1

Case Study: Global Market Entry Assessment (1/4)Project aims, objective & scope – Client requested Frost & Sullivan services to support its decision on whether to invest in a plant to produce Chemical X via a new feedstock process

Client

• Client was a family-owned company established in 1842

and based in Germany

• Along with a focus on various metals, it has a Chemicals

division with three plants across Germany, that supplies

specific specialty chemicals based on sulphur chemistry

for a variety of applications across global markets

Project objectives

• Client developed a process based on a low cost feedstock,

which has higher efficiency and produces Chemical X with

less by products than current production processes

• As part of the decision whether or not to invest in a

production plant for Chemical X, the client asked Frost &

Sullivan to conduct a global market assessment to determine

the opportunity for the Client in the Chemical X market

Project Scope

• Geographic: Europe, US, Asia (China, India, Japan, Taiwan)

• Product: Chemical X in two separate forms (anhydrous & 70%)

• Application: Three main applications (one with 8 sub-applications) and scouting for new applications

Key Questions to be answered:• What is the current global X market situation and expected situation in the future, including the development of volume demand?

• For which purpose and which products are X 70% and X anhydrous used and how are the application markets expected to develop?

• Who are the consumers of X, how high is their demand and where are they located?

• What expansion plans do current market participants have, and are there any future market participants expected, especially in China?

• What is the market share of suppliers, by volume?

• What are the market entry barriers for a new market entrant and how strong are they?

• What does the supply/demand equilibrium look like and how is it expected to develop?

• What are the prices of X 70% and X anhydrous and how are they expected to develop?

2

Go

/ N

o G

o d

ecis

ion

on

wh

eth

er

to d

o

furt

her

an

aly

sis

an

d e

va

lua

tio

n o

f th

e

mark

et

seg

men

ts t

o t

arg

et

Phase 1 – Supply Side

Overview of

Global Chemical

X Market

On-siteWorkshop

Research focus:

Existing Chemical X manufacturers &

distributors

• Secondary & primary

research (36 interviews)

• Analysis

• Short market report:• Market sizing &

potential by

region/application• Growth drivers• Supply / demand

equilibrium & future trends

• Competitive landscape (supply side)

• Identification of growth

hot spots

• Go/no go investment decision

• Development of project

roadmap i.e. selection of

phase two segments to focus on

Phase 2 – Demand Side

Deep Dive:

Understanding

the Customer

Presentation of Findings

Research focus:

Current & potential

Chemical X end users

• Secondary & primary

research (50 interviews)

• Analysis

• Final report:• Customer information

to understand

purchasing requirements and decision making unit

• Competitive landscape (demand side)

• Evaluation of global

opportunities

• Onsite presentation of project findings

8 weeks from project kick off Estimate for 3 segments: 8-10 weeks

Case Study: Global Market Entry Assessment (2/4)Proposed approach & timeline – Frost & Sullivan proposed a phased approach to ensure Client had an overview of the market in time to make a decision on investment & also to enable customer analysis to focus on the specific market segments of most interest to Client

Source: Frost & Sullivan

3

Case Study: Global Market Entry Assessment (3/4)Project Output – Phase one findings confirmed that there were no red flags preventing market entry, therefore we moved to a second phase of the project to deepen demand-side understanding of the market in order to build a route-to-market plan

Source: Frost & Sullivan

4

€10 million initial investment recouped during year 8 (assuming 50%

margin). This increases to year 19 if 10% margin is assumed.

792 t 873 t 989 t

435 t

1067 t

661 t

1135 t 1217 t

920 t

1319 t

1006 t

1337 t

1135 t

1356 t

1171 t

1375 t

1212 t

1394 t

1258 t

1413 t

1310 t

326 t

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Year

0

5

10

15

20

25

30

Sa

les

Re

ve

nu

es

(m

illi

on

EU

R)

59 t316 t

683 t866 t

74 t

1063 t

190 t

1424 t1728 t 1882 t

747 t

2140 t3 t

2351 t26 t

2544 t72 t

2619 t92 t

2733 t

146 t

2848 t

196 t

3049 t

2.005.102.20aXXX

1.203.201.7070% XXX

China

(€/kg)

US

(€/kg)

Europe

(€/kg)

Assumed

Pricing

Conservative pricing estimates were used

to develop this scenario. It may be possible to

demand slightly higher prices than those indicated.

Application 3 is very slow to start with but

is the best outlet for high quality products.

The volume taken by each customer is small so multiple contacts are needed.

Distributors

Application 1

Application 3

Cumulative Sales

Application 1 will take a bit of time to

penetrate (due to the testing required) but

offers good volumes, particularly if EU and US XXX are targeted. Initial sales come via distributors. XXX

distributors like XXX and XX are key to

supply Application 3 R&D but other distributors require higher volumes

Note: The numbers shown in red are the total annual volume sold across all routes to market. Those on the bars are the volumes for each route to market. The height of the bars represents revenue. All volumes are quoted as anhydrous (99%) Chemical X equivalents.

25 customers 25 customers →→→→→→→→ all regions (EU 6, US 6, China 13) & all routes to market (distall regions (EU 6, US 6, China 13) & all routes to market (distributors: 10, Application 1: 7, Application 3: 8)ributors: 10, Application 1: 7, Application 3: 8)

Source: Frost & Sullivan

Case Study: Global Market Entry Assessment (4/4)Project Conclusion – Frost & Sullivan was able to create a 15 year potential sales scenario, based on recommended route-to-market and pricing