Bicolano magic in a can - Planters Development Bank

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KEMWERKE, INC: Finding the Right Mix of Business and Chemistry BY VERONICA VELARDE PULUMBARIT 12 SME.COMmunity.PHilippines A Filipino chemical company, Kemwerke Incorporated, is proving that business and chemistry can mix, especially if stirred in with the right entrepreneurial attitude of passion, perseverance, and honesty. Luis G. Fernando, president and managing director of Kemwerke, says “You need to have passion in your work, products, and services.” Without passion, it will be difficult for entrepreneurs to sustain their businesses, he says. Passion is exactly what Fernando has for his company and its products, mainly coco alkyd and polyol resins. Unlike conventional petroleum-based resins, Kemwerke’s products are derived from environmental-friendly and renewable coconut. These coco-based specialty chemicals are exported to 29 countries. Fernando, a chemist, says that developing coco-based resins will help boost the Philippines’ competitive advantage as the world’s largest coconut oil exporter. The country produces about 950 million metric tons of coconut oil per day, representing 70 percent of the world demand. “In our country, the coconut is both abundant and indigenous,” he says. The tropical climate of the Philippines makes it possible to grow coconut on a commercial scale almost anywhere. Around 3.2 million hectares of farmland are devoted to growing the crop and 1.6 million Filipinos depend on it for their livelihood, so a welldeveloped coconut industry will have immense social impact on the quality of life in many impoverished rural communities. Wonder Product Kemwerke’s main products, the short oil coconut alkyd and polyol resins, are used as coatings that provide brilliance, gloss, and durability to different materials: metal, plastic, paper, wood, and ceramics. Its applications include car bodies, ship hulls, soda cans, packaging, furniture, wall boards and floor tiles. Kemwerke also manufactures polyester, aluminum paste, ester gum and other products for the paint, ink, and adhesive industries. Up to 97 percent of Kemwerke’s products are exported overseas. Its biggest client to date is Akzo Nobel Extrusion Coatings, the world’s largest paint and chemical company. Fernando says Kemwerke was previously known as Philippine Pigment Incorporated (PPI). About 50 years ago, he started his career as a research chemist at PPI. Eventually, he moved up the corporate ladder until he became its president. In 1983, Fernando and his business partners bought PPI and formed a new company,
SME FOCUS Kemwerke. “I never expected in my dreams that I would one day own the company I work for,” he says. He admits that going into the chemical business is not easy. The industry is capital-intensive and highly competitive. “To be profitable, you need a lot of capital,” Fernando explains. For its operation, chemical plants need a large tract of land, raw materials, industrial pipe systems, reactors, storage units, heavy equipment, transport systems, and others. Fernando adds that competition in the global market is very stiff. Most of their competitors abroad are bigger, established companies that are able to offer highly competitive prices and terms for products. Kemwerke is dwarfed by its German counterpart, which is 50 times larger but still classed as a small and medium enterprise. While Kemwerke might only be a microenterprise by European standards, Fernando says the company has distinct advantages over competitors abroad. Kemwerke easily obtains its main raw material, coconut oil, from its local suppliers in Laguna and Zamboanga. Most of its competitors abroad also source their supply of coconut oil from the Philippines. So, foreign companies pay more for the same raw material because of freight costs and trading charges. Another edge Kemwerke enjoys over its foreign competitors is that the company gets the freshest supply of coconut oil delivered to them on the same day it was processed. Fernando explains that the shipping of coconut oil to foreign companies takes about 33 to 50 days. Over time, the product becomes discolored. Produced from fresh coconut oil, Kemwerke can boast of the clarity of its products while those of its competitors are marked by a yellowish tint. Big Challenges Kemwerke bolstered the country’s chemical industry when it became the first alkyd resin manufacturing plant in the Philippines to bear the ISO-certified seal of Quality Management Systems from the United Kingdom Accreditation Ser vice in 2000. Kemwerke and its 20-member team of production and technical personnel have consistently maintained a record of high manufacturing, safety and environmental standards over the years. Fernando laments that despite the excellent quality of their products, the biggest challenges that remain are product promotion and market development. Citing his experiences in trade fairs in Asia, the United States, and Europe, I NEVER EXPECTED IN MY DREAMS THAT I WOULD ONE DAY OWN THE COMPANY I WORK FOR.” Fernando said he always had to work harder to prove to international buyers that a small Philippine company like Kemwerke is capable of producing unique, world-class chemical products. One particular experience involving a German businessman stands out. The executive belittled Kemwerke’s product line to the point of questioning the “sort of chemistry that the Philippines is capable of producing.” Unperturbed, Fernando patiently explained Kemwerke’s operations to the German and eventually won him as one of the company’s clients. Global Competition Fernando compares the competition in the world market to the Olympics. He says the global competition is at a totally different level from local competition. “To be globally competitive, you must have superior quality, best price, and excellent service,” he explains. In the world market, the foremost issue is the quality of the product. He advises exporters to obtain globally recognized proof of 13 VOL. NO. 03 / ISSUE NO. 05
Page 1 and 2: A Plantersbank publication sme .COM
Page 3: FROM THE PUBLISHER’S DESK / STAFF
Page 6 and 7: HOTLINE Plantersbank bags top SME f
Page 8 and 9: FRANCHISING FIRMS DOING BRISK BUSIN
Page 10 and 11: COVER STORY 8 SME.COMmunity.PHilipp
Page 12 and 13: Jun and Ana Manrique with their eld
Page 16 and 17: TO BE GLOBALLY COMPETITIVE, YOU MUS
Page 18 and 19: TOOLKIT 16 SME.COMmunity.PHilippine
Page 20 and 21: STRATEGIC PLANNING for BUSINESS SUR
Page 22 and 23: Making Sense of the U.S. Financial
Page 24 and 25: CONNECTIVITY Globe Business Entrepr
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