In the past few years, the role of special chemical products distributors has changed, which mainly affects the whole value chain of chemical products. In the past, chemical manufacturers used to see professional distributors as a necessary evil - a means to reach small customers or customers who were difficult to serve economically. Today, distributors are becoming an important part of the channel. The best dealers have deep market insight and the ability to create real value for manufacturers and customers. No wonder the market for specialty chemicals continues to grow faster than the industry as a whole.
We have recently conducted a comprehensive analysis of the sales market of specialty chemicals to identify promising markets and market segments, and to determine the development trend of the industry in the near future. (for similar analysis, see BCG report, distribution of specialty chemicals in North America, March 2016; market dynamics of specialty chemicals distribution, Boston Consulting Report, April 2014. ）The central conclusion of our analysis is that although the market is still very attractive, the threshold for the success of professional dealers is constantly increasing.
From 2012 to 2017, the distribution of specialty chemical products grew at a compound annual growth rate (CAGR) of 5.6%, with a global market size of about 97 billion euros. This is faster than GDP (2.7%), chemical industry (2.9%) and special chemicals consumption (4.9%) in the same period. However, to develop competitive advantage, scale itself can not solve the problem. Instead, professional distributors need to select specific market segments and geographic regions and then invest in the capabilities necessary to enable them to create value for chemical manufacturers and end users in these segments.
Moreover, digital technology is becoming crucial. Due to the high complexity of technology and logistics requirements, it is less destructive than other industries, but customers increasingly expect a complete online and offline experience. As a result, professional chemical products distributors must begin to invest in digital solutions, both in-house and customer-oriented operations, to expand their competitive advantage.
As of 2017, the largest markets were the Asia Pacific region (sales of professional distributors were around 40 billion euros), North America (31 billion euros) and Western Europe (13 billion euros). The rest of the market is less than 5 billion euros. The Asia Pacific region is not only the world's largest distribution market for specialty chemicals, but also one of the fastest growing regions, with a CAGR of 6.8% from 2012 to 2017. During this period, only the Middle East grew faster (7.8%). In contrast, growth in most developed markets has slowed, as expected, over the past five years: 4.7% in North America and 3.6% in Western Europe.
We expect sales growth of specialty chemicals to slow slightly to 5% by 2022, due to slower consumption of chemicals (for the industry as a whole and a subset of specialty chemicals), reduced demand in mature Western markets, and short-term setbacks in the Chinese economy. However, it will still outpace overall global GDP growth and specialty chemicals sales in major markets. (see Table 1. ）In absolute terms, most of the growth in third-party distribution of specialty chemicals will come from major markets in Asia Pacific and North America by 2022.
