With over 25 years of industry experience, Kline’s Eric Vogelsberg, Senior Vice President of the M&A and Corporate Development Practice, brings an authoritative and qualified perspective.
While 2011 ended in uncertainty, Eric sees the M&A environment as remaining fundamentally strong and fecund.
On April 18, 2012 at in-cosmetics Barcelona Eric will discuss the current M&A environment and key underlying trends and drivers and share his views on the impact on the personal value chain. He will examine how the continued consolidation and evolution of players will alter the structure of the business and the competitive landscape, and he will help you understand why personal care remains one of the hottest spaces in M&A.
Hear Eric speak on Future M&A Trends and Drivers Across the Personal Care Value Chain at in-cosmetics Barcelona, April 18, 2012 at 12:30PM in the Marketing Trends Theatre.

Within the specialty actives market, consumers are often the trend-setters. A growing consumer understanding of active ingredients in personal care products driven by extensive media coverage is compelling active ingredients manufacturers to innovate. The desire to look younger has raised consumer expectations regarding efficacy of active ingredients, resulting in functionality becoming increasingly important. Consumers expect results, and this is reflected in the trend towards more effective skin care products where validated active ingredients are the key. Consistent above average growth rate in active ingredients in general, particularly specialty actives, is the consequence. Nikola’s presentation will explore new trends in the specialty actives market and the parallel between consumer demands for skin care products and actives offerings. An overview of the present global active ingredients market and its outlook will also be discussed.

Hear Nikola speak on Opportunities in Skin Care: Exploring Specialty Actives at in-cosmetics Barcelona, April 17, 2012 at 10:30AM in the Marketing Trends Theatre.

Traffic? Change for a parking meter? Not issues when shopping’s effortlessly done from home or the office.

On January 31st at 1:00 PM US ET, catch a video recapitulation of a panel of leaders in the world of virtual beauty as they discuss beauty retail options outside the traditional bricks-and-mortar model in the Virtual Beauty Retail Webinar. Topics will include: what virtual retailers are looking for, different models for success, and how to capture the short attention span of the digital-age consumer.

Karen Doslow, Kline’s Consumer Products Practice Industry Manager will participate and discuss trends and insights gleaned from Kline & Company’s recently published report Beauty Marketing 2011: U.S. Promotional Activities and Strategies Assessment. She will also be available during the live questions-and-answers session after the webinar.

Virtual Beauty Retail: Video Recap from HBA, Tuesday, January 31st 1:00 PM US ET.

To register for this timely event, click here.

What has been the impact on the global lubricants industry? As per Kline & Company’s estimates, global lubricant consumption peaked in 2007 at about 39.8 million tonnes. Consumption declined by 3.5% in 2008 to 38.4 million tonnes and by a staggering 9% in 2009 to reach 35 million tonnes. Consumption grew by 7% in 2010 to reach 37.4 million tonnes. In 2011, we estimate that the industry grew by 2% to reach 38.2 million tonnes. The economic rollercoaster ride of the past three years has generated a debate on the nature of lubricant demand and its growth in context of economic growth. Does lubricant demand growth track GDP growth rate? Can we define a relation between GDP growth and lubricant growth? Has the lubricant market grown at all in the last 10 to 15 years? Let’s try to lay out our view on these questions.

Does lubricant demand growth track GDP growth rate?
Lubricants permeate every aspect of our life and are needed wherever machines are used. For our convenience, we break down the industry in terms of consumer segment which covers all privately owned cars, SUVs, motorcycles and small engines; commercial segment which covers all trucks, buses, tractors, and other commercial vehicles; and industrial segment which covers lubricants used in machinery in all industries and also includes metalworking fluids used in variety of metal processing industries. If we take a broad time horizon, then lubricant consumption growth should indeed track GDP growth rate given its wide usage. However, there are two caveats. First, not all sectors of the economy use lubricants to the same extent so lubricant demand growth is dependent on which part of the economy is growing. GDP is divided into manufacturing, services, and agriculture. Manufacturing GDP is most lubricant intensive, and services are the least intensive. In most affluent economies (Germany is an exception), GDP growth is primarily driven by growth in services hence the impact on lubricant demand growth is weak. Growth in manufacturing intensive economies will have a strong relation with lubricant growth. The second factor to consider is the degree of mechanization in the manufacturing sector. Many growth economies may have a large manufacturing sector, but their manufacturing is labour–intensive, using less mechanical power and hence less lubricants. As such economies grow, lubricant consumption would show some growth, but this growth would have been much stronger if it were to occur in an economy which is highly mechanized. Similarly, if growth comers from the Agricultural segment it is important to understand if agriculture is primarily mechanized or labour intensive. In our view lubricant demand growth is driven by GDP growth. However, the relation between the two is nebulous and changing based on where economic growth occurs.

Can we define a relation between GDP growth and lubricant growth?
To be able to quantify the relation between GDP growth rate and lubricant demand growth rate, we need a repeatable, consistent measure of “actual” global lubricant demand, as opposed to estimates. Unfortunately, lack of common definitions and spotty reporting by marketers means that we do not have consistent measure of actual lubricant demand. Data is indeed collected by various national associations but the data is strictly not comparable year to year as the list of participants keeps on changing. Also, differences in what is included make comparison between data from two sources difficult. Is process oil included? What about marine oils? How do re-refined oils get counted? Unless we have a robust, repeatable measure of global lubricant consumption covering all market segments (top tier to bottom tier), the correlation with GDP growth rate is not representative of the total market.

Even if we can’t quantify lubricant demand, we can quantify growth. It’s how much more was sold this year compared to the year before. We can therefore track lubricant demand growth with GDP growth and determine if there is a relation, right?
The answer is: maybe. The lubricants industry is very vast in terms of products, market segments, supply chain position, and geography. The growth rate experienced by industry constituents is based on their position. Niches within the total market may have high or low growth rate because of some underlying trend which drowns out the “real” demand growth. For example, an installer may experience a better than average growth rate if there is a significant shift from DIY demand to DIFM demand. Similarly, a Group III supplier may experience strong growth far in excess of the industry growth due to shifts in blending approaches. An additive company may experience a sudden spurt in demand related to the introduction of a new quality level. These market participants would experience some slowing down if the total market declined, but they would not be able make out if this was due to the slowing down of the market trend or slowing of the overall growth.

Due to supply chain effects, growth rates can be all over the place during times of economic turbulence. When growing at a steady pace, the lubricants industry is like a taut railway train with all chugging along at more or less the same pace. When economic growth stalls the impact on different supply chain levels is different. We did see in the latter half of 2008 and early 2009 massive destocking by lubricant marketers. This caused a more rapid contraction in demand for baseoil and additives suppliers than would have been justified by the contraction in the true demand. Similarly during the upswing in second half of 2010, these suppliers benefited from restocking. As a result, during this turbulent period, it would have been difficult for basestock and additive suppliers to relate their business growth to the GDP growth.

Finally, even if there is no special trend in play and no economic turbulence, growth of individual marketers will be higher or lower than the total market depending on whether it is gaining or losing market share. The point is that growth rates of individual market participants are unreliable indicators of overall market growth. The growth rate of the individual market participant may have been influenced by some major market trend unrelated to overall demand. It could also be the case that the company in question is losing or gaining market share.

Has the lubricant market grown at all in the last 10 to 15 years?
We cannot hold both views that lubricant demand tracks GDP growth and that lubricant consumption today is at the same level as it was 10 years ago, for the real GDP has grown in this period.

Between 2000 and 2010, cumulative global passenger car and commercial vehicle production accounted for nearly 718 million new units¹. Even allowing for vehicle scrappage, there has been a big increase in the global vehicle population. Between 2001 and 2011, steel production grew by 408 million tons². Other industrial end-use industries saw similar growth in production levels. Did lubricant consumption remain flat in face of such massive growth in vehicles population and industrial production? To be sure there has been a dampening of lubricant demand due to longer lasting lubricants, lower losses in use due to better equipment design, smaller sump sizes, better housekeeping, better re-refining, and other such factors. However, they have not been enough to cancel out the growth in the underlying demand for lubricants. Innovations such as longer drain engine oils have not spread out to Asia where the cost of insufficient lubrication far outweighs the cost of the lubricant. In our view, global lubricant consumption is likely to exhibit growth due to increasing vehicle population, industrial production and increased mechanization in growth economies. This growth rate will be lower than what you would expect from the build-up of vehicle population and growth industrial production, but still a long way from a flat market.

Finally, a word on our methodology.
Kline measures lubricant demand by a combination of lubricant usage norms (covering crankcase size, drain intervals, and top up demand where applicable) applied to passenger car, motorcycle, and commercial vehicle populations; lubricant usage intensity in different end-use industries; and estimates of sales by major marketers and their market shares. Usage norms in automotive segment and usage intensity in industrial segment are developed on the basis of end-user and installer interviews. Projections are based on growth in end-user segment and any shifts in the usage norms.

What do you think are the important parameters to be considered for estimating lubricant demand? What factors should we look at for projecting demand growth? Please provide your feedback at vera.sandarova@klinegroup.com. We would love to hear from you.

In closing, we wish you a healthy, happy, and profitable 2012!

By Milind Phadke, Industry Manager, Energy

Milind.Phadke@klinegroup.com

The article points out that because of the major differences in competitive dynamics between these two types of businesses, management’s focus is also very different. Managers in commodity driven businesses rightly focus on cost minimization: low cost raw materials, operational optimization and efficient channels to market. Conversely, managers in specialty businesses focus on understanding and responding to customer needs, product innovation and targeted marketing and sales.

Acquisition is often a manner in which companies find themselves prone to falling into the specialty trap as they attempt to reconcile commodity and specialty business interests. A commodity-oriented company might decide to broaden its portfolio by acquiring a specialty business, attracted by faster growth, higher margins and lower cyclicality. The acquisition price is justified by seeking cost synergies, however given their disparate needs, critical challenges emerge and there is much less room for maneuver than in either an exclusively commodity or specialty business.

The authors call attention to the fact that both business types  have relatively clear – albeit different – approaches to business model design, technology, and market and portfolio management. By contrast, businesses at risk from specialty traps face dilemmas in many of these areas. Consequent business models lack the clarity of a low-cost or high-differentiation approach, but are blends of both with no clear basis for value creation. Once it is clear that a business is at risk, there are two fundamental approaches to avert a specialty trap.

One approach is to reaffirm the business’s position as a commodity or a specialty player – if the former, stripping away costs; if the latter, stepping up product/market innovation. The alternative and more radical approach is to transition from a commodity player to a specialty player, or vice versa.

The problem is that – given the hybrid nature of competition in the specialty trap – neither low-cost nor premium-pricing strategies are likely to be successful. Winning companies adopt an integrated approach: assessing the scope for value creation based on customer needs; using competitive intelligence to understand competitors’ cost structure, profitability and positioning, and how these influence competitive dynamics; then realigning business strategy, organization and resources to optimize performance. This is likely to require a remapping of business segments, and strategies that vary significantly by product, market and geographical cluster. Kline’s observations have found that companies that take active steps to ensure they are not trapped in the middle ground between commodities and specialties are much more likely to have sustainable business portfolios and higher quality of earnings.

Likewise, Clarisonic is a logical acquisition candidate. It is the #1 brand in the explosive $1 billion at-home skin care devices market in the U.S. It has the unique premise of sonic technology in addition to being fashion-forward and trendy. As we had predicted in our recent market research report, At-home Skin Care Devices 2011: U.S. Market Analysis and Opportunities, the market is ripe for acquisition activity, and we are happy to see L’Oréal be one of the first to make a move here.

There is a lot of potential for Clarisonic under its new owner. L’Oréal has strength in globalizing once-local brands, as it has done with Maybelline and Redken. The devices market is flourishing all over the world and is particularly advanced in Asia (which Kline plans to examine in the next edition of our study), so Asia could be a next logical step for Clarisonic.

Essie is another good example of Clarisonic’s potential at L’Oréal. In just a little over a year from its acquisition, Essie’s share of the U.S. mass nail polish market has reportedly grown from virtually nothing to more than 10%. L’Oréal clearly recognized Essie’s potential and quickly married it with the booming nail polish market to successfully generate quick results.

Clarisonic has strong potential in its own right. Its patented sonic technology is unique and could be extended beyond cleansing and anti-aging to other skin care concerns, perhaps at different price points and in different channels under L’Oréal’s other brands like Vichy or Garnier.

This definitely seems like a good match and we believe it is a win-win for both L’Oréal and Clarisonic.

This is great recognition of our positioning and offerings both on the KMC and KMR sides of our business, with many people contributing to our success. Well done, everyone! We’re now going to figure out how to leverage this to maximize our exposure in the industry.

]]> http://blogs.klinegroup.com/2011/11/04/kline-wins-agrow-award-for-best-supporting-role/feed/ 0 Kline Blogs agrow http://blogs.klinegroup.com/2011/11/03/the-widening-of-the-panama-canal-the-potential-game-changer/ http://blogs.klinegroup.com/2011/11/03/the-widening-of-the-panama-canal-the-potential-game-changer/#comments Thu, 03 Nov 2011 16:45:24 +0000 Geeta Agashe, Vice President - Energy http://blogs.klinegroup.com/?p=1551 ]]> Historically, the U.S. East Coast (Atlantic region), led by New York, dominated trading activities with other nations. This makes sense as most of the trade those days was between Europe and the United States. With the emergence of the Asia-Pacific region (first with Japan and now China and the East Asian Tigers) the U.S. West Coast (Pacific region), led by Los Angeles and Long Beach, grew in importance. This certainly had an impact on the local economy in terms of growth in related industries such as shipping, trucking, railroad, and other such industries which resulted in the growth of marine engine oils, railroad engine oils, and HDMOs.

We may now see a shift in trade on a similar scale, with the U.S. Gulf Coast, led by Houston, New Orleans, and other ports in the region being the beneficiaries. A potential game changer, as announced by the Wall Street Journal, is the $5.25 billion widening of the Panama Canal scheduled to be completed in 2014. The widened canal will allow the passage of ships carrying twice the cargo as they are able to carry currently. This should open the Gulf Coast to megaships coming in from Pacific ports such as Singapore, Shanghai, Pusan, and others which have traditionally sent their cargos to the U.S. West Coast. Some leading analysts, according to the Wall Street Journal, predict that more than 25% of this traffic could shift to the Gulf and South Atlantic ports.

In addition, Latin America is now home to many of the world’s fastest growing economies including Brazil, with overall growth rates in 2010 exceeding 6%. Increased shipments are expected to come from Latin America to ports such as Houston, Corpus Christ, Brownsville, New Orleans, Pascagoula, and Gulfport-Biloxi.

The global lubricants market is estimated at around 36 million tonnes in 2010. Latin America now accounts for about 7% of the total. Due to the significant growth predicted over the next decade, this region is expected to increase its appetite for lubricants, with marine engine oils playing an important role as a contributor to this growth in demand. This is expected to have a positive impact on the demand for baseoils, lubricant additives, and finished lubricants.

This shift in trade patterns will have an impact on where lubricants are consumed. As per the recently published Kline study, Opportunities in Lubricants, North America, Petroleum Administrative for Defence District (PADD) 3 accounts for 16% of all lubricants consumed in the United States in 2010. Based on all of the changes highlighted above, we expect this number to grow significantly over the next decade.

What impact will these developments have on the supply chains of various participants in the lubricants industry? Would the sales force, technical support, and blend plant locations need to be re-aligned? Astute marketers will be well served to stay on top of these developments, which could have a significant impact on the U.S. lubricants business. Kline will investigate this issue in a FlashPoint report, The Widening of the Panama Canal: Impact on the Lubricants Industry. Please click here if you are interested in this analysis.

Geeta Agashe, VP, Energy

Sales of cosmetic and toiletry products through alternate channels have exploded over the last five years, fueling a 5.2% growth in direct sales that is outpacing the total market more than three-fold. While conventional person-to-person sales are declining gradually since 2005, multi-media driven channels have snapped up sales, with e-commerce growing by more than 26%, home shopping networks up nearly 20%, and infomercials posting just over 17% growth. This upward trend is expected to continue as mobile technologies, social media, and online deal-hunting converge to help bricks-and-mortar and direct sales-only retailers reach a wider, more diverse, and engaged audience.

Manufacturers’ Sales of Cosmetics and Toiletries by Retail Channel, 2005 and 2010

Faced with increasing competition from alternate channels, bricks-and-mortar stores have looked to physical enhancements to their retail space to build beauty momentum, with upgraded fixtures, increased floor/shelf space, and expanded brand lines. However, while all this revamping has spurred some sales, particularly in the drug store channel, bricks-and-mortar growth remained paltry in comparison to alternate channels. This begs the question: if you can’t beat ‘em, why not join ‘em? Rather than continually try to reinvent themselves to draw customers out of their homes and into the store, perhaps bricks-and-mortar retailers should take a lesson from the alternate channels and look at ways to leverage the tactics that seem to be working so well.

Online Channels Open New Doors
The omnipresence of the Internet combined with the convenience of online shopping have drawn beauty customers to the web in droves. The channel also enables retailers to reach a huge audience with incredibly affordable marketing tactics.

Online stores connect easily and seamlessly with free social media networks like Twitter and Facebook that can be used to build a following, connect with shoppers, and grow loyalty with easily distributed discounts, “how to” tips and other useful content, and special members-only deals. YouTube videos that demonstrate how to use and/or apply products, show before/after results, and incorporate testimonials offer a multi-media appeal that engages shoppers and overcomes the physical/tactile barrier of the Internet.

Some of the big players are working the online angle, but there is definitely room for expansion. RiteAid.com, Walmart.com, and Macys.com now offer e-commerce beauty sales, and Walgreens’ recent purchase of drugstore.com is obviously aimed at capturing this channel. In fact, Walgreens is even experimenting in some markets with a “double-play” of sorts: letting consumers buy online, then pick up their purchases in-store in a bid to work both channels.

However, none of the major retailers seem to have fully tapped the social media potential as of yet, at least specific to their beauty lines. With this option in place, retailers could even easily run their own flash sales (similar to HauteLook, Rue La La, and Gilt Groupe), Tweeting and Facebooking deep-discount, exclusive offers to fans and followers with a built-in sense of urgency that spurs consumers to act now to get in on the special limited-time-only offer.

The Power of the Demo
With more consumers staying at home, either by virtue of unemployment, telecommuting, or simply going out less to save money, the Internet was not the only place for beauty purchases. This dynamic has also helped to boost sales for home shopping networks like HSN and QVC. Combining product quality, value, and selection with information and entertainment, this channel is becoming a growth-leader in the beauty business, leveraging how-to-use and product application demos as an incredibly powerful sales tool.

With a storytelling platform that focuses on problem solving, home shopping channels are able to create a personal connection with consumers, weaving expert advice and customer testimonials into the presentation to help drive viewer engagement and sales in a way that straight-up traditional advertising never could. Luxury brands like Elizabeth Arden and Shiseido have worked with HSN to leverage the power of the demo with special packaging and other promotions exclusive to HSN shoppers, and earlier in 2011, Lancôme launched a new eye cream exclusively on HSN for a limited engagement specifically to demonstrate the product.

But, devoid of a massive television audience, how might bricks-and-mortar retailers leverage the power of the demo to beef up beauty business? In fact, Duane Reade is already making headway with its urban-located Look Boutiques boasting full-time beauty advisors, in-store aestheticians, and other on-site beauty services. The chain (now owned by Walgreens) is banking on its interactive motif, premium brands and upscale décor to attract more shoppers and build beauty sales. Other retailers could launch a similar approach, even if on a limited engagement: a Saturday morning Covergirl eye makeup demo at Rite Aid, for example, or a Lancome-sponsored anti-aging clinic at Macy’s.

Infomercials Tell the Story
Infomercials have also emerged as a beacon of growth in the beauty business. Combining effective storytelling with contemporary celebrity spokespersons, endorsements and abundant customer testimonials, Guthy-Renker is the industry’s powerhouse having pioneered the channel and launched many well-known and successful beauty brands, including ProActiv, Meaningful Beauty, Natural Advantage, Youthful Essence and Wen by Chaz Dean. In fact, its ProActiv acne treatment formula is the company’s largest selling product with $310 million in sales for 2010 introduced through infomercials.

Leveraging the same powerful storytelling model as the home shopping networks, infomercials take a truly multi-channel approach that offers consumers virtually unlimited purchase options. For example, Guthy-Renker’s ProActiv is available through toll-free numbers flashed during the 30-minute spot, by mail order through direct response cards tucked into magazines and coupon mailers, online at the company’s website (complete with video testimonials snipped from the full-length infomercial), and even at vending machines positioned strategically at shopping malls throughout the country.

Without a doubt, diversification is the most powerful lesson for retailers to learn from the infomercial model. The industry has managed to create multiple consumer touchpoints and purchase channels that have made it incredibly easy for consumers to buy no matter what their media preference or location. It is exactly this kind of ubiquity that consumers crave, and retailers must evolve to provide in order to catch shoppers at every available opportunity. stry has managed to create multiple consumer touchpoints and purchase channels that have made it incredibly easy for consumers to buy no matter what their media preference or location. It is exactly this kind of ubiquity that consumers crave, and retailers must evolve to provide in order to catch shoppers at every available opportunity.

The Marriage of Fun and Function
Perhaps more effective than the specific tactics employed by the alternate channels is the overall strategy: make it easy, fun and entertaining to buy. By integrating social media and interactive tools to engage customers in conversation, reach into their homes, and permeate their daily lives, alternate channels are appealing and effective for their immediate call to action and effortless purchasing options that reduce friction for consumers. By taking a lesson from the best practice tactics of the alternate channels, traditional beauty retail channels can use these same tools to marry fun with function and hold onto market share in the digital age.

Karen Doskow, Industry Manager, Consumer Products

Most consumers are completely unaware of the critical role excipients play in delivering the beneficial medicines millions rely on to fight diseases and stay healthy. Yet it is the fillers, binders, disintegrants, lubricants, and coatings that ensure the accurate, timed delivery of drugs required to safely maintain optimum active ingredient levels in our system and give the OSDF drugs we take every day their palpable size, texture, and flavor.

With average growth forecast to exceed 4% through 2015, the excipients market for OSDF is expected to keep pace with the 6% growth on the pharmaceutical horizon. While the two industries commonly track together for obvious reasons, the volume-based excipients market typically lags the value-based drug market.

Challenges at Home and Abroad
U.S. excipients manufacturers are facing some formidable new challenges. Consolidation in the pharmaceuticals industry is beginning to shrink the number of potential customers as merged/acquired drug makers tap into pre-existing supplier agreements with their new partners. Increased focus by the U.S. Food and Drug Administration on the quality and documentation of OSDF clients is resulting in tighter regulation and oversight.

Meanwhile, growth in the outsourcing of drug manufacturing to lower-production-cost countries in Southeast Asia and South America is whittling away at domestic market share. And, in the fillers/binders business, a run-up in the price of pulp, particularly carboxymethylcellulose, is driving up the cost of cellulosics and contributing to the shift of manufacturing/tableting operations to developing markets like India and China.

Stable Market Drives Steady Growth
Despite these challenges, the competitive landscape and overall market remains quite stable. For the most part, there is stability at the customer base, as drug makers are prone to sticking with a formulation that works, rather than make changes and risk alterations in the safe delivery, timed release or effectiveness of their product. Foreign competition from imported excipients remains a minor concern, as most manufacturers are hesitant to switch to more cheaply made Asian ingredients over fears of specification adherence, as well as the real or imagined risk of reduced quality or issues such as radiation contamination.

With the market for generic drugs still going strong, thanks in large part to the recession and continued weak economy, this tried-and-true formulation business has enabled excipient manufacturers to worry more about maintaining market share and less about technological innovation. However, as the economic cloud lifts, excipient manufacturers are shifting their attention back to R&D, working to develop new formulas to optimize drug delivery for the patient and manufacturing processes for drug makers.

Innovative Coatings, Disintegrants Support New Drug Systems
One of the most quickly evolving areas is the formulated coatings business, where interest is growing in both instant- and controlled-release products. Instant-release coatings enhance the drug flavor, making them more palatable, and enable the rapid delivery of medication to speed relief of pain and other symptoms. On the other end of the spectrum, it turns out some patients are not very compliant about taking their maintenance drugs when they should. Controlled release products that combat this problem and deliver sustained effects are also growing at about 5.5%.

Another fascinating area of growth and innovation is the disintegrants market, which is expected to add 5% over the next four years. By enhancing the rate at which the drug is made available to the body, these agents play a critical role in disintegration of the tablet as well as dissolution of the active ingredient. For the patient, it is the disintegrant that enables tablets and capsules to pack a powerful punch of medication in a tiny form that is easier to swallow, particularly for children and the elderly. The demand for rapid-relief, fast-melt tablets is driving 6% volume growth in crospovidone, which has become the disintegrant of choice for its better solubility and functionality compared to sodium starch glycolate and croscamellose sodium.

Blends: The Next Big Thing
Without a doubt, the biggest opportunity in the oral solid-dosage-form is in the development of custom-blended products that provide a one-stop-shop supply for drug makers. Pharmaceutical makers are eager to optimize their processes and reduce production. Customized blends or packaging programs that include a binder, filler, disintegrant, and coating specifically designed for the clients’ drug delivery goals allow the drug manufacturer to have greater control over their active ingredient, and save time and money in the blending process.

The problem is most excipient suppliers are not set up for this kind of broader service and customer-intimate relationship. In fact, the majority is very product-centric, and the industry as a whole is quite siloed in terms of expertise. However, this environment is actually quite perfect for strategic partnerships and alliances with non-competing suppliers of complementary products to meet drug makers’ more specific needs.

In fact, we’ve already seen early signs of this trend with the 2007 “controlled release alliance” between Dow and Colorcon. The deal, aimed at providing a broader solution set and more agile product development to drug makers, combines Dow’s expertise in controlled-release cellulosics with Colorcon’s proven experience and deep portfolio in the formulated coatings business.

Calling the alliance, “a natural progression for both companies in providing increased value to the pharmaceutical formulator,” Colorcon VP Jim Coward also accurately characterized the opportunity in custom blends for the entire industry. It is a natural progression that will no doubt better meet the needs of the market and provide for exciting innovations that will drive growth for years to come.

Anna Ibbotson, Industry Manager