Latin America Reports

Univar Targets Brazilian Coatings Growth

By Charles Thurston, Latin America Coorespondent | July 19, 2013

With expectations of growth rates in excess of the country’s expanding economy, Univar plans to focus its Brazilian operations entirely on domestic growth, while serving the remainder of Latin America from its Mexico operations.

Global distributor Univar Inc. is planning to broadly expand its recently-acquired chemical distribution network in Brazil, which includes all segments of the paint and coatings industry. With expectations of growth rates in excess of the country’s expanding economy, the Redmond, Washington-based distributor plans to focus its Brazilian operation entirely on domestic growth, while serving the remainder of Latin America from its Mexico operation.

“We serve all main segments of industry in Brazil, including the automotive, construction and white goods industries,” said Marco Antonio Quirino, who was appointed as the president of Univar Brazil in early May. “Within the paint and coatings market, we are not yet selling to the ten biggest international companies that control about 75 percent of the market, but we currently do serve the ten percent share of the market which is supplied through distribution,” said Quirino, based at company headquarters in Osasco, Sao Paulo state.

The company provides close to 200 individual products to paint and coatings formulators, of which approximately 60 percent are specialty chemicals and 40 percent are commodities, Quirino said. Univar produces polyurethane manufacturing systems in Osasco, along with warehousing and laboratory facilities. The company also has two regional warehouses, in Recife, Pernambuco state, in the north, and in Itajaí, Santa Catarina state, in the south.

“The north is a very important growth area for us because the regional economic expansion is faster than that of the country overall,” noted Quirino. “Over the past decade, government policies oriented at low-cost housing and poverty eradication have resulted in a growing consumer class there,” he added.

Univar imports most of its products through the port at Itajaí and then trucks the goods to Osasco or the other warehouse centers, rather than using the Sao Paulo port of Santos. “The cost of importation at Santos is prohibitively high,” he said. Itajaí is the second-largest container port in Brazil today.

The company began operations with the purchase of Arinos, a foam and mattress manufacturer in 2011. At that time, the company was acquiring approximately 40 percent of its distribution stock from domestic manufacturers and 60 percent from imports. Today the ratio is approximately 50-50, Quirino said. “Our goal is to further displace imports to a 40 percent share, so that local acquisitions will represent 60 percent of purchases,” he added. Brazil is among those countries with a strong history of local content requirements, typically set at 60 percent or more.

Challenges to growth in Brazil include the need for a culture change in the role of distribution, suggested Quirino. “The old distribution model in Brazil was based on small- to medium-sized companies that were perceived as an added cost to the supply chain. Our proposal is to serve with additional value through our broad portfolio, inventory controls, and logistics optimization,” he said. “One very big potential customer we recently met with is willing to allow us to supply 50 percent of the total universe of products they now buy from many different suppliers, so one-stop shopping is of great value to them,” he noted. “This concept is not new in the United States or Europe, but is in Brazil,” he explained.

Other key challenges to distribution in Brazil are the poor state of the transportation infrastructure system overall, and the complex design of taxation, which varies state by state, Quirino pointed out.