Opportunities in Chemical Distribution by The BCG

The industry

The chemical industry is fragmented. It is made up of over 100,000 products including petrochemicals, solvents, polymers, and customized specialty chemicals. This industry is comprised of more than 10,000 chemical producers worldwide. There are over 5,000 distributors worldwide, with most firms focusing on local or regional areas, and specializing in particular product segments.

The five largest chemical distribution companies worldwide control less than 19 percent of the global market.

Many producers have found it difficult to develop an effective sales model for small customers. In particular, producers find it difficult to offer sales, customer service, and technical assistance that is required to support these small customers.

Between 20 and 40 percent of chemicals are consumed by small customers (>$250,000 annual sales). Chemical distribution companies increasingly recognize their marketing, sales and distribution functions as sources of competitive advantage in servicing this market segment.


The approach to chemical distribution needs to be tailored for customer-application systems and require technical application support.

Customers indicated they would like more technical support and application support from distributors and producers as well as application expertise. A “one-size-fits-all” approach attempting to serve everybody from high-volume key-accounts customers, to low volume small customers are not viable anymore. Many producers have found it difficult to develop an effective sales model for small customers, particularly in mature markets; contributions margins are often higher in dealing with small and medium-sized customers.

This study also highlights the opportunities available through closer cooperation and partnerships among chemical producers, third party distributors, and customers, as well as the importance of taking a strategic rather than an operational approach to chemical product distribution.

Companies who set up highly complex relationships with a large number of distributors require substantial resources to manage and also lead to duplication of efforts and resources. Producers may seek to reduce the number of distributors they use and develop a strategic partnership with distributors that have the ability to invest in market development and information exchange.

Fully realizing the value from chemical distribution starts with recognizing that it is more than a simple operation issue. A strategic approach is needed instead of a undifferentiated approach that is purely based on customer size.

The key essentials when developing an effective and efficient channel to market strategy include the following:

  • Truly understanding customer segments and customer needs
  • Ensuring complete transparency to all information
  • Tailor a “go-to-market” approach
  • A defined sales and market process
  • A genuine partnership

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By |2019-07-17T19:32:18+00:00December 19th, 2016|News & Events|

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