How Care Chemicals Creates Value
Market insights, cutting-edge technologies, and a forward-looking approach to business comprise the core of Care Chemicals. By following lifestyle-driven megatrends, the Business Area strengthens Clariant’s position and image as a supplier of sustainable products.
1. Focus on future technologies and new business
Comprising Industrial & Consumer Specialties and New Business Development, Care Chemicals focuses on highly attractive, high-margin, and low-cyclicality markets.
The 15 production sites and application and development centers of Industrial & Consumer Specialties around the world focus on products that require similar technologies and common production capacities. Care Chemicals’ customers are varied: some receive ingredients for formulating products that are then distributed through retailers to end consumers; others redistribute to professionals, for use in industrial cleaning, aviation, or construction, for example. Customers include not only global brand owners, but also »local heroes«– smaller, private labels that capture market interest through claims-driven positioning.
While New Business Development falls under the umbrella of Care Chemicals, it scouts and develops opportunities with disruptive potential for all Business Areas, helping to address the world’s sustainability challenges. By looking beyond current businesses, New Business Development identifies areas with growth potential while also recognizing business risks for current Business Units.
2. Demand for sustainable products increases further
The CleanForward™ platform gives a face to the four global megatrends of convenience, sustainability, well-being and demographic change, providing unique insight into what moves people around the world concerning home care.
While most markets for Care Chemicals show signs of rebound, particularly in North America, Europe, and Asia, the last three years of recession have changed consumer preferences. These markets increasingly favor healthier, longer-lasting, sustainable goods with natural or bio-based ingredients instead of fossil-fuel-based products. In addition, customers are also requesting traceability – such as for palm oil derivatives – and substantiation of the sustainability claims in the marketing storylines.
Clariant meets these demands by increasing innovation campaigns and deepening its understanding of market needs and forward-looking trends. In 2017, Clariant not only continued the BeautyForward® trend initiative, but also launched CleanForward™, a platform that opens doors for dialogue with formulators and brand owners about global trends in the Home Care market and how Clariant technology can help address them.
In crop solutions, increasing regulatory pressure concerning adjuvants – additives that improve a pesticide’s ability to protect agricultural plants – opens up unprecedented opportunities for replacement. In industrial lubricants, with the trend toward faster machining, standard lubricants are no longer able to cope with the higher loads, speeds, and temperatures. Synthetic-based oils and multifunctional additives are becoming indispensable.
3. New opportunities beyond current businesses
PRELECT® silver nano inks
The global trends of sustainability, digitalization and the growing middle class are the key drivers for New Business Development. The growing middle class with changing food tastes and increased consumption are intensifying global food supply challenges and waste production. Clariant responds to these challenges with solutions for sustainably produced food ingredients and improved recyclability of plastics. Sustainable energy management as well as the continued trend towards miniaturization in handheld devices and adding electrical circuits to all »internet of things« products create new market opportunities for printed electronics. With PRELECT® silver nano inks, New Business Development developed a solution used for fine line printing, such as for printing blue tooth antennae, that also creates less waste water and uses less energy than traditional production technologies.
Emerging markets such as China and India are building their infrastructure with sustainable solutions from the start. To participate in this growth, by the end of 2017 more than half of the New Business Development group had been relocated from Europe to China and Taiwan, as well as Latin America.
Idea to Market
3.1. Three focus themes and new business fields
In 2017, the innovation efforts of Industrial & Consumer Specialties focused on three main themes:
- Providing »smart solutions« that allow customers to differentiate with highly efficient and cost competitive formulations. This needs in-depth understanding of structure-effect relationships, supported by collaboration with partners such as the Leibniz Institute of Polymer Research Dresden (IPF).
- Continuously shifting toward a more sustainable product portfolio by focussing on an improved renewable carbon index (RCI), which measures how much a product is based on renewable rather than fossil-fuel sources – an index of interest to key global accounts – and on the responsible and sustainable sourcing and use of renewable raw materials. As an example, Clariant has certified all its relevant production sites and is able to offer its customers sustainable palm oil derivatives certified according to the criteria of RSPO (Roundtable on Sustainable Palm Oil).
- Anticipating regulatory changes and proactively developing compliant alternatives. For example, regulation on preservatives is increasing and Clariant focused innovation on boosters that allow customers to lower preservative concentrations and new products that support »preservative-free« claims.
Clariant achieved an RCI above 50% for rheology modifiers that change flow behavior of paints and cleaning products that were previously fully petrochemical-based.
Key developments in 2017 were the inauguration of the new crop greenhouse, which received very positive early feedback including joint development proposals from customers, and the launch of the new Active Ingredients Unit to develop new powerful solutions enhancing performance and user experience in skin, hair and body care. Clariant also continued to setup R&D facilities into global trend-setting markets such as Asia Pacific for skin care or Latin America for hair care where Clariant operates its Hair Care Competence Center in Brazil, the most diversified and fastest growing region for hair care in the world.
»Our new Active Ingredients Unit is a flexible start-up to rapidly launch active ingredient innovations that meet the highly specialized product development needs of our customers and end consumers.«Christian VangHead of Business Unit Industrial & Consumer Specialties
New Business Development strives to convert promising innovation ideas which are beyond the scope of the Business Units into profitable business. In order to make sure that new businesses can be successfully integrated into established processes, businesses are developed until they are in the market and have a proven value proposition, market channels and marketing approach. Current activities include food ingredients solutions with a special focus on helping food companies increase the health of their products with sustainable ingredients, tailored materials for 3D printing leveraging Clariant’s broad portfolio of pigments and additives, silver nanoparticle containing inks for the electronic industry and encapsulated active ingredients for the Personal Care industry, such as Vitispheres®.
Market to Customer
3.2. Clear claims and sharper focus to support value capture
In 2017, Industrial & Consumer Specialties simplified the portfolio by 20% through pruning old technology to bring more clarity to the product offerings and reduce complexity cost. In addition, the product launch process was revisited to emphasize value propositions. For example, in personal care the effect of products from an end-user standpoint were documented and in home care the mode of action of product molecules was substantiated using Electron Magnetic Resonance (EMR) facilities. Key accounts recognize Industrial & Consumer Specialties as a strategic, innovative supplier and customer satisfaction and retention further increased in 2017.
Margin highlight on Genamin® Gluco 50 with characteristic number.
Care Chemicals further developed its comprehensive value-based pricing strategy, which focuses on end-user benefits rather than cost. For example, Genamin® Gluco 50 is currently the only label-free, renewable-based amine for paint neutralization on the market that is free of volatile/semi-volatile compounds (VOC/SVOC). It is an ideal ingredient for paints that are certified with an ecolabel, such as the German Blue Angel, the U.S. GreenSeal, or the Chinese TenRing. Its outstanding sustainability profile was recognized in 2017 with the prestigious Ringier Technology Award in China for the category Coatings Additives. Price strategy for Genamin® Gluco 50 is not based on simply being a substitute for a typical additive, but on the value of its stabilization properties and the new VOC-free claim.
In addition, Care Chemicals explores innovative go-to market routes with digital applications that help customers qualify their needs, navigate the offerings, and select the right product. Examples include the paints and coatings and crops segments, where formulation complexity and regulatory requirements are increasing, and personal care where the »Clarify« mild surfactants product navigator will be launched. In addition, to simplify order placements for routine products, Care Chemicals will open an online customer center starting with industrial applications.
Customer to cash
3.3. Increasing capacity and ensuring process safety and systems integration
In 2017, a key focus in production was broadening the technology portfolio, increasing capacity, and improving competitiveness. In Tarragona, Spain, Industrial & Consumer Specialties is building an integrated production plant for the Squalene/Squalane product portfolio. Squalane and Squalene are used in a variety of cosmetics as a natural moisturizer and are mainly produced from shark livers or olive oil distillates. The now fully integrated process in Tarragona will be based exclusively on non-edible olive oil distillates as a true renewable resource. An additional step forward is the full integration of all production steps at a single location, which will reduce the transportation distances along the value chain by a factor of 10, while improving quality and safety. In the major growth regions Asia and North America, the focus was to ensure benefits from strategic investments. For example, the cGMP pharmaceutical quality qualification is in full swing for pharma polyethylene glycol products at Huizhou, China, and the two new production lines for Ethoxylates at Clear Lake, Texas, that almost double capacity in the United States are already close to full utilization.
Safety counts: 20 tailor-made awareness and leadership workshops were carried out in Business Unit Industrial & Consumer Specialties.
To maintain and even further improve high safety standards, 20 tailor-made safety awareness and leadership workshops have been conducted at the sites in Germany, Brazil, China, Japan, and India. Also, a dedicated logistics cost optimization project was set up in collaboration with the Clariant Supply Chain System (CSS) to identify cost saving potential. The pilot in the Europe, Middle East and Africa region already revealed significant cost saving potential of CHF 4.7 million per year, and global roll-out, including deep-dive analyses on outbound freight and supply chain costs, is planned.
In 2017, New Business Development focused on how to effectively and efficiently set up new businesses while ensuring optimal integration with existing systems. Since agility is key for taking advantage of emerging opportunities, standardization and flexibility need to be well balanced. Making optimal use of Clariant Excellence tools and leveraging the Clariant sales organization for new business offerings beyond established channels, such as leveraging digital marketing for a more effective and targeted customer acquisition as well as establishing an e-commerce site to support the sales of 3D printing materials.
Growth potential per year
EBITDA target margin
R&D spend of sales
Raw material procured in CHF m
Active innovation projects
Number of raw materials procured
Raw material suppliers
Energy consumption in m kWh
In 2013 Clariant adjusted its reporting segments and grouped its businesses with similar end-user markets and growth drivers into four distinct Business Areas: Care Chemicals, Catalysis, Natural Resources, and Plastics & Coatings. VIEW ENTIRE GLOSSARY
A substance added to products in small quantities to achieve certain properties or to improve a product (Clariant Business Unit Additives). VIEW ENTIRE GLOSSARY
Pigments are substances used for coloring; they are used in a technical manner, for example in the manufacture of dyes, varnishes, and plastics. VIEW ENTIRE GLOSSARY
A substance added to products in small quantities to achieve certain properties or to improve a product (Clariant Business Unit Additives). VIEW ENTIRE GLOSSARY
The value chain describes the series of steps in the production process, from raw materials through the various intermediate stages to the ﬁnished end product. VIEW ENTIRE GLOSSARY
Clariant Excellence is an initiative launched in March 2009 with the aim of establishing a culture of continuous improvement. The initiative is based on a change in mindset among all employees and at all levels of the company. It aims to improve competitiveness through gains in efficiency and to create added value. The four elements of Clariant Excellence are: Operational, Commercial, People, and Innovation Excellence. VIEW ENTIRE GLOSSARY
Earnings before interest, taxes, depreciation, and amortization. VIEW ENTIRE GLOSSARY
The EBITDA margin is calculated based on the ratio of EBITDA to sales and shows the return generated through operations from sales before depreciation and amortization. VIEW ENTIRE GLOSSARY
Exceptional items are deﬁned as non-recurring costs or income that have a signiﬁcant impact on the result, for example expenses related to restructuring measures. VIEW ENTIRE GLOSSARY
The pool of funds available to the company for use in the production of goods or the provision of services. This can include funds obtained through financing, such as debt, equity, or grants, and funds generated by the company, for example through sales or investments. VIEW ENTIRE GLOSSARY
Knowledge-based intangibles used and created by the company, often in collaboration with partners. This can include intellectual property, such as patents, trademarks, copyrights, software, rights, and licenses, and »organizational capital« such as tacit knowledge, systems, procedures, and protocols. VIEW ENTIRE GLOSSARY
Manufactured physical objects such as buildings, equipment, and products. These can include objects that are available to the company for use in the production of goods or the provision of services, or that the company produces for sale to customers or for its own use. VIEW ENTIRE GLOSSARY
The company’s staff and its composition, competencies, capabilities, experience, and motivation to innovate. This can include employees’ alignment with corporate values and their ability to understand and implement the company’s strategy. VIEW ENTIRE GLOSSARY
Key relationships including those with significant groups of stakeholders and other networks. This can include shared values, the trust and willingness to engage that the company has developed, and related intangibles associated with its brand and reputation. VIEW ENTIRE GLOSSARY
Renewable and nonrenewable environmental resources and processes that support the past, current, or future prosperity of the company or are affected by it. Examples can include resources related to air, water, and land that are utilized or impacted for example by emissions. VIEW ENTIRE GLOSSARY