Forecasting the Most Profitable Market
- Kemira Example
The McIlvaine Water & Wastewater Treatment Chemicals:
World Markets forecasts a market of $30 billion next year of which municipal
wastewater is $5 billion. Pulp and Paper and Oil & Gas forecasts are more
modest. They exclude some of the products supplied by the treatment chemical
companies but which involve processes and not typical water treatment. This
continuously updated report with 50,000 forecasts is arguably the best source
for a multi-client estimate of the Total Available Market (TAM). However this
should be only the starting point in preparation of the Most Profitable Market
(MPM). This is the market which will yield the biggest profit given the
supplier’s capabilities. This market is impacted by new developments such as
proppants for hydraulic fracking. It is impacted by product quality and cost. An
important element is validation of a lower total cost of ownership (LTCOV) in
the minds of purchasers. Kemira will be used as an example of how to create the
MPM. Two of the most challenging aspects are to:
Accurately assess the big new opportunities e.g. phosphorous removal, hydraulic fracturing and total solutions
Create a validation path which is
economically effective
Kemira sales in 2018 were € 2.6 billion. EBITA was € 323 million for a margin of
12.5%. Net profit was € 95 million. 41% of the sales were outside pulp and paper
but the other 59% were in pulp and paper. Some of the largest customers are
municipalities such as Shanghai, Paris, London and New York. Other major
customers are oil field suppliers such as Halliburton and Schlumberger.
International Paper is also a customer.
Kemira expects increased demand in water treatment chemicals due to water reuse
and phosphorous recovery from wastewater. Revenue growth has averaged 3% over
the last 5 years while the EBITA CAGR has been above 5%. Five products each
account for more than 15% of revenue.