Caldic outlines growth strategy

Keeping a sharp focus on changing customer needs and fast-moving markets is the key to Dutch distributor Caldic’s growth plans

Caldic operates out of 25 locations throughout 13 countries in Western Europe and Asia; it is ranked Europe’s ninth-largest chemical distributor

A responsive market strategy has taken Caldic from its 1970 roots as a trader to become a large chemical distributor with the added expertise of running its own production and storage facilities.

Headquartered in the Netherlands, Caldic now operates out of 25 locations throughout 13 countries in Western Europe and Asia, and is ranked Europe’s ninth-largest chemical distributor by sales, which are expected to total €550m ($800m) in 2010.

At the helm is CEO Olav van Caldenborgh, who is upbeat about Caldic’s performance. “This year has been very positive for us. We have seen a pickup in demand and volume, prices are high and margins are good. And even though we read that the economy is not doing so well, we cannot back that up,” he says.

There is no doubt that the diversity of a distributor’s portfolio provides a clear advantage in times of crisis. So while construction has been slower, sectors such as food, pharmaceuticals and water treatment have been largely unaffected by the economic slowdown.

Caldic’s portfolio is divided into four key segments: solvent-based chemicals, acids and alkalis, food ingredients, and specialty chemicals. Demand for its products will be up by 20-25% this year compared with 2009, although this is also partly because of restocking. Van Caldenborgh expects that demand growth will return to more stable and healthy levels of around 5-6%/year in 2011 and 2012.

CONTINUED INVESTMENT
Despite the crisis, Caldic has continued investing in the past two years, acquiring companies, growing business activities and expanding its production and storage facilities. The company is always looking for opportunities to expand and is constantly watching fast-changing markets for investment opportunities. Van Caldenborgh adds, however, that a market has to be sufficiently developed for a chemical distributor to add value to the supply chain. “The value is only there if the level of economy is at a minimum level. That level has not been reached in certain Central European countries.”

The focus is to extend activities in targeted markets in Western Europe, parts of Central Europe and Asia. Any move, he says, depends on critical mass and portfolio.

Caldic has defined 23 market sectors and is seeking to create the right portfolio for these, which differs country by country.

Food is an important part of the company’s business. The acquisition last September of Sweden’s Norfoods, a leading supplier of food ingredients in the Nordic region, has boosted Caldic’s activities in the food sector from 25% of its overall business to 33%.

Van Caldenborgh sees sound growth in this market and says that the food industry will remain localized, because of regional tastes and cultures, and not join the manufacturing exodus to low-cost countries.

A dedicated food repacking line for acids and alkalis will go into operation next year in Belgium, which van Caldenborgh believes will make Caldic the only distributor to operate such a facility in Northern Europe.

Caldic also added acids and alkalis in the UK with the purchase of local distributor ­Omnichem on October 1 this year.

ASIAN GROWTH
In Asia, the distributor has operated for more than 30 years in Thailand and China and this has given it a deep knowledge and understanding of the different cultures in the region.

The company wants to grow its presence in Southeast Asia and it is looking at countries such as Vietnam, Malaysia and the Philippines, as well as India, where the economies are substantially developed. “We have a large customer network [in the region] already and we are now reaching critical mass to establish our own distribution companies in those countries,” van Caldenborgh says. Caldic will focus on growing activities in markets such as food ingredients and specialty chemicals.

Caldic has a strong presence in Thailand’s rubber market and will expand there too; a move is expected within the next five years.

The company established a sourcing office in China some five years ago in a bid to improve supply chain standards there, hiring local chemical engineers to audit its Chinese suppliers: it has since partnered with some of these Chinese producers as a result.

“China is an extremely difficult market but a very fast-growing market,” says van Caldenborgh. He believes that standards for quality, health, safety and environment (QHSE) are rising rapidly there and that Chinese authorities are becoming stricter on environmental protection, which he thinks is positive.

Caldic’s first office opened in Shanghai in 2006 and a second followed in May this year in Nanjing. As well as sourcing, Caldic sells and distributes products into the local market out of both these offices. Van Caldenborgh says that two more offices will open next year in Tianjin and Guangzhou.

Caldic is also planning to expand its silica capacity in Shandong, China, within the next two years. The distributor started its own silica production in 2007 in a bid to secure availability after leading producers restricted supply because demand was outstripping global production capability.

PRODUCTION ASSETS
The company also has production assets in Europe: specifically formaldehyde and ­derivatives at Europoort and customer distillation in Zevenbergen, both in the Netherlands, as well as Furex fire extinguishing agents in Dusseldorf, Germany.

Caldic moved into production in the early 1970s for the same reason as the more recent silica investment in China: security of supply and to meet customers’ demands. Chemical production accounts for 15% of its total business and van Caldenborgh says this ratio will not alter even though Caldic will continue to invest in this part of business.

Storage is another area of expertise for Caldic, which has tank farms at Europoort and Zevenbergen. A two-phase expansion at Europoort this year has pushed up total capacity to 172,500m3, from 60,000m3.

The second-phase increase costing €30m was completed early in October and van Caldenborgh says the additional capacity of 50,000m3 is nearly sold out. A first-phase expansion of 62,500m3 was completed in February. The facilities store ethanol/bioethanol and methanol for producers and importers who can use the tank farm as a hub.

CHALLENGES REMAIN
Van Caldenborgh is positive for the future, both for Caldic and the distribution sector, but he concedes that big challenges remain, including consolidation and legislation.

The costs of implementing new legislation such as Europe’s chemical regulation Reach; globally harmonized system of classification and labeling of chemicals (GHS) and classification, labeling and packaging (CLP) to name just a few, is enormous and “a big challenge for us and the industry,” he says.

Van Caldenborgh adds that the standard of operational excellence required to keep pace with changing legislation will be difficult, particularly for smaller distributors. “Companies need a continuous focus and investment to maintain the required level of QHSE,” he says, revealing that Caldic spends nearly €10m/year just to keep its facilities up to standard.

Whether it is chemical distribution, production or storage, Caldic has been successful in spotting opportunities and responding accordingly. Its constant attention to fast-moving, changing market needs and customer demands has steered a successful course to growth that van Caldenborgh intends to continue.

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