MARKETS
Distribution Becomes Problem A d v a n t a g e of selling chemicals through inter m e d i a t e a g e n c y discussed . . . Competition is o n e reason τ NDXJSTREES other than chemicals lean •*• very heavily on the distributor. This is particularly true in foods, drugs, beverages, paper, and building mate rials. In chemicals, t h e distributor's services are used to a comparatively small extent, mostly for consumer end products such as antifreeze and pack aged household products. There's growing belief that industrial chemical outlets can be supplied through distributors, as was contended the other evening during a meeting of the Chemical Engineers of Greater New York. Reason: growing industry and more highly competitive market. One development that has swung in dustry thinking around to the possibil ity is the increasing cost of preparing less than carload shipments to con sumers who buy their chemicals in drum quantities. Actually, there would be nothing very revolutionary about the idea because such large tonnage items as denatured alcohol, naval stores, am monia, and other liquified gases have been handled in this manner for many years by distributors, in addition to direct dealings between producer and consumer. In these instances he is usually the carlot or tank car buyer. H e will also buy drum lots. Alcohol, other solvents, turpentine or carbon tet, are repack aged in the standard 55-gallon drum or in smaller containers. The distributor is often located reasonably near many consumers of the same product. The paint and varnish industry seems to lend itself admirably to this kind of marketing. The importer, of course, is nearly always a distributor. Some Disadvantages. Premiums charged by the middleman over the manufacturer's carlot or tank car quota tion represent the cost of repackaging, handling, added shipping charges, and a reasonably small margin of profit. But John W. Stevens, Celanese chemi cal sales manager, points out that dis tributors at times demand substantial discounts; inordinate freight allowances on goods shipped in bulk through ware house to customer. There are other objections. It is contended that technical service ex tended to consumers cannot be met as well as by the producer's sales force. Distributor can turn out to b e a bottle neck in providing market data, and a greater danger would b e loss of one or two large accounts sold through the 4926
middleman. Dislocation t o the pro ducer would b e very great i n that even tuality. When producer loses one> or two consumer accounts they would represent only a small part of his total direct distribution. These are undoubt edly valid objections which deter wider use of chemical distributor. Technical Service. As to help ex tended in solving customer's technical problems, it is difficult to visualize the distributor, wholesaler, or sales agent in that picture. Some might feel that technical service is a nontransferable function of t h e manufacturer. He con ducted the initial product development and possesses fundamental information vital in solving process difficulties and in answering questions. There were many advantages not withstanding in selling chemicals through an intermediate agency, and these were enumerated by Stevens as well as by L. Stievater, Jr., McKes son & Robbins technical director, at the CEGNY conference. Selling ex pense of basic chemical producer is lowered through reduction in small orders handled. Branch warehouses can b e elirninated b y manufacturer, thus releasing capital for more profitable projects. Credit risks are reduced. In place of hundreds of small accounts, producer finds himself with fewer accounts, and these usually with substantially fi nanced companies. Use of distributor's sales force, prop erly and in right place, gives producer additional "solicitation impact" with ultimate consumer. There are many advantages to con sumer as well. He can carry smaller in ventories, has advantage of buying number of items from one source, can obtain more liberal credit terms. Naphthalene Supplies. Crude naph thalene production by coke ovens and tar distillers is off some 3 % for the first eight months this year, but the loss is more than made up for by slightly larger outputs of refined naph thalene and increased imports. Necessity of bringing in more naph thalene from European suppliers is probably obviated over the remainder of the year. Phthalic anhydride for alkyd resins and plasticizers, foremost derivative of naphthalene, is regarded by market authorities to l>e about in balance as between supply and de mand. C H E M I C A L
Crude naphthalene production froi domestic sources totaled about 21 million pounds this year through Ar gust, off some 3 % from the same pc riod of 1952 (Table I ) . Refined outpi: a t the same time was 58 million pound! a n increase of 7 % . Imports amounte t o approximately 61 million pound: making the new supply total for th period reviewed 335 million pound against 332 million for January-Augus a year ago, down about 1%. j Table I. Crude Naphthalene
Jaaa. Feb. March Ajpr. May
June July Avxg. Sept. Oct. Nov.
Dec TOTAL
(Production, pounds) 1953 ^ 1952 30,351,25 33,869,132 26,777,81 31,711,596 28,484,74 34,841,385 28,019,95 32,021,845 28,157,19 29,664,234 24,108,80 18,855,042 24,328,97 16,085,030 26,504,65 23,699,356 27,824,527 — 28,703,210 — 30,947,682 — 28,063,510 — 216,733,39 336.286.549
Phthalic Anhydride Capacity·
Ou
output of phthalic in 1951 prior t< N P A and DPA planning was 248 mil lion pounds. Later a capacity goal fo; pHthalic anhydride was set at 367 mil· lion, and for a time it appeared tha t h e program -would be exceeded. Some, projects were dropped out, howeveij a n d it will probably "shake down" tc t h e original goal of 367 million pounds. New Barrett plant at Chicago whicl c a m e in during June upped company'; prithalic anhydride production by 50% Same manufacturer's new plant a; Philadelphia is scheduled to go ίηίς operation around the start of 1954 doubling capacity Barrett had for the intermediate prior to June 1952. ! There have been other expansion.; in phthalic since that time. Phthalic anhydride producers include Monsanto' American Cyanamid, Allied's National Ajiiline, Koppers, Pittsburgh Coke £: Chemical, Reichhold Chemicals, Oro nite, and Sherwin-Williams. Price Trends Lower. As is naturaj with some slowing down in the temp< of business, prices seem on die bargain counter side. The index figure for in dustrial chemicals in October was 119.5 vs. 120.0 in September (1947J 4 9 = 100). Organic chemicals were 115.3 in October—116.1 in September! Yet chemicals and allied products and inorganics were unchanged. ! A producer of fine chemicals issues a revised price list every two months, indicating those that have declined and those which rose. In his NovemberDecember list there are 7 declines—nc advances. A N D
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