Chemical Distribution
Industry adapts through diversification and consolidation
In times of crisis, strong companies tend to survive, adapt and gain market share. Throughout the past two years of economic volatility and social contagion across South America, this trend has led to a substantial uptick in M&A activity. Latin America’s chemical distribution market is made up of a combination of global players, such as Univar Solutions, Brenntag and Helm, and regional companies adept in handling the unique challenges of Latin American business. These include Pochteca, GTM, and Química Anastacio, among others. The landscape of chemical distributors operating in Latin America is diverse and diffuse. However, the market was becoming more concentrated prior to the onset of Covid-19 and this looks to continue going forward.
One example is full-line portfolio distributor Brenntag’s push to increase synergies and market presence in areas such as specialty chemicals and specific niche markets, like food, nutrition and personal care. Over the last six years, the company acquired five businesses in Latin America, including its latest deal to acquire Quimisa in Brazil.
“Digitalization is going to significantly change the chemicals industry, and in China we already see much more advanced B2B digital trading platforms than in Europe or the Americas. I expect to see many more transactions being done automatically.”
Björn Steckel, EVP Regional Business Line Steering - Chemicals Americas, Helm
According to Rodrigo Gutierrez, CEO of GTM Holdings: “Consolidation is a global trend in almost every market and chemical distribution is not different. In Latin America consolidation is not simple, as it is a market with significant volatility across the board and some players may be reluctant to participate in it. GTM is used to volatility and we enjoy the challenges of Latin America. We believe that we are in a unique position to consolidate smaller competitors, especially given how Covid-19 has affected the cash flow of some of them.”
Eugenio Manzano, executive director of Pochteca, agreed: “Latin America continues to have a very fragmented chemical distribution industry with hundreds of small regional players. The challenging economic environment, open borders, government regulations, economy of scale requirements in order to be competitive, ecommerce and digitization and low commodity prices will certainly result in more mergers and acquisitions in our region. As we have always done, we will evaluate any attractive growth opportunity that we come across.”
One particular impetus that is driving organic and inorganic growth is digitalization. The pandemic necessitated the adoption of digital innovation and, in a flash, it has universally become an essential component of a company’s growth strategy. “Digitalization is going to significantly change the chemicals industry,” said Björn Steckel, EVP of Helm’s chemical business in the Americas.
There is a notion that Latin America is destined to follow China’s lead in embracing digitalization and possibly even setting up e-commerce type platforms similar to what Alibaba has done with its portal called 1688. Steckel elaborated: “In China we already see much more advanced B2B digital trading platforms than in Europe or the Americas. I expect to see many more transactions being done automatically. Right now, everyone is launching his own platform, whether it is distributors and producers, then you also have independent platforms that try to incorporate both producers and customers with very limited success so far. Nevertheless, the race is still open and the winner will be the one, who is able to connect offline and online business in a seamless way.”
“Anyone can sell a product, but having the technical expertise to support clients takes time, and this is where the value of a good chemical distributor is added. Having local knowledge in a country as large and diversified as Brazil adds great value to international clients.”
Carlos Marin, CEO, Bandeirante Brazmo