2026.09.29 | TB | Chemicals | Sherwin-Williams Supply Chain Expert

Client-led • 8 Sep 2026

Companies: SHW US, AKZA NL, PPG US

Expert Former Senior Executive, Supply Chain at Sherwin-Williams Co

Agenda

• Around 10 years' experience at Sherwin-Williams, focusing on material, production and inventory planning
• Well-placed to discuss Sherwin-Williams' business, competitive advantages, competitors and moat in the PSG (Paint Stores Group) division
• Key insights into Sherwin-Williams' potential M&A in PCG (Performance Coatings Group) and how its vertical integration strategy differentiates it from peers

Questions

00:05:44] I understand why Sherwin-Williams' PSG [Paint Stores Group] is a very good business and has gained a lot of share. The PCG [Performance Coatings Group] looks a lot like an AkzoNobel, Axalta or PPG type, where it's selling paint coatings into a variety of industrial end markets. It's not as clear to me why this is a good business. Why do you think Sherwin owns this business? Are there synergies to having the industrial end market exposure in addition to the US architectural residential?

Expert [00:06:34]: Basically, the backbone of any coating that you have out there is a polymer resin. That is the backbone and everything else is structured around that backbone. What is advantage about Sherwin is that the Performance Coatings Group actually makes all of those resins that the architectural group uses in their paint in the store, the Americas Group. All of the stores, the paint is made by, it's latex-based, mostly interior paint. Huge volumes that are going through there. Almost all of those resins are actually produced by the Performance Coatings Group and then sold basically transferred directly to another factory within the Sherwin system. The advantage is that there is a huge cost advantage around doing that.

00:08:29] Before Sherwin-Williams acquired Valspar, would it just buy already manufactured resins from someone else?

Expert [00:08:40]: From the open market. There was big players like AkzoNobel and things like that. I can't remember the names, but it was big players. The problem was that they were doing annual price increases with no justification for it and Sherwin was seeing their costs were getting out of control.

It's one of the business units in Performance Coatings Group. There are packaging coatings, which is in itself is another resin that's actually there, but it is the only non-BPA coating that is approved to go inside Coke cans and beer cans and such. Basically, they can't make enough of that to actually meet the demand. That is a massive business as well. The other one is coil and extrusion. This is the coil coatings group. They have they have a wonderful technology in terms of being able to basically premake the base and then colour it. They have narrowed their formulas down to basically two different types for the most part, and it applies to almost everything. You're getting economies of scale, but at the same time, it appears to be, each customer can choose their own colour as it were. They have that advantage in terms of being able to make the scale and then have the colour flexibility to do that. They're able to do that super fast, like within three days, and can match any colour on the planet.

The other thing that they are doing in terms of sales and marketing is that most coil coatings are actually project-based, and so it's for a stadium or skyscraper or something like that. They are actually marketing to architects instead of the actual coating companies and then the architects specify and the coating company follows along and like does it. That's the genius there in terms of how they've sales and marketing that. Then automotive, in terms of that, they do not do OEM because that is such a low-margin business that all it will do is just consume your volume, your capacity, and they only do aftermarket. From that point of view, that's where all the margin is, and that's where you get basically, that's what they're scaled to do in terms of automotive. It's all aftermarket.

00:12:15] It makes sense why Paint Stores Group is advantaged by Paint Performance Coatings Group. Does PCG itself have any competitive advantage vs AkzoNobel, Axalta or PPG?

Expert [00:12:39]: Yes. In certain sectors, yes. The Coil Coatings Group, basically, the way they have narrowed their formula space to where you basically have two or three choices in terms of what you can select and then any colour you like. That is a huge advantage in terms of having basically high capacity at very low capital.

Client 1 [00:13:13]: What do you mean?

Expert [00:13:22]: High capacity at low capital. Basically, you're able to make a base that has the same formula day after day after day. You are continuously making it, filling a storage tank and you have that base and then you can customise it with a colour that you need, and they have automated that so that you can do that by the drum and basically have a unique colour and it's fully automated and computer checked for colour and all of that.

Client 1 [00:14:00]: That's coil.

Client 1 [00:14:00]: Is the Sherwin Auto Refinish business better than competitors? Other players play in that, too.

Expert [00:14:19]: In my opinion, no. It's not. That's probably a weakness in terms of that. They have a very loyal distribution network that is keeping that volume there. It is driven by promos and things like that.

00:14:49] It's clear why PCG is good for PSG. Is there anything vice versa? Are there any consistent salespeople, buying power, volume leverage that it gets that helps its cost structure in PCG as well?

Expert [00:15:19]: Yes. PPG is a very large company. Do not underestimate their buying power for a fact that is there. I just think they have to spend a lot more capital to get the capacity because they have not harmonised their formulas. Every customer has a unique formula. It is super complex to manage that. In my opinion, it's a high-cost route to get that volume. They are managing it.

00:16:24] Does the fact that Sherwin-Williams owns PSG and PCG allow it to get better pricing when the company is buying raw materials for both?

Expert [00:16:38]: Absolutely. All of that volume is combined from a full business relationship. Those contracts for titanium dioxide or any of those other bulk materials that are being purchased mostly monomers at this point. Yes, all of that is grouped together in terms of the purchasing price that you're paying.

Client 1 [00:17:09]: That's one synergy to having them together.

00:17:09] You talked about PSG's cost structure. Are there other synergies in the supply chain, on the distribution side or fixed cost leverage on the facilities?

Expert [00:17:30]: I think there's a lot of synergy in terms of logistics. The total warehouse network in North America is actually shared between all the groups. Actually, Sherwin also has their own trucking system as well, both for vans that are just carrying finished goods and bulk tankers that will transfer between factories. They have their own fleets now.

00:22:55] What about on the sales or marketing side? Within PCG, it has pretty disparate end markets. It's auto refinish, coil, F&B packaging and general industrial. Are there any stable synergies, or does it have to have completely different sales forces for all of those?

Expert [00:23:28]: Yes. They generally have different sales forces because they are going for different customers that have different needs. Even for some of the niche things, like they have a separate sales force for military because, well, you need Department of Defense specifications and all that sort of qualification stuff. Those sales guys are basically shepherding that product through all of those bureaucratic layers to get there. The same way with automotive, too. Some of the automotive coatings are actually not to OEM, but to say, the guys that are producing shocks, shock absorbers. They're putting that yellow coating and black coating that's on that shock absorber, but those are very specified products that have extreme tolerances to actually be functioning on a shock absorber. Those coatings, the sales guys are keeping track to make sure the specifications are always right that the bill of material is correct, the COA is correct and all that kind of stuff. They're actually shepherding that, basically presenting the product to the customer in the best possible way. It isn't that they're just collecting sales and stuff. They're actually involved in the product as well.

Client 1 [00:24:59]: It seems like there aren't many synergies on the sales force side.

Expert [00:25:06]: The endpoint is so different. Basically, a wood product customer is not going to have anything in similarity with an automotive customer.

00:26:04] Who should we be worried about from a competitive standpoint? Does PCG depend a lot based on the end market?

Expert [00:26:17]: I would say it depends a lot on the end market. From that point of view, healthy competition as it were. Keeps you on your toes, keeps you moving forward, keeps you watching the margin, keeps watching the cost. You're looking at what they're presenting to the marketplace. Every time they would present a new coil coating or something like that. We'd have our tech services guys actually be in the factory, seeing how it ran and they're like, "No, that one is not going to work. The customer is not going to be happy with that, and it's not going to work." You could tell very quickly. Sherwin was a much better product.

00:27:47] PPG and Akzo don't have their own equivalent to Valspar. Is Sherwin more vertically integrated further up the chain or do those players also have their own manufacturing?

Expert [00:28:04]: I think Sherwin is the most vertically integrated, and it's mostly around resins at this point. It's around logistics at this point and having your own stores.

Client 1 [00:28:21]: That I know for sure.

00:29:47] Why do you think some peers, such as Akzo, Axalta and PPG, have seemingly struggled over the last five years? Are they generally selling commoditised things and Sherwin isn't, or is it that Sherwin has a much better cost structure? The rest of them seem to have been floundering along for a while.

Expert [00:30:19]: Yes. I think PPG basically has invested a lot of capital to create capacity. They have the volume, but it is low-margin volume, and that is a fundamental problem.

Client 1 [00:30:42]: Why is it low-margin volume?

Expert [00:30:45]: Because it's probably automotive OEM or some other big customer that has massive leverage to get low prices.

00:31:37] For Sherwin's Paint Stores Group, where it is selling mostly in the US, could you take us through the entire chain, from what it buys to where it gets manufactured and how it gets distributed? Geographically, how does the process of making paint work?

Expert [00:32:01]: No, I couldn't take you through each one.

Client 1 [00:32:10]: Do they all do different things?

Expert [00:32:18]: Yes, they all have their own product lines. Some of the product lines are repeated. I mean the basic white Sherwin paint that is sold in most of the stores is probably made in 15 different factories.

Client 1 [00:32:52]: They make the paint in the US, but are buying a ton of titanium dioxide and other things?

Expert [00:33:02]: Yes.

Client 1 [00:33:03]: Does all that come from all over the world?

Expert [00:33:09]: Obviously, when you're importing raw materials, you can't get it in the US. Something like for coil, PVDF, which is the resin that makes that coating so stable for 40 years. That is basically mostly from China. There is capacity in the US for it, but it only supplies maybe 40% of Sherwin's demand. They're not going to sell everything they make to Sherwin. It's basically proportioned out. We get what we can from the US because that's the lowest logistics cost. Then you have to import from China and everything else. Then you make sure that your formulas can take those differences between the raw materials so that you have a stable formula, you have certain mixes that you can take depending on what's available and then you can get the same outcome every time. That's basically how that works. Then there's other materials like that, especially small ingredients, additives or things like that, the enhancers for the coating to make it flow better or viscosity enhancers or whatever it is. A lot of pigments, too, are actually imported from Asia and such because that's where they're mined. Yes, there's a lot of imports, but as much as possible, everything is basically trying to be sourced from the US. The bulk of what your paint is mostly resins and monomers, and those are all sourced from the US.

00:34:56] How important would you say innovation is in the overall sector? Is it more of a commoditised product?

Expert [00:35:12]: It depends on what you're talking about. I would say architectural paint is pretty much commoditised or commoditised. That's the bulk of the volume out there, which makes sense. I mean, it's been around for 200 years. It's a commodity. Now some of the specialised coatings that are there for the industrial sector, especially the military, that paint that can take a bullet hit and not chip, that is specialised and that is tech.

00:38:28] How do you think Axalta and AkzoNobel impact its PCG business, if at all?

Expert [00:38:45]: I would have no idea how they're going to impact that business. Axalta, I think, was more focused on wood coatings, I think. I don't know. AkzoNobel had a coil business and all of that. They're probably trying to pick that up. It's going to be peanuts compared to the market share that Sherwin already has there, so.

00:39:25] How would you rank the six subsegments within Performance Coatings Group from strongest to weakest?

Client 2 [00:39:45]: The six divisions are General Industrial, Packaging, Industrial Wood, Auto Refinish, Coil and Protective and Marine.

Expert [00:40:18]: I actually would put Packaging at number one. Coil at number two. Three is General Industrial, four is Protective and Marine, five is Wood and six is Auto.

Client 1 [00:40:56]: Is that because auto is very low margin?

Expert [00:41:01]: No. Actually, it's low volume. It's low volume at this point. It's one of the lowest volumes ones. They are choosing the high-margin part of that to be in. You are not killing your capacity with low margin, but it is low volume.

00:44:39] You mentioned packaging was your number one. Recently, there are some talks about movements away from BPA [Bisphenol A] chemicals and Sherwin's packaging is the leader in having BPA-free technology within its packaging resins. It has a lead there against competitors. How big is that opportunity? How ahead is it vs everybody else?

Expert [00:45:25]: Now they really are ahead. It's a real thing. The great thing about it, if you've ever seen how a Coke can or a beer can is actually coated on the inside, it's like 1.5g of this resin is spray coated within a partial second on the inside of each can, but there are billions of cans. The volumes are just massive that are being consumed of this product. It is the only non-BPA product out there for coatings.