2021 Market Trends Podcast Series: Color & Compounding

Host:

Welcome to M. Holland’s 2021 Market Trends Podcast Series. At the end of every year, M. Holland’s market managers take time to reflect on the previous 12 months and anticipate the year to come. What drove their market segments? What can the industry expect to see in the coming months? Typically, we share these insights and predictions in a blog, but this year we decided that a podcast format is more fitting. Listen over the next few weeks as these market managers give us an insider’s look at the plastics industry.

What a year — it’s a simple way to sum up 2020, but last year brought about a unique set of challenges, as well as plenty of opportunities. Scott Arnold, our color & compounding market manager, talks about the consolidation of the industry, how international business continues to grow, and what to watch for in 2021.

Scott Arnold:

I’m Scott Arnold, I’m the market manager for color & compounding; color, which we define as masterbatch, and compounding more in the conventional sense. So, I also direct our account managers in pellet reduction, which is grinding, and also flake and granular products, which are really not only common, but critical to the compounding industry. I’m proud to say I’m in my 30th year in the plastics industry.

Host:

Reflecting on 2020, what stands out as a key learning point for you?

Scott Arnold:

Well, I’ll tell you — what a year, right? I think the resilience of our industry, and also our company, is what’s going to stick out in my mind the most. You know, obviously COVID played a huge role, as a lot of the compounders’ labs were kind of forced to shut down. And so new projects were handled as a last resort because they’re just trying to keep their businesses running, right?

Also, material shortages continue to hamper the growth. It was a crazy, crazy year in that respect, where the fallout from the hurricane season, it’s still going to affect our business well into 2021, with allocations and forced majeures are still major factors in the supply chain. So, probably the biggest thing that I learned, and the key point that affected the marketplace in 2020 for compounding was the consolidation and the buyouts that happened.

It was kind of a perfect storm for what happened, a massive over-supply in the market. There are over 500-plus compounders in North America. Money is very cheap right now, so it’s a good financial time to do a consolidation or a buyout. Compounders are buying into new markets, so they’re buying competitors to force their way into new marketplaces. A lot of companies at this point, or as part of their succession plan, as new generations come into play and they don’t really want to be in the family business. So, companies are actually leaving the industry because of that. And one of the other factors I saw that loomed very large was the larger companies decide to focus more on their businesses. So, there was a rather large buyout in that respect. Really, all those factors are contributing to the constriction of the compounding marketplace.

Host:

Is there a materials application that really won the year for you?

Scott Arnold:

You know, as I look back in my particular marketplace, our compounding team sold over 500 unique products into the market this year, which is astounding. Compounding tends to be a very creative type space, much like a chef looking for that special recipe, right? We’re sprinkling in a little bit of this and a little bit of that. So, the one item that really sticks out in the front of everybody’s mind right now is sustainability and how compounders can incorporate more environmentally friendly and sustainable products into their product lines. We have these discussions with our clients on a daily basis. It’s not only important to our suppliers, it’s important to our customers and it’s obviously very important to us. So we’ve put a lot of resources towards that.

Host:

With 2020 now officially behind us and moving into 2021, what are you most looking forward to in color & compounding?

Scott Arnold:

With the consolidation that’s happening in the marketplace, because it’s a very highly service industry, I think we’re going to see a lot of newer and smaller compounders starting up that are going to be much more nimble. And it will be exciting to see and help them grow in their new, small niches. This happens a lot whenever there’s any kind of consolidation. Companies get bigger and they’re not moving as quickly. So, I think you’re going to see a lot of smaller companies, a lot of talent fall out of those bigger companies and start new, exciting marketplaces. So, that’s going to be fun to watch.

I’m also really excited about our international business expanding. As we grow and the growth of our compounding distribution business, outside of our traditional focus of clients, and into new areas of opportunities really across the globe, I think our international business is doing great, and that’s going to allow us to reach more compounders. So, we’re excited about that.

Host:

We are, as well. Thanks so much, Scott, for sharing your insights and thank you for listening. Continue to tune in and learn what 2020 meant and what 2021 will bring from markets including Healthcare, 3D Printing, Wire & Cable, Electrical & Electronics, Flexible Packaging, Rotational Molding, Color & Compounding, Automotive and Sustainability. All episodes can be found on the news and insights page on the M. Holland website. We’ll see you next time.