20th Annual Top Chemical Distributors
Sales surge despite rising costs
By Susan Avery -- Purchasing, 5/5/2005 6:00:00 AM
For the complete list of top 100 chemical distributors, click here .
The chemical distribution industry had an exceptional sales year in 2004. A revitalized manufacturing sector and strong new-housing starts contributed to an 11% gain in sales for the Top 100 chemical distributors, according to results of PURCHASING magazine's annual survey. This is the 20th time that PURCHASING queries the nation's chemical distributors about their businesses.
A year ago, sales at the Top 100 chemical distributors increased 3.4% from the previous year. Then, distributors were cautiously optimistic about prospects for 2004 as they were facing such challenges as high operating costs, rising feedstock and energy prices and intensifying global competition. Clearly, these challenges were not insurmountable. Chemical distributors responding to PURCHASING's survey report average sales of $162.1 million for 2004, compared to $144.5 million in 2003.
"I'm surprised the number is not higher than that," says James L. Kolstad, president and CEO, National Association of Chemical Distributors (NACD), Arlington, Va. "It was a good year for our members," he says pointing to housing and a robust manufacturing sector as growth drivers for the industry. "Everything but automobiles seems to be selling well."
Kolstad says that many NACD members are having record sales months in 2005 compared with 2004. "Volumes are up. Revenues are up. Still, I have to say that prices are up and margins are slim. It's a very competitive environment."
The NACD is working to help chemical distributors meet both internal and external challenges. For one, the entire membership is completing the second three-year cycle of responsible distribution third-party certification this December. For its part, NACD is working to make the protocol more comprehensive in the U.S and it's joining with the International Council of Chemical Trade Associations to expand and strengthen the use of third-party verification for responsible distribution and responsible care for customers in Europe.
Also, the NACD supports legislation currently in Congress allowing the association to offer health insurance to its members nationwide. Last month at a fly-in in Washington, D.C., NACD leadership met with the Department of Homeland Security and the Environmental Protection Agency as well as members of Congress to discuss such issues as chemicals security legislation. NACD also is addressing pending environmental legislation in Europe. It hopes eventually to hold an international expo with suppliers of chemicals at its annual meeting. The expo, Kolstad says, will provide a forum for discussion between NACD members and its suppliers.
While a vital economy creates a climate for acquisitions, the chemical distribution industry was relatively quiet on this front in 2004 aside from Bain Capital's purchase early in the year of Brenntag—the third biggest company on PURCHASING's Top 100 list. "This is likely to continue as long as the economy stays strong," Kolstad observes. "It appears that cost-savings measures distributors put in place in 2002 and 2003 in response to market forces are having a stronger effect now when times are much better."
He points out that there appear to be more distributors looking to buy than sell. Results of PURCHASING's survey show that many of the industry's big players include plans for acquisition as part of their corporate strategy for 2005. Of the Top 25, Harcros, JLM, Itochu, Hydrite and Los Angeles Chemical all have indicated that they're looking to grow their business through acquisition in the months ahead.
The Top 25 shared a peek into some of other areas of their corporate strategies for 2005 as well. CHEMCENTRAL has plans to grow its specialty distribution business and expand its international distribution capabilities. HELM wants to increase its product portfolio. Quadra may invest in offshore manufacturing. EMCO is investing in fine ingredients. C.P. Hall is targeting Asia and South America for significant growth.
The Top 100
Eighty-five percent of chemical distributors responding to PURCHASING's Top 100 survey had sales gains in 2004. Nine percent had a year in which sales were flat with 2003. Just 6% experienced lower sales in 2004, compared to the previous 12 months.
As is evident from the 85% figure, sales gains were recorded by distributors both large and small on this year's list. (Last year, much of the increase in sales occurred among many of the bigger players.) For the Top 50 chemical distributors, sales averaged $300.5 million in 2004. A year ago, this figure was $267.7 million, a 10.9% increase. For distributors with sales of $100 million or more, sales for 2004 averaged $537.3 million, up from $476.8 million, an increase of 11.2%.
The Top 5 chemical distributors remain unchanged from last year. With $3.4 billion in annual sales for 2004, Univar takes the top spot once again. The distributor's sales increased 9.3%. Ashland is number-two with annual sales of $2.8 billion. Its sales grew by more than 7%. Number-three Brenntag recorded sales of $1.8 billion, an increase of 6.2% over 2003.
Hitting the $1 billion mark, CHEMCENTRAL again takes the fourth spot on PURCHASING's list. At number-five for the third year is ICC Chemical, with annual sales of $720 million.
With annual sales of $300 million, Canada Colors & Chemicals remains in the sixth spot on PURCHASING's annual list. An increase of $138 million propels Aceto into the Top 10 at number seven, with $298 million in annual sales. Last year, the chemicals distributor had sales of $160 million, which placed it in the 14th spot on the list. Eight and nine belong to Harcros, with $268 million, and JLM, with $263 million. Newcomer to this year's survey, Itochu Chemicals America takes the 10th place, with annual sales of $237 million.
Hydrite Chemical and HELM switched spots. Last year, Hydrite was number 11 and HELM was number 12. This year, HELM, with sales of $235.4 million, moves to the 11th spot, while Hydrite, with sales of $222 million moves into the 12th slot.
Rounding out the Top 15 are: Quadra Chemicals, ($210 million), Interstate Chemical ($206.4 million), and Los Angeles Chemical ($163 million).
As one company, the 15 independent distributors that make up the Omni-Chem 136 alliance (www.omnic-hem.com) would fit between Brenntag and CHEMCENTRAL on the Top 100 list for 2005. Its annual sales were $1.2 billion. Instead, PURCHASING editors opt to list each company individually.
Same holds true for the Chemical Distribution Network (CDN) Together the 21 independent chemical distributors belonging to the CDN (www.chem-distnet.com) have sales of $750 million, which places this alliance at number five on the list, following CHEMCENTRAL. For more information on these alliances and their capabilities, please see the accompanying sidebars on pages 36C11 and 36C13.
The next 10 chemical distributors all shifted positions somewhat in a year's time. The Plaza Group moved from the 25th to the 20th spot. Its sales were $129 million in 2004. In 2003, the chemical distributor was number 35 on PURCHASING's list. Sales at PVS in-creased from $99.2 million to $116 million, nudging the distributor up one place to number 22 on this year's list. One noteworthy change is the dropping of Callahan Chemical from the list. Executives there declined to return the company's survey.
Survey results
Results of PURCHASING's Top 100 chemical distributors survey show chemical distributors were managing an average of 11.2 stocking locations at the end of December, 2004, slightly more than they were managing a year before (10.6). Of those responding to the survey question, 30.1% opened stocking locations in 2004, while 11.1% closed them. Last year, these figures were 35.1% and 16%, respectively. Nearly 30% plan to open new locations in 2005, the same as a year ago. Of this figure, 13.1% expect to open more than one stocking location in the months ahead. Last year, 8% expected to open than one stocking location.
Chemical distributors on PURCHASING's list have stocking locations mainly in the U.S. and Canada. Many also have branched out as respondents report having stocking locations in Mexico (40%) and Latin America (30%). Others sell product in Europe (46%) and Asia (33.3%).
Last year, 41.4% of distributor execs reported their companies had stocking locations in Mexico, while 44.8% maintained sites in Latin and South America. For Europe and Asia, these figures were 48.3% and 37.9%, respectively.
As of December 31, 2004, chemical distributors had an average of 2.83 million gal of bulk storage capacity and an average of 378,000 sq ft of warehouse space. On average, chemical distributors have 38 trucks, 7 vans, 41 trailers, 20 tankers, and 9 railcars. All told, they have an average of 141 vehicles.
In 2004, the Top 100 chemical distributors sold products to buyers in these industries: paints and coatings (80.6%), cosmetics/personal care (79.6%), soaps and detergents (77.6%), adhesives and sealants (72.4%) and pharmaceuticals (70.4%). Just 28.6% of chemical distributors say they serve a niche market. Of those who responded to PURCHASING's survey, 61.2% serve customers in 8-18 different industries; 10.2% market their products to more than 19 types of businesses.
Chemical distributors on PURCHASING's list provide their customers with a variety of products. Of those responding to the annual survey, 46% offer 9-16 different kinds of products. On average, respondents carry 13 lines. Classifying themselves as specialized chemical distributors are 27% of the Top 100; they offer 1-8 products lines. The remaining companies provide customers with more than 17 different types of products.
Sales through chemical distributors consist mainly of these products: surfactants (73%), amines (68%), alcohols (62%), and esters (61%). Other chemicals which make up a bulk of distributor sales are: acids (61%), inorganics (60%), food additives (58%) solvents (56%), resins (55%) and glycol ethers (53%). Rounding off the list are: Chlor-alkali (52%), thickening agents (52%), fatty chemicals (47%), chelating agents (45%), pigments (45%) and ketones (43%).
All of the distributors on the Top 100 list import some of these products: On average, they import 22.3% of the chemicals they sell.
Chemical distributors provide their customers with a host of services, with 22% of those on the list offering an extended range of services (five or more). Thirty percent provide a limited number (one or two). Among the most popular: blending (65%), contract packaging (49%), technical training (42%), manufacturing (39%), safety training (32%) customer product research (29%) and hazardous waste removal (19%).
PURCHASING also queried chemical distributors on their customers' biggest concerns on this year's survey. Among them are pricing increases/price stability (77.5%), product availability/shortages (50%) and overseas competition/manufacturing moving offshore (16.2%.) Other buyer worries include fuel costs, regulatory compliance and safety issues. For what buyers think of their chemical distributors, please see the story on page 36C1.
2005 distributor profile
| Average bulk storage capacity: | 2.83 million gal | |
| SOURCE: PURCHASING |
||
| Average warehouse space: | 378,000 sq ft | |
| Average delivery fleet size: | 141 vehicles | |
| Of those who said they have | % who have one or more | Average number in service |
| Trucks: | 49% | 38 |
| Vans: | 16% | 7 |
| Trailers: | 60% | 41 |
| Tankers | 37% | 20 |
| Railcars: | 44% | 9 |
| Other vehicles: | 8% | 1 |
Customer concerns
| Pricing increases/price stability | 77.5% |
| SOURCE: PURCHASING |
|
| Product availability/shortages | 50% |
| Overseas competition/manufacturing going offshore | 16.2% |
| Fuel/energy/transportation costs | 11.2% |
| Regulatory compliance | 6.2% |
| Safety | 6.2% |
| Consolidations/bankruptcies | 6.2% |
| Economy | 3.8% |
| Currency values/weak dollar | 3.8% |
| Health insurance costs | 2.5% |
| Other | 7.5% |
Other regions with stocking locations
In addition to the U.S. and Canada, the Top 100 chemical distributors have stocking locations in the following regions:
| Mexico | 40.0% |
| SOURCE: PURCHASING |
|
| Latin/South America | 30.0% |
| Europe | 46.7% |
| Asia | 33.3% |
| Other areas | 16.7% |
Industries which purchase through distributors
| Market | (%) |
| SOURCE: PURCHASING |
|
| Paints and coatings | 80.6% |
| Cosmetic/personal care | 79.6% |
| Soaps and detergents | 77.6% |
| Adhesives and sealants | 72.4% |
| Pharmaceuticals | 70.4% |
| Primary chemical processing | 68.4% |
| Food and beverage | 67.3% |
| Plastics | 65.3% |
| Electronics | 49% |
| Pulp and paper | 48% |
| Tires and rubber | 48% |
| Automotive | 48% |
| Metals | 46.9% |
| Textiles | 45.9% |
| Municipal | 43.9% |
| Agriculture | 43.9% |
| Petroleum refining | 33.7% |
| Glass and refractory | 30.6% |
| Appliance | 19.4% |
| Other | 18.4% |
Most popular lines among distributors
| Product line | (%) |
| SOURCE: PURCHASING |
|
| Surfactants | 73% |
| Amines | 68% |
| Alcohols | 62% |
| Esters | 61% |
| Acids | 61% |
| Inorganics | 60% |
| Food additives | 58% |
| Solvents | 56% |
| Resins | 55% |
| Glycol ethers | 53% |
| Chlor-alkali | 52% |
| Thickening agents | 52% |
| Fatty chemicals | 47% |
| Chelating agents | 45% |
| Pigments | 45% |
| Ketones | 43% |
| Polyglycols | 43% |
| Lubricants | 43% |
| Plasticizers | 42% |
| Hydrogen peroxide | 41% |
| Chlorinated solvents | 40% |
| Specialty quats | 39% |
| Catalysts | 28% |
| Flavors and fragrances | 26% |
| Aldehydes | 21% |
| Adhesives and sealants | 19% |
| Industrial gases | 18% |
| Institutional maintenance | 10% |
| Other | 29% |
Extra services offered (beyond delivery and warehousing)
| Service | (%) |
| SOURCE: PURCHASING |
|
| Blending | 65% |
| Contract packaging | 49% |
| Technical training | 42% |
| Manufacturing | 39% |
| Safety training | 32% |
| Customer product research | 29% |
| Hazardous waste removal | 19% |
| Solvent reclamation | 11% |
| Other | 14% |
| No extra services offered | 15% |
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