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Innovation in the can: In paint and sundries, high-tech innovation colors the category

BY Kate Fazzini

More so than perhaps any other market in the home channel, every aspect of the consumer paint market has been touched by high-end innovations.

Chemicals safe and odorless enough to spray indoors, high-tech polymers that bond to tough outdoor surfaces, color-recognizing computers and coatings that can turn any wall into a chalkboard are just some of the many advances in the category that continue to expand in the marketplace. Plus, sundries and other associated products—like caulks, sealants and wood finishing products—all have seen heavy innovations in recent years.

Paint products create a lot of buzz, and they manage to put what often are very high-tech products into the hands of consumers in a low-cost, non-threatening DIY package.

Consumers have reported for several years that of all the home improvement projects they could do, they are most likely to want to paint an interior room, according to data from the Home Improvement Research Institute. In a study of what consumers actually purchased in 2005, 26.2 percent of consumers said they bought interior paint, followed by 19.4 percent who reported buying brushes, rollers, pans or pads; 18.3 percent reported buying paint tape, 13.4 percent reported buying caulk and 10.5 percent reported buying spray paint.

Retailers have capitalized on this, with stores from Benjamin Moore, Do it Best, True Value, Ace Hardware, Home Depot and Lowe’s all giving their paint offerings and displays serious recent upgrades.

Many of the innovations paint companies have made in recent years fall into the eco-friendly category. Stiffer federal and state regulations of volatile organic compounds (VOCs) have led to an all-over “green” revolution in paint and coatings products.

It’s not just big companies that are getting in on the act. Jim Weppner, a national accounts manager for Sunnyside Corp., a Chicago-based coatings and cleaning products company, said, “almost the only products that have been available have had petrochemicals. It’s only logical that this is where innovation has gone. Paint is definitely going in a green direction—it’s going to have to.”

Weppner pointed specifically to Sunnyside’s line of brush cleaners and primers, which are water-based and low odor. The Sunnyside line of products recently was added to True Value’s Greener Options program, which sets aside eco-friendly products with a “green” marketing scheme and in-store displays with audio promoting the products. Other new green products featured in the True Value program cross the paint and coatings spectrum—they include a latex primer and sealer by Kilz, a low-odor deck stain by Woodsman and a nontoxic spackling paste by UGI.

Like True Value, several retailers have jumped on the eco-friendly bandwagon. Home Depot’s Eco Options program, for example, includes a “Clean Air” collection of products, highlighting new low-VOC paint options from Glidden and a “VOC” calculator for consumers. At Benjamin Moore, products from the company’s “Waterborne” collection are moving in on higher odor items. According to the company, “Products developed from this new technology are replacing current alkyd product that had higher VOC contents.”

Other companies have developed their own green innovations.

“Probably the most innovative paint that we’ve had is the water-based spray paint, the latex, so you can actually spray it indoors. It washes up in soap and water,” said Terry Painley, a representative for Sherwin-Williams’ Krylon spray paint brand.

Aside from the green innovations, many new products are about looks—faux finishes, glosses and textures have grown in number and complexity. Krylon, for example, has introduced faux finish sprays that can create brushed or hammered metal looks. “You’ve got to keep bringing something new out. If you stay where you’re at, you’re going to lose out on business,” Painley said.

And where there are new areas of the home, there are new opportunities for innovation—some new paint products have even spread to the sidewalk, porch and garage.

Valspar has launched several new products under its Quikrete brand, including an epoxy garage floor finish that consumers can pair with jars of colored acrylic flakes to create a faux granite appearance.

“The technology we’ve had for about three years, but this comes in a waterbase, which is low-odor and more consumer friendly,” said Dick Seitz, director of communication and training for Valspar. “It’s a real leap, in that it’s water-based.”

Valspar has also made technological headway with a sidewalk product that looks like sand, but when water is added, becomes a powerful filler for brick and stone sidewalks.

“It’s a polymer-modified sand,” explained Brian Brown, a sales manager for Quikrete. “We have our own research facility here in Atlanta. We’ve used many polymer-modified products, but this is just a little bit different kind of polymer.”

Some innovations come out of necessity—in order to make sanding and finishing wood an easier, cleaner process, 3M developed a handheld sander and flexible sanding cloths for DIY consumers.

“From a tools standpoint, we designed the tool with a movable handle, so if you’re right-handed or left-handed, you can turn it,” said Galen Fitzel, a technical service specialist with 3M. “Sanding is a dusty, dirty, messy job—to make it easier, I think that is really the key behind this. So if I can make my sanding more pleasurable and easier, it’s going to be more fun.”

Fun is one often-recurring theme—fun in choosing color, by using color-recognizing computers, cards or a host of sample products, is one example. Another is in offering consumer education at the store level, or packaging whole-project kits to help “weekend warriors” complete complex jobs fast.

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Lumber Liquidators closes IPO

BY HBSDEALER Staff

Toano, Va.-based specialty hardwood flooring retailer Lumber Liquidators has closed its initial public offering.

The company offered 10 million shares of common stock at a price of $11 per share, including 3.8 million shares offered by the company and 6.2 million shares offered by selling stockholders.

The company intends to use the net proceeds of approximately $36.4 million from the offering to repay outstanding debt and support the growth of the business, which includes plans for 25 stores in 2007, followed by 30 to 40 new stores per year until 2011.

Goldman Sachs and Merrill Lynch acted as joint book-running managers with Lehman Brothers, Banc of America Securities and Piper Jaffray serving as co-managers for the offering.

Lumber Liquidators has seen same-store sales growth of 8.5 percent to 9 percent each quarter this year. According to the company’s S-1 filing with the Securities and Exchange Commission, in 2006 Lumber Liquidators had sales of $332 million, up 35 percent from sales of $245 million in 2005.

The retailer currently operates 111 small-format stores in the United States. The company is traded on the New York Stock Exchange under the symbol “LL.”

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NKT Holdings withdraws initial public offering

BY HBSDEALER Staff

Providence, R.I.-based HVAC company NTK Holdings has canceled its initial public offering according to a Securities and Exchange Commission filing this week.

The company said that the application was withdrawn “due to the unsettled market conditions.” The company had planned to use the IPO proceeds to repay debt.

The announcement was part of Nortek’s third-quarter earnings statement. Nortek, which reported a 4 percent increase in sales, is a subsidiary of NKT.

The company reported net earnings of $37.6 million for the period ended Sept. 29, down 44.9 percent from last year’s earnings of $67.7 million in the same period last year. Nortek also reported net sales of $602 million, up 4 percent from $579 million last year.

NTK Holdings manufactures air conditioning, heating ventilation and home environmental control technology products.

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