Current Market Trends and Challenges Ahead for Chemical Distributors
Neville Prior, president FECC, and Frank Schneider, vice president FECC, about the state of the chemical distribution industry
In today’s competitive global market, chemical distributors face not only growing compliance demands and have to deal with digitalization issues but also strive to increase their significance in the chemical value chain and adapt their business models to a changing market environment. Under the theme “Voices of the Future” the annual congress 2019 European Association of Chemical Distributors (FECC), to be held in June in the seaside town of Sitges, Spain, aims to provide inspiration to the delegates on all these topics. Michael Reubold asked Neville Prior, president FECC, and Frank Schneider, vice president FECC, about the challenges ahead for the chemical distribution industry and ways to cope with them.
CHEManager: What are the current market trends in chemical distribution and what is driving them?
Neville Prior: The distribution market is still enjoying growth rates over and above that of the chemical industry generally. The impetus for this continues to be the growing understanding by manufacturers of the added value that distributors can bring, and the wish to simplify their business models. As has always been the case, manufacturers tend to deal on a direct basis with the large multinational customers, but the point at which customers are handed over to distributors is increasing in size. For now we see this as an ongoing trend, and Europe for instance has some catching up to do in this regard, with Asia and the Americas. Of course, this trend is not uniform across the distribution spectrum and we see that the distributors that benefit either have the assets to add significant value, such as laboratories, blending capability, repacking facilities etc., or have regional or global coverage.
What is your vision of the future for chemical distributors? Will their significance in the chemical value chain decrease or increase?
N. Prior: I believe that the industry has a bright future, and that it will continue to see growth. Distributors, in hand with organizations like FECC, are continuing to talk about the advantages they can bring to the chemical industry generally, and manufacturers are listening. Good businesses look to simplify their business models, and distributors can allow complex manufacturing to do just this. Alongside that benefit, distributors have excellent market insight and broad market coverage, which results in better service to customers and principals alike. As always, there is the possibility of markets being disrupted, and the industry needs to understand and embrace the opportunities that emerging technologies bring. This is possibly the number one topic on the tongues of the distributors right now.
How do chemical distributors have to position themselves in order to play an even stronger role in the chemical value chain?
Frank Schneider: Chemical distributors have proven that they are flexible in the way they conduct their business. There is not “one size fits all” but the necessity for an individual approach by each individual player. Every company has to define and to continuously review its core competences and determine its own strategy. Chemical distribution always lived from its creativity and its preparedness to adapt to changing business environments and the growth rates of the past decades have established a proven track record. Flexibility, creativity, speed and service will remain the determining success factors…hence the right people and the adequate networks are key.
How does the chemical distribution industry prepare for this new or at least changing role?
N. Prior: Simply having a competitive product is no longer good enough. Customers and principals are ever more demanding. Distributors must look at their organizations and create suitable strategies, have the right people and invest in their businesses. They must embrace the latest technologies where they are appropriate and ensure that their operations are adding value both internally and externally. They need to ensure that the “customer experience” is the right one and understand that the generations coming through have different requirements on how they are communicated with, how they buy and how they find information. Every closer partnerships on technical and supply chain support will be needed. How for instance can Artificial Intelligence be used? On top of this, companies need to consider how they can be better corporate citizens. The wider public are looking for ethical and responsible products, and our customers will be looking to us for the same.
“Like it or not, technology is here and growing at an exponential rate, we need to consider it further.”
Digitalization has proven to be a disruptive force in many industries, providing entry points for new market participants. Are chemical distributors looking to protect their businesses from such outside influences or rather utilizing them to develop a future-proof business model?
F. Schneider: Protection never helped in free market and business environments. Cooperation and participation will lead to better understanding of all options the digital world and community are offering to chemical distribution. This is why FECC welcomes and opens towards the new digital players that are entering the arena of chemical distribution and recommends its members to share this path. We should not see these as “outside influences” but make them part of daily assessments.
Previous FECC annual congresses already focused on ‘Chemical Distribution 4.0’. After a couple of years of discussion, how well prepared is the chemical distribution industry for the challenges that come along with digitalization in various aspects?
N. Prior: I would like to believe that the message has started to gain traction. For many years technologies such as EDI [electronic data interchange (editor’s note)] have been in use, as have websites. Now, distributors are looking at and creating platforms in order to market over the internet, but this is just the beginning. Consideration must be given as to how AI and bots, virtual or augmented reality, internet of things, blockchain, amongst others, can find appropriate and value creating roles within companies. Like it or not, technology is here and growing at an exponential rate, we need to consider it further.
“Protection never helped in free market and business environments.”
At the FECC Congress 2019, participants will share their visions for chemical distributors. Which are the topics to be discussed?
F. Schneider: We chose the theme “Voices of the Future” as we actually see a strong and significant turn in our society, which has a similarly strong direct impact on our business environment. The generation of baby boomers will be reaching retirement age in the coming years, with a new generation arriving commanding a fundamentally different personal value scorecard. Communication speed has increased as have information volumes.
Travel and general mobility have reached a level that the world seems to shrink, and working globally has become a daily challenge. Cultures are mixing and melting together around the globe throughout all businesses, creating new technology dimensions and new product requirements, newly designed raw materials are spreading, and people are changing personal priorities when it comes to balancing out work and private life areas.
At the FECC Annual Congress 2019 we want to offer a forum to openly and ambitiously discuss which impact all of the above — and more — changes and challenges can and will have on the chemical industry in general and on chemical distribution in particular. Attendees will discuss what we can and should do to cope successfully with this rapidly changing business environment in the near and midterm future, and how we can prepare for the longterm. And for sure items such as diversity, gender ratios, women in leadership, addressing and winning young talents, digitalization, globalization, sustainability, and many others will guide us through the discussion.
As change is everywhere, how does the FECC as an association providing advocacy, educating and supporting for their members adapt to the changing market environment?
F. Schneider: Listen, understand, learn, develop, support! This is what FECC is trying to do and this is reflected very much visually in the newly designed congress format. We want to establish more dialogues and multilateral interaction among all our members and together with all stakeholders of our relevant industries. We want FECC to become “the marketplace” of new ideas, new developments and new trends for chemical distributors. We do not want to be “teachers” but encourage and enhance a space and forum that allows to make our segment strong, resilient and future-oriented.
Distributors face the same challenges and deal with the same issues as their suppliers who can rely on influential industry associations and lobby organizations. Should FECC intensify collaboration with, for instance, CEFIC on a European level?
N. Prior: FECC has and continues to have a strong voice in Brussels. It is one of the cornerstones of FECC’s existence. FECC has also had a relationship with CEFIC for many years, collaborating for instance on Responsible Care. In recent years we have sought to deepen that relationship and continue to do so. However, FECC has also built relationships with many other organizations in Brussels, both upstream and downstream. This allows our collective voice to be heard more strongly and brings a wider ranging perspective to our thoughts.
We will continue to adopt that approach and build informal or formal partnerships where they bring benefit. Of course, we work closely with our national association partners across Europe. FECC has also looked beyond Europe in these relationships, as we find ourselves in an ever more global industry, and we are proud of our collaboration with organizations such as NACD in the USA and ICTA on a global level. The stronger our voice, the more we can help our industry to grow, prosper and engage in best practice.
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