JOSEPH A. McGROARTY Merck Chemical Division, Rahway,
N. J.
DDS as an Epoxy Resin Hardener DDS
began as a dyestuff intermediate, was tested as an antimalarial and antitubercular, and had achieved success in treating leprosy when its epoxy resin hardening properties almost created a new market
THE decision to produce a thousand pounds of diaminodiphenylsulfone (DDS) for a market development program was made in September 1955 after six weeks of field study stimulated by inquiries from two principal suppliers of epoxy resins. From talks with purchasing, research, and marketing people in these companies, it was concluded that DDS might be a promising product. Epoxy resin production was expected to approach 30 million pounds in 1955, with some 8 million pounds of liquid epoxies to be used in laminating and potting applications processes which required presence of an acid anhydride or diamine as a cross-linking or hardening agent. Epoxy experts estimated that specialty uses would generate an annual requirement for about 500,000 pounds of DDS. Development
Although ideally the ultimate price should approach that of the resins, then 80 cents a pound, a price ranging from $1.50 to $2.00 might be tolerated if the prototypes fabricated from DDS-epoxy systems proved out as anticipated. At this stage it was not possible to calculate return on investment, of course, but the research people believed that technical DDS could be manufactured for about $1.00 per pound. Thus even $1.50 per pound looked attractive. There was an interim process in the files, adaptable production equipment was available part-time in an existing plant, and customers were in sight, so the company decided to begin. During 1956, the market development group gathered product use information, principally from the laboratories of the epoxy resin producers, and distributed it to prospects. Researchers studied in the laboratory the proposed process on which cost predictions had been based. Production made the original 1000 pounds, and by the end of the year was starting work on a second production order for 5000 pounds. At the end of the year, the situation was reviewed.
Until then 1-pound laboratory samples had been supplied to 125 prospects, many of whom had been referred by salesmen of the epoxy resin producers. Many of these prospects had come in for additional quantities of DDS which they bought at a development price of $4.50 per pound. These prospects were uniformly enthusiastic about the properties of the epoxy products made from DDS. Among the advantages were higher heat distortion point (350' F., compared with a 300' maximum obtainable with other hardeners), higher flexural strength, more durable interlaminar bond, and enhanced retention of dielectric properties, all at high temperature. In addition, the longer pot-life of DDSepoxy systems facilitated fabrication. For example, glass cloth preimpregnated with DDS systems could be stored as long as a month before curing. In contrast with some other diamine and anhydride hardeners in use, no dermatitis problems had been encountered with DDS.
7.
On the negative side, the high melting point of DDS presented an operating problem. A temperature considered high by some fabricators, 350" F., was required to prepare a smooth blend of DDS and liquid epoxy resin. Curing time and temperature were higher than conditions feasible for some fabricators. However, the superior properties of DDS laminates and other fabricated articles were imposing enough so that the product appeared to be definitely technically attractive. Competition. Until January 1957, a year after the program started, there was no active competition in DDS. There were rumors that two other large chemical companies were interested in the product, but they had not yet offered material for sale. The development price of $4.50, which just covered actual production costs for small factory runs, was coming under attack by prospective users. They said they could tolerate this figure for small laboratory quantities, but the price would have to get into the $1 .OO
Epoxy resin liners form hard glossy shield that eliminates flaking, scaling, and friction on pipelines VOL. 52, NO. 1
JANUARY 1960
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to $2.00 range before they would adopt DDS as a production raw material. By then a technical potential for about 75,000 pounds of DDS was expected during 1957, and production had reported that this quantity could be made with modest additions to existing factory equipment. As the cost in this temporary unit would be $2.45 per pound and the primary interest was to develop a market rather than to show a profit! it was decided to reduce the price of DDS to $2.50. This was a timely move, as a competitor appeared in February 1957 with DDS priced at this figure. As a result of the year-end revieiv of the status and prospects for DDS, the market development group recommended that the new, more economical process be fully developed and that a plant with capacity for 400.000-pound annual production be installed for start-up in late 1957. I t was anticipated that the market ivould support near-capacity operation in 1958 at a price to be established between $1.00 and $2.00 per pound when costs were precisely known.
Production
During the first half of 1957 technical and commercial interest in DDS grew apace, and the first significant customer
Isas developed. This prospect, a leading producer of decorative and industrial laminates: sivitched from diethylenetriamine, for which he had been paying 55 cents a pound, to DDS at the prevailing price of $2.50. His purchases for production began at the rate of 1000 pounds a month and were expected to grabs substantially when the price could be reduced to $1.50. Six months later, storm warnings were beginning to appear, however. .41though there were 346 prospects using development quantities of DDS by mid1957, resistance to the price and criticism of the handling difficulties ivere pronounced. The ultimate market for the product appeared to be much more specialized than anticipated even six months before. Although twice as much DDS had been sold in the first quarter of 1957 than during all of 1956 and sales in the second quarter had again doubled, it \vas obvious that full year 1957 sales \uould fall far short of the 75,000 pounds projected earlier. During the second half of 1957 strenuous efforts \\'ere made to convert the most promising among the 346 prospects to significant consumers of DDS. Only one more cf them graduated to a substantial monthly purchase basis nonetheless. Half a dozen others Ivere buying 100- to 250-pound orders. but establish-
Epoxy resins are used for high temperature applications such as the steam lines shown here
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INDUSTRIAL AND ENGINEERING CHEMISTRY
ment of worth-while regular requirements was still indefinite. Plans Abandoned
Meanwhile, the engineering division had completed an estimate of capital investment and operating cost based upon the new process for making DDS. The figures indicated that a plant investment of $750,000 would be required and that the product would cost $1.10 per pound. Selling even at $1.50, which by then was felt to be the maximum price the traffic would bear, DDS would return on total investment in plant and working capital only about 87c after tax. This figure compared unfavorably with the company's average return. Thus it \vas regretfully decided toward the end of 19 57 not to proceed with production and sale of DDS. The company would coast through early 1958 on existing inventory to supply established customers and would see \vhether demand for the product might develop favorably after all. Accordingly, during the first half of 1958 the balance of DDS stock was sold at the established price of $2.50. Meanwhile it was ascertained that the second supplier in the field was well equipped to take care of established DDS users. A final swing of the major prospects was made, but no basis could be found for changing the earlier decision, Because the primary interest here is in the marketing and economic aspects of this case study, technical aspects of the manufacture of DDS or its use in competition with other epoxy resin hardeners have not been discussed in great detail. The company gambled that the superior technical properties of DDS-epoxy systems ivould generate a satisfactory market, but this turned out not to be true. Failure to make the grade with DDS did not result from any one overwhelming product defect. Attainable production cost. while reasonable for a compound of the structural complexity of DDS, was not low enough to compete with other hardeners. Technical excellence of the product, while outstanding- and hence interesting to everyone in the epoxy field, did not lead to volume applications to generate a large enough market. Profitability and return on investment under these conditions, while attractive to a banker, did not come up to a reasonable standard for the chemical industry. All of this can be discerned in retrospect, but no one could predict it with accuracy in advance. Thus the DDS problems are excellent examples of the pitfalls which may beset any commercial development project. Only by having a good try at a reasonable number of new product projects can any company expect to grow and prosper. If the percentage of successes is better than even, the company will probably do well; but there are bound to be some failures
