Niche market success Advansa

NICHE MARKET SUCCESS

A niche market focus and post buy-out management agility have given a competitive edge to Advansa, leading supplier of polyester fibre, filament and specialities. “We are not swimming with all the fishes,” says managing director Dr Heinz Meierkord in a conversation with Colin Chinery.

IN the ultra competitive polyester fibre industry, specialisation has made the German/Dutch Advansa a global niche leader. With a manufacturing plant at Hamm in Germany, Advansa is a leading supplier of polyester fibre, filament and specialities, with annual revenues in excess of €150 million.

With its main marketing and logistics operations in Europe, the USA and Asia, Advansa’s business portfolio extends across three main categories – two with a high focus in branding and marketing: fibre fill for pillows, quilts, mattresses and furniture; performance fabrics used mainly in sportswear and related items; and highly specific polyester fibre for technical end uses in industries as diverse as automotive, construction, medical and packaging.

Niche definition

“We have very clearly decisive niches in the polyester fibre business which is otherwise a huge global ocean in which you swim. So we are not swimming with all the fishes,” says managing director Dr Heinz Meierkord.

“In these niches we have very decided, partly visible, partly invisible competitive advantages, and at least in Europe if not to an extent on a global scale, we are the market leader.”

This former Du Pont business was acquired from Sabanci, Turkey’s leading industrial and financial conglomerate, two years ago by a group of investors including the senior management of Advansa.

The buy-out has brought the company great agility, says Dr Meierkord. “The changes are those that occur when you get out of a big industrial conglomerate that has a number of structures and processes going through several layers of management and decision-making.

“Compared with the past, decisions are now taken extremely quickly, largely independently, based on pure data and – in most cases – the experience of a single decision maker. Our levels of flexibility and initiative have increased enormously, which is hugely important in this very competitive and daily changing business environment we are working in.”

At the same time Advansa is able to draw on its 50-year Du Pont heritage, with full rights to the former DuPont polyester technology as well as access to the experience associated with its continual development. And there is another major legacy – its people.

“Our company has emerged from a big conglomerate into the mid size structure. So we have people with a much broader background, colleagues in the shareholder team coming back from ICI times who later joined Du Pont, and those like myself who started purely in Du Pont.

“And because of this we have an international team, notably in the marketing organisation where we have ten different nationalities with 14 active spoken native languages. If we had started purely as a small Westphalian company in Hamm, it would have been very unlikely that after 20 years we would have had a team like that.”

Another of the company’s strengths is the close relationships it maintains with its key suppliers: “Pulcra Chemicals in particular is a very important supplier to ADVANSA. Pulcra Chemicals, B-Plast 2000 and Anton Uhlenbrock are all long term and good partners of ADVANSA. They achieve good ratings as suppliers in our quality management systems. Our priorities for key suppliers are: good value for money, suppliers with a service orientation and we prefer to establish long term partnerships.”

Focused R&D

Advansa’s ability to continually develop and commercialise innovative polyester products while remaining competitive, is one of the company’s critical success factors. And here the key driver is its state-of-the-art R&D multinational research project leaders and operational teams.

But in an industry with tight profit margins, R&D must be strictly monitored and end-user focused, says Dr Meierkord. “Many traditional approaches have a management philosophy that R&D by its nature has a poor yield and many failures. But this means you waste a lot of money, and the margins in this business are not so high that you can afford significant mistakes.

“And if you look to the financial strengths of your company, one point where you can improve your financial and commercial strength is to reduce waste – not only in production but also, for example, R&D. So you must strive for a higher percentage of probability – easy to say but on a daily business basis difficult to carry out.”

In general the overall man made fibres sector that has seen significant developments over the past decade, the current hot spot is carbon fibres, says Dr Meierkord.

“On the other hand, the most traditional polyester has become a huge and growing global business.

“In Nylon for example, after a significant restructuring, there are more niches that many recognise, and those companies that are in there are now enjoying it. These new businesses are high tech – high cost however – and they need to justify their place in the industries where they have the end use, and this can be very difficult.”

Polyester fibres are a sector where both the industry and its customer base are subject to globalisation and all its competitive realities. “Other industries complain about global competition, but if you compare them to polyester fibre then nobody knows what global competition really means.

“If in Greater Europe, say, polyester staple mill consumption is something above one million tonnes, then 600,000 of that is coming from Asia. It’s not rocket science any more to make decent normal polyester fibre, and technology is no longer a true competitive advantage. 15 or 20 years ago perhaps, but those times are over.”

Vice-chairman of the industry’s European association, Dr Meierkord says that in a global battle to remain competitive, the European industry is being hobbled by electric power prices, government created adds-on such as taxes, regulations and subsidies for alternative energies, and the excessive bureaucratic application of REACH, the European chemical regulation system.

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Power struggle

“The man-made fibre industry ranks among the energy-intensive sectors, and stateimposed levies and taxes on energy prices have a severe impact on competitiveness. More or less each year since 1998 we have seen energy prices in Germany increasing by between three and six times the inflation rate.

“The illogical structure of subsidies for alternative energy has to be quickly revised using common sense, otherwise the base from which German success is coming will disappear. And that base is industrial activities which still account for more than 20 per cent of the German GDP.”

Through its strategy of specialisation and focus, and not participating in the standard fibre market, Advansa will continue to innovate in three different market niches, frequently with tailor-made solutions for individual customers, says Dr Meierkord.

“Already growing in Europe, Asia and the USA, we will clearly strengthen ourselves and grow in the niches where we are already leading, increasing our market share. On the other hand, based on our know-how and financial strength, I would not exclude enlargement through acquisitions.

“We are geared up for very specific solutions and looking for cooperations along the value chain. We are not looking for opportunistic businesses.” n