Keeping inventory for three months to avoid shortages and loss of volume: Alok Sharman, Regional Director – South Asia & MD – India, Brenntag Ingredients India

  • July 25, 2022

What are the global trends in chemicals and ingredient distribution business in 2022 and how do you see its implication on India?

Chemicals: Key trends in chemicals are leaning towards natural, organic, sustainable, biodegradable, low/zero carbon footprint chemicals. Customers have started moving up the value chain.

The supply situation of key chemicals and ingredients is expected to remain tight in 2022 due to global logistic challenges and the current geopolitical situation, as a result of the Russia-Ukraine crisis amongst others. For example, crude derivatives form 30-45% of raw material costs for paint companies. A rise in crude oil and currency depreciation adds to the pressure of the price of raw materials and therefore profitability of paint companies.

To counter continuing supply challenges, organisations will have to be working strategically to put up the right business continuity plans in place. Distribution companies with a global footprint like Brenntag can potentially provide partial relief to supply challenges by alternate sourcing, demand forecasting and end-to-end supply chain services. Service excellence is also a key tool for differentiation for us, along with value-added offerings like blending solutions, repackaging, etc.

Food ingredients: Globally, we are seeing Generation Z and Baby Boomers become increasingly focused on improving mental wellbeing and managing stress through their nutrition. Stay-at-home lifestyle during the pandemic has impacted food behaviour. 32% of consumers globally have cooked or baked at home and increased their snacking at home as well. Fresh, local, and traditional foods are getting priority in this environment and are expected to remain strong as their multiple benefits hit home with consumers. Better ingredients, authenticity and better nutrition are a key focus of consumers’ buying decisions.

Many also look at natural ingredients in the labels. Other trends are: reductions (sugar, salt, etc.), control (immunity boosters), and enriched positive effects (gut health through fibre, protein, vitamins, and minerals).

India is catching up with global trends due to increased customer’s preference for healthy alternatives and people becoming more nutrition conscious. Key trends in India are in line with global mega trends – plant[1]based products, tech to table, gut health, back to roots, and amplified experience (food as entertainment). Additionally, food processors are focusing on greener and cleaner India. Some companies claim they are water positive, carbon positive, solid waste recycling positive for over 10 years. Others are giving 100% commitment to use reused and compostable packaging.

Also, sustainability and health are driving veganism as a key trend, as it is seen as healthier and better for the planet. Consumers are increasingly looking for plant-based alternatives to meat and dairy. Increased options in quick service restaurant food chains also include menus with vegan options. For consumers, food safety, health aspects and nutritional content are becoming top purchasing preferences.

How are you trying to minimize supply chain constraints in 2022?

Brenntag India mainly imports chemicals from Asian countries. The challenge we faced during the pandemic was the shortage of containers for handling cargo. We have started keeping inventory for three months to avoid shortages and loss of sales volume and market share.

Another major problem many companies face is the non-availability of transportation infrastructure across multiple emerging economies. Brenntag India has warehouses at multiple locations stretching from North-South, to West-East to cater to our local customers.

Digital platforms bring chemical distributors, manufacturers, and consumers together and provide suitable solutions. Brenntag India has already embraced a digital/e-commerce platform – Brenntag Connect – to receive customer enquiries, orders, searching products and pricing inquiries, viewing and downloading documents, tracking shipments, etc. thus reducing turnaround time in these internal processes. Brenntag India customers can now register and start adding chemicals and ingredients to their shopping carts on Brenntag Connect available on our website.

Key learnings during the pandemic and how do you plan to move ahead in future with respect to supply chain challenges?

Freight prices increased by three times during the pandemic and there was a shortage of containers. The world was not at all prepared for handling such a scenario. Brenntag employees worked tirelessly to ensure the continuity of business for us and our customers and have had outstanding business results with the support of our key business and supply partners. We plan to move ahead in the future by having better forecasts and building enough inventory to meet our business requirements.

How has Brenntag India performed both in the Essentials and Specialties Business Units?

Since 2020, the Brenntag operating mod[1]el has included two global divisions, Brenntag Specialties and Brenntag Essentials, with a distinct market approach addressing the changing needs of our business partners.

With our transformation program “Project Brenntag” we are laying solid foundations for sustainable organic earnings growth and even stronger partnerships with our customers and suppliers.

Brenntag Specialties division is focused on performance chemicals and ingredients, which tend to enhance performance of the manufacturing process and end products.

Hence, they are directly used in the production of customer’s end products. The key factor behind the growth of specialty chemicals is that they are more consumer-centric and are designed for specific applications to manufacture end-use products as compared to commodity chemicals. Thus, they offer higher growth rates, although the volumes of the specialty chemicals are generally lower than commodity chemicals.

Brenntag Essentials division is the agile, lean, and most efficient partner of choice for our customers in local geographies for high volume delivery, which requires local market knowhow, creates a strong Brenntag brand recognition and works in markets with high barriers to entry. The operating model is complemented by a distinct go-to-market approach with globally harmonized and advanced customer segmentation, in addition to a focused sales organization geared to customer requirements.

Both Brenntag Essentials and Brenntag Specialities have performed above budget for the year 2021 with Brenntag Specialties being the larger part in the Indian market.

What is the role of Brenntag's Regional Hub of Asia Pacific in ensuring centralized coordination between regional suppliers and India specific sites?

The Regional Hub as a single point of con[1]tact for Asia Pacific supply chains helps reduce traditional complexities. With it, suppliers have one regional point of contact for supply chain issues and receive forecasts and full-container load orders. Customers feel assured with stock availability in Asia and have reduced lead time for regular product orders.

Brenntag also has a global sourcing arm called Global Sourcing Organization (GSO), which provides access to industrial and specialty chemicals from emerging markets like China, India, Korea, Taiwan, and Southeast Asia whilst ensuring quality, reliability, sustainability and in compliance with Brenntag standards.

Brenntag India has the second largest team of GSO in Asia Pacific, second to China.

From the Regional Hub, GSO and procurement arms of Brenntag Essentials and Brenntag Specialties business units coordinate to facilitate supplier products to Brenntag India sites.

The company has signed a distribution agreement with Elementis in Asia Pacific. What are your India plans?

The relationship with Elementis in India aims to explore new opportunities by having a deeper understanding of the market and changing customer needs, and by partnering in localization and innovation. Brenntag will set up a Coatings Applications Development Centre near Mumbai to support customers and offer them our technical application capabilities. The team is super excited and is looking forward to creating more value for customers in India.

What are the new initiatives being planned by Brenntag India and Capex allocation for the same?

Being a chemical and ingredients distribution company, Brenntag has plans to invest in warehouse facilities closer to customers in North India to help service the market better.

Further blending facilities for Food, Material Science, Lubricants along with Material Science application laboratory are also being planned.

What is your business outlook for the Indian market in 2022? How are you planning to achieve it during the year?

A strong increase in demand is notice[1]able after two years of subdued demand during the pandemic. We are aligning our portfolio to market demand, and plan to stay invested in key industry trends.

The Indian food processing industry is having a robust double-digit growth. We plan to grow in line with a continued solution-based approach, leveraging Brenntag’s global knowledge and local application expertise with application development centres.

At Brenntag, we apply a customer segment approach - offering the right technological and commercial expertise and specific value proposition. Furthermore, Brenntag India continues to invest in human capital and build a great workplace culture. In fact, we have been again certified as a Great Place to Work.

How do you address sustainability issues? Any key initiatives in the Indian context in 2022?

Sustainability is a fundamental part of Brenntag’s corporate strategy, a constant business driver and an integral part of Brenntag’s corporate culture.

Brenntag’s key role in the value chain offers huge potential, but also entails an obligation to contribute towards greater sustainability in the industry.

Safety is the highest priority at Brenntag, both for our employees as well as our customers and partners. Brenntag India strives to ensure bringing down the TRIR (Total Recordable Injury Rate). There exist strict management and safety standards across all Brenntag India sites. We are engaged in various environmental activities like tree planting, opting for paperless offices, solar powered offices, as well as using split ACs instead of central air conditioning. Further plans are to ensure that the new warehouse we are soliciting in North India will meet our sustainability parameters.

Brenntag has committed to switching its electricity consumption completely to green electricity by 2025 under the global RE100 initiative. What are your India plans?

We are committed to the principles of Responsible Care and Responsible Distribution. The Brenntag India office in Gurgaon has already implemented a solar powered office set-up. We also follow natural lighting at our warehouses. We believe in staying in proximity with our local customers, so by optimizing both the distance to the customer and trans[1]port requirements, we will also lower CO2 emissions and improve our environmental footprint.

Is Brenntag India planning any acquisition for increasing its market share in India?

Both organic and inorganic growth have been integral parts of Brenntag’s strategy. In 2018, Brenntag acquired Raj Petro, which has turned out to be a very successful acquisition. Similarly, we will always be interested in distribution and value-addition service companies which will provide synergy to the growth of Brenntag India.

Brenntag has plans to invest in warehouse facilities closer to customers in North India to help service the market better