Chemical distributors: an important channel-to-market
Producers of chemicals are increasingly viewing chemical distributors as an important channel to market. While non-European producers have always used distributors to gain market access and sell their products, “domestic” producers too are increasingly using distributors in a systematic way, in particular when they have to reach out to smaller customers or users of smaller volumes of product. Globally the sales figure for the chemical distribution industry is close to EUR 120 bn (2008 data), according to a survey published by the Boston Consulting Group in 2010 (1). The share of the European distributors is ca. 31%, equivalent to a turnover of EUR 37 bn per annum. This represents about 11% of the “relevant” consumption of chemicals, i.e. excluding big ticket items such as basic petrochemicals feedstocks and large intermediates, which are typically sold by producers directly or moved via traders as an alternative channel. Seen from the customers’ perspective, distributors are an attractive source of products and an ever more important link in the supply chain. This article aims to outline what services are offered by distributors and what benefits producers and users of chemicals can gain from working closely with them in their marketing & sales and procurement efforts.
CHANNEL VS. LOGISTICS MODE
Distributors are typically active “downstream” in the chemical value chain. Their area of activity is the sales and marketing of intermediates (industrial chemicals), specialty and performance chemicals and formulated products. There they can work alongside a producer’s direct sales force. They buy the goods from the producers (often called “principals”) under contract and then re-sell them on their own account, as opposed to agents, who always conduct business on behalf and the account of their principals (Figure 1). Further upstream, in the world of petrochemicals and some large volume intermediates, the indirect channel is made up of traders.
INDUSTRIAL VS. SPECIALITY CHEMICALS