Printer Friendly

CHEMICAL DISTRIBUTORS LOOK TOWARD SPECIALTY PRODUCTS FOR INCREASED PROFITABILITY

 FAIRFIELD, N.J., May 25 /PRNewswire/ -- Operating costs of chemical distributors have been increasing due to the increased costs of product stewardship, including: (1) assisting customers with environmental, health, and safety issues; (2) maintaining and updating Material Safety Data Sheets (MSDS); and (3) upgrading storage facilities to minimize spills and other accidental discharges of chemicals. Furthermore, with the depressed economy, distributors have not been able to increase their prices to recover these costs. This has resulted in declining profit margins for chemical distributors. In order to improve profit margins, distributors need to provide specialty products and value-added services, according to the preliminary results from a new study by Kline & Company, a leading business consulting firm serving the chemical and related process industries worldwide.
 The value of shipments by industrial chemical distributors in 1992 is roughly $18.5 billion, illustrating a decline in growth over the last few years. The top 50 distributors account for an estimated $7 billion with the balance split among numerous smaller organizations. The leading five companies combined represent approximately $4 billion or 23 percent of the total, as shown in the chart below.
 Chemical manufacturers are currently reviewing their distributor networks in order to: (1) ensure all distributors are properly trained to handle their products; (2) assure adequate coverage of their products; and (3) reduce their distribution costs. This has resulted in many chemical manufacturers reducing the number of distributors authorized to handle their products. In addition, end users are finding that their costs for monitoring environmental compliance are increasing. Therefore, end users are choosing to deal with fewer suppliers. These two trends have resulted in a consolidation of chemical distributors in the past five years. Furthermore, this trend is expected to continue as smaller chemical distributors will: (1) lack sufficient volume to meet the increased overhead costs; (2) lose customers due to supplier consolidations; and (3) not be able to maintain sources of supply.
 Industry consolidation has not helped the profitability of the surviving distributors. These organizations have had to make capital investments to improve their facilities, upgrade their information processing equipment, and add personnel to specialize in regulatory compliance. Yet depressed demand for chemicals has prevented price increases for the recovery of these costs.
 To improve profitability, chemical distributors are providing higher value services to their customers. Salesmen are becoming industry specialists for industries such as:
 -- Cosmetics and toiletries
 -- Electronics
 -- Food processing
 -- Paints and coatings
 -- Pharmaceutical
 -- Plastics
 -- Textiles
 This allows the distributor to add value by supporting its products with competent technical service. Furthermore, chemical manufacturers are able to augment their captive sales and marketing forces by relying more on chemical distributors. This has resulted in "partnerships" between distributors and chemical manufacturers to ensure that: (1) the chemical products are properly stored, transported, and handled; (2) end users are properly trained in their usage; and (3) marketing and strategic information is shared.
 In a new study, CHEMICAL DISTRIBUTION 2000, Kline & Company will analyze the overall chemical distribution business, including the effect on both distributors and chemical manufacturers. Included in the analysis will be issues such as environmental audits, partnerships, and specialized services. The new study will detail the dynamics of the industry and project the effect of these issues for the balance of the decade. In addition, approximately 130 chemical distributors will be profiled.
 Kline & Company's new study will provide an analysis of the chemical distribution industry for both distributors and chemical manufacturers. The report is scheduled for completion in May 1994 and is available only by subscription from Kline & Company, 165 Passaic Avenue, Fairfield, N.J. 07004.
 ROUGHLY ESTIMATED U.S. SALES OF CHEMICAL DISTRIBUTORS, 1992
 Ashland 8 percent
 Van Water & Rogers 8 percent
 CHEMCENTRAL 3 percent
 SOCO 2 percent
 Ellis & Everard 2 percent
 Other 77 percent
 TOTAL $18.5 Billion
 Source: Kline & Company, Inc.
 -0- 5/25/93
 /CONTACT: Barry Friedfeld of Kline & Company, Inc., 201-227-6262


CO: Kline & Company, Inc. ST: New Jersey IN: CHM SU:

MM-SB -- CH005 -- 3528 05/25/93 12:30 EDT
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:May 25, 1993
Words:663
Previous Article:AT&T INTRODUCES WORLDSOURCE(SM) COMMUNICATIONS SERVICES; FORMS ASSOCIATION WITH KDD OF JAPAN AND SINGAPORE TELECOM; WILL EXTEND SERVICES TO...
Next Article:WHOLESALE DISTRIBUTION INDUSTRY CONFIDENCE RISES, BUT SO DOES OPPOSITION REGARDING CLINTON ECONOMIC PROGRAM; INDEX INCREASES TO 105.0 FROM 103.8
Topics:


Related Articles
GREAT LAKES ANNOUNCES 47 PERCENT SECOND QUARTER EARNINGS GAIN
BF GOODRICH NAMES WAYNE O. SMITH EXECUTIVE VICE PRESIDENT AND PRESIDENT, BF GOODRICH SPECIALTY CHEMICALS
Cab-O-Sil Division of Cabot.
FREEDOM CHEMICAL TO MAKE ADDITIONAL ACQUISITIONS, CALLS OFF IPO
Consep, Inc. Reports Third Quarter and Nine Months Results
BF Goodrich Acquires Textile Additives Business
KMG Chemicals Announces Corporate Name Change
KMG Chemicals Issues 1999 Fiscal Year-End Outlook
Ashland Chemical Company Names Hank Waters Vice President And General Manager Of Its Ashland Plastics-Europe Division.
Synalloy Corporation Announces 33% Increase in Annual Earnings.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters