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Chemical companies must adapt their business models to the New Normal

September 27/2011

(ICIS) -- Chemical companies must adapt their business models to the reality of the New Normal of permanent lower growth and an increasingly volatile macroeconomic environment, a leading consultant said on Monday. A growing elderly population in mature economies has far-reaching consequences for the level and type of demand growth for chemicals, according to International eChem chairman Paul Hodges. Planning for the uncertainties of this new macroeconomic environment is vital, he believes.

He claims that by 2020 an unprecedented 33% of the developed worlds population will be over 55 years old. This is thanks to the ageing of the huge post-war Baby Boomer generation. Older people typically spend less and save more. Companies need to get to grips with trends such as the ageing population, greater food production and increased water quality and availability. The core market for companies operating in the west will not be the high end of people with lots of money to spend but those on pensions of USD 10,000-15,000 a year [EUR 7,400-11,100 a year].

He said companies which still operate on a model which assumes a high level of  spending are already losing pricing power and are issuing profit warnings. The financial crisis currently enveloping mature economies in Europe and the US is the result of policy-makers refusal to plan for the New Normal, said Hodges.

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