Akzo Nobel Paints beats out Sherwin-Williams for Wal-Mart business

Published: Wednesday, September 01, 2010, 6:52 PM

CLEVELAND, Ohio -- In a cross-town showdown between paint companies, Akzo Nobel Paints LLC of Strongsville will become the primary U.S. supplier to Wal-Mart Stores Inc., brushing aside Cleveland's Sherwin-Williams Co., the current supplier. The deal, announced Wednesday, will bring jobs to the region, an Akzo Nobel Paints executive said. Starting early next year, Akzo Nobel Paints will provide interior and exterior paints for more than 3,500 Wal-Mart stores, the company said. That means Akzo Nobel's Glidden brand will replace Sherwin-Williams' Dutch Boy on store shelves. Also, Akzo Nobel will take over making Wal-Mart's house brand, ColorPlace, from Sherwin-Williams. "This is a major deal for our company," Erik Bouts, managing director of Akzo Nobel Paints, said in an interview. ". . . It's good news for the company and the region. If we win, the region wins." Akzo Nobel Paints is the U.S. decorative paints business of Amsterdam-based AkzoNobel N.V. AkzoNobel N.V. has about 1,000 employees throughout Northeast Ohio, primarily in Strongsville and at manufacturing and distribution facilities in Huron. "You can expect significant hires in Huron and Strongsville to service Wal-Mart and our existing customer base," Bouts said. The company declined to be more specific about its hiring plans. The deal could boost AkzoNobel N.V. into the No. 2 spot among U.S. decorative paint makers, behind SherwinWilliams. Sherwin-Williams spokesman Mike Conway said there would be no layoffs as a result of the company's loss of the Wal-Mart business. Sherwin-Williams still has five other products in Wal-Mart, including Krylon spray paints, Thompson's WaterSeal and Minwax, he said. "Wal-Mart remains a large and valued customer of the Sherwin-Williams company," Conway said. AkzoNobel N.V., the world's biggest paint company, has been building up the Glidden brand in an effort to boost sales in the American market. Last year it landed a deal to produce a line of Martha Stewart-branded paints for Home Depot. AkzoNobel acquired the Glidden brand in 2008 when it bought British paints firm ICI. Since then, the Dutch paint maker has poured tens of millions of dollars into strengthening the brand that was born in Cleveland in 1875.

Wal-Mart Drops Dutch Boy Paint for Akzos Glidden

September 01, 2010, 4:51 PM EDT

By Jeroen Molenaar and Jack Kaskey Sept. 1 (Bloomberg) -- Akzo Nobel NV will become the sole paint supplier to Wal-Mart Stores Inc. in the U.S., with its Glidden brand replacing Sherwin-Williams Co.s Dutch Boy on the shelves of the worlds biggest retailer. The exclusive strategic alliance means Glidden will be introduced to the 3,500 Wal-Mart stores across the U.S. early next year, said Tex Gunning, head of Amsterdam-based Akzos decorative paints unit, in a telephone interview today. Akzo over the next two years will take over production of Wal-Marts private label paints sold under the ColorPlace brand, he said. The contract may boost Akzos U.S. household-paint sales by 31 percent, ING analyst Jan Hein de Vroe said. A similar accord with Home Depot Inc. helped lift Gliddens second-quarter sales 10 percent. Akzo has striven to make the former Imperial Chemical Industries brand profitable since taking it over in 2008. Chief Executive Officer Hans Wijers plans to examine options for Glidden once an overhaul is completed. The company displaces Sherwin-Williams, shows its Deco business in the U.S. is still viable, and gets recognition for the rebranding work it has carried out with the Glidden brand, INGs de Vroe said today. The Dutch company, already the worlds largest paintmaker, may add 200 million euros ($255 million) to the 650 million euros of annual revenue Akzo makes from selling household paints in the U.S., de Vroe said in a note. Akzo, which bought ICI for $15.9 billion, rose 1.9 percent to 42.445 euros in Amsterdam trading, the biggest gain in a month. Sherwin-Williams gained 50 cents, or less than 1 percent, to $70.88 in New York Stock Exchange composite trading. Global Ambitions The Wal-Mart contract will propel Akzo to the No. 2 spot in the U.S. market, ahead of Masco Corp. and behind Sherwin Williams. The maker of Dulux and Glidden paint had been tied in third position with companies including Valspar Co. and PPG Industries Inc., said Erik Bouts, general manager at Akzos U.S. decorative paints unit, in an interview. The contract may form a base for a broader alliance with the U.S. supermarket, Gunning said.

Sherwin-Williams, Valspar and Masco currently share production of Wal-Marts ColorPlace paints, said Dmitry Silversteyn, an Independence, Ohio-based analyst at Longbow Research. Akzo got the business, but they probably had to do it on a very compelling value proposition for Wal-Mart, Silversteyn said. To a large extent it was done on price. The lost business will cost Sherwin-Williams about $100 million in annual sales, or 10 cents a share in earnings, when fully implemented, he said. Valspar will lose about $30 million of revenue, or 4 cents a share, Silversteyn said. Mike Dougherty, a Valspar spokesman, and Kathleen Vokes, a Masco spokeswoman, didnt immediately return calls for comment. Wal-Mart continues to sell other Sherwin-Williams products including Krylon aerosol spray paint and woodcare products, Mike Conway, a spokesman for the Cleveland-based company, said by telephone. He declined to comment on the impact of the changes. Reward Sherwin-Williams of course is a local supplier and were a global supplier and Wal-Mart has very strong global ambitions, said Akzos Gunning. Were first going to make the U.S. work, but of course you can expect the next conversation to be about the rest of the world. The contract is also a reward for a rebranding and overhaul of Glidden, running to tens of millions of dollars, according to Bouts. Akzo was among five companies vying for the WalMart contract. Wijers has closed and refurbished Glidden paint stores and factories in the U.S. Management also changed the cans and started advertising, giving away free quarts of paint, staging a dance event in Manhattans Union Square Park and airing TV commercials featuring nuns as part of the campaign. Akzos revenue from household paint from the Americas region totaled 1.5 billion euros ($1.9 billion) last year, one quarter of its global tally for that product. The manufacturer, which also sells coatings for boats and chloride used in swimming pools, had 2009 sales of 13.9 billion euros. Though Wijers has said all options for Glidden will be examined, Gunning declined to discuss if the brand will be sold. We have never said we would sell the U.S. business, said Gunning. The Wal-Mart breakthrough is a big, strategic move. --Editors: Andrew Noel, Jim Silver Source: BusinessWeek