Digitisation has been both a blessing and a curse for the distribution industry. Running a web-based portal helps streamline purchasing etc, but the internet also makes it easy easier for a manufacturer to go directly to the source for an active ingredient, cutting out the distributor.
Gone are the days when you can buy-in ingredients and scrub their origins to white label them. Tracking providence, sustainability and CO2 emissions is putting a strain on smaller players, and even some big ones. Some have suffered, some have gone under.
“We thought distribution was dying about five years ago,” said Karsten Smet, CEO of UK-based ACI Group. “Distribution is likened to being an estate agent, nobody really likes you, you’re a necessary evil who you have to give a bit of money to in order to sell or buy something.
That ability to hide where the product has come from has gone. All the things that distributors have traditionally done they can’t do them anymore.”
After briefly being acquired by a Swiss banker in 2018, ACI Group has been back in the Smet family’s hands for the past four years. Typically, a chemical distribution CEO comes through the ranks of a chemical company (Clariant has spawned a few) before making the leap over to distribution. Smet — a former Microsoft, Rackspace, Barclaycard and UKCloud executive — is cut from a very different cloth. He was about to take his next role at a CRM company for a “very nice salary” when he chose to rejoin the company his father established. Little surprise that he is shaking things up at the supplier of additives, ingredients and pharma products.
Under Smet’s tech-orientated business plan, the goal is to drive sales to £50 million by 2028 as it moves deeper into areas like nutraceuticals. Products in this segment are going more mainstream, moving from pharma in the form of gummies and tablets to an ingredient that’s baked into bread or added to a drink.
After repurchasing the business at the height of Covid in 2020, Smet bypassed SAGE and other firms offering digital solutions and chose to acquire software company Oomph instead. This month will see ACI roll out its in-house CRM solution to its client list that includes the likes of DuPont, Nouryon and BASF. When the family bought it back from the Swiss investor at the height of the Covid pandemic, it was turning over about £8 million. Today, it’s more like £20 million.
Smet said he sees a gap in the market for an Amazon-type portal that can not only handle sales and POs but also real-time inventory management, batch level tracking, safe data sheets, CO2 emissions and MHRA (the UK’s Medicines & Healthcare products Regulatory Agency). The Oomph purchase came with an un-marketed CRM platform, which ACI has been upgrading over the past year to make it more interactive. It’s now on the Xero market place as an alternative to the Mondays of this world.
“Ours is coming from a technologists point of view, not a marketeer one. You have to try and identify what value you add to a client. If you don’t add value why would I bother using a distributor and just go direct,” he said in an interview with chemicalESG.
“We’ve gone from a company like every other little distributor trying to feed off the scraps to suddenly signing some really big names.”