Distribution is such an important part of the chemical industry, but we don’t often get to hear from the people who make this vital link possible. In this episode, Terry Hill, the CEO of Barentz, talks about a variety of things that are transforming this particular side of the industry right now. Sitting down with Victoria Meyer, Terry compares what the industry was like when he started and how it has changed and evolved over the years. He pays particular attention to the cultural shift and the adoption of digital technology that is accelerating change and innovation in the space. Tune in and learn a lot of things from this insightful conversation with an industry veteran.
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A Look Into The Distribution Side Of The Chemical Industry With Terry Hill, CEO Of Barentz
I am speaking with Terry Hill, who is CEO of Barentz North America. He joined the Maroon Group as CEO in 2019 and then, during the acquisition of the Maroon Group by Barentz, moved to Barentz. He’s been part of the distribution industry for most of his career. He hadn’t spent almost 30 years with Univar and has also been very active in the National Association of Chemical Distributors, as well as the Chemical Educational Foundation, which is where I first met Terry. We are going to be talking about a variety of things, and I think you’ll enjoy the conversation. Terry, welcome to the show.
Thank you for having me. I’m excited to be here.
I’m happy to have you here. What’s your origin story? How did you get into the chemical business and specifically distribution?
It’s funny how things work out. The old saying, “It’s better to be lucky than good.” I think sometimes I was lucky. I grew up in the Panhandle of Texas and didn’t know this industry even existed. I understood, having grown up in the oil and gas industry, agriculture industry and ranching. That’s what I knew. I knew I liked the technical aspects. I liked chemistry, but when I was growing up, I didn’t realize this was here. I went to school, got a Chemistry and Microbiology degree. I was thinking about medicine and had a guy that mentored me in the medical distribution business.
I went to Dallas and worked for him for a couple of years. I met a still good friend of mine. At the time, it was Van Waters & Rogers, which was one of the routes to Univar. He was leaving that company to go work in commercial real estate. He was like, “You’ve got a Chemistry degree and you know distribution. I think this is something you would like.” Long story short, 30 years with Univar and was a great compilation of your technical acumen and business. I love this industry and love what it has done.
You’ve certainly seen the industry evolve, and it’s evolved significantly. What’s striking to you about the chemical industry, the distribution business, versus when you first started out?
It’s interesting because if you think about it, in every distributor that started the same way, it was a family-owned business. If you can look at Univar Solutions, Barentz, and IMCD, every one of them, even the global ones all the way down to now, a big part of them are still family-owned. It was a family-owned business, and what they found was an opportunity in their geography in a specific industry to bring value to the supply chain. That’s what to me is interesting about our industry.
I think about the bigger picture. The definition of work is to create value. For us in the distribution space, it’s all about creating value for the chemical manufacturer who chooses to market through distribution, as well as creating value for that customer who chooses a distributor or outsources certain items to that distributor, and that’s all about creating value.
I have loved this industry. I love the story about how companies got started and where they found an opportunity. They found the entrepreneurial spirit, created value for a chemical manufacturer and for a customer and started their businesses. Over time, what we have seen is a consolidation of the businesses coming around the globe, but one of the things that’s fun about this business and while after many years, I still see it changing day to day, there are so many moving parts in that entrepreneurial spirit to create value is amazing in our industries in the distribution space, as well as the whole industry of chemistry.
I do observe the same thing that many of the distributors started out as small family-owned businesses that saw the opportunity to create value. There’s been tremendous consolidation. Barentz, like many others, has been very inquisitive in order to drive growth, in order to create maybe some of those network effects.
What I find is that as companies get bigger, that entrepreneurial spirit gets squashed underneath processes and standardization. As well as the fact merging companies and cultures is notoriously difficult. Something like 50% of all acquisitions fails to meet any of those targets. How do you and Barentz ensure success? How do you keep that entrepreneurial spirit alive? How do you bring companies together and still keep the best out of them?
One of the comments you made was culture. In my 30, 35 plus years, I probably had over 25 to 30 acquisitions. One of the things that I see, and this is something that we strive for at Barentz, is to look at the culture. One of the things that we have found is, as you target a customer or distributor, you look at them and say, “First, there’s a strategic fit or why you are talking to them.” Once you look at that strategic fit, then the real key is looking at the culture because one of the things that we found is the success is around, “Do you think alike? Do you look at things the same way? Are you entrepreneurial?”The definition of work is to create value. Click To Tweet
Some of the things you talked about as you get bigger, you do have to have processes, but one of the things that you talk about is turning the org chart upside down. We want to create the line that the employee needs to remain entrepreneurial and flexible. We want to provide standards and we want to provide opportunities, but bringing in that culture together is the key.
Think about it from a strategic fit, but then the next milepost is culturally, do we think the way and our DNA are the same? I have seen instances where that did not happen and we had a lot of work to do. You still had this strategic fit, but there were a lot of transitional things you had to do to bring the cultures in line, and that, to me, is one of the key aspects to success is making sure the culture fit is there.
Let me tackle the strategic fit to the extent that you are able to share that. Barentz was in an acquisition kick, including during the pandemic, which is when Maroon Group joined and continues even now. I have seen some announcements. What’s the strategy that’s being pursued and what are you guys looking for as you identify those target businesses to bring on board?
It starts with the culture. For us, as we have created a specialty distributor, and one of the things that we think about is always creating a better solution. I went back to talking about the definition of work is to create value. One of the things that we think about is our main goal. When you think about this, we want to create value for our employees and their family. One of the things we always think about is how do we create more value for our employees and their families around this distribution space, knowing that to create value, the chemical manufacturer has a choice in the distributor he uses or they use. You have to create value for them. The customer has a choice.
We think about whoever has a choice. We have to create more value to be a market leader. Whether it’s the chemical manufacturer, chemical end-user, or it’s our employees. They have a choice of where they work. Why would they choose Barentz? The same thing we think about when we look at targeted acquisitions. We look at them and say, “It’s not a fit.” If it’s a transition where we look at a lot of synergies, our whole strategy is to buy and build. In every one of our transactions and over twenty acquisitions globally, the company has more employees and more value than when we first found them. That, to me, is one of the strategic fits that we look at.
Looking at our history, for example, we knew we wanted to be in the personal care space, so we targeted a regional acquisition. For example, in the US Northeast, and then in our hands, we bring them across North America. As well as with Barentz, we utilize the scale and skill on a global basis to bring more producers and customers and then it allows us to create more value. Our strategy is how do we create more value for our employees? We know if we do that, then their entrepreneurial spirit and ability will create more value for, whether it’s the principal or a customer, so we think about that.
You talk a lot about entrepreneurial opportunities for your employees. You said that you want people even at the bottom. When you flip the organization, how do you make sure that they continue to have those opportunities? What does that look like to you? Entrepreneurs, that’s a word that gets thrown out around a lot. It means different things to different people. What does it mean to you?
I will give you an example. In the chemical industry, in general, in the past couple of years, we have seen these trends over different times. In many years, I have never seen it like this where you had supply chain shortages, volatility, outages, and all these convolutions of all these different things. I have seen different spaces but not like this all at once. It’s been a very unique time. When you think about those things in our industry, the world is always changing.
One of the things that we think about and how that looks like entrepreneurial, and that’s a generic term, but what we want to do is turn the org chart upside down, and we always think about that I am the first assistant to the level above me or next level up. They are the first assistant to the next level up. We want to keep a flat organization. We want to keep it quick, but our job is to give strategy like, “Here’s where we are going.” Empower people in their entrepreneurial ability to say, “We have got a supply chain issue. Do we need more inventory? Do we have a shortage on one product? Is there a functional equivalent that we can go do?”
What we have found is the best answers come from the people interacting with the customers or the principals, and our job is to support that and help with the strategy and learn. We want to learn. We always want to see what’s happening. That’s what that looks like. We give a lot of authority and autonomy to our people within a barrier. It’s like a straight map. We want to go from Houston to Chicago, so we want to do that. How you get there is up to you and based on what’s happening. That’s the way we think about things.
As you mentioned, the last couple of years have been full of unexpected events across the industry. Product availability and lack thereof, pricing volatility, the supply chain challenges has turned, supply and chain to a household word, and now, inflation. We are starting to see quite an effective inflation. I have been looking at the earnings reports from a lot of companies and so far, much of the chemical industry seems to be holding on pretty well, but none of us know what the second half of 2022 is going to look like.
Inflation, potential recession, and these continuous variabilities are going to persist. We’ll see where that goes. What’s been most significant for you? When you guys reflect on the last few years, and the acquisition of Maroon group that brought you into Barentz is significant, but what’s been most significant for your company over the last few years?The fundamental key aspect of success is looking at the culture. Click To Tweet
It’s been an interesting time. It’s been exciting to see all the changes because one of the things I see is that you’ve had the pandemic, which changed how we work. If you think about the due diligence that Barentz did on Maroon, we never were in a room together. It was all done via Teams or Zoom. We never were physically in a room together for over a year.
When you think about what technology has done to allow us to continue to work even through a pandemic, that’s an amazing cultural shift that has occurred. Now, you are looking at digital tools, looking at things that are happening, you still have to create value. You still have to create relationships. You still have to do things, but now we have a whole new way of working.
Physically being together is important, but I also think using these digital tools to save time, travel, and balance of work life has been an amazing change that has gone on. I also think because of all the things that have gone on with the speed of work, the things that are going on. The digital tools have helped. In the last couple of years, I think about: we have all had to deal with a pandemic to keep our employees safe. We are working at looking at flexible work hours. Being able to work from home or work remotely. We have had some people. There are certain positions you can’t do that. Our laboratory and technical people, all of that, but we needed to keep them safe, so we also needed to segregate that.
That’s one aspect, and then the changes that have occurred with the supply chain. All the things and having direct very quickly have been amazing the last couple of years. Overall from a distribution standpoint in general, the value of distribution has elevated itself because of the complexity of the supply chain and of things that have happened. It’s been a good opportunity for, in general, the distribution market to show the value and how important of a role we play.
I talked about the business of chemistry, the link of quality of life, because we have been able to fill in for the supply chain and we have solved the problems for people being able to do that so they can get the products on the shelf. It’s an industry. We need to stay humble, but I also think we can be a little bit prideful in that our role in the economy and society is very important, and we have proven that over the last couple of years.
That’s a great point because often, producers and principals would think there’s always this dilemma of what I use. What part of my business do I go through distribution for? What part do I not? At times, there can be a bit of a tug of war over certain customers and certain scales. I saw that during my time at Shell, Clariant, and elsewhere. Yet, distributors such as Barentz have a much wider variety of relationships. It’s the ability to pull on a much broader set of potential suppliers as well as a much broader set of potential customers that creates those optimization opportunities.
I agree with that because one of the things I always think about is if you can’t create that as a distributor to the end customer and to the principal, it’s almost like a customer segmentation. If the customer sees no value in what the distributor is providing, then the chemical manufacturer should have that customer. If distribution can’t create value, then long-term, that principal won’t hold that customer anyway, because they are going to go to the value proposition.
To your point, one of the things that we are starting to see is both from a technical acumen, from a supply chain to sourcing, to be able to put together technical products and specialty applications for them around the whole encompassing of the formularies or from the supply chain problems they are having. I was talking to one food company and one of the interesting things they said is they, like us, as well as other distributors, the technical acumen. What they are saying to us is, if I talked to one producer, for example, if their producer that produces gum there, their answer to a thickening problem will be at a gum.
If I talked to another company that is methylcellulose, maybe that’s what their answer says. One of the things we love about distribution is you are a little bit chemistry agnostic. You are giving us the best solution. It might be gum, cellulose, or many other things. They like that sparring partner from a technical aspect.
That’s one of the evolutions that I have seen over time with Barentz as well as other distributors is that are saying, “Always creating a better solution.” We are working on a technical level, as well as the supply chain, to create value overall for the customer. In the last couple of years, that’s been paramount because there have been times when they say, “I can’t get this product. Do you have a functional equivalent or can I reformulate it? What can you do to help me?” You are bringing value in those kinds of conversations.
I’m glad you addressed that because that was going to be one of my questions is what do you see a value because you use that term a lot. When you think about that, especially from a technical formulation perspective, that implies that you guys make quite an investment in that technical formulation work and the lab work to understand how to apply these different potential products into a solution.
That’s one of the things that we focus on. When you look at products in the chemical industry, you’ve got commodities in what I call differentiated products and specialties. What we target is differentiated in specialty products. The definition of a specialty product of value of the product is in the application of in the formulary. For us, we look at things. We have technical people. We go to market by verticals. We have seven verticals in North America and globally. Whether it’s food, animal nutrition, human nutrition, personal care, pharmaceutical, or case plastics, our HR and I have people dedicated to those industries. We have personal care people talking to personal care people.Think about your strategies and the digital tool you can use that will accelerate your strategy because it starts with what your plan is. Click To Tweet
We have human nutrition talking to human nutrition, case plastics to case plastics, and then we back that up with laboratories. We have PhD chemists who are coming from the industries and are looking at trends, formularies, and things that help us do those things to create solutions, and we partner with our principles. What innovation is out there? What new products are you doing? Where are you bringing value into the formulation? That’s important in the market.
Let’s talk about your principles. How do you create value for them? This has maybe a couple of questions. One is how do you create value? What’s in it for your principals or your suppliers that you are working with? The second piece is how do you strike that balance? Everybody always wants to be the most important supplier and wants to have the first choice. 1) How do you provide value? 2) How do you balance across the needs and desires of these different principles that you work with?
One of the things that we work on and we have what we think is a nice situation where I have principal-facing managers as well as customer-facing managers. For us and in the specialty business, we try to be as exclusive as we can in the market so that it allows us to focus on those things. We look at that and say, “We look at the chemistries and we look at the portfolios in our different industries and we know there’s certain industries or certain product portfolios that we need to have to be relevant. Therefore we know there are certain principles that we need to have to be relevant.” It’s a circular conversation. The principals also want a distributor to be relevant in the target chemistries that they are trying to apply and sell and they want people knowledgeable about that.
The principals don’t have time to train distributors or to work with distributors and teach them the industry. What they want is someone that is industry knowledgeable and understands how their chemistry is used. There may be some subtle training, but it is around their individual chemistry. One of the things that we try to work on is aligning ourselves with the right principal doing the right chemistry and then seeing what they want to sell and the best returns for that. That’s the way we think about that.
The synergistic effect of understanding the chemistry that the end customer needs and the principal is trying to sell and fill that void in the chemistry value is important when you think about that value. We try to think about where there are people waking up every day thinking about, “How do I create value for a principal?” Going back to the distribution space, principals have a choice in the distributor they choose. They need to choose the right distributor that can fulfill their plans. We need to articulate and understand those and then equate that to the customer because the end customers are the ultimate person we need to think about.
How much transparency is there?
One of the things that we talk about is the two T’s, Trust and Transparency. Every relationship is built with trust and with our principals, as well as our customers. We try to be very transparent. Here are our customers. Here’s where we are focused. Here’s our value proposition. Here’s what we can do because we think that’s important because we want to align and build a partnership with our principals as well as our customers. We think that it’s ultimately very important to be transparent with: here are the markets, here’s where we are at.
It’s a pretty straightforward conversation when you are talking about your scorecards or your business plans together, here’s what we are good at. Here’s where we are working. Can you help us be better? It’s a circular conversation. Could you tweak this formula because we could see where there’s an opportunity in the market for X product that probably is a base chemistry of yours that you could fulfill as well? That transparency is very important, especially at this time with the supply chain and all the things that are going on. It’s important to have that transparency.
Let’s turn back maybe a little bit to digitization. We talked about digitization in the sense of making it easier to work as a team. Digitization had a large focus since the pandemic for companies and it’s not the way. These interpersonal ways of working, but it’s also having a greater web presence, because as individuals, we are much more into it, “If I can order from Amazon and track my delivery on my phone, why can’t I do that with a chemical company?”
Quite frankly, the chemical industry has been pretty darn slow at making that move, and a lot of the reasoning is because of these personal relationships and some of the fine-tuning. What’s your take on this? What approaches have you and Barentz been taking as it relates to digitization over the past few years or what do you see going forward?
I have heard this over time. After I left Univar, I did a lot of work in the digital space and thought about that and even talked to Amazon. One of the things is that the word digital or all these things get convoluted in like, “What does all that mean?” The way we think about this is, “What’s our business strategy and how do we create that?” Going back to create value, and then, “What are the tools that we have to execute on that?” That’s when we start thinking about digital. How do we use all the tools that are available to us to create value in the market? One of the things you talked about is like Amazon, some of those kinds of things you think about, our industry is a regulated industry, not everybody should have visibility and see these things and be able to buy these things. It’s a controlled network.
Amazon is an open network. What you need is a closed network. The other thing is the digital tools depend on the ERP systems people are using and the value that creates for them. A lot of people, if they have their ERP and can enter an order and it goes to their supplier to go on a separate network, it is double work for them.
There’s no advantage to that other than to self-serve, and some of the things you’ve discussed about are safety data sheet, CFA, or, “Let me look at the spec sheet or I need a formulary.” A lot of the distribution space is catering to those kinds of things. The way we are doing it, we are thinking about this from a digital aspect, is what’s our strategy and what are the tools to allow us to succeed in that such strategy. Some of those are digital tools, whether it’s the Teams meeting, Zoom, or some of the things to be able to contact customers or webinars.
Being able to reach a lot of people at a low cost is one way to execute your strategy using digital tools, looking at solutions and formularies and things like that. That’s another way to execute using digital tools. We have done a lot of things like YouTube and digital things about, “How do you formulate with a certain product?” “Here’s a quick 1 to 2-minute video on how you do that.”
This is an evolution that is occurring. We start to see those kinds of things. We are starting to see a lot of applications out there that are catering to the market because one of the things is you could make a circular conversation that the chemical industry has been slow to adopt digital, but I also would tell you, there’s been a lot of lack of digital tools specifically for the chemical industry, and there are some of those starting to arise now.
I know that you personally and maybe Barentz have been involved with BluePallet as one example. It’s an evolution, as you say. We are going to continue to evolve.
The thing I tell people is to think about their strategies and then think about the tools. Is digital a tool that will accelerate your strategy? It starts with, “What is your plan? What is your strategy?” As opposed to, “We need digital.” “What’s the end game for digital?” That’s something that the distribution and the business of chemistry need to think through.
Sometimes it’s hard to find that end game, so you find at least your mid-game and then where you are going because the world keeps changing. What’s next for you and Barentz? What’s your outlook for the rest of 2022 for you guys and as you start looking at 2023?
We are going to continue to be inquisitive. There are certain markets that we still need to grow more scale and skill and keep developing. We are going to continue to be inquisitive in the market. We look forward to the second half of the year. The old saying, “What goes up usually comes down.” We are waiting for this rollercoaster ride to go the other direction.
It will at some point, so we are watching the roots of inflation or deflation as well as demand in the market. The consumer still seems to be weighing in. If you look at North America, the employment rates still seem to be pretty good, but it’s a matter of time with inflation and one, “Is the consumer going to step back a little bit?” As well as globally.
Some of the things that are going on, the tension between China, US, Ukraine and Russia, and some of the things that are going on are going to play themselves out. Every one of those situations is an opportunity for the chemical distributor. It’s an opportunity for us to create value for principals and customers.
This has been wonderful. I appreciate you taking the time and joining us. It’s been a great conversation.
Thanks for having me. It’s been great. Thank you.
Thanks, everyone, for reading. Keep reading, sharing, and following, and we will speak with you next episode.
- Barentz North America
- National Association of Chemical Distributors
- Chemical Educational Foundation
About Terry Hill
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