Specialty chemicals - winning strategy by Gibson Chemicals

Presentation on 5 April 1995

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Frank Lawson

Frank Lawson

Chairman Gibson Chemical Industries
Head Office, Cheltenham, Victoria. (See also Gibson Maxwell Chemicals in WA)


Priority to people

Over the last 20 years Gibson Chemical Industries (GCI) using direct selling has achieved a compounded turnover growth of 13 per cent per year to $163 million. With group pretax profits on sales in both local and overseas markets compounding at about 12 per cent, shareholders have been rewarded with a 25 per cent return on shareholders funds.

Speaking to an obviously fascinated audience, Frank Lawson, Chairman of GCI addressed the fifth CIP seminar, -and the first for '95.

Overseas markets are increasingly important to GCI with some 40 per cent of sales now derived outside of Australia providing significant sales growth in contrast with the Australian market growing at just 2 per cent. Frank stressed effective representation of company staff, and not just using an agency, as vital to successful operation in Asian markets. He referred to the publication Inside Asia - Australian companies becoming local players. (This is available free from Austrade tel 13 28 78).

GCI's industry was summarised as the mixing of chemicals to customers needs with a high degree of flexibility. Flexibility and working closely with customers were repeatedly stressed by Frank as keys to their success enabled by being in a business with low capital requirement.

The right personnel was stressed as vital to their business with selling as their predominant activity. Some 406 of their 960 employees are salespersons, and all employees paid on results. Enjoying the challenge of selling and working with customers was regarded as very important. The result of such close, relations resulted in many new applications for their products. One example quoted by Frank was the idea of stacking wrapped carcasses in New Zealand with an adhesive thus helping meatworks efficiency.

The combination of customer-oriented staff, remuneration related to performance, flexible manufacturing in low capital cost plant, limited advertising and promotion, meant being able to respond quickly from conceiving the product to its marketing. The combined benefit is that GCI is growing in a mature market.

Customers of GCI in the detergent and related products are mainly commercial or industrial - it does not supply the household sector. With the exception of one company operating in Australia, no specialty chemical manufacturer supplied both the domestic and industrial/commercial sectors as these had different priorities.

There are many changes occurring in specialty chemicals.

For example, larger corporations are changing their buying practices and Frank indicated how the Ford USA motor company, in planning to reduce its direct suppliers by 90 per cent, was indicative of globalisation trends around the world in all markets including Australia. This made it increasingly difficult for smaller suppliers with many becoming uneconomic. Some larger customers now required transactions to be undertaken electronically that was costly and created an entry barrier to smaller suppliers. TQM too was seen as essential and part of the globalisation trend in his industry. Many customers now required AS 3901 accreditation and some even set higher standards such as Q1 by Ford.

Frank's enthusiasm for new developments was hard to contain and he talked about fast 50 knot boats that could carry cargo in 33 hours to Fremantle from Melbourne, new antifouling systems and building board made from sand in place of wood particles. The changes created new opportunities for the flexible.

Clearly as seen by Frank's enthusiasm, change is not a cost to be recovered but one which creates new markets and opportunities.

The key is people and Gibson Chemicals appears to have achieved that very well! Gibson Chemical Industries are now a major player in the formulating industry in a sector that represents about two-thirds of Australia's chemical sector or 7 per cent of Australia's manufacturing activity.

It is worth noting that most specialty chemicals have a high bulk thereby incurring high transport costs. The freight cost provides substantial advantage to local manufacturers using nearby available water, solvents and other low cost bulk adding components. However this benefit can be modified by other factors such as new legislation and practices. Though not mentioned in his presentation, in keeping with a shift also evident in WA's chemical formulating industry, manufacturing Is being consolidated Gibson has acquired 40 hectares. of land in Wagga NSW to manufacture the more hazardous chemicals for the eastern States' markets presently produced in suburbs of major cities.

Frank commented about not being In the household sector for detergent related products. It is generally recognised that the household sector is influenced by other than cost-performance Influences underpinned by large advertising outlays that cannot be recovered by smaller companies. The commercial/industrial sector selects products based on costs and benefits - emotive advertising as used for the household sector is not relevant what Is Important is being able to understand the customer needs -packaging with supporting information Is not always enough to win commercial/industrial customers.

For example greases and lubricant preparations are now often supplied by specialists that understand the machinery In which they are used. Such understanding enables cost saving assessments with the higher cost of some lubricants traded-off against the benefits of longer service intervals or having regard to the anticipated lifespan of the equipment

Gibson's signals to the benefits of working closely with your market As with advertising in the household sector, it is a cost that is well justified if not essential to one's business!

 

© 1996; Chemlink Pty Ltd, PO Box 673, West Perth, Western Australia


Chemlink Pty Ltd ABN 71 007 034 022. Publications 1997. All contents Copyright © 1997. All rights reserved. Information in this document is subject to change without notice. Products and companies referred to are trademarks or registered trademarks of their respective companies or mark holders. URL: www.chemlink.com.au/

Created: Thursday, 14 December 1995, 9:02:47 PM Last Updated: Thursday, 14 December 1995, 9:02:47 PM
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