Business Models of the Segments
Markets and consumer behavior are moving faster than ever, presenting our customers from a variety of industries and regions with a wide range of challenges. These include managing limited natural resources amid rising demand and the trend toward sustainable products. Our segments’ business models help to solve these challenges and show how we implement our corporate strategy in practical terms.
Strategic alignment of the segments
The Chemicals segment is at the heart of the Verbund. It reliably supplies BASF’s other segments with chemicals to produce higher value-added products. It also markets high-quality basic chemicals and intermediates to customers in downstream industries. In this way, the Chemicals segment makes a significant contribution to BASF’s organic growth.
We create value through process and product innovation and invest in research and development to implement new, sustainable technologies and make our existing technologies even more efficient. Technological leadership, operational excellence and a clear focus on individual value chains are among our most important competitive advantages. We concentrate on the critical success factors of the traditional chemicals business: leveraging economies of scale and the advantages of our Verbund, high asset reliability, continuous optimization of access to raw materials, lean and energy efficient processes, and reliable, cost-effective logistics. We continuously improve our value chains and are expanding our market position – especially in Asia – with investments and collaborations in growth markets.
Furthermore, we are constantly improving our global production structures and aligning these with regional market requirements. For example, we closed a production plant for butanediol in Kuantan, Malaysia, in 2021. We also plan to expand our 2-ethylhexanoic acid plant there, which is scheduled for startup in 2024.
The Materials segment develops new plastics applications, high-performance materials, systems and digital solutions. Our product portfolio is unique in the industry. We aim to grow mainly organically by differentiating ourselves from our competitors with our systems-oriented application expertise and industry knowledge, and creating maximum value in our isocyanate and polyamide value chains. Our advanced material simulation capabilities are a unique selling proposition in the industry and enable us to operate close to our customers.
Additional differentiators are our products that contribute to the circular economy and our more sustainable production processes. BASF is active in substantial parts of plastic value chains, from monomers to polymers and their formulated specialties. Combined with our specific technology knowledge, this offers us the unique ability to shape and close cycles ourselves. One concrete example is our pilot projects for recycling used mattresses: Based on a wet chemical process developed by BASF, precursors recovered from old mattresses can be used to produce new mattress-sized blocks of flexible polyurethane foam. Other examples include our ChemCyclingTM project, biomass balanced products and certified compostable bioplastics. This also enables us to meet growing customer needs in all key markets.
Tailor-made service and product offerings enable us to continuously expand the range of applications in our portfolio. We operate close to our customers with our global production network.
The Industrial Solutions segment markets and develops ingredients and additives for industrial applications. These include fuel and lubricant solutions, ingredients for paints and coatings, electronic materials and plastic additives. We concentrate on research and development and invest in the creation of innovations with the aim of enabling more efficient resource use. This is why we develop more sustainable products and processes, for example, in polymer dispersions, resins and plastic additives, and enable our customers to contribute to sustainability through their applications and processes. Other focus areas are efficient production setups, backward integration in our Production Verbund’s value chains, capacity management, and technology and cost leadership.
Our global presence enables us to operate close to our customers and their industries. As a reliable partner, we offer high-quality products at good value. We work on new solutions together with our customers and strive for long-term partnerships that create profitable growth opportunities for both parties. To achieve this, we draw on our innovative strength and our many years of experience and in-depth industry expertise. Through our in-depth application knowledge and technological innovations, we strengthen customer relationships in key industries such as the automotive, plastics and electronics industries.
In the Surface Technologies segment, our focus is on the protection, modification and development of surfaces. We develop innovative products and technologies in close collaboration with our customers from the catalysts, coatings and battery materials sectors. We also offer precious and base metal as well as surface treatment services. Our aim is to drive growth by leveraging our portfolio of technologies to find the best solution for our customers in terms of functionality and cost. This in turn helps our customers to drive forward innovation in their industries and contribute to sustainable development.
Key growth drivers for us are the positive medium-term development of the automotive market, especially in Asia, the trend toward sustainable, low-emission mobility, and the associated rise in demand for battery materials for electromobility. Together with our customers, we are developing customized, more sustainable solutions in these growth areas for battery materials, emission control, recycling and functional coatings. Our specialties and system solutions in these areas enable customers to stand out from their competition.
The above trends mean that the automotive industry is currently undergoing a fundamental transformation. As one of the largest chemicals suppliers to this industry, we will, as announced in December 2021, further strengthen our focus on battery materials and recycling and pursue an ambitious growth plan. We will also establish a new entity (BASF Automotive Catalysts and Recycling) within the Catalysts division for mobile emissions catalysts, automotive catalysts recycling and associated precious metal services. The carve-out process started in January 2022. The new organizational structure will prepare the business for the upcoming changes in the internal combustion engine market and allow for future strategic options.
In the Nutrition & Care segment, we strive to expand our position as a leading provider of nutrition and care ingredients for consumer applications. We aim to enhance our capabilities in areas such as biotechnology and broaden our portfolio with bio-based and biodegradable products. In this connection, BASF has entered into partnerships to further strengthen its position in the bio-based surfactants and actives market. One example is the technology cooperation with Holiferm Ltd, Manchester, United Kingdom. The focus here is on the development of fermentatively accessible glycolipids for home and personal care and industrial formulator applications.
Our enzymes business enables us to pursue a targeted, accelerated marketing strategy and expand our portfolio for natural and biotechnological products. Furthermore, we are investing in natural and biological substances. BASF’s biopharma business supports the biopharmaceutical industry by supplying the raw materials used to produce biological drugs.
In addition, acquisitions complement our focus on emerging markets, new business models and sustainability trends in consumer markets. Future growth in our markets will be driven by trends like growing consumer awareness and the resulting demand for sustainable product solutions, natural and organic ingredients and their traceability. Moreover, the shift toward individualization and local production supports new players and business models. Digitalization, a focused technology and product portfolio, and close cooperation with our customers is crucial to meeting these dynamic market requirements both now and in the future.
Farming is fundamental given that by 2050, the world’s population is expected to increase by two billion people.1 In the Agricultural Solutions segment, we believe that the way forward for agriculture is to find the right balance and create value for the environment, society and business. While the demand for food, feed, fiber and energy is growing, natural resources are limited. Agriculture is a key enabler in providing enough healthy, affordable food and responding to changing consumer behavior while reducing the impact on the environment.
As one of the world’s leading agricultural solutions companies, we are committed to making a positive impact on sustainable agriculture and food systems. Our innovation-driven strategy for agriculture focuses on selected crops and their appropriate cultivation systems in specific regions. We integrate sustainability criteria into all business and portfolio decisions. In doing so, we help farmers achieve better yield – yield that is produced in ways that are recognized as valuable by society, are kind to the planet and enable farmers to produce economically.
We leverage our expertise in research and development and our deep understanding of the way individual growers manage their farms to provide offers across technologies. These include novel solutions for seeds, traits, crop protection and digital products, which we link intelligently. This enables us to offer farmers solutions tailored to their region and crop systems to safeguard yields, mitigate risks and fulfill societal requirements.
1 Source: U.N. World Population Prospects 2019