Digital and sustainability capabilities and global reach are important factors for commodity distributors to consider.
FREMONT, CA: Research shows that the global chemical distribution market will grow at a compound annual growth rate (CAGR) of 6.3 percent between 2023 and 2030, reaching USD 246.49 billion in 2022. The distribution industry can grow as chemical consumption increases across multiple end-use industries, such as construction, pharmaceuticals, polymers and resins, and plastics. Businesses in the manufacturing and industrial sectors purchase key raw materials from chemical producers. The raw materials are sold directly by producers or distributed by third parties. In comparison to the sale of specialty and commodity chemicals directly to end users, third-party distribution of value-added services such as packaging, logistics, waste removal, blending, inventory management, and technical training may grow particularly due to outsourcing of value-added services like packaging, logistics, waste removal, and blending.
Chemical distribution services help producers connect with smaller clients in less developed areas. Chemical distributors assist chemical producers in entering new markets, which contributes to the growth of the global chemical industry. Emerging markets are crucial to the development of the chemical industry today. Developing as well as developed markets benefit from the chemical sector.
Diversification: The producers consolidated their distributor portfolios worldwide for many years to simplify the supply chain and cut costs. The push to diversify is particularly strong in Europe. Producers realize that no single distributor can be best in class in all regions as markets become more competitive and customer expectations rise. Distributors who can deliver top results in the regional and local segments contributing most to a producer's bottom line, are the key. This means working with many distribution companies, which is at odds with attempts to simplify supply chains. Diversification is likely to continue as relevant expertise becomes more difficult.
Strong market position: A wide range of attributes can score distributors, and producers gave commodity distributors with strong market positions their highest scores. The attribute of the next-highest importance – product and application expertise – was equally strong for specialty and commodity distributors. Digital maturity and offering, global reach, and sustainability performance were the top three dimensions for specialty distributors. According to these findings, specialty distributors should improve their position and knowledge of local markets, while commodity distributors should improve their digital and sustainability capabilities and global reach.
ESG: As environmental, social, and corporate governance (ESG) becomes increasingly important to producers across the chemical industry, distributor selection has become influenced by these factors. Over 90 percent of survey respondents in the next three years said sustainability would be a major driver of distributor selection. ESG concerns are especially important in the specialty market. The importance of some ESG criteria, such as low energy consumption and meeting the highest government standards, is likely to skyrocket. Producers will also look for ways to assess potential partners based on capabilities such as emissions. Many producers seek distributors who share their passion for sustainability, focusing on their product portfolios and brand positioning. Sustainable distributors will stand out in the coming years and capture market share.
Digital Skills: Customer relationship management (CRM) has grown from less than 20 percent to 50 percent today. Producers are increasingly looking for distributors that can work with them digitally. Recent economic events only accelerated the trend of producers working digitally with distributors. By 2024, the digital collaboration will increase by approximately 50 percent. Most producers will interact with distributors digitally, including technical support, automatic reordering, and replenishment.
Chemical distributors offer a variety of specialty and common chemicals for use in oil and petroleum, cosmetics, food, textiles, paint, building construction, and agriculture. Producers will require localized expertise from distributors, and distributors will need to build expertise within specific geographic-segment combinations. Distributors must adjust their sights in response to producers' increasing need for regional-segment specialists.
