Challenges to a mature industry: Marketing and economics of oleochemicals in the United States
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Fatty acids, accounting for more than half of oleochemicals discussed, grew at an annual rate of ca. 3% during the 1970s, with no growth since 1979. As competition intensified, the number of companies in the industry declined or owenrship changed. Challenges are covered under five major headings—markets, raw materials, competition, research and profitability. Oleochemical markets are extremely diverse but usually involve surface modification. Fatty acid disposition and real consumer personal income correlate closely. Growth of consumer income in the 1980s will be the most important factor in determining growth of fatty chemicals. Fatty chemicals compete with petroleum-derived products; and, therefore, price relationship of natural fats versus petroleum will affect market share. Tallow and other natural fats and oils are approximately the same price as 15 years ago, whereas ethylene has about doubled. Interchangeability of natural fats tends to moderate price fluctuations. Competition remains intense with market shares divided among many companies. Neither imports nor exports have played a significant role in the US fatty chemical industry. There are large exports of fatty acid derivatives, particularly to South America. Research will concentrate on energy reduction as oleochemical production is highly energy-intensive. Enzymatic splitting is a potential commercial process for this purpose. Improved hydrogenation catalysts and development of new specialty oilseeds are additional research objectives. Success of researchers will probably play the biggest role of all in future marketing and economics of fatty chemical companies. The belief is that the fatty chemical industry has had difficulty in consistently maintaining acceptable levels of profitability. To avoid extinction and achieve reasonable rates of return, business strategies must (a) identify, create and exploit growth segments; (b) emphasize product quality and innovative product improvement; and (c) systematically improve production and distribution efficiencies.
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