Swiss-based KEMIEX is an independent online trading platform for professional buyers and sellers of commoditized additives, vitamins, amino acids, APIs and other substances for feed, food, veterinary and pharma industries.
It has been developed in strategic partnership with renowned ATRADIUS credit insurance which is a provider of financial risk insights and insurance on the platform.
The company’s vision is to make trading more efficient, convenient and safer, based on technology that is inspired by advanced trading tools in other industries.
Feed Additives spoke to Founder and CEO Pau Franquet to learn more about this new platform and their view of the industry.
[Feed Additives] KEMIEX is in a unique position in our industry, interacting with firms across the sector. What common traits do you see in the most successful feed additives producers?
[Pau Franquet] Successful firms have a clear strategy in place to achieve cost leadership, differentiation or a focused approach to avoid being “stuck in the middle”.
For commoditized products, more than ever, it is key to operate as efficient as possible to protect net margins. Leaders optimize their reach and cost base simultaneously by using innovative and digital tools such as KEMIEX, and we also observed an increased pace of larger players acquiring smaller ones to achieve economies of scale.
For speciality products, the need for comprehensive advice throughout the product life cycle is high and offers attractive margins. Successful producers create strong brands, offer vast technical knowledge and operate in close collaboration with their clients to help them thrive.
Some of the firms follow a focused approach and succeed in selected areas where they have an edge. Most of the leading firms we talk to, are deeply looking and embarking on comprehensive digital solutions such as KEMIEX. They are looking to manage commoditized ingredients in a smart way, by handling higher volumes despite streamlining operational costs at the same time.
[Feed Additives] Sales people are expected to act as a trusted advisor, advising their customer to buy at the right time, especially with commodities. In this extremely volatile market, how can you capture this buying momentum in a electronic platform, as speed is crucial?
[Pau Franquet] First, we believe that an independent online commodity exchange helps participants to achieve better terms and execute trades real-time and with less effort and errors. Having said this, commodity trading advisors, purchasers and sales people are the greatest profiteers as KEMIEX helps them to streamline the operational trading for commoditized products and provides a powerful tool and market insights to spend more time with advice and content where it is most needed.
In the financial sector, electronic trading is happening real-time with deep liquidity and yet there are more trusted advisors than ever, since clients strive for guidance in today’s complex markets. But the transactions happen where the transaction costs are the lowest.
[Feed Additives] The human factor has always been crucial in transactions in the feed industry; how do you create the same human connections in an online platform?
[Pau Franquet] An online platform will never replace human interactions but rather complement it to make certain operations more efficient, convenient and safer. Some traders and buyers struggle already with exchanging hundreds of emails every day, spending money and time to identify suppliers for basic commodities or non-strategic product categories to finally still experience operational losses or failing to get the best terms. It’s a reality that misunderstandings, contract breaches and lack of business ethics are happening even to the most seasoned experts despite human interaction.
[Feed Additives] Your background is in investment banking; what could raw materials traders learn from financial traders?
[Pau Franquet] Some people in our network are trading both raw materials and financial products, so I guess their core mentality and business sense is quite comparable. Eventually, financial trading is more high-tech, transparent and faster while raw material trading requires more comprehensive knowledge in supply chain management, as well as technical product and industry insights. Therefore, we believe the main learning point, if any, would be the use of digital platforms which have been used during decades whereas raw material traders have kept their traditional channels to do business.
[Feed Additives] You have a partnership with Atradius to provide credit insurance on a trade-by-trade basis; what other steps can one take to limit counterparty risk?
[Pau Franquet] Relying on only one or a few traditional counterparties and ignoring new channels poses the highest counterparty risk. At KEMIEX we take risk management seriously as we position ourselves as a premium invite-only platform for companies that meet certain financial and quality management criteria. We have a thorough onboarding procedure to filter the good companies based on creditworthiness and quality standards and we are constantly monitoring these companies with the support of Atradius credit insurance.
Atradius has access to financials and trade information of 240 million companies worldwide. An additional behavioural user rating is available for platform members as they are rated based on real transactions allowing us to monitor the behaviour of platform participants and act accordingly.
Legally, all trades will be executed in line with our comprehensive GTCs which are based on accepted guidelines recommended by international trade associations and, for instance, include a retention of title clause until a transaction is fully completed.
[Feed Additives] Why has it taken so long for an online trading platform to enter this industry?
[Pau Franquet] Online matchmaking platforms are not a completely new concept to feed industries with some platforms dating back to early 2000s. A high-end trading platform like KEMIEX is the result of the digitalization trend and use of advanced technologies, the combination of best practices from outside and inside the industry and ultimately intensifying market trends urging market participants to diversify their networks and toolsets. In a recent research paper, we outlined some ideas how to strategically approach purchasing to cope with current industry challenges such as higher price volatility and more frequent supply disruptions driven by environmental regulations, trade wars and vulnerable, global supply chains.
Many existing matchmaking platforms fail to offer a holistic solution to some of the most pressuring industry challenges as they do not check the quality of their members, do not offer real-time market prices and automated trade execution or are simply distributing their listed products or such of related companies through an online store.
At KEMIEX, the key value-adds for feed additive traders, buyers and sellers is an affordable, safe and neutral premium trading ecosystem that allows you to do more business with a global network of reliable counterparties. Additionally, companies can benefit from insights and insurance provided by Atradius credit insurance.
[Feed Additives] What’s been the hardest part of getting the Kemiex platform to market/ready for use?
[Pau Franquet] We are very satisfied how the marketing and client acquisition works in advance of our official trading launch in September. To win early adopters for a new trading venue that is beyond breadth of previous solutions you must be able to catch the right people with strategic foresight, operational experience and willingness to try new things and change existing procedures. Once we sit at the table with senior managers demonstrating the platform they typically ask immediately where to sign the contract.
Interacting with some of the most senior and experienced managers of the industry has also been very valuable for the project. One example is Tim Lemeer from Barentz Animal Nutrition who has been a great challenger and supporter.
Some market participants are fearing platforms as a risk to their traditional business model, but put correctly, it actually helps to enhance and develop their business.
Another challenge we mastered is more related to our other product categories as KEMIEX also complies with the higher regulatory requirements for APIs in the pharmaceuticals sector.
KEMIEX is a partner of Feed Additives 2018. For more information about their platform please visit www.kemiex.com