Graco Inc. (GGG): PESTLE Analysis [Nov-2025 Updated]

You're looking for a clear, actionable breakdown of the external forces shaping Graco Inc. (GGG) right now, which is smart. The operating environment for industrial equipment is complex, so getting a handle on the Political, Economic, Sociological, Technological, Legal, and Environmental (PESTLE) factors is defintely the right move before making any big investment or strategy calls.

Political Factors: US Policy vs. Global Risk

The political landscape presents a mix of clear domestic opportunity and global cost. Continued US-China trade tensions complicate supply chain sourcing and market access for Graco Inc. Also, geopolitical instability in Eastern Europe and the Middle East increases commodity price volatility, which hits the cost of goods sold. But, favorable US industrial policy-think infrastructure spending-directly boosts domestic construction and manufacturing demand. The global push for reshoring manufacturing also creates long-term opportunities for domestic equipment sales. Political risk is a cost, but domestic policy is a clear tailwind.

Economic Factors: Margin Pressure and Currency Drag

The biggest economic news is the anticipated global interest rate stabilization in late 2025, which should ease pressure on customer capital expenditure (CapEx) budgets. Still, inflationary pressure on raw materials like steel and aluminum remains a margin risk, even if moderating. Graco Inc.'s projected 2025 net sales are expected to reach around $2.35 billion, reflecting modest growth in key segments. Here's the quick math: a strong US dollar still makes international sales less profitable when repatriating earnings. Plus, localized slowdowns in housing and non-residential construction hurt the Contractor Equipment Division. Currency translation is the biggest economic headwind right now.

Sociological Factors: The Automation Imperative

The persistent skilled labor shortage in painting, finishing, and maintenance drives a clear, structural demand for automated, easy-to-use equipment. This is a non-cyclical driver. Honestly, aging infrastructure globally necessitates more repair and maintenance, increasing demand for Graco Inc.'s specialized pumps. Customers are also showing increased preference for sustainable and low-VOC (Volatile Organic Compound) coatings, which requires compatible application systems. Finally, focus on workplace safety and ergonomics drives adoption of lighter, more efficient sprayers and fluid-handling tools. Automation demand is a direct response to a shrinking workforce.

Technological Factors: The Shift to Smart Systems

Graco Inc. is making significant R&D investments, focusing on 'smart' fluid handling systems with IoT (Internet of Things) for predictive maintenance and usage tracking. This integration of robotics and advanced automation in customer manufacturing lines is boosting demand for their precision dispensing equipment. To be fair, the development of new, highly viscous, and abrasive materials requires continuous innovation in pump and seal technology. Graco Inc. continues to invest over $50 million annually into R&D to maintain its technology lead in core markets. They are selling data and uptime, not just pumps.

Legal Factors: Compliance and Data Security

Stricter product liability laws in the EU and North America require enhanced safety features and clearer operating instructions for all products. Compliance with the latest OSHA (Occupational Safety and Health Administration) standards for confined space and hazardous materials handling is mandatory. Also, evolving international patent law requires constant vigilance to protect intellectual property (IP) on new dispensing technologies. Plus, increased scrutiny on data privacy regulations is a new compliance layer for connected 'smart' equipment. If onboarding takes 14+ days, churn risk rises. Legal compliance is now about product safety and data security.

Environmental Factors: Driving Product Innovation

Growing regulatory pressure to reduce waste and energy consumption in industrial coating and finishing processes is a major driver of product innovation. Customer demand is shifting toward equipment compatible with waterborne and solvent-free coatings to meet environmental standards. The focus on ESG (Environmental, Social, and Governance) reporting also drives internal goals for reducing Graco Inc.'s manufacturing carbon footprint. Supply chain due diligence is crucial to ensure materials are sourced from environmentally compliant partners. Environmental standards are creating a new product upgrade cycle.

Graco Inc. (GGG) - PESTLE Analysis: Political factors

Continued US-China trade tensions complicate supply chain sourcing and market access.

You can't talk about industrial manufacturing in 2025 without starting with the US-China trade dynamic. It's a persistent headwind, not a passing storm, and it forces a constant re-evaluation of your total cost of ownership (TCO) model.

For Graco Inc., the exposure is clear: China accounts for approximately 6% of both global sales and global production costs. The ongoing tariff uncertainty has compelled management to project a potential negative impact on full-year revenue of approximately 1% to 2%. Honestly, that's a manageable hit for a company of Graco's size, but it's pure margin pressure.

In the second quarter of 2025 alone, tariffs increased Graco's costs by $4 million, which compressed the gross margin rate by 80 basis points. To counter this, the company announced targeted price increases starting in September 2025. This is the new reality: a political cost that must be passed on to the customer or mitigated through supply chain redesign. Graco is actively exploring alternative suppliers and product redesigns to defintely reduce its tariff exposure.

Geopolitical instability in Eastern Europe and the Middle East increases commodity price volatility.

The political risks aren't confined to tariffs; they are now deeply embedded in your raw material costs and logistics. Instability in Eastern Europe and the Middle East has injected significant volatility into the markets for industrial metals and energy, which are core inputs for Graco's equipment.

The conflict-driven disruption in the Red Sea, for instance, continues to force shipping companies to reroute around the Cape of Good Hope, adding an extra 10 to 14 days to Asia-Europe transit times. This is why global container rates are still nearly 2 to 2.5x higher than 2019 norms as of late 2024. Meanwhile, a geopolitical escalation in the Middle East in June 2025 caused crude oil prices to spike, recording an intraday peak up to 13%.

Here's the quick math: for energy-intensive industries like steel and aluminum-key materials for Graco's pumps and sprayers-production costs rise by an estimated 2% to 4% for every 10% increase in energy prices. That pressure hits your manufacturing margins directly, and it's a political risk you can't easily hedge away.

Favorable industrial policy in the US (e.g., infrastructure spending) boosts domestic construction and manufacturing demand.

Now for the good news: US industrial policy is creating a massive, multi-year tailwind for domestic equipment suppliers like Graco. The federal government's commitment to infrastructure and manufacturing is translating into concrete demand for your fluid handling and coating equipment.

The Infrastructure Investment and Jobs Act (IIJA) and subsequent initiatives have committed over $1 trillion in federal and state funding. This is already showing up in the numbers:

• Non-building construction spending, which covers major infrastructure projects like highways and bridges, is forecasted to be up 17.6% by the end of 2025.
• Total private construction spending on manufacturing facilities has soared, increasing 3x from $76.2 billion in January 2021 to nearly $230 billion in January 2025.
• As of July 2025, manufacturing construction accounted for nearly 14% of all private construction spending in the US, a huge jump from 6% in January 2021.

This is a structural boost to your core markets, especially the Contractor and Industrial segments. This is a clear opportunity to grow your domestic market share.

Global push for reshoring manufacturing creates long-term opportunities for domestic equipment sales.

The political push for supply chain resilience, coupled with the economic reality of high logistics costs, is fueling a significant reshoring trend that directly benefits Graco's domestic equipment sales.

Between January and September 2025, companies announced over $1.2 trillion in investments toward building out US production capacity, led by sectors like electronics, pharmaceuticals, and semiconductors. The long-term commitment is there: the share of CEOs planning to reshore operations in the next three years increased by 15% compared to last year. Over 500,000 manufacturing jobs have been announced in the past two years through reshoring and foreign direct investment.

This shift means new factories, which require new equipment-your equipment. What this estimate hides is the premium customers are willing to pay for speed: 43% of Original Equipment Manufacturers (OEMs) would pay 10% to 20% more for components with a one-week lead time versus a six-week lead time, favoring domestic suppliers. The political climate is demanding resilience, and Graco is positioned to sell the tools for that resilience.

Here is a summary of the key political-economic impacts for Graco in 2025:

Next Step: Operations should immediately draft a 12-month commodity price and freight cost sensitivity analysis by Friday to stress-test the September price increase strategy.

Graco Inc. (GGG) - PESTLE Analysis: Economic factors

Graco Inc.'s Projected 2025 Net Sales and Growth

You need to know where the top-line is heading, and the picture for Graco Inc. is one of modest, acquisition-fueled growth against a challenging organic backdrop. The analyst consensus for Graco Inc.'s full-year 2025 net sales is projected to be around $2.25 billion. This reflects the company's official guidance of achieving low single-digit sales growth on an organic, constant currency basis. To be fair, this growth is heavily supported by recent acquisitions, which contributed a strong 6 percentage points of growth in the first quarter of 2025. The underlying market, however, is slowing down, so management is focused on operational efficiency to maintain profitability.

Global Interest Rate Stabilization and CapEx

The stabilization of global interest rates in late 2025 is defintely a positive signal for your customers' capital expenditure (CapEx) budgets. The Federal Reserve's key interest rate, which peaked at 5.50% in 2023, has seen cumulative cuts of about 100 basis points (1%) by late 2025, easing the cost of corporate borrowing. For Graco, which sells durable goods, this lower cost of capital should eventually translate into increased industrial and manufacturing investment. Plus, the full expensing of CapEx from 2025 to 2028 in the U.S. is expected to lower corporate tax burdens, freeing up cash for industrial equipment purchases. Graco itself is planning CapEx of approximately $50 million to $60 million in 2025, showing a commitment to internal investment despite the moderate sales outlook.

Inflationary Pressure on Raw Materials Remains a Margin Risk

Honesty, the raw material inflation story is not fully moderating; it's being renewed by policy. New tariffs in early June 2025 doubled pre-existing steel and aluminum duties from 25% to 50%, which immediately pushes up input costs for Graco's products. This tariff surge is a direct margin risk. For context, U.S. hot-rolled coil (HRC) steel prices had already surged by 30% since January 2025, reaching around $960 per ton by April. Aluminum premiums also hit a record 60¢/lb in June 2025. While Graco has historically offset some of these costs through price realization, the magnitude of the tariff hike makes it a persistent challenge to maintain the gross margin rate, which dipped in Q1 2025 due in part to higher product costs.

Strong US Dollar and Repatriated Earnings

The strong US dollar (USD) continues to be a headwind, making international sales less profitable once earnings are converted back to USD. In the first quarter of 2025, currency translation reduced Graco's net sales growth by 2 percentage points. Graco is a global company, so a stronger dollar means the revenue generated in euros, yen, or other currencies buys fewer dollars. The company's full-year guidance, assuming current exchange rates, projects a small 1% favorable impact on net sales from currency movement, but this is a volatile factor that can easily flip back to a drag, as seen earlier in the year. You need to watch the US Dollar Index (DXY) closely; any renewed strength will directly squeeze the reported value of Graco's non-US sales.

Construction Slowdowns Hurt Contractor Equipment Division

The softness in global construction markets, particularly in North America, is directly impacting the Contractor Equipment Division, which accounts for nearly half (48%) of Graco's total sales. The evidence is clear: organic revenue declined 2% in Q3 2025, with the CEO specifically citing ongoing softness in global construction. However, the outlook is mixed and regional. While the overall U.S. construction industry is forecast to show signs of growth in 2025, with residential construction anticipated to rebound by 12%, non-residential construction forecasts are more cautious, with projections ranging from a 2% to 6.9% increase in spending. The slowdown is not uniform, so the risk is concentrated in specific sub-sectors like commercial real estate and certain regional housing markets.

• Organic sales declined 2% in Q3 2025 due to construction softness.
• Residential construction is forecast to rebound by 12% in 2025.
• Non-residential spending forecasts for 2025 are highly varied, from 2% to 6.9% growth.

Graco Inc. (GGG) - PESTLE Analysis: Social factors

Persistent skilled labor shortage in painting, finishing, and maintenance drives demand for automated, easy-to-use equipment.

The most acute social factor impacting Graco Inc.'s core Contractor and Industrial segments is the persistent and severe skilled labor shortage. This is not a cyclical dip; it is a structural issue driven by a wave of retirements and a lack of younger workers entering the trades. To illustrate, the US construction industry alone needs to attract 439,000 new workers in 2025 just to meet demand. This deficit means contractors must complete more work with fewer hands, pushing them to invest in high-efficiency, automated, and less labor-intensive fluid-handling equipment.

This shortage directly translates into a higher demand for Graco Inc.'s advanced sprayers and pumps, which offer superior throughput and require less physical effort and training. Half of all skilled tradespeople identified the shortage of qualified candidates as the top challenge in 2024, a concern that continues into 2025. This trend makes a compelling business case for equipment that can effectively 'upskill' a less-experienced worker or allow a single skilled technician to cover a larger area.

• Skilled labor shortage is 'severe' in the painting industry.
• One in five construction workers is over 55, signaling mass retirements.
• Demand is shifting to automated tools that maximize crew efficiency.

Increased customer preference for sustainable and low-VOC (Volatile Organic Compound) coatings requires compatible application systems.

The global push for environmental, social, and governance (ESG) compliance and consumer health awareness has made low-VOC (Volatile Organic Compound) and water-based coatings the industry standard. This is a massive, growing market that requires specialized equipment. The global low-VOC paints and coatings market size is estimated to be valued at $28.3 billion in 2025 and is projected to grow at a Compound Annual Growth Rate (CAGR) of 3.8% through 2032.

Graco Inc. is defintely positioned well here because these newer, thicker, and often more abrasive water-based coatings require high-performance pumps and sprayers to maintain application quality and flow. Traditional equipment often struggles, leading to downtime and poor finishes. The company's ability to deliver fluid-handling systems compatible with these cleaner, more complex materials is a significant growth driver, aligning its product innovation with a major social and regulatory trend. The shift is driven by stringent environmental regulations and rising consumer awareness of health hazards linked to VOC emissions.

Aging infrastructure globally necessitates more repair and maintenance, increasing demand for Graco Inc.'s specialized pumps.

The social necessity to repair and maintain aging public infrastructure-like bridges, water systems, and highways-is translating into massive, long-term government spending, which is a key demand driver for Graco Inc.'s Industrial and Contractor segments. In the US, the Bipartisan Infrastructure Law (BIL) and subsequent state-level initiatives have committed over $1 trillion in total funds by 2025. This investment is not just for new construction, but for the repair and protection of existing assets.

For example, the Biden-Harris administration's 2025 fiscal year budget proposes $5.5 billion to states specifically for highway bridge rehabilitation and preservation. These projects rely heavily on Graco Inc.'s high-pressure protective coatings equipment to apply durable, anti-corrosion materials to steel and concrete. This is a stable revenue stream, as maintenance spending is less volatile than new construction. The overall US infrastructure sector is seeing unprecedented investment growth in 2025, which directly benefits equipment manufacturers.

Focus on workplace safety and ergonomics drives adoption of lighter, more efficient sprayers and fluid-handling tools.

A growing social and regulatory focus on worker well-being is pushing companies to prioritize ergonomics (the science of designing equipment to fit the worker) and safety. This trend is a clear opportunity for Graco Inc. to sell its lighter, more balanced, and often battery-powered equipment. OSHA is even focusing on new rules for 2025 that require protective equipment to properly fit individual workers to improve protection against worksite hazards.

The industry is actively looking to reduce musculoskeletal disorders (MSDs), which are one of the most common workplace injuries. Graco Inc. addresses this by designing tools that reduce fatigue and strain, like lighter spray guns and smaller, more portable pumps. The company itself highlighted its emphasis on safety and innovation in its late 2025 ESG report, noting its focus on products that help customers improve efficiency and support cleaner technologies. This alignment with safety trends is a competitive advantage.

Graco Inc. (GGG) - PESTLE Analysis: Technological factors

Significant R&D focus on 'smart' fluid handling systems with IoT (Internet of Things) for predictive maintenance and usage tracking

You need to know that Graco Inc.'s competitive edge is defintely tied to its push into smart fluid handling, moving past simple mechanical pumps to connected systems. This is the core of the Industrial Internet of Things (IIoT) for their market. Their focus is on giving customers real-time data to prevent downtime, which is the most expensive cost in a manufacturing line.

For example, the new QUANTM™ Electric Diaphragm Pumps not only cut energy use by up to 80% compared to traditional pneumatic models but also enable remote operation and easy integration with existing plant systems for process control. This is a massive shift. Also, Graco's Intelligent Paint Kitchen (IPK) system uses a network of sensors and control modules to manage paint circulation and supply, providing closed-loop pressure and flow mode control for both electric and pneumatic equipment.

Here's how Graco's technology is delivering smart data:

• SmartControl with Digital Display: Found on equipment like the ULTRA 450 sprayer, it shows real-time pressure, gallons used, and diagnostics, which is critical for maintenance tracking.
• Intelligent Auto-Shutoff: This feature, also on the ULTRA 450, activates when the sprayer runs out of material, safeguarding the pump and eliminating the risk of dry-running damage.
• Data Collection: Automated adhesive dispensing systems collect and monitor dispensing data in real-time, giving operators more control over process quality.

Integration of robotics and advanced automation in manufacturing lines is boosting demand for precision dispensing equipment

The global shift toward factory automation and robotics is a major tailwind for Graco's high-precision dispensing equipment. When you automate, you need equipment that can deliver repeatable, micro-level accuracy, and that's where Graco focuses its engineering efforts. Their products are designed to be robot-ready, integrating seamlessly into high-throughput production environments, particularly in the automotive and electronics sectors.

The company offers complete Automated Adhesive Dispensing Systems for small electronics manufacturing, where precision is non-negotiable for applications like bonding, sealing, and potting. This capability is what allows Tier 1 Automotive suppliers to maximize production and quality, as Graco's spray guns and mixing systems easily integrate with robots and reciprocators on the paint line.

Development of new, highly viscous, and abrasive materials requires continuous innovation in pump and seal technology

The materials science world isn't standing still; new, tougher coatings and adhesives are constantly being introduced for everything from electric vehicle batteries to protective infrastructure coatings. These materials-think silicones, high-solids epoxies, and urethanes-are often highly viscous or abrasive, and they destroy older pumps quickly. That's the challenge Graco's R&D teams are solving.

Graco's equipment is engineered with specialized components and corrosion-resistant materials to handle these difficult fluids, ensuring maximum uptime. For instance, their Husky Series of Air-Operated Double Diaphragm (AODD) pumps are specifically designed for abrasive fluids, sludge, and harsh chemicals, with flow rates reaching up to 1000 L/min depending on the model. The expansion of the QUANTM pump line in 2025 included the XTREME TORQUE (XT) motor technology, which is a direct response to the need for handling more demanding, high-viscosity materials in automated factory settings.

Graco Inc. continues to invest over $50 million annually into R&D to maintain its technology lead in core markets

Graco's commitment to innovation is clear in its financial statements. The company does not just talk about technology; they fund it aggressively. This sustained investment is what keeps them ahead of competitors who might only focus on incremental product updates.

For the Last Twelve Months (LTM) ending September 25, 2025, Graco Inc.'s Research & Development Expenses (R&D) totaled $82.5 million. This figure is a critical indicator of their long-term growth strategy, which prioritizes the development of next-generation, connected fluid-handling technologies. To be fair, this LTM figure is significantly higher than the $50 million benchmark, showing a clear acceleration in their innovation spend.

Here's the quick math on their recent R&D spend:

What this estimate hides is the strategic value of acquisitions, like Corob S.p.A. in 2025, which instantly brought in new tinting, mixing, and dispensing systems technology, effectively supplementing the internal R&D spend.

Next Step: Review the Industrial segment's Q4 2025 sales forecast to see if the new QUANTM line adoption is meeting management's expectations.

Graco Inc. (GGG) - PESTLE Analysis: Legal factors

Stricter product liability laws in the EU and North America require enhanced safety features and clearer operating instructions.

You need to recognize that the product liability landscape, especially in the European Union, has fundamentally shifted in 2025. The new EU Product Liability Directive (PLD) (EU) 2024/2853, which came into force in December 2024, is a game-changer for a global manufacturer like Graco Inc. This directive expands the definition of a 'product' to explicitly include software, AI systems, and digital manufacturing files. This means the software in your connected 'smart' dispensing equipment is now directly subject to strict liability claims, just like a defective pump component.

The biggest risk here is the shift in the burden of proof. The new PLD establishes several rebuttable presumptions of defectiveness and causation, making it easier for a claimant to win a case. For example, a court can now presume a defect exists if Graco Inc. fails to disclose relevant evidence during a claim. This procedural change, combined with the expansion of liability to digital elements, means your R&D and legal teams must collaborate to ensure safety features are not just compliant, but defensible.

The financial implications of a successful product liability claim are significant, particularly given the size of Graco Inc.'s operations. While the company's 2024 Form 10-K (filed February 2025) indicated that compliance with environmental laws did not have a material effect on capital expenditures, the new PLD and other regulations will defintely increase legal and compliance spending in 2025 and 2026.

Compliance with the latest OSHA (Occupational Safety and Health Administration) standards for confined space and hazardous materials handling is mandatory.

The cost of non-compliance with US workplace safety standards is rising, and the rules are getting stricter. OSHA introduced significant updates to its Confined Space regulations, with changes taking effect in 2025. Given that much of Graco Inc.'s equipment is used in industrial settings like tanks, silos, and pipelines-classic confined spaces-this is a direct operational concern for your customers and, by extension, your instructions and product design.

The maximum penalties for OSHA violations also increased as of January 15, 2025. The maximum penalty for a Serious or Other-Than-Serious Violation is now up to $16,550 per violation, up from $16,131. Your compliance strategy must also address the revised Hazard Communication Standard, which requires enhanced labeling to clearly communicate chemical risks, a necessity for any company dealing with fluid materials.

Here is a snapshot of the key OSHA compliance actions required due to the 2025 updates:

• Expanded Hazard Definitions: Must now account for emerging risks like micro-particulates and reactive chemicals in pre-entry assessments.
• Stricter Training: Requires annual refresher training for confined space entrants, attendants, and supervisors.
• Mandatory Reassessment: A hazard reassessment must be conducted before any confined space entry, even if conditions appear unchanged.
• Enhanced Rescue Drills: Rescue teams must conduct quarterly drills in simulated confined spaces.

Evolving international patent law requires constant vigilance to protect intellectual property on new dispensing technologies.

Protecting your intellectual property (IP) is a core competitive advantage for Graco Inc., especially in your advanced dispensing and spray technologies. Your total product development expenditures for all segments were $87 million in 2024, averaging about 4 percent of sales over the last three years, showing a significant investment that must be legally protected.

The reality is that IP disputes are an ongoing cost of doing business. For instance, the litigation case Graco Inc. et al v. Carlisle Construction Materials, LLC (D. Del. 2024) is still proceeding to trial as of late 2024. The court denied Graco Inc.'s request to dismiss Carlisle's antitrust claims related to US Patent No. 7,527,172 concerning spray-foam guns, meaning this costly and time-consuming battle over a core technology continues. This highlights the need for constant, proactive defense of your patent portfolio against both infringement and antitrust counterclaims.

The table below outlines the financial context of your R&D investment that IP law must protect:

Increased scrutiny on data privacy regulations for connected 'smart' equipment.

The rise of your connected or 'smart' equipment is a major opportunity, but it is now fully entangled in new data privacy legislation. The EU Data Act (Regulation 2023/2854) became applicable on September 12, 2025, and it profoundly impacts how Graco Inc. manages the data generated by its industrial machinery.

The core change is a shift of control to the user. The Data Act grants users of connected products-the owner of the machine-the right to access the data generated by the product, including non-personal data, and to request that data be shared with a third-party service provider. This means your aftermarket service business model, which may rely on proprietary access to machine performance data, is now under threat of disruption.

The most critical action item is updating your data contracts. Under the Data Act, Graco Inc. (as the 'data holder') may no longer use or share the data generated by a connected product without a contractual agreement, or a 'data license,' with the user. Plus, the existing GDPR rules are also getting teeth: non-compliance fines in 2025 can reach up to 6% of global annual turnover or €30 million, whichever is higher. You need to adapt your product design for 'access by design' and rewrite your service contracts now. It's a compliance challenge that will reshape your digital business model.

Graco Inc. (GGG) - PESTLE Analysis: Environmental factors

Growing regulatory pressure to reduce waste and energy consumption in industrial coating and finishing processes.

You are seeing a clear, accelerating trend where government bodies, particularly the Environmental Protection Agency (EPA), are tightening the screws on industrial emissions. This isn't just a future threat; it's a current-year cost driver. The push is specifically targeting Volatile Organic Compounds (VOCs), which are gases emitted from many traditional solvent-based coatings. Tough environmental rules are forcing industries to invest in high-quality, precision equipment that minimizes waste and boosts energy efficiency.

For Graco Inc., this regulatory pressure is a massive opportunity, not just a compliance hurdle. Our equipment is engineered to thrive in this environment. For example, in January 2025, Graco partnered with a robotics firm to develop fully automated coating systems for automotive plants. This kind of automation is defintely key because it reduces material overspray-which is waste-and cuts down on the energy needed for ventilation and curing.

Here is a quick look at the market pressures driving this:

• VOC Regulation: Forces a shift away from traditional solvent-based coatings.
• Industrial Coatings Market Value (2025): Projected to hit $109.9 billion.
• Coating Equipment Market Value (2025): Valued at $21.3 billion.

Customer demand for equipment compatible with waterborne and solvent-free coatings to meet environmental standards.

Honestly, the market is already moving, and customers are leading the charge. They aren't waiting for the next EPA deadline; they are demanding equipment that can handle waterborne and 100% solids (solvent-free) coatings right now. It's better for their employees, better for their brand reputation, and often cheaper in the long run due to reduced material costs and disposal fees.

The data confirms this shift. The industrial coatings market growth is substantially driven by the move toward sustainable formulations, with over 38% of manufacturers transitioning to water-borne and other sustainable systems. Graco is positioned well here because our protective coatings product line is already designed to handle high-solids and solvent-free coatings, like 100% solids epoxies and polyurea. Our precision dispense technology is crucial for customers trying to decrease waste and reduce the release of VOCs.

Focus on ESG (Environmental, Social, and Governance) reporting drives internal goals for reducing manufacturing carbon footprint.

The focus on ESG reporting is an external investor requirement that translates directly into internal capital expenditure decisions. Graco Inc. released its annual ESG report on November 10, 2025, which underscores our commitment to sustainable practices. The CEO, Mark Sheahan, has been clear: we manage the business by 'conserving natural resources, minimizing our carbon footprint and championing circular economy principles.' That's a strong signal to the market.

This commitment means real, tangible investments in our own operations. We are opening new manufacturing facilities that are explicitly designed to have a 'reduced environmental footprint,' and we are continually looking to install more efficient equipment. We also appointed a global environmental, health, and safety leader to make sure our policies are aligned globally, which is a key governance step. It's about walking the talk on resource conservation and minimizing our energy use, which directly impacts greenhouse gas (GHG) emissions.

Here's the quick math on our internal focus:

Supply chain due diligence is crucial to ensure materials are sourced from environmentally compliant partners.

The regulatory and reputational risk doesn't stop at our factory door. We are responsible for the environmental integrity of our entire value chain. That's why supply chain due diligence is a non-negotiable factor in 2025. Graco Inc.'s 'Supplier Code of Conduct' was last updated on July 28, 2025, and it clearly outlines these expectations.

The code requires our suppliers to 'comply with or exceed the requirements of all applicable environmental laws and regulations.' More than just compliance, we expect them to adopt continuous improvement practices, prevent pollution, and responsibly manage resources. We encourage suppliers to set their own 'carbon reduction goals' and implement effective emissions management practices. This isn't a suggestion; it's a mandate that must be passed down to their own suppliers, fostering compliance at all tiers of the supply chain. Our financial stability depends on a stable, compliant, and sustainable supplier base.