Leadership Dialogue: NIPSEA China

China is an extremely competitive market, and growth without margin discipline is fragile. Volume gained at the expense of profitability is difficult to sustain and often damages brand value. NIPSEA China rejects a single price competition model and is driving the construction of a dual-engine model of “Innovation + Service.” This approach allows us to build a competitive moat that is not easily replicated, and puts us ahead of the competition.

We are particularly proud of Magic Paint, which exemplifies our commitment to innovation. More than just a paint product — it delivers a distinctive style and aesthetic experience through finishes such as leather, fabric, micro-cement, and stone. By collaborating with aesthetic ambassadors and leveraging on our well-known IPs (such as our Dream Home Makeover TV programs, individual creative content, music), we are positioning Nippon Paint as the brand of choice for taste and expertise, enhancing our brand equity across all product categories.

On the service side, we focus on delivering a seamless end-to-end experience from product selection through to delivery. As early as 2011, NIPSEA China launched its Hassle‑Free Renovation Service, or “No-Need-to-Lift-a-Finger” renovation service system, which was further enhanced under our 2025 strategic blueprint. By leveraging a growing network of community stores, we bring decision-making closer to consumers, convenience and encourage repeat purchases. As of end-2025, 300 NIPSEA China community stores had been rolled out nationwide. In 2026, Nippon Paint will roll out a community store upgrade program, strengthening the reliability of its “last‑mile delivery” through enhancements to store image, product offerings, and operating models. In parallel, we have set industry benchmarks through our talent certification system, ensuring that skilled applicators are trained to our standards. This not only builds trust but reinforces NIPSEA China’s reputation for quality craftsmanship.

Together, these innovation and service strategies help us stand out and deliver sustainable results, even in a highly competitive market.

According to the National Bureau of Statistics of China, floor space under construction by real estate developers declined by 10%, while completed floor space fell by 18% in 2025. Despite these industry headwinds, NIPSEA China’s revenue performance in 2025 demonstrated greater resilience, with revenues declining less than the broader industry average. This outperformance underscores the effectiveness of its strategic initiatives and its ability to adapt in a challenging environment.

NIPSEA China’s TUC strategy is centered on capturing growth in Tier 3-6 cities and expanding its texture coatings portfolio. The company has adopted an asset-light approach to enable rapid expansion into the smaller cities. A key component of this approach is the Application Service Partner model, which builds direct service relationships with painters and accelerates penetration in these markets. County distributors support service providers, allowing them to focus on customer acquisition and delivery, which ensures efficient distribution and quality service.

More than 12 million people have returned or moved to rural areas, driving demand for houses there. In 2025, government subsidies for rural revitalization totaled RMB 159.3 billion. Rural housing construction has shifted from basic shelter to decorative and functional needs, with residents seeking to live well. NIPSEA China’s texture paint strategy addresses these upgraded demands and needs by offering competitive and broad-range products tailored for rural markets. Enhanced production efficiency and price competitiveness make texture coatings accessible and attractive in these regions. NIPSEA China’s TUC strategy enables the company to gain ground and deliver resilient performance, even as the broader market continues to face headwinds.

TUB is undergoing a significant transformation. The slowdown in residential construction has accelerated our shift toward industrial and infrastructure-related projects. In these areas, technical capability, service quality, and reliability are paramount, outweighing price competition. We are focusing on project types where we can demonstrate differentiated performance, deliver on time, and manage risk effectively. This approach not only improves margin quality and reduces exposure to cyclical residential demand, but also enforces stronger project selection discipline and tighter credit controls. Since 2021, the proportion of non-commercial housing tracks—including industrial enterprises, municipal engineering, heavy industry, hotels, and commercial complexes—has gradually increased to over 50% of overall TUB business, and is expected to rise further to 60% by 2026. This strategic shift is establishing a stronger foundation for TUB’s long-term growth in a changing market environment.

Over the past three decades, NIPSEA China has consistently invested in building and strengthening our brand image, recognizing the importance of brand awareness in a highly competitive paint market. As a result, we have sustained a top-of-mind awareness rate of over 50%, representing an absolute advantage which is roughly twice that of competitors.

Our brand communication strategy is multi-faceted, including a longstanding collaboration with the TV program Dream Home Makeover which has been running for 11 consecutive years, embedding the brand’s image of revitalizing beautiful living spaces in consumers’ minds. We have promoted color expertise and established NIPSEA China as a leader in wall color trends, culminating in the launch of the “Magic Paint” series in 2022 and the introduction of a brand ambassador to lead the new trend of textured paint.

Our color strategy is multi-layered. First, we use data from our computerized color matching (CCM) tinting machines to understand what colors are trending in different regions, among different age groups, and at different times of year. This helps us stay ahead of the curve and tailor our offerings to what people actually want. We also run annual color trend reports and work with influencers on social media to promote popular colors especially on platforms like Rednote (Xiaohongshu), where we are ranked #1 for color. For more conservative customers, we recommend classic, versatile colors and provide easy-to-use matching formulas, supported by offline sales training and optimized store displays.

We have introduced AI tools to generate high-quality case materials and offer interactive color selection through our WeChat mini program. We create immersive color-themed spaces at major design exhibitions and partner with top art museums to enhance our brand’s appeal, especially among younger audiences. All these efforts culminate to make our color strategy a real driver of demand and a key part of our brand strength.

Over the past few years, we have driven significant organizational transformation, including the implementation of IPD (Integrated Product Development) and PDT (Product Development Team). We have established a platform‑based organizational model that seamlessly connects the front, middle and back offices to enable end‑to‑end collaboration. Our front office is sharply focused on key industries and customers, with a clear emphasis on understanding and capturing customer value. The middle office is centered on profit delivery and capability building, particularly through product and technology innovation, enabling us to develop differentiated solutions that truly stand out in the market. Meanwhile, our back office has built integrated service capabilities that keeps the whole organization running efficiently and cohesively.

We have strengthened processes in credit evaluation and management, especially for businesses within real estate. Our system now proactively identifies credit and liquidity risks for specific companies, enabling us to act before issues escalate. By establishing a coordinated approach across Legal, Finance, and Business, we ensure credit and default risks are addressed promptly and comprehensively. This helps us surface potential problems early and maintain a robust risk control environment.

NIPSEA China’s digitalization and AI strategy is centered on driving a “Data-flow integration + AI-driven” transformation. To ensure effective implementation, the Transformation Committee oversees strategic planning and decision-making, while cross-departmental working groups and consensus meetings facilitate project execution. The company has established an empowerment system for all employees, focusing on AI talent development, and conducts regular surveys and reviews for continuous optimization.

Some examples of AI projects include TUC’s AI Design application, which allows rapid generation of wall renderings and 3D videos within two minutes, TUB’s AI Intelligent Delivery Assistant reducing manual order processing rate and exceptional handling times, and a new “Hundred Cities, Thousand Stores” initiative to empower stores to upgrade from selling products to selling services.