Petchem manufacturers outsource product marketing

Jack be nimble

17 November 2009 12:31  [Source: ICB]

As the industry flounders, petrochemical distributor The Plaza Group is using its agility to maximize growth opportunities

SIZE DOES matter, and US-based petrochemical distributor The Plaza Group (TPG) proves this adage. In a shaken petrochemical industry, TPG's small size is one thing that saves it.

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We feel that we are in a better position than most because of our size. We are more nimble, and nimbleness is very important in the current environment," says Randy Velarde, The Plaza Group's president.

TPG differs slightly from the traditional distributor in that, as part of its business model, it provides business and marketing services for producers that have had to cut back on their own resources.

"With their limited resources, they're focusing more on their core products. We have found great success in providing business and marketing services they can utilize related to their noncore products," says Velarde.

In many cases, TPG takes on an exclusive arrangement with these producers on those noncore products.

One of the top priorities in the company's strategy is to continue indentifying supply partner or customer partner candidates who fit most logically into TPG's business model and pursue them. They are carefully reviewing candidates in the US and abroad.

The kind of candidates they look for have a product or coproduct that has a strong showing in the petrochemical industry.

"And as many of these companies continue to cut back on their resources, yet continue to make these products, they will need our help to take those products to market," Velarde says.

STRONG LEGACY
With more than 250 years of combined experience in TPG, the company has a strong legacy behind it to convince supply and customer candidates of its commercial expertise, including in the supply chain and customer service areas.

One asset that's slightly different is the level of consultancy that TPG offers its partners on the supply side and the customer side.

"We are more nimble, and nimbleness is very important" Randy Velarde, president, The Plaza Group

"While these companies have outsourced some or all of a product area to us to take to market, they don't want it to fall into a black hole. We provide a business plan, we provide regular updates in an efficient way as to how we're progressing with those business plans, and we write a monthly newsletter," says Velarde. "We believe quite strongly that the consultancy we provide to our suppliers and our customer partners is very important to our success."TPG provides "high-touch" customer service, Velarde says. "Our customer service is unparalleled in the industry, and that's one reason why buyers purchase from our company."

Velarde also emphasizes that a prominent issue in today's environment is credit.

"We provide at least two areas of great benefit to our supplier partners. First, we pay them based on our negotiated arrangements. We pay our suppliers on the day on which payment is due. The second benefit we provide is that we manage a large number of customers on our suppliers' behalf, as part of managing the marketing of that product. So in today's environment, where the credit management is ever more challenging, we play a very important role for that supplier by managing dozens of customers for them," Velarde explains.

"We think living by our word and performing by our word is quite valuable at any time, but especially at this time," he adds.

"We are pleased with our performance in 2009, especially in light of the environment under which we all worked. We expect sales to be close to what we were able to achieve in 2008, which is quite impressive, especially in light of lower demand and declining product prices - especially in the first half of this year. We are very pleased with how sales performance has been," he adds.

While TPG does not disclose sales, it says dollar sales growth over the past five years was more than 35%. This year, despite the downturn in demand for some of its products - especially those related to the housing and automotive sectors - the company was able to add new supply in two areas. This served to overcome the decline in demand and replace some weak product areas.

In one of the new product areas, TPG took on a line of polymers for petrochemical company Polimeri Europa at the beginning of this year. It is a $25m (€17m) business and includes Polimeri Europa's elastomers, styrenics, polyolefins and some intermediates. Polymeri Europa is a wholly owned subsidiary of Italian energy giant Eni.

The other business TPG took on was the Blue Island Phenol plant (former JLM plant in Blue Island) in Illinois, US, in July 2009. The products TPG will be marketing for Blue Island Phenol include phenol, acetone, alpha-methylstyrene, acetophenone, and cumene.

GROWING SERVICE
Another element of the company's model that has become more prominent in the past five years has been its growing service to non-US producers. For example, TPG is seeking to expand its product portfolio with downstream petrochemical products from Middle Eastern producers.

"One area we'll be focusing on is the continued development of downstream products in the Middle East, including acetone, alcohols, ketones, solvents and intermediates," Velarde says.

The Middle East already prominently consists of petrochemical producers. Now they are making investments in further downstream products such as solvents, alcohols and other intermediates that TPG will be pursuing in the next five years.

"We are in relationship development with the Abu Dhabi, Qatar and Saudi Arabia regions," Velarde says.

The Plaza Group already has a supply partnership with SABIC, in Saudi Arabia, for both acetone and methanol, and the company sees further opportunities to expand this relationship.

Velarde says his outfit will also develop its sales opportunities in Latin America, and will continue to build supply relationships in Asia.

A significant element in TPG's business model and a significant reason for its strength during the economic downturn has been its expansion outside US borders.

"We serve a similar role of providing business and marketing services for non-US producers [as the company does for US producers] that wish to achieve fast and efficient access to the US market," he says.

Today, about two-thirds of the company's supply is US-based, with the remainder from outside the US. And about two-thirds of sales are in the US market, according to Velarde.

Read Paul Hodges' Chemicals & the Economy blog

By: Feliza Mirasol
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