polypag.ch – News – News

30. 05. 2011

Successful alternatives: taking stock after the first four months

There has been a prohibition on self service of classic PU foams throughout France and Germany since the end of December. Time now to look at the initial, very positive results in the market for the innovative, non-classified product systems which have si
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Just about twelve months ago, our distribution partners – particularly in France and Germany - were suddenly confronted with new product ranges. Products which, thanks to their innovative technology, no longer had to be labelled with special health and environmental warning symbols.

A new range of materials, differing markedly from the more familiar PU foam spectrum but at the same time costing decidedly more than the well-known products, gave rise to numerous sceptical queries. Certainly, none of our sales partners was willing to even hazard a guess as to the sales potential of these alternative products – much less start to project likely sales turnover figures.

Meanwhile, there was always the possibility (at least in theory) that the legislature would find a way to circumvent the planned self-service prohibition. All this meant that marketing people tended to hold back on product launch budgets.

Meanwhile four months have passed since the launch of these non-classified PU products, and what we can now say loud and clear is that

nobody at all anticipated the success we have experienced!

Of course, with the new legislation there was always going to be a high demand for initial stocking. But the key question was whether sales would follow suit?

The answer is yes. Users have embraced the new PU foams. The consistently high level of demand has continued into May, so that but for increased production capacity, we would actually be looking at supply bottlenecks. Particularly in France, where the legislation has effectively banned conventional PU foams from sale in DIY outlets, sales volumes have been replicated virtually one-to-one by non-classified product; with marked increases in turnover.

Those customers who took up the new, innovative PU products early on have managed to increase their market share. Increases of 50% have been common. Putting false modesty aside, we are quietly proud to have demonstrated the validity of our core concept: PUR Partnership – Your Benefit.

In Germany meanwhile, sales of classic PU foams have been managed a little differently to those in France, and a direct comparison is more difficult. The majority of German DIY outlets have chosen to continue with the sale of classic PU foams – now, however, kept under lock and key - alongside the new non-classified alternatives. Although these are being offered at quite markedly higher prices to the conventional foams, turnover figures have remained stable, with up to 30% of the classic foam business replaced; depending on the specific market in question.

Sadly this development is lost on those who choose to continue to push solely or mainly conventional foams. They may not have witnessed as feared the dramatic sales collapse forecast in some quarters, but they could be earning considerably more money on the same sales volumes.

These first results demonstrate that the slower market acceptance in Germany in comparison to France is not a result of consumer diffidence. Rather, the take-up serves to demonstrate that our long years of very positive results in Scandinavia can be readily transferred to Western Europe.

Something else which has become quite obvious is that the successful market launch of these products requires clearly defined positioning and comprehensive marketing support. Wherever classification-free products are sold indiscriminately alongside conventional PU foams without any discernible differentiation for the consumer, take-up is poor. In contrast, distribution partners who have focused on the new non-classified products and marketed them accordingly have achieved steady growth without the need for intensive advertising activity.

This is so important when new, improved formulations are soon to be available. In the Summer of this year, for instance, a low flammability, so-called “B1”foam will join the range of classification-free products.

Against this increasing diversification of the product range, a clearly delineated and communicated positioning strategy is the most important factor in successfully participating in the dynamic growth of a new generation of PU foams.

Achim Niemeyer
Member of the Board
Marketing / Strategic Purchasing

30. 03. 2011

The obverse of the economic upturn

As raw material prices scale new heights, the almost universal capacity downturn in 2009, coupled with the ever-increasing demand for materials, are starting to generate shortfalls.
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It seems paradoxical that most sectors of industry did all the right things quickly enough to address the ramifications of the financial crash; yet now those very measures are threatening to slow or even extinguish the current upturn. After matching capacities to the then falling demand figures, now nearly every raw material supplier is finding it difficult to meet the current massive increases in demand! The risk of shortfalls is further exacerbated by material speculation, which has increasingly affected pricing. Our raw material prices have thus increased by between 25% and 70% across the board since the middle of 2009, and are already back above the previous record high levels seen in 2008.

Those product areas using relatively high raw material inputs (such as PU foams) are facing massive cost increases. But with material cost content of up to 80%, there is very little room to cover these increases elsewhere. Matching sales prices to the new cost structures is now inevitable; provided the segments concerned allow it. Larger contract partners, the main distributors of PU foams, tend to insist on long-term price agreements. Manufacturers, by contrast, do not have the luxury of such arrangements with their suppliers: their prices for propellants and special additives are charged at ruling weekly price levels, or even daily spot prices. Even for polyols and MDI, price agreements seldom extend beyond a month.

What’s more, it is not only prices that are causing problems for manufacturers: important chemical constituents, without which PU foams cannot be manufactured , are now produced to order. Additional deliveries are either flatly impossible to organise or attract ludicrously high prices. For our company, producing as it does exclusively own label, it is a major headache: alongside consistently high product quality, 100% fulfilment of all orders is the central requirement of our distributors. Any shortfalls in our ability to deliver result in lost turnover, penalty claims and image loss for our contract partners.

To meet the quality demands of our partners and ensure seamless supply, we are going to have to address the raw material price increases we are facing. In other words, to amend our selling prices accordingly. One issue that is central is the achievement of an acceptable return for this business. The current plethora of legislative changes on the sale of PU products demonstrates only too well how right and apposite it was to invest in the new technologies when we did. Years of research and development into non-hazardous PU foams have meant that we are one of the very few manufacturers in a position to ensure the future of our partners.

We are able to provide timely delivery of products, which will enable our customers to maintain and build on their market positions. Now the task is to take this new generation of PU foams forward, expanding and improving our offer.

Achim Niemeyer
Member of the Board
Marketing / Strategic Purchasing

30. 11. 2010

A new era in PU foams throughout the EU from 01. December 2010

After wrestling with the matter for more than 10 years, the EU Commission in Brussels, in issuing ATP 30/31, has finally agreed on a new classification for MDI. This will have far-reaching consequences for the marketing of all conventional PU foams
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within all member states of the EU.

As of 01. December 2010, all PU foams sold in Europe must be marked with the warning labels R20, R40 and R48; effectively prohibiting free sales in many countries. The so-called self-service market is now barred.
(Full details can be found on the website under NEWS and PU DATA – “ New regulations for PU foam product labelling”).

What does it all mean for the market and for PU foam products?
It is important to understand that this new labelling regime is a typical Brussels bureaucratic outcome: a compromise focussing on the MDI raw material, with little concern for the products made from it. So our branch assumed for a long time that an exclusion would be given to PU foams in order to circumvent the self-service restriction. Not at all.

What still applies:
Conventional products have been tried and trusted over decades. They have been used in numerous construction applications in filling, sealing and sound-insulating gaps, and remain, in our view, the best flexible solution to such needs.

After millions of applications there have simply been no recorded incidents of serious health issues resulting from using the foam or from contact with the cured product. But as a chemical product containing MDI, the foams have been at the centre of the socio-political debate for years now. This is mainly because there has not been an adequate differentiation between starting materials – which are genuinely injurious to health - and end-products like PU foams. But this is exactly the advantage and innovation of PU foam in gas cartridges.

It is important to emphasise that conventional, established PU products are, and will remain, both safe and free from any concerns. Whether for the professional or amateur user, they can be recommended without hesitation!

However, thanks to the new EU Directive, there are certain new conditions pertaining to the marketing of PU foam products. Conditions which will require manufacturers, sellers and dealers to reconsider their position vis-à-vis their entire sales and marketing strategies.

Why?

With the introduction of the new regime, a class of so-called “classification-free PU foams” has arisen – products which can be marketed without constraint.

Conventional PU foams will, however, have to live under the shadow of identification requirements and the concomitant restriction on self-service purchase.

Which proactive marketing strategies are available to make a virtue out of a necessity in turning this perceived problem into a real marketing advantage?

Identifying and maximizing emerging marketing opportunities:
Conventional PU foams have, in any event, become commodity products; driven by price with little genuine focus on product quality.

The emergence of a range of classification-free foams will enable manufacturers, sellers and distributers to market these products as a premium range, in comparison to classic, established PU foam products.

The advantages are obvious:

Product profiling: “classification-free foam”, “innovative PU product,” “world first”
Attractive competitive advantage by “positioning”
Increased market share, turnover and margins
Elimination of costly sales arrangements associated with self-service prohibition
No expensive health and safety labelling requirements

And a special advantage for our customers:
Our companies – Polypag AG and Hago GmbH & Co KG - can offer you a whole range of classification-free products to match your specific needs and marketing requirements:

MDI-free PU foams
MDI-reduced PU foams <1%, but > 0.1% MDI content
Low level MDI foams; < 0.1% MDI

Together, these represent an interesting range of product mix options.

So even if we view the new regulations critically [actually, as downright unnecessary] they do represent a global trend towards increased concern for health and safety and product labelling requirements.

They are a reality we must all face up to. The trend cannot be circumvented or ignored; but neither should the emerging marketing opportunities be lost.

In this respect, we look forward to being of continued assistance.

G.J.Peichl
President

29. 11. 2010

New Requirements on PU Foam Packaging

From 01. December 2010 all PU foams have to be labelled with the product safety warnings R20, R40 and R48.
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This requirement is contained within the 30./31. ATP [Attachment to Technical Progress] of the European Commission, and covers every PU foam sold anywhere in the EU with a monomeric isocyanate content of greater than 1%. The three warning notices have to be on every product concerned by the launch date of 01. December 2010 – in effect on virtually every PU foam product sold in the European market.

The decision to include PU foams, which have been marketed without problem for the past twenty years, is to say the least the subject of continuing debate. On the one hand, there have never been any reported incidents of suspected effects among users, while on the other hand, the basis for the new regulatory regime are test methods based on laboratory conditions completely alien to real-life usage conditions.

What’s more, there are virtually no restrictions across almost all European countries on the sale or diverse use of conventional, tried-and-trusted-a-million-times PU foams, which we will continue to develop, modify and optimise for new emerging applications.

There are, however, quite severe consequences in both France and Germany surrounding the sale of products bearing an R40 label. [“Suspicion of carcinogenic effects…”. The marketing of such products is extremely tightly controlled. Hitherto freely- available conventional PU foams can no longer be simply lifted from the shelf by the customer. On the contrary, they have to be kept in a secure store, and can only be sold by appropriately trained individuals. The seller also has to advise the consumer about potential risks associated with the intended use. In order to be able to do this, sales personnel have to attend product training courses and pass an examination.

Although a direct sales organisation will remain largely unaffected by this self-service prohibition, shops and retail outlets representing the majority of sales will have to reckon with considerable costs if the range is to be maintained. Meanwhile, companies carrying these products via an e-platform, internet marketing route will have to de-list the products concerned: home shopping is completely prohibited for products carrying an R40 label.

In both France and German, products with less than 1% monomeric icocyanate content can continue to be freely marketed, but products containing more than 0.1% are classified as injurious to health, and will have to carry an Xn danger code.

PU foams containing less than 0.1% monomeric isocyanate are treated as harmless and have no requirements in terms of safety labelling [also note glove requirements]. There are currently two different technologies which meet this requirement. The first is the so-called low isocyanate system and the second is the isocyanate-free, silane-based foam.

We have already developed both technologies to market, and supply isocyanate-free, silane-based foams to Scandinavia into channels where the isocyanate-free criteria is of paramount importance.

Low isocyanate products represent a new development for dealers, for whom the critical aspect is that conventional foam properties are maintained as closely as possible. Our future-focused development strategy, aimed at maintaining a viable product portfolio, has taken on board these changes and the anticipated directive following from the REACH 01.01.2015 regulation. We have therefore developed a range of products containing less than 0.1% monomeric isocyanate. We have had these products in our range since April 2010.

The following enclosed table "regulations for labelling" shows the different conditions pertaining to the labelling and marketing of the various PU technologies currently available.

The requirement to apply the new labelling regime from 01.12.2010 is unfortunately a fact of life. It will inevitably cause considerable problems and immense cost throughout the entire supply chain; particularly in France and Germany, where there is an additional self-service restriction for R40 products. Companies which made appropriate arrangements to label the products concerned with the R40 notice ahead of the December 01. deadline will be required to keep them under lock and key at point-of-sale...

We are offering easy-to-use labelling systems which can be used to identify the products concerned, whether they are in the stores or on the shelves, thus enabling our customers to conform to the new legal requirements for labelling.

Achim Niemeyer
Marketing & Sales
Polypag AG

Downloads:

Overview regulations for labelling (259 KB)

29. 11. 2010

Requirement to provide gloves with PU Foam products to non-commercial users

With effect from 27. December 2010, all PU foams retailed to the public have to be issued with safety gloves
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Based on risk assessments associated with the handling of diphenylmethane diisocyanate MDI products, the European Parliament has decreed that products containing more than 0.1% isocyanate must be sold with safety gloves when bought by private individuals. The regulation covers the whole of Europe and takes effect from 27. December 2010. From that date any product concerned on the shelf must be sold with free gloves.

The European regulation differentiates between products with different isocyanate contents [>0.1%], and to whom the products are being sold: trade customers can continue to purchase the foams without gloves. In contrast, it is absolutely imperative to provide gloves with product sold to private individuals. What’s more, thee new labels have to be put on all such canisters.

The quality of the gloves provided is also specified, and has to be guaranteed by the CE mark. This also defines how long the gloves can be used for, which in fact also has to be written on either the gloves themselves or on the foam canister. Differentiating between trade and private customers does not depend on issues such as whether special product accessories such as guns are provided, but solely on whether a private customer can buy the material – if they can, gloves have to be provided.

In practice this means that in addition to classic DIY retail outlets, any trade outlet selling to the general public must ensure that gloves are provided. Alternatively they must take the trouble to create two separate product lines according to the user groups.

We are offering our customers several ways of conforming to the new legal requirements and to add value to their product. For instance the gloves can be sleeved on the foam adapters, providing a point-of-sale seal on the cap and an anti-theft device.

Getting things in place by 27. December 2010 will represent a major undertaking for us all. To comply with the requirement for retro-fitting stock canisters with gloves and minimising returns for retro-fitting, we are providing customers with sticky-back glove packs on grease-proof backing, enabling retro-fitting in the stores or at the point of sale.