Sherwin-Williams Industry Analysis

Introduction to Sherwin-Williams

Two young entrepreneurs and a lot of dedication and drive. That's how it all began. Henry Sherwin, a native of Cleveland OH and graduate of Western Reserve College, weighed all of his career options and decided to go into business for himself. He pulled all of his resources and bought a stake in Truman, Dunham and Co, a firm that sold painter's pigments, linseed oil, colors, brushes and other finishing and decorating products. Although this was not high on his list of choices, he saw potential in the industry. It was the post civil war era and Cleveland was experiencing an economic boom. His plan was to develop the market for paint and coatings to not only corporate America, but to the untapped consumer market as well. He was looking for the now called "Do It Yourselfer" who wanted to have a part of their own home improvement with a quality product. Edward P. Williams joined Sherwin in the late 1860's after ending his partnership with a glass company in Kent, OH. The two men never could have dreamed where their investment would lead them.

Today, Sherwin-Williams has more than 2600 company owned stores in 50 states, Canada and Mexico. They are the US market leader in distribution and sales of coatings (paints, lacquers, varnishes, etc) and coating related products. Their annual revenues exceed $5 million and they are ranked in the Fortune Top 400 companies. They are one of the world's leading companies involved in the manufacture, distribution, and sale of coatings and other products in the professional, industrial, commercial and retail customer. They manufacture and sell under the name Dutch BoyТ, Pratt and LambertТ, Martin-SenourТ, Dupli-ColorТ, KrylonТ, Thompson'sТ, and MinwaxТ.

Through all of this, Cleveland based Sherwin-Williams has remained committed to customer service and production of a quality product. They have a strong commitment to everyone involved in their company - customer, vendor, shareholder and employee alike. As stated in their business ethics policy, they are committed to conducting business in an ethical and legal manner throughout the world with the highest standards of integrity. They are committed to protecting the environment, health and safety of employees, customers and the public and they are an example for any company out there of how a successful company conducts business. (www.sherwinwilliams.com)

Economic Environment

Sherwin-Williams and its subsidiaries are broken up into four different divisions including: Paint Stores, Consumer, Automotive Finishes, and International Coatings. Sherwin-Williams surpassed the $6 billion in sales for the first time in history. Three of their four operating segments grew their sales and operating profits. Sherwin-Williams faced rising raw material costs but still declared a 20 percent increase in quarterly dividends payable to shareholders in 2004. In 2004, annualized yearly raw material costs for the industry increased more than any time in the last decade. This resulted in pressure on their consolidated gross margin. Sherwin-Williams has put forth efforts to offset raw material cost increases through manufacturing efficiencies, higher fixed cost absorption, alternative technologies, tight expense control, and measured price increases.

There were an increased number of contractor sales and architectural paints along with related supplies. An increase in Do-It-Yourself customers has also helped with strong sales growth. The increase in the Do-It-Yourself market resulted in higher sales of paints, wood care products and aerosol products. The services of professional painting contractors