Distributors Are Crucial to the Supply Chain

Interview with Neville Prior, President of the FECC and Chairman of the Cornelius Group

  • Dr. Neville Prior, president of the European Association of Chemical Distributors (FECC)Dr. Neville Prior, president of the European Association of Chemical Distributors (FECC)

In May 2014, Dr. Neville Prior, Chairman of the Cornelius Group, took over as president of the European Association of Chemical Distributors (FECC). Speaking about his appointment, Dr. Prior said, "It is now my turn to lead the association into the next phase, without losing the essence of FECC." Dr. Michael Reubold asked him about the current state of the chemical distribution industry, his outlook, and the goals he has set for his presidency.

CHEManager: What is your personal perception of the European (or global) chemical distribution market in terms of market size and the emergence of new opportunities?

N. Prior: The chemical distribution sector is large. We believe it to be around €170 billion globally, with about €30 billion in Europe. If one looks at growth rates, then the emerging markets show double-digit growth, whereas we do not see this in the mature economies of Europe and North America. Overall growth rates are between and 6% and 7%, which of course gives rise to new opportunities each year.

Do you expect growth opportunities for chemical distributors due to an increasing market volume or will we rather see a shifting of market shares via industry consolidation in a stagnant market?

N. Prior: The market continues to grow, and we see that manufacturers are increasing their use of distributors. This gives opportunity to those distributors that can match their strategies to those of their principals, or that can fulfill a service in a specialized niche. Industry consolidation will continue where it makes sense, but the industry is still highly fragmented, and will continue to be so.

What will be the major trends influencing the direction the chemical distribution industry will take in the future, and what do you see as the biggest challenges that the industry will have to deal with?

N. Prior: There will be trends going in two directions. One will encompass the large volume, less specialized chemicals, and will necessitate that distributors offer a cost-effective service to principals, whilst meeting all health, safety and environmental requirements. The second will be in the field of specialties, and will require distributors to not only offer sales expertise, but to go further in creating innovative solutions for principals and customers alike. Distributors will need to invest in technical functions, and added value facilities such as blending and compounding.

The acronym VUCA is frequently being used to describe the volatility, uncertainty, complexity and ambiguity of market conditions also in the chemical and pharmaceutical industry. How does the VUCA world affect chemical distributors?

N. Prior: In common with other businesses, distributors are affected by all of these things. The positive thing for distributors is that generally they have very flexible business models, and are able to adapt to rapidly changing conditions. It is no coincidence that the industry has come through the recent global financial crisis in a strong position, and we would see this continuing for the future.

How will chemical distributors have to adapt their business models or strategies in order to participate in the future growth of their principals?

N. Prior: This is all about aligning strategies with those of the principals. We see manufacturers looking to work more and more with good distributors. No longer can a distributor simply act as a sales conduit. They have to share appropriate information and work in partnership. Distributors have to add value in many ways, including managing supply chains; working with principal and customer alike to create innovative solutions; ensuring good health, safety and environmental practice; and providing repacking, blending and other added value operations. Distributors will need to invest in resource and relevant assets where necessary.

As the link in the chemical supply chain that connects producers with buyers, distributors do often feel (financial) pressure from both sides. How can they ensure their fair share of the business?

N. Prior: Distributors may feel that they are "caught" in the middle, being squeezed from above and below. However, providing that they can show their value to customers and principals alike, then they have an important part to play in the supply chain. The skills of distributors are often unique, and the ability to supply "baskets of goods" alongside expertise in products and services, can give them a strong position with many customers.

As in the chemical industry, small and medium-sized companies are forming the majority of the distribution industry. A question that is therefore constantly being discussed is, "Does size matter?" Does it matter?

N. Prior: In reality, size is not the relevant factor. What matters is capability and expertise. Of course, all principals want to work with financially secure partners, but often, the smaller distributors have unique knowledge and infrastructure that gives them a strong position in the market. There is and will remain a place for local, national, regional and global players.

For some years now, "sustainability" has been one of the buzzwords in the chemical industry. You chose "Towards a Sustainable Future" as the theme of the FECC Annual Congress 2015. One of the session titles is "Sustainability, Putting It in Perspective." In your opinion, what does sustainability stand for?

N. Prior: There are many opinions over sustainability, even so far as what it means! In my view, we all have a duty of care towards our employees, local communities, the environment and our industry. That aside, consumers are demanding "responsibly produced goods" and customers are constantly working towards ever more sustainable solutions. Not only is this morally driven, but also consumer and government driven: It is definitely the future.

What goals have you defined for yourself to achieve during your presidency?

N. Prior: FECC has an enviable past, and I want it to have a sustainable future, so that it can continue to be the voice of our industry in Europe. We wish to increase our membership both in terms of company and national association members, and to this end we have welcomed several new members in recent months. Our services need to be relevant to our membership, and we continue to review these on an ongoing basis. It is important that we continue to drive forward Responsible Care and sustainability in Europe, and we will continue to work with Cefic - the European Chemical Industry Council - on this topic. Clearly we will continue to work with regulators to ensure that future legislation is appropriate to the wider community and our industry alike.

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