The specialties market is under pressure. In order to generate value, manufacturers and clients need to continue optimizing their supply chain on a regular basis. As a result, the role of the distributor in the chemicals industry is becoming more and more important. Now one of the top ten in the European distribution market, the Oqema group is pursuing a change of roles from intermediary to service provider and has recently introduced an advice- and service-oriented strategy for its specialty business. As group director of specialties for Oqema since 2017, James Berwick is responsible for strategic direction. In this interview, he explains which trends and developments will shape the market in the future and how the group can create more value for customers and manufacturers in this scenario.

CHEManager: Mr. Berwick, how is the specialties market currently structured?

James Berwick: The global market is growing, at a sustained rate of approximately two per cent in Europe and by roughly six per cent in Asia. The highest growth rates can be found in developing and emerging countries, where the demand for specialty chemicals is increasing alongside the need for highly functional products. Growth in eastern Europe is stronger than in western Europe, where it’s just about stable.

In the global market, China’s role as a cheap producer and exporter of specialty chemicals is diminishing as a result of an increase in domestic demand and the closure of many facilities over the past two years. This benefits European producers, who are picking up the slack and planning new capacities, as well as India, Japan and South Korea.

Industrial sectors such as coatings, plastics and construction will continue to dominate over the years to come, fueling product development in these sectors in the future. However, the market is also driven by innovations, especially in the area of nanotechnology, which enables applications and product characteristics that a few years ago would have been unthinkable and promise great benefits in the areas of pharmaceuticals, cosmetics and personal care. Interestingly, many of these innovations come from Asia, which goes to show just how advanced the specialties market is there.

What are the general trends that have been observed?

J. Berwick: The trend dominating the market continues to be the fundamental shift from specialties to semi-specialties and ultimately to commodities. This transition takes the form of a decaying curve.

The development of new, innovative products that satisfy the growing demand for new lifestyle products can be found at the top end of the curve. While in the past new developments have focused on chemical functionality and complexity, the consumer trend towards conscientious and sustainable consumption is increasingly intensifying the demand for environmental compatibility, safety and ethical products. Universities and institutes have already been successful with innovations in this area for years, particularly when it comes to nanoproducts. Interestingly, Asia has shown itself to be particularly innovative, as environmental regulations increasingly thin out the traditional production profiles of these countries and innovations create new markets.

Established products flourish in the center of the market curve. Developments in this area are also heavily influenced by current consumer trends. Development efforts concentrate primarily on improving existing product characteristics. When it comes to non-regulated products, there’s a key focus on optimizing costs and expanding product functionality in this life cycle phase, through blending, derivatives and reformulations. By creating product ranges, producers can delay the switch to commodities and thus redefine potential margins. With China’s competitive role in the export of such products declining, an increase in EU production could even boost export to China.

The lower end of the curve features products which have become generic commodities, even if many customers still treat them as specialties. While these products are located at the lower end, they still form the basis for the entire curve. Some producers need this foundation in order to carry out expensive R&D projects in the area of innovative development on the higher end of the curve.

What does that mean for manufacturers and customers?

J. Berwick: The growing demand for increasingly complex and functional lifestyle products means huge challenges in terms of value creation for producers, customers and suppliers. As the developer and owner of the product IP, the producer is subject to intensifying requirements concerning quality, regulation and permanent competition if it wants to stay in business. Customers in the specialties segment have increasing quality requirements but, at the same time, have to maintain an efficient production process, which they attempt to do by optimizing operations and promoting product consolidations.

How is Oqema positioned in this scenario?

J. Berwick: Over the years, we have identified the requirements of the individual markets we serve, which has expanded Oqema’s specialties portfolio. And this continues to be the case today. Since 2017, we’ve been expanding and further developing our specialty business and standardizing this across country borders.

Many customers associate Oqema, formerly Overlack, with our strong owned infrastructure position in eastern Europe, an established business in Germany and with lots of flexibility at both ends of the supply chain. We still hold true these values, and practice these qualities to this day. However, in the future, we’ll also be looking to bundle our exceptional technical expertise and our extensive market knowledge across the group even further.

What is the long-term goal?

J. Berwick: By 2020, our specialty business will focus on the food, cosmetics and personal care segments as well as the paints and coatings industries, in which we can already demonstrate many years of experience.

The core of our strategy is the development of an optimal supply chain, which will require meticulously developed product portfolios, our modern, comprehensive and connected warehousing, and our own logistics fleet. We offer extensive portfolios in our twenty defined industry segments and can thus cover all complementary segments. And, of course, our employees play an important role with their experience, expertise and flexibility.

We are also expanding our procurement expertise to more and more regions around the world to ensure we are optimally positioned there. A great deal of our attention goes to our location in Asia, which we are expanding right now.

What will the resulting added value be for customers? And for producers?

J. Berwick: The days in which distribution companies were mere intermediaries are over. Producers increasingly expect us to assume responsibility for sales organization as well as work with the customer to develop the product portfolio. Customers, on the other hand, need us to manage logistics, packaging and quality, and they increasingly expect us to provide solutions for new product demands. Synergies and the exploitation of potential procurement efficiency also need to be taken into account – in other words, they want everything from a single source. And that’s what we will give them. We are working on a large, impressive portfolio in our three selected segments of focus. With this service-oriented approach, we want to become the European distributor of the future.