Top 100 Chemicals Distributors: Continued demand outweighs cost challenges
Despite a slowing U.S. economy and rising costs, the chemical distribution industry reports strong demand and is as competitive as ever. And that's good news for chemical buyers.
By Susan Avery -- Purchasing, 5/8/2008
CLICK HERE to view the Top 100 Chemicals Distributors listing
Strong is the word chemical distributors use to describe their industry, and it's a word chemical buyers want to hear.
Chemical distributors use “strong” not only to describe demand for their products and services in the current economy—average sales increased 13% in 2007—but also to describe the underlying fundamentals of their business and the long-term outlook for the chemical distribution industry.
Make no mistake, chemical distributors are concerned about the state of the U.S. economy, rising chemical prices and a splattering of availability issues as demand from other regions of the world continues to grow.
But even with these concerns, chemical distributors are upbeat. While 2007 was not a record-breaking sales year for much of the industry, chemical distributors have no reason to complain, and the outlook for 2008 is good. In fact, according to results of Purchasing's 23rd annual survey of chemical distributors, sales at 77% of respondents' companies increased last year, a statistic that few other industries may be able to tout.
The year also saw its share of mergers and acquisitions, with most activity occurring in the first six months. While the market continues to sort itself out, the consolidation still leaves chemical buyers with plenty of supply options, from very large national or global players to smaller, regional and niche providers, and, distributors say, a more efficient industry.
Most notable in 2007 was Univar's acquisition of Chemcentral a year ago, which came shortly after chemical buyers were starting to get used to Brenntag buying Los Angeles Chemical and Quadra Chemical, and KODA Distribution Group purchasing Ribelin Sales a few months earlier. Then the pace of acquisitions slowed.
This is not surprising, considering the sluggish economy and the credit crunch. But chemical distributors are as competitive as ever, with 31% of respondents to Purchasing's survey reporting expansion plans are in the works for 2008. Another 34% expect to add product lines this year, while 11% are increasing service offerings in such areas as logistics.
What's ahead“Overall, 2007 was an eventful year for chemical distributors,” says Gary E. Pruitt, chairman and CEO of Univar in Bellevue, Wash., referring to the industry consolidation that occurred last year, including his company's acquisition of Chemcentral. He says that chemical buyers likewise are continuing to consolidate their supply bases and tend to look to distributors for economies of scale as they select suppliers to do business with in the years to come.
“The industry is on the right track,” Pruitt says. “Chemical distribution is preparing for the future. Customers are looking for a distributor that can react quickly to their changing production requirements which is clearly very critical to managing their businesses particularly in a changing economy.”
Pruitt points out that the chemical distribution industry tends to mirror the general economy so sectors experiencing a slowdown now such as housing and automotive are purchasing fewer chemicals. Sectors faring better such as energy and and those that tend to be resistant to economic swings such as food and pharmaceuticals have seen little change, and maybe even increases in demand for chemicals.
Sean McDonald, president of JLM Industries in Tampa, Fla., says the competitive nature of the chemical distribution industry is reason for strong sales in 2007. “Demand remains healthy across the chemical industry and we are seeing more growth in the personal care and cosmetics sector.” In response to that increased demand, JLM added two new product lines: surfactants and oleo chemicals. The distributor also recently acquired KC America, importers of fluoropolymers and fluorochemicals.
“Customers tied to the construction, housing, automotive and related industries are obviously impacted by very difficult conditions,” says William A. Fidler, president and CEO at Brenntag North America in Reading, Pa. “Many other customers, particularly those that export their goods and services are very busy. The economic environment seems to be stronger than pundits are telling us.” Brenntag continues to see growing demand for products and services used in food, energy, mining, chemical processing and water treatment industries.
The chemical distributor saw record-breaking results in 2007, Fidler says. “But it was also a year of change, especially in the second half with challenges of rising energy costs, a strong export market for chemical manufacturers and a rapidly changing agricultural industry.”
Brenntag is working to improve efficiencies in its core logistics functions such as inventory management, packaging and freight as well as technical support and customer relationship management. The company last year launched its Solutions Group, which provides outsourcing and call-center services for specialty chemical producers, and Brenntag Specialties for distribution of specialty chemicals. It also acquired St. Lawrence Chemical, a specialty distributor in Canada in 2007.
As Fidler sees it, the consolidation in chemical distribution has made a mark on the chemicals supply chain. “It's resulting in a more efficient industry capable of supplying a broader portfolio of products and services to customers that want to do more business with fewer suppliers,” he says. “Global capabilities have become increasingly important as the number of national and international companies seeking consistent cross-regional products and services continues to grow.”
Morris Owen, vice president of sourcing for Ashland Distribution in Dublin, Ohio, agrees that 2007 was challenging for the chemicals industry, including distribution. “The big issue was volatility in base feedstock and petroleum pricing which led to market fluctuations that tested everybody. All the adjustments everyone had to make to keep their business running smoothly added complexity.” In particular, Owen says chemical buyers looked to Ashland Distribution for help with improving supply chain efficiency through such services as inventory management.
Eighty-three percent of the chemical distributors on Purchasing's Top 100 list for 2007 are members of the National Association of Chemical Distributors. Christopher L. Jahn, president and COO of the NACD in Arlington, Va., meets regularly with executives of member companies and has a firm grasp on their concerns. “Clearly, the biggest issue is the state of the economy,” he says. “I hear a lot particularly about the state of domestic manufacturing.”
Another issue is prices. “Commodity prices are at or near-record levels,” he says. “Producer suppliers are passing on increases at a nearly constant pace so it's a challenge for chemical distributors to pass them along in a competitive environment and maintain their profit margins.”
Top 100 by the numbersSeventy-seven percent of chemical distributors responding to Purchasing's 23rdannual Top 100 survey saw sales grow in 2007. Eighteen percent experienced sales decreases while sales for the remaining 5% were flat.
For the Top 100, sales averaged $238.5 million in 2007, up 13.2% from the $207.3 million reported in 2006.
The Top 50 distributors on the list reported the biggest gains. For these chemical distributors, sales averaged $414.4 million in 2007, a 13.6% increase over the $357.7 million figure a year ago. Still, sales at the other chemical distributors on Purchasing's list grew 4.1% from $323 million in 2006 to $337 million in 2007.
Distributors with sales of $100 million or more had average sales of $689.6 million in 2007, up from $589.9 million for an increase of 14.4%
Positions of the top five chemical distributors in 2008 reflect Univar's acquisition of Chemcentral last year. Until then, Chemcentral had occupied the fourth spot on Purchasing's annual list. With the chemical distributor off the list, Helm America and ICC each moved up a spot. Now, the top five are: Univar ($5.5 billion), Ashland Distribution Co. ($4.3 billion), Brenntag North America ($2.9 billion), Helm America ($1.7 billion) and ICC Chemical Corp. ($1.1 billion).
As one company, the independent chemical distributors that make up the Omni-Chem 136 alliance would fit between Helm America and ICC Chemical on the Top 100 list. Its sales were approximately $1.7 billion (based on a Purchasing estimate). Omni-Chem 136 gained a new member in 2007, Grupo Pochteca in Mexico City and lost one, Ulrich, when the chemical distributor was acquired by Brenntag. Rather than list the companies together as an alliance, Purchasing chooses to list each individually.
Likewise for the Chemical Distribution Network (CDN). Together the 21 independent chemical distributors that belong to the CDN reported sales of approximately $1 billion (based on a Purchasing estimate) which would place the alliance between ICC Chemical and Itochu Chemicals America on the Top 100 list. For more information on these alliances and their capabilities, please see the accompanying sidebars on p. 28C14 and above.
Rounding out the top 10 (each chemical distributor simply moved up a spot on the list from 2007) are: Itochu Chemicals ($539 million), Harcros Chemical ($356 million), JLM Industries ($338 million), Hydrite ($322 million) and Canada Colors & Chemicals ($272 million).
The same holds true (each distributor moving up a spot from 2007) for most of the rest of Purchasing's top 15: KODA Distribution Group ($260 million), Premium Ingredients International ($233 million), Interstate Chemical Co. ($228.4 million), L.V. Lomas ($218 million) and Quadra Chemicals ($203.1 million).
New to the list this year is Grupo Pochteca, a chemical distributor based in Mexico City which became a member of the Omni-Chem 136 alliance. With $151 million in annual sales, the company places 21st on Purchasing's Top 100 for 2008.
Other chemical distributors with annual sales figures that place them in the top 25 are: EMCO Chemical Distributors ($190 million), K.A. Steel Chemicals ($190 million), Superior Solvents & Chemicals ($184 million), Hawkins ($160.4 million), Mays Chemical ($159 million), Grupo Pochteca, PVS Chemicals ($147.6 million), Barton Solvents ($130 million), E.T. Horn ($127 million) and Wego Chemical & Mineral ($123 million).
Chemical distributionPurchasing's Top 100 chemical distributors were managing an average of 11.6 stocking locations at the end of 2007, according to results of the 2008 survey. This figure is about the same as last year, when they operated 11 stocking locations. Of chemical distributors responding to the survey question, 22% opened stocking locations in 2007, while 7% closed them. Last year, these figures were 29% and 9%, respectively. Twenty-four percent plan to open new locations in 2008, fewer than last year when 29% had such intentions. Of those who say they will open new stocking locations this year, 9% plan to open more than one in the months ahead. Last year, this figure was 12%.
Chemical distributors on the Top 100 list have stocking locations mainly in the U.S. and Canada. Many also now have stocking locations in Mexico (9%) and Latin and South America (9%). Some have locations in Europe (11%), Asia (7%) and other regions of the globe (2%).
At year-end 2007, Purchasing's Top 100 chemical distributors had an average of 3 million gal. of bulk storage capacity and an average 1.2 million sq. ft. of warehouse space. On average, survey respondents have 57 trucks, 29 vans, 46 trailers, 45 tankers and 16 railcars in their vehicle fleets.
Chemical distributors have on average 206 employees. Average sales per employee is $1.5 million, same as recorded last year.
In 2007, the Top 100 chemical distributors sold products to purchasing pros at companies in these industries: cosmetics/personal care (87%), paints and coatings (83%), adhesives and sealants (79%), soaps and detergents (75%) and food and beverage (72%). Twenty percent say they serve a niche market. Of those who responded to Purchasing's survey, 44% serve customers in more than 13 different markets, meaning they are fairly or very diversified. On average, the Top 100 today sell products to 11 markets.
Chemical distributors on Purchasing's list provide customers in those markets with a variety of products. Of those responding to this year's survey, 42% offer nine to16 different kinds of products. On average, chemical distributors carry 14 lines. Calling themselves specialized chemical distributors are 24% of the Top 100: They offer one to eight product lines. The others provide more than 17 different types of products.
Products sold by chemical distributors are: surfactants (77%), inorganics (75%) and amines (70%). Other chemicals that make up the bulk of distributor sales are: alcohols (68%), esters (62%), solvents (62%), food additives (60%) and glycol ethers (60%) and acids (57%). Rounding out the list are: Thickening agents (56%), chlor-alkalis (53%), ketones (53%), chelating agents (51%) and chlorinated solvents (51%) and resins (51%).
Forty-one percent chemical distributors responding to Purchasing's survey say they import at least 15% of the products they sell.
Eighty-nine percent provide services, with 25% offering five or more. Those offered are: blending (70%), contract packaging (54%), technical training (41%), manufacturing (36%) and customer product research (35%).
| Average bulk storage capacity: | 3.0 million gal |
| Average warehouse space: | 1.2 million sq ft |
| Average delivery fleet size: | 157 vehicles |
| Of those who say they have | % that have one or more |
| Trucks: | 53% |
| Vans: | 14% |
| Trailers: | 69% |
| Tankers | 40% |
| Railcars: | 80% |
| Other vehicles: | 6% |
| Source: Purchasing | |
| Average number of employees in 2007: | 206 |
| Average sales per employee: | $1.5 million |
| Source: Purchasing | |
| Market | % |
| Cosmetic/personal care | 87% |
| Paints and coatings | 83% |
| Adhesives and sealants | 79% |
| Soaps and detergents | 75% |
| Food and beverage | 72% |
| Pharmaceuticals | 69% |
| Plastics | 68% |
| Primary chemical processing | 62% |
| Pulp and paper | 57% |
| Automotive | 56% |
| Electronics | 55% |
| Municipal | 50% |
| Metals | 49% |
| Tires and rubber | 45% |
| Agriculture | 45% |
| Textiles | 40% |
| Petroleum refining | 38% |
| Glass and refractory | 29% |
| Appliances | 13% |
| Other | 24% |
| Source: Purchasing | |
| In addition to the U.S. and Canada, the Top 100 chemical distributors have stocking locations in the following regions: | |
| Europe | 11% |
| Mexico | 9% |
| Asia | 7% |
| Latin/South America | 9% |
| Other areas: | 2% |
| Source: Purchasing | |
| Service | % |
| Blending | 70% |
| Contract packaging | 54% |
| Technical training | 41% |
| Manufacturing | 36% |
| Customer product research | 35% |
| Safety training | 34% |
| Hazardous waste removal | 14% |
| Solvent reclamation | 9% |
| Other | 16% |
| No extra services offered | 11% |
| Source: Purchasing | |
| Product line | % |
| Surfactants | 77% |
| Inorganics | 75% |
| Amines | 70% |
| Alcohols | 68% |
| Esters | 62% |
| Solvents | 62% |
| Food additives | 60% |
| Glycol ethers | 60% |
| Acids | 57% |
| Thickening agents | 56% |
| Chlor-alkali | 53% |
| Ketones | 53% |
| Chelating agents | 51% |
| Chlorinated solvents | 51% |
| Resins | 51% |
| Lubricants | 48% |
| Pigments | 46% |
| Plasticizers | 45% |
| Fatty chemicals | 44% |
| Polyglycols | 41% |
| Hydrogen peroxide | 40% |
| Catalysts | 35% |
| Specialty quats | 33% |
| Flavors and fragrances | 30% |
| Adhesives and sealants | 25% |
| Aldehydes | 22% |
| Industrial gases | 12% |
| Institutional maintenance | 8% |
| Other | 29% |
| Source: Purchasing | |
| Add products | 34% |
| Grow/expand | 31% |
| Improve customer focus | 15% |
| Add services/logistics | 11% |
| Maintain supplier partners | 11% |
| Source: Purchasing | |
| Economy/slower growth | 56% |
| Pricing increases/stability | 53% |
| Product availability/shortages | 20% |
| Overseas competition/mfg. going offshore | 13% |
| Regulatory compliance | 10% |
| Fuel/energy/transportation costs | 8% |
| Source: Purchasing | |
| Company | Rank |
| A.G. Layne Inc. | 96 |
| Alchem Chemical | 91 |
| Alexander Chemical Corp. | 84 |
| Allchem Industries | 32 |
| Archway Sales Inc. | 33 |
| Ashland Distribution Co. | 2 |
| Astro Chemicals Inc. | 59 |
| Barton Solvents | 23 |
| BHS Marketing LLC | 69 |
| Brenntag North America | 3 |
| Buckley Oil Co. | 94 |
| Callahan Chemical Co. | 30 |
| Canada Colors & Chemicals | 10 |
| Charkit Chemical Corp. | 50 |
| Chemical Distributors Inc. | 87 |
| Chemicals, Inc. | 31 |
| Chemisphere Corp. | 82 |
| Chem One Ltd. | 70 |
| Chemroy Canada Inc. | 56 |
| Chemsolv Inc. | 59 |
| Coast Soutwest, Inc. | 99 |
| Cole Chemical & Distributing Inc. | 42 |
| Conchemco | 49 |
| Dar-Tech Inc. | 68 |
| DB Becker Co. Inc. | 75 |
| DeWolf Chemical Inc. | 87 |
| D.H. Litter | 47 |
| Dorsett & Jackson | 62 |
| Dowd and Guild | 77 |
| Dunleary Inc. | 97 |
| Durr Marketing Associates, Inc. | 40 |
| EMCO Chemical | 16 |
| E.T. Horn Co. | 24 |
| E.W. Kaufmann Co. | 85 |
| Fitz Chem Corp. | 67 |
| George S. Coyne Chemical Co. | 44 |
| Grupo Pochteca | 21 |
| G.S Robins & Co. | 38 |
| Gulf Coast Chemical Inc. | 89 |
| Harcros Chemical | 7 |
| Hawkins, Inc. | 19 |
| HB Chemical | 51 |
| Helm America Corp. | 4 |
| H.M. Royal, Inc. | 35 |
| Hubbard-Hall Inc. | 61 |
| Hydrite Chemical Co. | 9 |
| ICC Chemical Corp. | 5 |
| Ideal Chemical & Supply | 56 |
| Independent Chemical Corp. | 83 |
| Industrial Chemicals Corp. | 76 |
| Industrial Chemicals Inc. | 45 |
| Interstate Chemical Co. | 12 |
| Itochu Chemicals | 6 |
| J.F. Shelton Co. | 95 |
| JLM Industries | 8 |
| John R. Hess & Co. Inc. | 93 |
| K.A. Steel Chemicals Inc. | 16 |
| KODA Distribution Group | 11 |
| Kohl Marketing Inc. | 72 |
| Lintech International LLC | 53 |
| L.V. Lomas | 14 |
| Matteson-Ridolfi | 80 |
| Mays Chemical Co. Inc. | 20 |
| McCullough & Associates | 56 |
| M.F. Cachat Co. | 26 |
| Miles Chemical Co. Inc. | 78 |
| Premium Ingredients International | 13 |
| Pride Solvents & Chemical | 28 |
| PVS Chemicals Inc. | 22 |
| Quadra Chemicals Ltd. | 15 |
| Quaker City Chemicals Inc. | 81 |
| Rowell Chemical Corp. | 39 |
| Sarcom Inc. | 100 |
| Schibley Solvents & Chemical | 90 |
| Sea-Land Chemical Co. | 52 |
| Skyhawk Chemicals Inc. | 63 |
| Slack Chemical Co. | 86 |
| Solvents and Chemicals | 37 |
| Startex/CSD, Conroe | 27 |
| Superior Solvents & Chemicals | 18 |
| Sweetlake Chemical | 97 |
| Tanner Industries | 36 |
| Tarr, LLC | 46 |
| TCR Industries | 47 |
| Tilley Chemical | 41 |
| The Chemical Co. | 64 |
| The Plaza Group | 29 |
| T.H.Hilson Co. | 74 |
| Transchemical Inc. | 65 |
| TR International Trading Co. | 66 |
| United Mineral & Chemical Corp. | 71 |
| Univar | 1 |
| Van Horn, Metz & Co. Inc. | 55 |
| Veckridge Chemical Co. Inc. | 92 |
| Walsh & Associates | 54 |
| Webb Chemical Service | 73 |
| Wego Chemical & Mineral Corp. | 25 |
| Westco Chemicals Inc. | 43 |
| Whitaker Oil Co. | 34 |
| Young Chemical Co. | 79 |
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