"A real distributor is always adding value to both principals and customers. If you do not do that, you do not have a reason to exist. You have to be the link between world class producers and medium-sized and small customers.”
Could you do a brief recap of GTM’s footprint and scope in Latin America?
We are the second largest chemical distributor in Latin America, and the only Pan American distributor. The company nearly tripled its size via three acquisitions made between September 2016 and April 2017, and that created an integration challenge. We transferred the headquarters of the company from Costa Rica and Houston down to Sao Paulo. Now, the integration has been completed successfully and the structures are in place, with little over 1,000 people in the region. We can now look for new M&A opportunities, as the distribution market in Latin America is still very fragmented.
Beyond the size, what changed with the acquisitions of High Chem, quantiQ and Peruquímicos?
The number one change by far is that we entered the specialties market. Before acquiring High Chem, our position in specialties was very limited. We had a good position in industrial chemicals and in what we call customer solutions, which is basically to elaborate tailor-made blends and formulations for the clients. Through High Chem and then quantiQ, which had a very significant specialty chemicals operation as well, we became a full line supplier, with both industrials and specialties, and now we are transferring that knowledge from Mexico and Brazil to the other markets. With our specialties, we serve many industries, the most important ones being paints and coatings, cosmetics, agro, lubricants, construction, resins, adhesives, plastics, mining and oil and gas.
What is the role of distributors in the current market?
A real distributor is always adding value to both principals and customers. If you do not do that, you do not have a reason to exist. You have to be the link between world class producers and medium-sized and small customers. Before, you had guys simply buying something from somebody, storing it and selling it to somebody else, but these days are over. Selling a product is part of what we do, but this is really a service for the producers to reach a market that they cannot serve and for the customers who would otherwise not have access to the producer.
Which markets present the most significant growth opportunities?
Brazil and Mexico are the major economies in the region and the ones that present the greatest opportunities. Brazil has suffered the worst recession in its history, and its recovery has been quite slow in 2018. In the past, Brazil came out of other recession periods with growth rates of 5% to 10%, so 1% is nowhere close to that. Now, considering our new product lines and our focus on specialties and customer solutions, we see great opportunity in Brazil. The same applies to Mexico, with huge potential derived from the changes in the energy sector.
How do you manage talent in the organization?
Every company will tell you that its people are the most important assets they have. In the case of distribution, this is even more the case: we do not have technologies or products, what we have is customer relationships and principal relationships. This is 100% human behavior, so we are in the people business. Therefore, we need to have extremely good people, and we put a lot of emphasis on training (managerial skills, negotiation skills, etc) and work with our principals to do the technical training. We already have 19 labs throughout the group, and we are implementing three more in 2019 in Central America, Colombia and Peru to improve our customer service for specialties.
How does training change when you deal with specialty chemicals versus commodities?
The industrial chemicals sales people are extremely quick. They need to take decisions very fast, and doing long-term development is not in their nature. Meanwhile, the specialty chemicals sales people are very comfortable doing the development, but often they are not so comfortable closing the deal. So we try to combine both profiles in the different teams, and this is working very well.
What are the main challenges to operating in Latin America?
The challenge of Latin America is twofold: the first one is logistics (which includes the security aspect) and the other one is fiscal. However, we are the Latin American guys – this is what we do. We do not have any other regions that can compensate for shortfalls in Latin America, so all our eggs are in the Latin American basket – this means we need to know how to handle the challenges. Logistics is actually one of the areas where we have a competitive advantage. We are one of the few companies that can do liquid bulk transport in dedicated ships coming from the U.S. Gulf to both the Atlantic and the Pacific coasts of Latin America. Indeed, we own four marine terminals in Central America.
Finally, how important is the APLA annual meeting for GTM?
The APLA meeting is a very efficient way of spending three days. In the end we are exhausted, but we meet many people and gather a lot of opinions. What we do as GTM is use that time to have our strategic reviews with our suppliers. For us, APLA and AFPM are the two key meetings we attend every year.