Tile adhesive is expected to become the "C-position star" of building materials. Who will become the "king" in the tile adhesive market?

For a long time, the penetration rate of domestic tile adhesives has been low and the growth has been slow. The main reasons are: the high price of tile adhesives, the poor flatness of domestic buildings, and the unfamiliarity of renovation workers with the use of tile adhesives. At present, there are many favorable factors to promote the development of tile adhesives. Tile adhesives have many advantages such as strong functionality, wide application range, and simple construction methods. The bank believes that in the context of the weakening trend of real estate, it is a very attractive subdivision track, which is expected to attract leading building materials and high-quality chemical companies to enter, strengthen the industry, and reshape the pattern.

Tile adhesive is developing rapidly. For a long time, the penetration rate of domestic tile adhesive has been low and the growth has been slow. The main reasons are: the high price of tile adhesive, the poor flatness of domestic buildings and the unfamiliarity of decoration workers with the use of tile adhesive:

(1) Safety requirements and policy promotion: When ceramic tiles are used as decorative materials for the exterior facades of buildings, high requirements are placed on the firmness of the paving. The Ministry of Housing and Urban-Rural Development has issued a document requiring that from September 14, 2022, the use of on-site cement mortar to paste exterior wall facing tiles will be prohibited, and cement-based adhesive materials can be used as an alternative; 

(2) The popularity of large slabs/rock slabs has promoted the use rate and amount of tile adhesives: Medium and large-sized ceramic tiles have higher requirements on the strength of the adhesive materials, and large slabs need to reach a certain laying thickness to prevent the tiles from breaking;

(3) Cost reduction: The average price of tile adhesive in my country has dropped from RMB 1,659/ton in 2013 to RMB 1,193/ton in 2021, with a 7-year CAGR of -4.6%; 

(4) Tile adhesive can meet the needs of niche tile paving: Tile adhesive products are rich and functional, and there are special adhesives for different types of tiles. 

(5) Demand release in third- and fourth-tier cities: At present, the usage rate of tile adhesive in third- and fourth-tier cities is relatively low, and the increase in usage rate will release incremental demand.

It is estimated that the product space will exceed 22 billion yuan and the construction output value will exceed 180 billion yuan in 2025:

Domestic consumption of tile adhesives has increased year by year, from 3.5 million tons in 2013 to 12 million tons in 2020, with a 7-year CAGR of 19.3%. The bank predicts that from 2020 to 2025, the consumption of tile adhesives will increase from 12 million tons to 21.24 million tons, with a 5-year CAGR of 12.1%. The market size will increase from 14.3 billion yuan to 22.3 billion yuan, with a 5-year CAGR of 9.3%. In the long run, by 2030, the consumption of tile adhesives will increase to 28.5 million tons, and the material market size will increase to 29.9 billion yuan. With greater room for construction output value and the trend of rising labor costs, the bank estimates that the construction output value of tile adhesive paving will increase from 123.4 billion yuan in 2021 to 184.6 billion yuan in 2025, and will reach 247.7 billion yuan in 2030.

International brands take the lead, while domestic brands accelerate:

The domestic tile adhesive industry as a whole is small and scattered. As of 2021, there are nearly 4,000 domestic tile adhesive manufacturers, and the CR10 based on sales is 45%. Participants in the tile adhesive track can be divided into three types: international brands, domestic mainstream brands, and regional brands. International brands are still dominant, with obvious first-mover advantages, and have a long history in channel layout and customer marketing. The major domestic brands continue to make efforts, and the layout of tile adhesive products can not only meet the "one-stop procurement" needs of terminal owners or foremen, but also increase the sales order value. The construction output value of hundreds of billions of yuan attracts manufacturers to extend the paving business and tap the service value.

Reshaping of the market: Breaking the “small and scattered” situation, and guiding the concentration of domestic brands:

(1) Foreign investment layout implements retail distribution strategy and cultivates the fast-moving consumer goods and retail attributes of tile adhesive; (2) Compared with interior wall paint products, the "consumer product road" of tile adhesive is naturally not easy; (3) The risk exposure of real estate enterprises affects the development prospects of the building materials industry, and the sales channels of tile adhesive have not formed a situation of rapid expansion of large B projects; (4) Weak consumer attributes and distribution model mainly mean that cost and efficiency are the core of competition. 

The accelerated entry and increased market share of domestic mainstream brands will break the "small and scattered" situation, and the concentration power is expected to be controlled by domestic brands:

(1) "He who has the foreman has the world", and the foreman resource advantages of domestic first-line brands are also obvious;

(2) Domestic brands still have cost-effective advantages. Brand reputation, the opinions of decoration masters, and product quality are the key factors for consumers to choose tile adhesive brands.