Types of Specialty Chemical Manufacturers

Specialty chemical manufacturers can be tollers, custom chemical producers, and/or proprietary chemical producers. Whether a company operates in the specialty or fine sector, it may play in one, two or all three arenas. Specialty chemical manufacturers may serve a downstream customer, which is either a formulator* (blends materials together, but there is no chemical reaction) or another chemical manufacture (doing a reaction). Some may also operate formulating businesses as well as reaction processing.

*An example of a formulator is an adhesives company that blends various raw materials (ingredients) together into a mixture, packaged, and sold to a big-box retailer such as Walmart.

  • Toller – A company that sells its manufacturing capabilities
    1. Customer pays a “toll” fee for the use of a toller’s manufacturing assets. There is no chemistry development by the toller – customer provides a turnkey technical package and support.

    2. Customer is responsible for chemistry performance; toller’s responsibility is to operate within procedures/process conditions provided by customer. Typically the customer supplies raw materials, packaging, material requirements planning, etc., although exceptions can be made for these on a case by case basis.

    3. Toller does not generally own the finished product intellectual property (IP), but manufactures chemicals for others (i.e., rents equipment and facilities to others who don’t have capacity or reaction/synthesis experience).

    4. May consider their sales offering to be “process IP.”

    5. Sales contracts may be short or long-term duration.

    6. Sometimes interchanged with the term “custom chemical producer.”

  • Custom chemical producer – A company that provides support on any scale (from lab to pilot plant to full-scale commercial manufacturing) for chemistry designed for an individual customer
    1. Often these are new products and not fully developed processes. Customers are drawn by critical process requirements needed (i.e., organometallic, high pressure, etc.).

    2. May (or may not) share in IP, raw materials, etc. Almost always, these are covered by non-disclosure agreements (NDA’s) and produced for a specific customer only. If the customer owns the finished product IP, they may turn to a custom chemical producer because they do not have the “sophisticated” or “complex” synthesis capabilities in-house required to produce a compound or series of intermediates and finished goods in house.

    3. May only do custom work while others may do a mix of custom work and proprietary products (based on their own IP) that are sold to downstream customers as common raw materials.

    4. Sometimes interchanged with the term “toller.”

  • Proprietary chemical producer – A company that combines various raw materials into their production process IP and sells finished goods to a downstream customer based on their IP and skills, unique intermediate capabilities, or ability to handle certain raw materials
    1. Has a competitive advantage /expertise that the other company does not have – the IP could be considered a “brand.”

    2. Sells either a molecule in which they own the technology (IP) or – in the case of formulated products – a solution to a problem using a formula that they own, often across numerous industries.

    3. May perform custom work, too, because they have process capabilities that others need and value, but it may not be their primary business model.

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