"As Winston Churchill said, 'never let a good crisis go to waste,' and we need to make sure the products and technologies designed today will be aligned with the customers of our customers in the future.”

Martin Toscano

MANAGING DIRECTOR, EVONIK INDUSTRIES (MEXICO)

January 13, 2021

How has Evonik performed in Mexico in 2020, and to what extent has the pandemic impacted the company’s operations?

In 2020, despite the ongoing challenges with Covid-19, Evonik will actually achieve higher sales in Mexico than in 2019, for both, turnover and volume. A diverse and resilient product portfolio of specialty chemicals have been the main reason behind this performance. Evonik Industries is well represented in Mexico through all his business lines, which allows us to reach sectors which are heavily involved in local manufacturing for regional and global markets, because Mexico is becoming more of a powerhouse for global exports platforms.

Why do you think Mexico is a strategic country for world manufacturers in many industries?

First of all, Mexico’s open business mindset, with over 50 free trade agreements, gives the country access to over 60% to 70% of global GDP. Investment has continued to flow into various segments in Mexico, with the automotive industry being a frontrunner, but in recent years other sectors have followed the same strategy of establishing global manufacturing facilities here. Mexico’s proximity to the US and logistics network through the Americas, labor and running costs, and a favorable regulatory framework for foreign trade, make the country an attractive base for multinationals and for the further expansion of Mexican companies.

Can you explain how Evonik is accelerating the ‘time to market’ aspect of innovation?

We believe not only in the innovation fields that Evonik develops globally, but also in the increasing trend of following the innovation of our customers along the value chain. This involves engaging with different stakeholders to get a broader view of how solutions can be developed and brought to the market quickly. Evonik also engages with venture capital organizations in investments into start-ups and SMEs who are doing earlier stage work with new technologies that can benefit our right to play in different industries in the future.

The food industry has gone from strength to strength regardless of macro conditions. What involvement does Evonik have in this segment?

The food industry deals with the big question of how we are going to feed 9 billion people around the world in a sustainable way with restricted resources. Evonik participates in this sector through agriculture and protein in different business lines, for which we experience growth every year. Mexico has become a net exporter of animal protein, especially for beef and pork, to markets including the US and Asia. In the agricultural business we have seen 6-7% growth per year in the fruit and vegetables segment – an added value industry which differs from the bulk crop production seen in Brazil, Argentina or the US for corn, soy and wheat, for instance. An increase in demand for organic products from retailers in the region has been key to this growth for Mexican famers. Additionally, the recent renewal of the free trade agreement between Mexico and Europe has increased our participation in food markets.

Do you think sustainable initiatives will be incentivized under the ‘green reset’, or will challenging economic conditions mean the cheapest products will be favored?

Overall, the strong sustainability agenda of the private sector is aligned with governments around the world. This will continue to drive the way we do business. Covid-19 was a good reminder that this is the right path. In 2020, most governments and companies have been focused on fire-fighting to mitigate health risks and then resolving logistics bottlenecks to make sure products were supplied to customers.

However, we must also not forget to look forward. As Winston Churchill said, “never let a good crisis go to waste,” and we need to make sure the products and technologies designed today will be aligned with the customers of our customers in the future. This is a discussion which should happen now, and we have to make sure that we understand our “right to play” in the future as well.

What do you think are the biggest challenges facing Mexico’s chemical industry?

One of the biggest challenges we have is the lack of access to competitive raw materials coming from the downstream of the petrochemical industry. Also, a lack of infrastructure for transportation and energy holds us back. I think that Mexico enjoys a very good position with young talent in our social pyramid to develop business domestically, but what is missing is a clear agenda with the public sector in order to get the necessary support that incentivizes further investments in the country. Today the chemical industry is running at a lower rate than the installed capacity, so the potential to grow is there.

Will Evonik be looking to grow organically or through acquisitions in Mexico in the coming years?

As part of Evonik’s North American operations that include the US and Canada, Mexico benefits from M&A activity made by the group in this region. Typically, we feel the benefit from acquisitions made in the US, and this has been the case in the last five years. Right now we are in the integration process to incorporate these new businesses. On top of this, there are increasing local and regional accounts in Mexico within Evonik’s business lines which are contributing to organic growth, which mirrors the company’s global strategy to grow through a diversified portfolio of specialty chemicals.

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