For followers of the “go-to-market” channels of the polymer and plastics market, there seems to be an interesting dynamic emerging that’s shifting industry conversation. Traditionally, major polymer producers like DowDuPont and Chevron Phillips would sell their commodity, engineered, and other polymers to a plastics compounder. These corporations would produce value-added compounds and market these compounds their target end user customer. From packaging to automotive to healthcare, this practice covered many industry segments. And now? Well, it seems like this is no longer the case.
Consider the recent moves made by major polymer producers LyondellBasell and Toray Industry. Both have made acquisitions that bring downstream channel value to their base materials. Through their acquisition of global engineering plastic compounder A. Schulman, LyondellBasell is seeking to improve their value creation. The ability to provide end user product solutions means that the producer will capture profits previously lost to the middleman, or an external masterbatch provider.
In other market segments, the acquisition of HiTech Polymers by 3M Company will allow the industry giant to retain value and margin. By using this speciality compounding capability, 3M can travel further downstream to final article solutions. Similar strategies are being implemented by Lanxess Corporation, especially with the recent announcement of it’s commissioning of a new production line for the manufacture of specialty compounds in Europe. It remains to be seen how global, privately-owned masterbatch leaders such as Ampacet Corporation will manage this shift.
In the case of Toray, a major carbon fibre producer, the acquisition of TenCate Advanced Composites is poised to help accelerate the company’s growth. With the acquisition, the producer has the capacity to expand its high-performance thermoplastic and thermoset composites offering used in the aerospace and automotive sector.
With this channel switching comes the potential for considerable revenue synergies. Strong compound annual growth rates are forecasted for the next ten years as industry players, both large and small, move to take advantage of these synergies.
At Match Point Strategies, we keep tabs on market intelligence and movements to better understand the industries in which our clients operate. What are your thoughts on channel switching? Let us know!