmented. There are many companies that
manufacture various types of products.
These products serve a plethora of markets.
A recent global trend has been the
concentration of the industry through
mergers and acquisitions. Acquisition
provides access to new technology. It also
allows rationalization of production facilities
and provides immediate access to new
markets.
The demand drivers
The major users of adhesives are the
packaging, automotive, construction
(housing, commercial buildings and
organized retail) and furniture (plywood,
veneers and laminates) industries.
Plywood veneers and laminates: A big
chunk of adhesives produced is
consumed by plywood, veneers and
laminates sector. Indian plywood and
veneers industry is as big as Rs 80 billion
and the laminate industry is almost Rs 30
billion. The industry is growing at a rapid
pace of 10 to 20 per cent per annum.
Approximately 600 units are operating in
the country, of which the unorganized
plywood sector comprises 80 per cent
and laminates around 50 per cent.
Traditionally, most Indians preferred
furniture made by local carpenters.
However, with the increase in disposable
income of the urban middle class, the
demand for the classy custom-made
branded furniture is on the rise.
In fact, according to a recent study,
households with annual earnings upwards
The power of adhesive
The size of the adhesives market in the country is around 5,000 tonnes per
month. In India and across the world, the industry is fragmented.
OVERVIEW
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of Rs 10 lakh are expected to grow from
0.8 million in 2002 to3.8 million in 2010.
Indias disposable income is poised to
grow at 50 per cent from US $203 billion
to US$ 322 billion in the next three years.
This would give a boost to the plywood,
veneers and laminates which in turn will
further prop up the adhesives industry.
Packaging. This is another industry that
determines the demand of adhesives.
Adhesives are required for making
containers and flexible packaging. While
this industry uses many types of
adhesives, hot-melt products are much in
demand as they are particularly suitable
for modern, high-speed processes. Global
packaging industry is valued at around US
424 billion. Western Europe and North
America are the largest packaging
markets, accounting cumulatively for 58
per cent of the global industry.
The size of the Indian packaging industry
is estimated around USD 14billion. The
market is growing at the rate of more than
15 per cent annually. Till now, Indias per
capita packaging consumption was less
than $15. The global average in
comparison was US$100, nearly a
seventh.
However, the scenario is expected to
change with the growth of the Indian
economy. As GDP grows to 7.5 per cent,
the packaging industry, too, is expected to
double its growth to around 25 per cent
Housing: New applications in construction
represent huge potential markets. Floor
systems can be adhesively bonded to
support joints, adding increased strength
and rigidity. Interior wallboard and
paneling can be adhered to studs,
providing wall surfaces free from
blemishes caused by nail or screw heads.
Structural sealants can be used to hold
curtain wall panels and insulating glass
units in place, sometimes without
accompanying support from mechanical
fasteners. Research indicates an increased
demand for permanent, non-slum houses
across India driven primarily by the growth
in population, urbanization and income.
India is the worlds fourth largest economy
in terms of purchasing power parity.
According to estimates, the Indian middle
class will spend an additional USD 420
billion during the next four years. With
growing aspirations, the demand for
houses is expected to remain robust.
An increasing demand for housing has led
to a growing market for construction paints
and chemicals such as waterproofing
material; repair materials namely crack
filling, rust remover. That will further give a
boost to the adhesive industry.
Commercial Buildings and Organized
Retail: About 80 per cent of the demand
for office space is driven by IT/ITes
sectors. India has over 3,000 IT service
providers. The IT industry has grown by
21-24 per cent in 2007-08 and it is further
expected that the industry (IT/ITes) is
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April 2010 PURCHASE 161
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likely to grow with the same pace to touch
US $50 billion by 2008-09. The total
demand for commercial buildings is
expected to increase to 500 million
square feet over the next decade.
Organised retail segment is also growing
at a rapid pace, increasing its share from 4
per cent of total retail sales to 5 per cent.
This has increased the demand for retail
space. Mall space, for instance, has
increased from meager 1 million square
feet in 2002 to 40 million square feet
already. It is expected to touch 200 million
square feet by 2010. Estimates suggest
that organized retail segment will account
for 12-15 per cent of total retail sales by
2011.
Growing office spaces and organized retail
will lead to an increased demand for
adhesives and sealants and construction
paint and chemicals.
Automotive Industry: The automotive
market also offers significant potential for
new opportunities. Adhesives are already
used for interior applications such as
bonding decorative elements and
carpeting, and sealing doors and windows
and for exterior applications including
vinyl roofs and side moldings. Increased
use of polymer composites will lead to
increased adhesive consumption. Even in
conventional metal construction, adhesive
usage is expected to. The aerospace
industry is also using increasing amounts
of adhesives and sealants for essentially
the same reasons as the automotive
industry.
Growth in the sectors like Hospitals (the
size of Indian private health care sector is
expected to double from the current
figure of Rs 690 billion to Rs 1,560 bn by
2012), hotels (over 1,50,000 new hotel
rooms to be added in next five years),
footwear (domestic market growth
estimated to increase from 1.5 billion pairs
in 2000 to an estimated 2.3 billion pairs in
2010), will also give a further boost to the
sector.
The global scenario
The global market for adhesives and
sealants is growing at about the rate of GDP,
with significant variations between the
regions. Historically, the industry was
dominated by a few industrialized countries.
Now, a significant portion of new demand is
being generated by emerging countries such
as China. The next major growth country
could be India.
The largest global markets are North
America, Western Europe and the Far East.
These three regions account for 85 per cent
of the global demand volume and 78 per cent
of the total global value.
The Far East region continues to show the
greatest growth and has the most vibrant
country markets. China has surpassed all
other countries in per annum growth, which
overall is estimated at 7 per cent for the next
three years.
The three major forces that are driving the
market are globalization, the strengthening of
new trading blocs, industrial consolidation
and technological evolution.
Market fragmentation continues as new
adhesive demand is generated from a supply
and demand standpoint. The demand growth is
also supported by the emergence of new
market applications that result from changing
substrates and evolving assembly processes.
On the supply side, despite ongoing industry
consolidation and M&A activities at the level of
the multinational companies, new small- and
medium-sized companies are beginning to
serve targeted market niches and/or specialize
in a specific state-of-the-art technology.
Outlook
Indias per capita income grew nearly 12
per cent from Rs 29,642 in 2006-07 to Rs
33,131 in 2009-2010. By 2010, the top 50
Indian cities will enjoy a gross income
exceeding US $20 billion, comparable to
some of the largest cities in US today. With
these enhanced incomes, more Indians will be
opting for lavishly furnished houses which are
creating the demand for new houses, malls
and fancy furniture giving a boost to plywood
and veneers, housing segments. Thus,
requirement for adhesives and sealants are
rapidly growing to cater to the increasing
requirements of the above segments. Growth
in the organized retail, hotels, hospitals,
engineering, textiles will also contribute to
growth in the years to come.