Chemicals distribution started out with small scale entrepreneurs buying and selling excess or surplus quantities of chemicals – taking from the over-provided and selling to the needy, at least in chemical terms. Not exactly Robin Hood, but certainly providing a valuable medium in which to trade relatively small quantities of chemicals.
These small scale operators became specialised in specific sectors of the chemical and pharmaceutical sectors, becoming experts in pigments or pharmaceutical excipients or solvents to whom the big players in the industry turned when they needed the particular types of materials. The business also diverged somewhat into distributors and traders, those who sold speciality chemicals on behalf of a selection of the majors, perhaps acting as an agent in markets that the principle could not or did not want to access, and those who bought and sold those excess or surplus chemicals and sold them to those companies that found themselves in need whether due to unexpected product growth or problems with their own production activities.
Although the distinctions have remained blurred, with some companies doing both traditional distribution and trading, some years ago the market went through a major upheaval with a wave of consolidation that resulted in the big names like Univar and Brenntag appearing to dominate the sector.
As with the chemical majors from which some, like Univar with its Dow Chemical heritage, some of these large distributors are now suffering from the same problems that dog the chemical majors themselves – they have become slow in responding to market needs, or they have perhaps overstretched themselves financially, and increasing size has meant that dealing with smaller customers becomes unviable.
While turnovers in this sector may be considered large, the margins for individual products can be small and constantly changing. To be successful, nimbleness together with the traditional strength of the distributor and trader, personal relationships, are the key.
While the big distributors are looking for venture capitalists and other funding sources to maintain their cumbersome operations, the small and agile companies are beginning to enjoy the opportunities that are either lost by, or are moving too fast, for their larger brothers. We have even reached the point where the small operators are customers and clients to the large distributors as well as the major chemical producers.
With the addition of the emerging economies to the mix from Africa and South America to Asia, there are opportunities for everyone but speed and personal service remain paramount for success.
Selling chemicals is not just about the substance but the whole product, be it technical support or service, the right packaging or delivery size, as speciality chemical producers and distributors have always known; this message should not be forgotten by the chemical majors and the consolidated distributors, especially in the straitened times in which we find ourselves.
Neil Eisberg - Editor