26 September 2011 09:00 [Source: ICIS news]
By Will Beacham
LONDON (ICIS)--Chemical companies must adapt their business models to the reality of the New Normal of permanent lower growth and an increasingly volatile macroeconomic environment, a leading consultant said on Monday
A growing elderly population in mature economies has far-reaching consequences for the level and type of demand growth for chemicals, according to International eChem chairman Paul Hodges. Planning for the uncertainties of this new macroeconomic environment is vital, he believes.
He claims that by 2020 an unprecedented 33% of the developed world’s population will be over 55 years old. This is thanks to the ageing of the huge post-war “Baby Boomer” generation. Older people typically spend less and save more. They have to budget for 20 years or more of retirement and no longer have to house, feed and clothe growing families.
“Companies need to get to grips with trends such as the ageing population, greater food production and increased water quality and availability. The core market for companies operating in the west will not be the high end of people with lots of money to spend but those on pensions of $10,000-15,000 a year [€7,400-11,100 a year].”
He said companies which still operate on a model which assumes a high level of spending are already losing pricing power and are issuing profit warnings.
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“The business models we had simply won’t work any more. We’re in crisis and we don’t know how the future will be because we’ve never had a 65-year old generation before. Contingency planning is absolutely critical,” said Hodges.
“I don’t have the solutions, but as soon as we realise the world has become this uncertain then we can start moving forward. We need to stop pretending to ourselves that we will one day wake up and this nightmare will be over,” he added.
It is co-authored by Paul Hodges, chairman of International eChem, who writes the ICIS Chemicals and the Economy blog, and John Richardson, director, ICIS training Asia, who writes the Asian Chemical Connections blog.
ICIS and International eChem have also launched a training course, aiming at helping companies to become a winner in the New Normal.
($1 = €0.74)
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