Thermoplastic concentrate makers aren't alone in wanting to rule the world - but they need to have their priorities straight before setting off on a global campaign.
John Manuck, owner of color concentrates maker Techmer PM LLC, and other speakers laid out their agenda Feb. 10-12 at Thermoplastic Concentrates 2003 in New Orleans, sponsored by Applied Market Information LLC.
Manuck went so far as to quote the song that British combo Tears for Fears took to the top of the American pop charts almost 20 years ago.
``Everybody does want to rule the world,'' said Manuck, whose firm recently regained independence after a lengthy struggle with compounding leader PolyOne Corp. of Cleveland. ``But it's dangerous to expand and go global just because it's an ego thing.
``You need to understand the clash of social forces and the mix of diversity and uniformity that it brings,'' he added. ``On the one hand, it's a global village, but people still identify with local culture.
``In some cultures you need to tell people what to do and in other cultures, consensus rules. What you might consider a good decision from a profit-margin point of view might not be that way to someone from another part of the world.''
Last year Techmer generated about 5 percent of its $130 million sales total from international markets. The firm currently is working to expand a business relationship with Ciba Specialty Chemicals AG that would give Techmer access to compounding capacity in Saudi Arabia and Malaysia.
AMI research director Andrew Reynolds confirmed that firms with global brands, such as Coca-Cola Co., are taking product consistency and appearance seriously.
``Five years ago, Coke would talk about the consistency of `Coke red,' but now they insist on it being exactly the same in every region of the world,'' Reynolds said.
But the lurking contradiction in the concentrates market is that while some global concentrate suppliers - such as PolyOne and Clariant SA - have emerged, the majority of all concentrate markets remain local, resulting in many opportunities for small to midsize concentrate makers.
PolyOne's Tom Bolger has seen that trend firsthand. His firm, which ranks as North America's largest overall compounder, has struggled recently, posting financial losses in 2001 and 2002.
``We're continuing to meet or exceed our global customers' needs, but we haven't done a real good job of keeping up with our regional customers,'' said Bolger, vice president and general manager of the Americas color business for PolyOne.
``That's where other firms are gaining share - not on the global level, but with smaller, regional processors,'' Bolger added.
Closer to home, those factors have led 60 firms to enter the North American concentrates market since 1996 - but increased competition has driven 66 out of the market in that same period, according to AMI President John Jones.
By AMI's count, 39 of those 60 new entrants were brand-new companies, while the remainder resulted from spinoffs, integrations or established companies launching concentrate production. AMI tallied 144 concentrate makers in North America last year.
Looking ahead, Wyomissing, Pa.-based AMI expects to see slower volume growth for North American concentrate makers as the market matures somewhat. The annual growth rate had been 7 percent from 1997-99, but should be around 4 percent from 2001-06, Jones said.
Growth in the 1996-2001 time frame was boosted by a significant jump in the amount of resin using concentrates. AMI estimates that 36 percent of all North American resin used concentrates in 1995. That number climbed to 45 percent by 2001.
But increasing competition and low barriers to entry caused the average per-pound selling price for all concentrates to drop from $1.65 to $1.55 in that stretch. AMI's estimate includes higher-price engineering resin concentrates as well as lower-price commodity resin products.
Based on dollar sales, three firms - Tarrytown, N.Y.-based Ampacet Corp., PolyOne and Clariant's Clariant Masterbatches unit in Charlotte, N.C. - held almost one-third of the North American concentrate market in 2001. Ampacet held a 13 percent stake, while PolyOne checked in at 10 percent and Clariant laid claim to 8 percent.
Jones noted two concentrate firms showing aggressive growth in the past couple of years: Spartech Corp. of Clayton, Mo., at 4 percent and Brampton, Ontario-based Colortech Inc. at 3 percent.
In separate color categories, black concentrates showed the highest volume growth in pounds since 1996, while white concentrates were the only type to grow faster in dollar terms than in pounds.
During that period, concentrate makers saw reduced business in color and black products based on engineering resins, as makers of those resins did more work in-house, Jones said.
For whites, average loadings continued to increase, with common loadings moving from 50 percent to an average of 60-70 percent and some going as high as 90 percent, according to Jones.
The importance of the service model in the concentrates world hasn't been lost on Alloy Polymers, a toll compounder in Richmond, Va. Alloy, which last year purchased a major compounding site in Gahanna, Ohio, from Basell NV, has marketed its service as a means of letting customers focus on their core businesses.
``Outsourcing lets our customers get a higher return on capital,'' said Alloy licensed products director Tony Bernardo. ``If they can take care of the dollars, let us take care of the pennies.
``We can let a resin maker focus on neat resin production, or we can handle products at the beginning or the end of their life cycles. But we have to be capable of the same or better standards than our clients expect from their own operations.''
PolyOne, which AMI ranked as North America's second-largest concentrate maker, trailing only Ampacet Corp., remains optimistic in spite of the challenges facing the concentrates market.
``It's been a tough couple of years, but they've been eye-opening years as well,'' Bolger said. ``We've seen a huge number of converters and [original equipment manufacturer] customers go to global approvals and supply agreements.
``In the last four or five months there's been a real rebound,'' he added. ``We're hoping to get a little tailwind behind us.''