The influence of original equipment manufacturers on the North American color concentrates market should continue to grow this year, with OEM-specified business accounting for about 10 percent of the total market.
OEM-specified color business more than quadrupled between 1994 and 2004, according to Tom Bolger, color business manager for PolyOne Corp. of Avon Lake, Ohio.
Specified business comes from OEMs like Procter & Gamble Co. and Apple Computer Inc., which choose one or two colorant suppliers and require the processors they work with to use those companies' color products.
Other OEMs - such as the Big Three automakers, Dell Computer Corp. and Unilever plc - specify a broader range, choosing a group of suppliers and allowing processors to choose where they source their colorants.
OEM product selection ``boils down to cost, control and consolidation,'' Bolger said at Thermoplastic Concentrates 2005, an industry conference hosted Feb. 9-11 in New Orleans by Wyomissing, Pa.-based Applied Market Information LLC.
``It's happening everywhere. The typical OEM uses only 15 percent of the material they qualify. They outsource most of it.''
PolyOne has a lengthy relationship with P&G, dating back to 1989 when Cincinnati-based P&G began using special-effects color matching from PolyOne predecessor M.A. Hanna Co.
In 2005, 45 percent of PolyOne's color business is specified by the ultimate end user, Bolger said. Those key accounts - from OEMs or large injection and blow molders - generate about $500 million in annual sales for PolyOne.
It's not clear yet how P&G's recent $57 billion acquisition of consumer products maker Gillette Co. will affect PolyOne, according to PolyOne Vice President Lance Mitchell. Both firms are PolyOne customers, but PolyOne has a much larger presence at P&G, Mitchell said.
Moving forward, Bolger said PolyOne expects the overall amount of OEM-specified sales - in the strict P&G/Apple model - to grow to almost $200 million in 2005.
PolyOne also anticipates that more domestic and global OEMs will follow that model.
In addition, OEMs are expected to consolidate the number of global colorants they are using, and some even are moving upstream and specifying the pigments, additives and resins that they want used in the color products they choose.
Traveling that road offers a big chunk of business for companies such as PolyOne, but the road is not always a smooth one.
``PolyOne has been painted as the boogeyman by molders who believe that we pioneered the idea of going directly to OEMs and that we're dragging our customers and competitors into it,'' Bolger said. ``But we got dragged into it as well.''
``Some molders consider [PolyOne working with the OEM] to be going behind their back,'' he added. ``They say that the OEM is their customer, not ours. [Molders] don't like the fact that they're having some control taken away from them.''
Working with OEMs still can be complex, Bolger said. P&G, for example, has more than 1,100 purchasing agents in Cincinnati alone, and PolyOne supplies 18 different types of pearlescent white concentrates, with different thicknesses and additives, for just one P&G product - Pantene-brand shampoo.