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Study “Chemical Distribution 2012“
- Results Dr. Matthias Hornke, LL.M. (M&A)
Münster, February 2012

Matthias.Hornke@gmx.de

Agenda

Status Quo and Study Overview
Results: Overview

Results of the Online Survey
Function/ Responsibility of the Respondent
Role of Chemical Distributors
Challenges and Key Success Factors of Chemical Distributors
Classification of Respondents

Contact: Grosse-Hornke Private Consult

1

Chemical distributors with growing relevance to chemical manufacturers and end-customers of chemical products

Status Quo Chemical Distribution

Economic recovery of the chemical distribution in 2010 and 2011 with record revenues of approx. €190bn generated by the German chemical industry in 2011
Growing relevance of chemical distributors as partners of the chemical manufacturers representing >10% of market share (in terms of revenues) for basic and special chemical products
Increasing coverage of news about the chemical distribution in trade media as well as general business media stressing the economic relevance and development (e.g. M&As) in this industry

ard trend tow continued f the distribution a “There is rcing o d outsou rers [to crease in manufactu sident hemical] Pre
[…] by [c n Zillmer, rs].” (Joh distributo nivar, 2010)
,U
and CEO

rowth ontinued g ss, D set on c
“IMC
ical Busine
CIS Chem path.” (I
2011)

n in the Distributio shifts up a gear
“M&A Activity al Week, 2011)
Sector.” (Chemic

nges tor IMCD cha mical distribu
“Che
hands.” private equity eek, 2010)
(Chemical W

-based erman Mülheim shopping tour: G
“Large
intends to acquire
Dealer Brenntag
Sonntag,
Chemical
IPO.” (W elt am companies after further 2010)

2

The sample of the study “Chemical Distribution 2012” mirrors the fact that the chemical distribution industry is highly characterized by SMEs

Study Objectives

Identification of key success factors and trends in the chemical distribution industry within
Germany, Austria and Switzerland
Demonstration of international distribution and supply markets’ relevance
Analysis of chemical distributors’ role positioned between chemical manufacturers and endcustomers

Study Format

Online survey with 62 participants and additional face-to-face interviews
Academic cooperation with the University of Münster
Study conducted in October/ November 2011

Respondents

50% of the participants belong to the executive management, 48% to sales/ marketing and 2% are miscellaneous 53% of respondents distribute basic chemical products and 90% specialty chemicals
42% of the participants employ more than 100 employees, 10% between 50 and 100 employees and 26% between 10 and 50 employees
Annual revenues (2011): 21% of the participants generate > €250m, 10% between €100m and
€250m, 8% between €50m and €100m, and 29% between €10m and €50m
81% of the companies are family-owned

SME = Small and medium-sized enterprises

3

Agenda

Status Quo and Study Overview
Results: Overview

Results of the Online Survey
Function/ Responsibility of the Respondent
Role of Chemical Distributors
Challenges and Key Success Factors of Chemical Distributors
Classification of Respondents

Contact: Grosse-Hornke Private Consult

4

Summary: Study „Chemical Distribution 2012“

Evaluation by the 62 study participants:

The majority perceives the partnership with chemical manufacturers as cooperative
Industry &
Role of
Chemical
Distributors

Technical trainings and product trainings are a strong requirement for chemical manufacturers
Face-to-face contact as major communication channel to manufacturers as well as to end customers
Distributors perceive themselves as intermediary between producer and end customer
Request for intensified manufacturers‘ development programs for distributors
Industry change is mainly forced by globalization and competition in saturated markets

Considerably increasing demands for employee qualification as key challenge in this industry
Skill shortages as an important and acute challenge for chemical distributors
Challenges &
Success
Factors

Expansion of distributors’ service offers to end customers as a success factor
Customers’ demand for reliability, speed and flexibility has increased significantly
Increased sourcing in Asia (particularly China and India) is planned
Focusing of product categories, industries, and applications provide good prospects to distributors
Activity for Mergers & Acquisitions is slightly increasing

Chemical Distribution: Strongly cooperative relationship between manufacturers and distributors – however, there is demand for intensification of partnership, e.g. regarding product trainings and distributor development programs
5

Detail: Chemical manufacturers and distributors:
Tight partnership for long-term market success

Requirements for profitable growth in 2012

Chemical
Manufacturers
Service

Product training offers Contact person for REACH and other regulations
Focus on Key
Account Mgmt.
Technical
trainings for chemical distributors

Chemical Distributors
Close
Cooperation between Distributor and Manufacturer

Focus on
Face-to-face
contact
Support
through ITapplications
Demand for retailer development measures 1) CRM = Customer Relationship Management

Strategic
Expansion to new procurement markets in
Asia (China, India)
Organic growth, enhancement of market penetration Constant M&A activities
Enlargement of service offers Focus on specific product groups and industries

Operative
Cost efficiency optimization
Enhance employee qualification and recruitment

Customers
Comprehensive
Customer
Relationship
Management

High relevance of face-to-face contact
Increasing
relevance of
CRM1-Tools

Customer
Requirements

Focus on:
Reliability
Delivery speed
Flexibility of delivery dates
Low prices

6

Agenda

Status Quo and Study Overview
Results: Overview

Results of the Online Survey
Function/ Responsibility of the Respondent
Role of Chemical Distributors
Challenges and Key Success Factors of Chemical Distributors
Classification of Respondents

Contact: Grosse-Hornke Private Consult

7

Function/ responsibility of respondents

Question: Which functional area do you work in? (Multiple answers allowed, n=62)
Executive Management

50% (31)

Sales/ Marketing
Supply
HR

I answer questions for …
(n=62)

48% (30)
8% (5)
5% (3)

73% (45)
27% (17)

… the entire company

… a department of the company

High relevance of study through high participation of executive managers, as well as employees/ managers working in sales and marketing.
8

Agenda

Status Quo and Study Overview
Results: Overview

Results of the Online Survey
Function/ Responsibility of the Respondent
Role of Chemical Distributors
Challenges and Key Success Factors of Chemical Distributors
Classification of Respondents

Contact: Grosse-Hornke Private Consult

9

Role of the distributor

Question: Does the description of the distributor as intermediate with global and local competences also apply for your company? (n=62)
Yes (95%)

No (5%)

Question: Which tasks do express the best your function as an intermediate?
(Multiple answers allowed, n = 62)
Bringing together demand and supply
Customs documents, REACH etc.

82% (51)
79% (49)

Bundling of small-volume demands

71% (44)

Interface for information exchange regarding customer requirements 69% (43)

Information exchange about technological innovations

52% (32)

The majority of respondents sees themselves as intermediary between manufacturers and end customers.
Bringing together demand and supply as well as management of legal and regulatory affairs (customs documents,
REACH, etc.) represent the most named tasks of the respondents.
10

Communication channels
Question: Which channels do you use for your communication?
(Multiple answers allowed, n=62)
100% (62)

Face-to-face contacts

92% (57)
65% (40)

Own IT-structures

Standardized systems for Customer
Relationship Management (CRM-Tool)
Others

IT-structures of the manufacturers

53% (33)
52% (32)
19% (12)
24% (15)
21% (13)

… with the customers
… with the chemical manufacturers

18% (11)
48% (30)

Face-to-face communication is ranked highest by chemical distributors – in contact with chemical manufacturers as well as with customers.
Two third of interviewees stated that they use IT-systems additionally when communicating with their customers, and more than half of the respondents also utilizes Customer-Relationship-Management (CRM) systems.
11

Evaluation of the cooperation with chemical manufacturers
Question: How do you evaluate the cooperation with chemical manufacturers?
(n=62)
The cooperation is dominated by ... no one

84% (52)

the chemical
13% (8) manufacturers us, as chemical distributor 3% (2)

Question: Do you think that chemical manufacturers will tighten their efforts to set up their own distribution companies in the future?
(n=61)
No (74% = 45)

Yes (26% = 16)

Despite the high market power and financial power of chemical manufacturers 84% of the study participants assess the relationship as fair. Merely 3% declare that distributors are dominant, versus 13% who identify a dominance of manufacturers. This positive cooperation between distributors and manufacturers is supported by the assumption that chemical manufacturers do not have intentions to set up their own distribution companies in the future (74%).
12

Requirements to the chemical manufacturers and key success factors for the cooperation
Question: Which characteristics of chemical manufacturers are important for a successful cooperation with your company? (n=62)
Key Account Management for distributors at the chemical manufacturer Important, but not
8%
offered
67%
Important
Unimportant
18%
No answer

7%

Development programs for distributors
Important, but not
23%
offered
23%
Important
Unimportant
No answer

No answer

Important, but not offered
Important
Unimportant
No answer

7%
75 %
13%
5%

Sales training offers
Important, but not offered
Important
Unimportant

36%
18 %

10%
21%
59%

No answer

Product training offers
Important, but not offered
Important
Unimportant

Specific contact person for REACH and other regulations

10%

Technical training offers
5%

Important, but not offered
85%

8%
2%

15%
66%

Important
Unimportant

16%

No answer

3%

Product training offers are evaluated by 85% of the participants as important and is clearly higher ranked than the requirement to provide a contact person, e.g. for REACH and other regulations (75%) and the existence of a Key
Account Management for distributors at the chemical manufacturers (67%).
In contrast, a considerable amount of respondents (59%) ranks sales training offers as unimportant.

13

Agenda

Status Quo and Study Overview
Results: Overview
Results of the Online Survey
Function/ Responsibility of the Respondent
Role of Chemical Distributors
Challenges and Key Success Factors of
Chemical Distributors
Classification of Respondents
Contact: Grosse-Hornke Private Consult

14

Challenges for the chemical distributors
Question: Do the following issues currently represent a challenge for your company?
(n=62)
Arithmetic mean (rounded)
Increasing requirements regarding employee qualification Ø 3,59

n (61)

Lack of qualified personnel

Ø 3,08

n (60)

Fuel cost of transportation

Ø 3,03

n (59)

Demographical aspects of employees

Ø 2,69

Generation change in family-owned companies

Ø 2,42

Energy cost for facilities

Ø 2,27

1
2
Not a challenge at all

n (58) n (60) n (56)

3

4

5
Major challenge

Growing requirements regarding employee qualification as well as a lack of qualified personnel challenge many chemical distributors.
15

Key success factors for chemical distributors

Question: Which factors do you regard as important for a successful future of your company? (n=62)
Arithmetic mean (rounded)
Employees/ employee qualification
Enlargement/ diversification of portfolio

Ø 4,11

Enhancement of services
Specialization of product portfolio

n (62)

Ø 4,42

n (61)

Ø 3,95

n (61)

Ø 3,67

Focusing on specific regions (e.g. Eastern
Europe, Southern Europe, …)

Ø 3,42

Expansion to international sales markets

n (61)

Ø 3,29

Take-overs within the industry

n (62)

Ø 3,07

Succession planning

n (62)

Ø 2,96

Other business cooperations (e.g. supply partnerships) Ø 2,5

1
2
Very unimportant

n (59) n (57) n (58)
3

4

5
Very important

The majority of the study participants assesses employees or employee qualification as a key success factor with high relevance.
16

Development of M&A activities

Question: How do you evaluate the development of M&A activities for the German chemical distribution industry in the next two years?

55%
(29)
2% (1)
1

4% (2)
2

3

34%
(18)

6% (3)

4

5

("1" = strong decrease, "3" = constant, "5" = strong increase)

A majority of study participants assumes constancy (55%) and slight increase (34%), respectively, of M&A activities in the future.
17

Reasons for M&As
Question: Which are the primary reasons for M&As?
(Multiple answers allowed, n=62)
Increase of market share in existing markets
Expansion to new geographical markets

77% (48)
69% (43)

Expansion to new product markets

66% (41)

Increase in efficiencies, economies of scale

63% (39)

Integration of competitors
Access to new technologies/ know-how
Missing succession
No answer

56% (35)
50% (31)
37% (23)
6% (4)

Growth as major reason for Mergers and Acquisitions

18

Factors for an industry change
Question: Do you agree that a strategic change has occurred in the chemical distribution industry during the last two decades? (n=59)
86% (51)
14% (8)

Yes

No

If yes, what did cause the industry chance in your opinion?
(Multiple answers allowed, n=62)
Globalization

68% (42)

Intense competition in mature markets

63% (39)

Increasing regulatory requirements (e.g. REACH)
Repositioning of manufacturers regarding chemical distribution 63% (39)

Increased demand for services by the customers
Technology change
Generational change

60% (37)
45% (28)
23% (14)
16% (10)

Globalization, intense competition in mature markets and increasing regulatory requirements were identified as key reasons for the industry change for chemical distribution.
19

Characteristics for a successful cooperation with customers

Which characteristics appreciate your customers most?
(maximum three answers, n=62)
Reliability
Low prices
Face-to-face contact

75,8 % (47)
46,7 % (29)
38,7 % (24)

Delivery speed

33,9 % (21)

Flexibility in the delivery dates and delivery intervals

32,3 % (20)

Product portfolio

30,6 % (19)

Delivery of small quantities
Flexibility in delivery quantities

12,9 % (8)
11,3 % (7)

Chemical distributors think that their customers pay particular attention to reliability (76%). In contrast, low prices (47%) and face-to-face contact (39%) are considered as less relevant.
20

Evolvement of customer requirements
Question: How the customer requirements have changed during the last five years?
(Multiple answers allowed)

Reliability

Arithmetic mean (rounded) n (57)
Ø 4,11

Delivery Speed

Ø 3,93

n (58)

Flexibility of delivery dates

Ø 3,88

n (57)

Low prices

Ø 3,72

Flexibility of delivery quantities

Ø 3,62

Face-to-face contact

Ø 3,39

Delivery of small quantities

Ø 3,27

n (58) n (58)

Ø 3,5

Product portfolio

n (58)

1
Less important

2

n (57) n (56)

3
No change

4

5
More important

Characteristics such as reliability, delivery speed and time-related flexibility gained significance for the customers in the past five years.
21

Potential markets for chemical distributors
Question: Which markets are attractive for your company in the future? (n=62)
China, India
Asia (China, India excluded)

23% (14)
87% (54)
16% (10)
61% (38)
66% (41)
53% (33)

Eastern Europe

87% (54)

Western Europe

50% (31)

Middle East

27 % (17)
37% (23)

North America

21% (13)
36% (22)

Southern Europe
South America
Africa
Australia, Oceania
None

40% (25)
32% (20)
15% (9)
26% (16)
18 (11)
10% (6)
11% (7)
5% (3)

For sales
For supply

5% (3)
0%

The study results clearly show the increasing relevance of Asia as a procurement market. China and India in particular are perceived as attractive supply markets in the future by 87% of participants.
22

Entrance barriers of attractive sales and supply markets
Question: Which problems do you see for entering an attractive market?
(Multiple answers allowed, n=62)

Many markets are mature, saturated

60% (37)

Currency uncertainty

45% (28)

Lack of own resources (e.g. Personnel)

44% (27)

Capital intensity

39% (24)

Cultural aspects

32% (20)

Markets are not sufficiently developed

32% (20)

Political uncertainty

31% (19)

No access to partnerships
No answer

28% (17)
6,5 % (4)

As entrance barriers to sales and procurement markets the respondents have ranked market maturity (60%) as most important problem, followed by currency uncertainty (45%) and lack of own personnel resources (44%)
23

Management of delivery shortfalls

Question: How do you deal with delivery shortfalls of the chemical manufacturers?
(Multiple answers allowed, n=62)

We buffer uncertainties with high inventories
We change the source
We wait for new delivery capabilities

66% (41)
44% (27)
31% (19)

We are not concerned
No answer

16% (10)
5% (3)

The majority of the respondents (66%) uses high inventories to prevent themselves from delivery shortfalls.
44% of the participants consider changing the manufacturer in the case of a delivery shortfall.
24

Impact of the raw oil price increases on the product pricing

Question: Do you pass price increases (of raw material) to your customers in the short term?
(n=61)

Question: Do you pass price increases (of raw material) to your customers in the long term?
(n=60)

85 %
15 %

No

87%
13%

Yes

Yes

No

Price increases of raw materials are passed to the customers in the short and long term.
25

Development potentials of chemical distributors
Question: Where do you identify development potentials for your company?
(Multiple answers are possible, n=62)
Organic growth, enhancement of market penetration

69%

Enhancement of service offers

61%

Focus on specific product groups

61%

Focus on specific industries

60%

Focus on selected applications

50%

Mergers & Acquisitions

39%

Specialization in serviced for regulatory changes (e.g. REACH)

27%

Specialization in sustainability topics

24%

Becoming a “generalist“ and to broaden the product portfolio to spread the risk

24%

Purchasing Association

19%

IT-services and IT-infrastructure

18%
15%

Enlargement of production capabilities
Concentration on current topics such as electro mobility or renewable energies
No Answer

8%
2%

Growth opportunities for 2012 are identified by the respondents in organic growth/ enhancement of market penetration
(69%), enhancement of service activities (61%), focus on specific product groups (61%), focus on specific industries
(60%), as well as focus on selected applications (50%).

26

Agenda

Status Quo and Study Overview
Results: Overview
Results of the Online Survey
Function/ Responsibility of the Respondent
Role of Chemical Distributors
Challenges and Key Success Factors of
Chemical Distributors
Classification of Respondents
Contact: Grosse-Hornke Private Consult

27

Field of activities of participating companies

Question: What is your company‘s field of activity?
(Multiple answers allowed, n=62)
90%

Distribution
Third-party deals

77%

Retailing

60%

Warehousing

57%

Production
Engineering

24%
3%

The study participants clearly represent the chemical distribution industry (90%). At the same time, many participants also do business in distribution-related fields of activities such as third-party deals, retailing and warehousing.
28

Service offer of chemical distributors
Question: Which services are offered by your company in addition to your core business?
(Multiple answers allowed, n=62)
Technical support incl. advisory services for REACH

77%

Laboratory services

47%

Packaging, labeling

47%

Assembling

39%

Vendor Managed Inventory (VMI)

23%

Sieving, grinding, etc.

21 %

Research and development
No answer

18%
8%

The majority of companies (77%) offer technical support (incl. advisory services for REACH), laboratory services
(47%), packaging/ labeling (47%), and assembling (39%) in addition to their core business
29

Product portfolio of study participants

Question: Which products does your company offer?
(Multiple answers allowed, n=62)
Specialty chemicals

90%

Basic chemicals

No answer

53%

3%

The study participants distribute in particular special chemicals (90%) as well as basic chemicals (53%).
30

Number of customer industries for chemical products

Question: How many industries does your company supply with chemicals?
(n=62)
More than 10

47 %

6 to 10

34 %

2 to 5

15 %

1

2%

No answer

2%

Approximately half of the participating companies supply more than 10 industries with chemicals.
31

Business segments of study participants

Question: How is your business allocated (on a value basis) among the following three business segments?
(Multiple answers allowed, n=62)

79%

17%
Chemicals
(agrochemicals excluded) 12%

Pharmaceuticals

Agrochemicals

Key business segment of study participants is chemicals (79%).
32

Size of participating chemical distributors

Question: Number of employees of your company in 2010? (n=62)
42 %

More than 100

10 %

51 to 100
31 to 50

3%

Question: Revenues generated by your company in 2010 (in €)?
(n=62)
> 250m
100 - 250m
50 - 99m

21 %
10%
8%

10 - 49m

11%

< 5m

< 10

29 %

5 - 9m

10 to 30

10%

23 %
22 %

No answer

11%

42% of the study participants represent companies that employ more than 100 employees. 21% generate revenues higher than €250m (in 2010).
33

Ownership structure of participating companies

Question: Is your company familyowned?
(n=62)

81 %
19 %

Yes

No

The majority of study participants represents companies, which are family-owned.
34

Agenda

Status Quo and Study Overview
Results: Overview

Results of the Online Survey
Function/ Responsibility of the Respondent
Role of Chemical Distributors
Challenges and Key Success Factors of
Chemical Distributors
Classification of Respondents

Contact: Grosse-Hornke Private Consult

35

Contact

Internet (www.grosse-hornke.de)1

Dr. Matthias Hornke, LL.M.
Grosse-Hornke Private Consult
Am Dornbusch 54
48163 Münster
Tel.: +49 2501 59435-10
Fax: +49 2501 59435-11 mobile: +49 172 6814074 email: matthias.hornke@grosse-hornke.de www.grosse-hornke.de 1) English page: www.grosse-hornke.com

36

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...Elizabeth Fechtel is no rookie when it comes to pageants. The former Miss America’s Outstanding Teen 2012 is now this year’s Miss UF. The 19-year-old telecommunication sophomore was one of 18 contestants at this year’s pageant and said she saw it as an opportunity to do what she loves. But when asked whether or not she thought she was going to win, Fechtel’s immediate answer was no. “Because I’d done pageants before, some of my friends thought, ‘oh, easy breezy,’” she said. “But I knew how difficult it was walking on stage in a gown.” Miss UF is a preliminary pageant to Miss Florida, which is preliminary to Miss America. “There are so many pageants, but there is only one Miss America,” she said. As Miss UF, Fechtel will uphold the four pillars of the Miss America...

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