More specialty oleochemicals in the pipeline

BEING RELEVANT: It's not always the biggest nor the one with the deepest pocket that succeeds. Very often, those that adapt rapidly to changing business environment are the ones with staying power. Ooi Tee Ching writes on the industry’s specialty oleochemicals initiative.

AT FIRST GLANCE, Matrix Oleochem Sdn Bhd may seem like any other ordinary company. But if you look a little closer, you'll realise it is the only standalone specialty oleochemical player in Malaysia that is thriving on product innovation.

Founded by chemist Dr Tan Chee Hong 17 years ago, Matrix Oleochem is currently Malaysia's biggest exporter of coco diethanolamide, an ingredient that is predominantly used as a thickening and foaming agent in shampoos, dish washing liquid and fabric softeners.

Matrix also makes another popular ingredient called cocoamido propyl betaine. This is widely used in the "no more tears" range of shower creams and shampoos for children.

Last year, the company exported 7,000 tonnes of specialty oleochemicals. "I think we should be able to export 40 per cent more this year," he said.

In differentiating itself from the more well-known giants like IOI Oleo Group, KLK Oleo Group and Emery Oleochemicals (M) Sdn Bhd, Tan said, "I sell tubfuls of specialty chemicals while others sell truckloads of basic oleochemicals".

"I make do with what I have. I don't have deep pockets or financial backing from plantation giants but what I possess is talent and knowledge. I'm fortunate that the time and effort I've invested in making specialty chemicals is delivering good profit margins," he added.

Businesses that are positioned higher up the palm oil value chain, like Matrix Oleochem, are essentially more service-oriented. 

Tan noted that when it comes to specialty oleochemicals, customers are not necessarily going to buy whatever products that are pushed to them. "They'll want to see what the products can do for them. Ultimately, consumers will spend money for a more convenient or comfortable lifestyle," Tan said. 

Indeed, there is an advertising axiom that illustrates this point succinctly: People don't necessarily want a bar of soap all the time. What they want is clean hands. 

Therefore, manufacturers like Matrix should be able to offer more choices. The use of its ingredients should be versatile and can be incorporated in liquid handwash, hand sanitisers or even clean wipes.

"Customer needs and market trends are always changing. We need to remind ourselves that whatever we offered five years ago may not be relevant a year from now," he said. "So, we really have to listen and customise accordingly."

Tan's business has thrived in leaps and bounds because he has always focused on product innovation and development of niche markets. "We've never competed head-on with the big players. In fact, we complement their businesses because they are suppliers of basic ingredients," he said.

Recently, Italy's Societa Chimica Lombarda Pte Ltd (also known as the Erca Group) decided to partner its chemical distributor Chemical Mate Technologies Sdn Bhd to manufacture specialty chemicals in Malaysia. Their 55:45 joint venture, called ICM Specialty Chemicals Sdn Bhd, is investing RM130 million to put up a specialty ester plant in Pulau Indah, Klang.

ICM managing director Kenneth Chang Boon Kit noted that Chemical Mate, established in 1995, has been distributing specialty oleochemicals. 

"We've been doing business with Erca Group, which is owned by the Seccomandi family for some time. As time goes by, they see a need to expand their chemical making business in Asia. So, it's only natural that our distribution partnership is now strengthened to include that of manufacturing specialty oleochemicals," he said.

Chang concurred with Tan that the rising disposable income in Asia is fuelling demand for more varieties of toiletries, detergents and even industrial cleaning chemicals.

"Twenty years ago, an average household in Asia might be satisfied with just a bar of soap. Now, there's a wide range of haircare, skincare and even nail care products. This fuels the demand for more natural, halal, easily biodegradable and renewable ingredients such as palm-based oleochemicals," he said.

Currently, Malaysia has 18 local oleochemical companies with a combined annual capacity of 2.6 million tonnes. 

Their plants make basic oleochemicals like fatty acids, fatty alcohols, esters and refined glycerine. These are then sold to specialty chemical manufacturers like Matrix Oleochem and Erca Group which then process them further and formulate them into toothpaste, soap, dishwashing liquid, laundry detergent, industrial lubricants and even food emulsifiers.

Since 2010, the government had called on the palm oil industry to move up the value chain under the Economic Transformation Programme.

In a separate interview, the Prime Minister's Department's Performance Management & Delivery Unit (Pemandu) director for Palm Oil & Rubber NKEA & ETP Investment Ku Kok Peng noted that in heeding the government's call to add value to the oleochemical industry, the three giants, namely IOI Oleo Group, KLK Oleo Group and Emery Oleochemicals (M) Sdn Bhd, are investing further downstream to make more specialty chemicals. 

Smaller entities include ICM Specialty Chemicals, Carotino, UniOleon and Ancom Crop Care.

Ku said the government's role is to be an enabler to drive the industry to be more competitive. "We're focusing on high-impact areas and the manufacture of specialty oleochemicals is one of them."

Ku revealed that to date, the palm oil industry has committed RM1.36 billion investment in making more specialty oleochemicals. 

Of that total, the government, through the Malaysian Palm Oil Board, has committed RM223 million to incentivise this initiative to fruition.

To a query if Matrix feels threathened by the big boys' move into specialty oleochemicals, Tan gave a wry smile and replied, "Innovation is finding a new use for the same product. We've diversified from detergent and personal care sector to include the construction industry."

ICM's Chang alluded that the market pie is growing. "It's not like we're competing head-on with other players because all of us have our niche clients. Our partner Erca Group has decades of experience in the synthesis of personal care and cosmetics formulations."