Competition Commission Anglo American/Lafarge Merger Inquiry · GfK Custom Research Anglo...

Competition Commission

Anglo American/Lafarge Merger Inquiry

Presented by: GfK NOP

Your contact person: Nicky Brockington

Phone: +44 (0)20 7890 9367

E-mail: [email protected]

GfK NOP

GfK. Growth from Knowledge

Anglo American/Lafarge Merger Inquiry December 2011 GfK Custom Research

Research Objectives and Approach

The main purpose of this research was to: Identify the key drivers of decision making about which construction products are produced and

which products are purchased amongst customers and competitors of Anglo American and Lafarge Identify the effect that the merger might have on customers and competitors.

Survey conducted amongst:

The person responsible for negotiating prices and making decisions about which products to

purchase or produce.

Customers of Anglo American or Lafarge who have purchased one of the following four products in the last 12 months: Aggregates/RMX/Asphalt/Cement.

Competitors who produce one of the following products:

Aggregates/RMX/Asphalt.

Customers with a spend level in the last 3 years of at least: Aggregates £10,000, RMX £75,000, Asphalt £10,000, Cement £10,000. All the ‘large 5 nationals’ and their subsidiaries were removed from the sample.

Interviews were carried out by telephone using a structure questionnaire. 6 in-depth telephone interviews were also carried out prior to the main study as a pilot to test the questionnaire.

Interviews conducted between 27th October and 21st November, 2011.

2


Sample taken from Anglo American and Lafarge customer lists and additionally a list of BDS Competitors

1,000 interviews completed as shown in the table below, representing a 19% response rate overall (excluding those ineligible to take part in the survey and incorrect sample details)

Due to the nature of respondent businesses, it was often difficult to secure an interview with the appropriate contact as many were working ‘off-site’.

Respondents answered about one product only in the survey even if they purchased or produced more than one to keep survey length to a minimum and avoid respondent fatigue.

Sample

3

Number of interviews

Aggregate Customers 292

Asphalt Customers 252

RMX Customers 270

Cement Customers 67

Aggregate Competitors 41

RMX Competitors 72

Asphalt Competitors 6

Due to the sample size of asphalt competitors – no separate analysis has been included in the report – only 30 contacts were provided for this category


Presentation Agenda

2

3

1 Company background

4

6

Switching behaviour/ability to switch

5

Suppliers

7

Summary

Appendix

Expected effect of merger

Purchasing


Company Background

1


Customers


Products produced and purchased

Base: All customers: Aggregates (292), Asphalt (252), RMX (270), Cement (67) Q.S2/3 Does your business purchase/produce .....?

7

Customers

Aggregate Customers

12% only purchase

aggregates

88%

25%

21% Lafarge 63% Tarmac 16% Both

Asphalt Customers

3% only purchase asphalt

97%

15%


RMX Customers

10% only purchase RMX

90%

13%


Cement Customers

1% only purchase cement

99%

30%


Only purchase ONE product

Purchase other construction products*

Produce other construction products*

*aggregates, asphalt, RMX, cement

Customer of Joint Venture parties


37%

27%

43%

34%

19%

31%

32%

30%

10%

12%

12%

11%

33%

30%

13%

25%

0% 20% 40% 60% 80% 100%

Cement Customers

RMX Customers

Asphalt Customers

Aggregate Customers

Local

Regional

Multi-regional

National

Base: All aggregates customers (292), asphalt customers (270), RMX customers (251) and cement customers (67) Q Do you consider your business to be local, regional, multi-regional or national?

Local, regional or national business 8

Customers


6%

33%

27%

39%

16%

2%

1%

5%

74%

26%

14%

0%

0%

45%

0%

5%

5%

14%

66%

Civil Engineering Company

Local authority

Concrete products producer

Distributor/builder merchant/DIY store

General construction/contractor

Aggregate customers

Asphalt customers

RMX customers

Cement customers

Type of business

Q. Which one of the following best describes your business for which .... are purchased?

9

Base: All customers: Aggregates (292), Asphalt (252), RMX (270), Cement (67) N.B. Responses of 5% or more for at least one product category shown

Customers


Purchasing for fixed site or projects 10

53%

5%

15%

43%

90%

76%

4%

5%

9%

0% 20% 40% 60% 80% 100%

Cement Customers

RMX Customers

Aggregate Customers

Mainly fixed

Mainly projects

Both equally

Q. Do you mainly purchase for fixed sites or mainly for specific projects whose location varies on a job-by-job basis? Base: All customers excluding asphalt: Aggregates (292), RMX (270), Cement (67)

Customers

N.B Question not asked of Asphalt customers


Competitors


Products produced and purchased

Base: All competitors Aggregates (41), RMX (72) Q.S2/3 Does your business purchase/produce .....?

12

Competitors

Aggregate Competitors

71% only produce primary

aggregates

29%

88%

7% Lafarge 30% Tarmac

4% Both 59% Neither

RMX Competitors

76% only produce RMX

24%

100%** - 28% also purchase RMX


54% Neither

Only produce ONE product

Produce other construction products*

Purchase other construction products*

*aggregates, asphalt, RMX, cement

Customer of Joint Venture parties

** aggregates and cement needed to make RMX


78%

76%

21%

20%

1%

2%

2%

0% 20% 40% 60% 80% 100%

RMX Competitors


Local Regional Multi-regional National

Base: All aggregate competitors (41) and RMX competitors (72) Q Do you consider your business to be local, regional, multi-regional or national?

Local, regional or national business 13

Competitors


Types and number of sites 14

Aggregates RMX

37%

51%

10% 2%

6+

4-5

2-3

1 60%

28%

5% 7%

Active sites Fixed plants

Types of sites/production Fixed sites 60% Volumetric trucks 38% Mobile plants 8%

Q. How many ...... which produce .... do you own or operate in the UK?

Average 2 Average 2

Base: All Aggregates competitors (41) and RMX competitors (43) who have fixed sites

The average number of volumetric trucks owned is three with a third only owning one truck

Competitors


Status of production operations

Q. In the last 12 months which one of the following statements best describes your business in terms of your ... production capacity?

15

Only 2% of RMX Competitors claimed to have been operating at full capacity in the last 12 months and nearly half had a lot of spare

capacity.

Base: All RMX competitors (72) and Aggregate Competitors (41)

Around a fifth of Aggregate competitors and three in ten RMX competitors expect to open a new site in the next 3 years

More likely to be those businesses with more than

one plant already

Competitors


Competitiveness of business compared with large national producers in area (Aggregate and RMX competitors)

16

Base: All aggregate competitors (41) and RMX competitors (72) Q Thinking about large national aggregate producers in your area, how competitive or uncompetitive do you think your business is compared with them on the following attributes

49%

59%

76%

93%

15%

5%

2%

2%

24%

24%

12%

12%

12%

10%

5%

Ability to increase outputs

Cost of production

Price charged to customers

Level of service

Competitive Neither Uncompetitive Don't know

RMX Competitors

Large national producers defined as any of Aggregate Industries, CEMEX, Hanson, Lafarge, Tarmac active in area


68%

49%

54%

92%

8%

10%

15%

22%

38%

26%

6%

Competitors


Purchasing 2


Aggregates


47%

89%

13%

14%

46%

79%

92%

49%

71%

46%

Primary special types

Primary crushed rock

Primary sand and gravel

Secondary

Recycled

All in one

Aggregates purchased (Aggregate customers and RMX competitors)

19

Base: All Aggregate customers (292) and RMX Competitors (72) Q Which of the following aggregates does your business purchase? Q Which of the following types of aggregates does your business purchase to produce RMX?

RMX Competitors for use in production of RMX

Aggregate Customers

Grades Coarse 77% Fine (natural) 74% Fine (from coarse) 39% Other 6%

Primary

Customers and Competitors


Proportion of Aggregates purchased (Aggregate customers and RMX competitors)

20

Base: All Aggregate customers (292) and RMX Competitors (72) Q And what proportion of this volume did each of the following types of aggregate represent in terms of total aggregate production/purchasing?


Aggregate Customers

Proportion purchasing ONE type of aggregate only: 10% Most likely product to purchase on it’s own: Sand and Gravel 7% Proportion purchasing MORE THAN ONE type of aggregate only: 90% Proportion purchasing primary only/primary and other aggregates Primary only 19% Primary and other aggregates 81%

Proportion purchasing ONE type of aggregate only: 54% Primary crushed rock 6% Primary sand and gravel 44% Secondary 1% Recycled 1% Proportion purchasing MORE THAN ONE type of aggregate only: 46% Proportion purchasing primary only/primary and other aggregates Primary only 81% Primary and other aggregates 19%



25%

26%

30%

22%

12%

14%

2%

2%

2%

9%

12%

8%

6%

4%

2%

35%

42%

43%

Primary/secondary or recycled (252)

Coarse or fine (252)

Sand and gravel or crushed rock (247)

Very important Fairly important Neither Not very important Not at all important Depends on project

Importance of types of aggregates when purchasing (Aggregate customers)

21

Base: All Aggregate customers excluding merchants who purchase each product Q When making decisions about which aggregates to purchase, how important or unimportant are the following elements?

Customers


22

Factors important in deciding on which aggregates to purchase (Aggregate customers and RMX competitors)

91%

44%

29%

18%

9%

18%

5%

7%

82%

82%

15%

22%

0%

6%

3%

1%

Price of product

Quality of product

Availability of product

Quality of service

Types of work/project

Delivery times

Customer request/demand

Environment/green concerns

Aggregate Customers

RMX Competitors

Most important Aggregate RMX Customers Competitors Quality of product 17% 47% Price of product 55% 38%

Base: All Aggregate customers excluding merchants (252) and RMX competitors (72) Q What is the most important factor to you when considering what aggregates to purchase? And what others are important?


N.B. Responses of 5% or more for at least one product category shown


Cement


78%

26%

6%

18%

11%

14%

CEM 1

CEM 2

CEM 3

GGBS

PFA

Other

Types of Grey Cement purchased (Cement customers and RMX competitors)

24

Base: All Cement Customers (67) and RMX competitors (71) Q Which types of bulk grey cement or other cement products does your business purchase?

Cement Customers RMX Competitors for use in production of RMX

Type of grey cement bought Bagged 53% Bulk 73%

61%

31%

1%

24%

CEM 1

CEM 2

CEM 3

Other



Proportion of Cement purchased (Cement customers and RMX competitors)

25

Base: All cement customers (67) and RMX Competitors (72) Q And what proportion of this volume did each of the following types of cement represent in terms of total cement purchasing?


Cement Customers

Proportion purchasing ONE type of cement only *: 67% CEM 1 39% CEM 2 14% CEM 3 0% Other cement products 14% Proportion purchasing MORE THAN ONE type of cement only: 33% CEM 1 and CEM 2/3 21%


Proportion purchasing ONE type of cement only: 58% CEM 1 37% CEM 2 7% CEM 3 0% GGBS 1% PFA 0% Other 13% Proportion purchasing MORE THAN ONE type of cement only: 42% CEM 1 and CEM 2/3 21%

* Excluding not stated


Factors important in deciding which cement to purchase (Cement customers and RMX competitors)

26

89%

60%

15%

20%

18%

3%

5%

5%

76%

75%

30%

13%

7%

3%

0%

0%

Price of product

Quality of product

Quality of service


Delivery times


Environment/green concerns

Building regulations

Cement Customers

RMX Competitors

Most important Cement RMX

Customers Competitors Price of product 54% 48% Quality of product 23% 38%

Base: All cement customers (67) and RMX competitors (72) Q What is the most important factor to you when considering what aggregates to purchase? And what others are important?




RMX and Asphalt


87%

14%

55%

From fixed RMX plants

From mobile plants

From volumetric/minimix trucks

Types of RMX purchasing in last 12 months (RMX customers)

28

Base: All RMX customers excluding merchants (238) Q In the past 12 months , from which of the following have you purchased RMX?

Main Reasons for using volumetric trucks rather

than RMX plants

Size of project 44% Prices of RMX 30% Availability of RMX 21% Other 45%

Customers

51% only use fixed RMX plants

9% only use volumetric

trucks

1% only use mobile plants

39% use more than one method of purchasing


Factors important in deciding which RMX to purchase (RMX customers)

29

Base: All RMX customers excluding merchants (238) Q What is the most important factor to you when considering where to purchase RMX? And what others are important?

94%

41%

41%

22%

19%

Price of product

Quality of product

Quality of service

Delivery times


Most important

Price of product 61% Quality of product 11%

Customers



Types of Asphalt purchasing in last 12 months (Asphalt customers)

30

Base: All Asphalt customers (270) Q Which of the following types of project was the asphalt you purchased in the last 12 months used for?

Essential to use 24/7 site 20% Preferred to use 24/7 site 13% No need to use 24/7 site 67%

Customers

Purchasing from sites with permission to operate 24/7

Proportion purchased from 24/7 sites

24/7 sites: Average proportion of purchasing: 26%

7%

4%

5%

14%

44%

11%

7%

5%

2%

27%

45%

None

1-20%

21-50%

51-80%

81-100%

Don't know

24/7

Non 24/7


Switching behaviour/ability to switch

3


Aggregates



Ability to switch purchasing between different types of aggregates (Aggregate customers and RMX competitors)

33

Base: All aggregate customers excluding merchants (252) and RMX competitors (72) Q Thinking about your purchases of aggregates in the last 12 months, could you have changed any of your purchases from … to …?

16%

13%

36%

76%

82%

59%

8%

6%

6%

From sand and gravel to crushed rock (230)

From crushed rock to sand and gravel (197)

From primary to secondary/recycled (251)

Yes No Don't know

Aggregate Customers

Approximately half of RMX competitors could switch : • From primary to secondary

or recycled • From crushed rock to sand

and gravel

Lower proportions of RMX competitors could switch between other types of aggregates: • From sand and gravel to

crushed rock (c. two-fifths) • From coarse to fine (c.3 in

10) • From fine to coarse (c. 2 in

10)



Proportion of aggregates which could be switched (Aggregate customers and RMX competitors)

34

Base: All aggregate customers and RMX competitors who could switch between different aggregates Q Approximately what proportion of your purchases in the last 12 months do you think you could have changed from …to…?

5%

8%

6%

24%

32%

29%

22%

24%

18%

41%

24%

39%

5%

8%

4%




All of it Three-quarters Half A quarter Less than a quarter Don't know


Aggregate Customers

Of those who could switch between products, moving from primary to secondary or recycled was the most difficult – only about one in ten could switch completely

83% could either not switch or only switch up

to a quarter of production from primary to

secondary or recycled

Overall 73% could either not switch or switch less than a quarter from primary to secondary or recycled


* N.B small base size

*

*


Reasons for not being able to switch at all/less than 25% between aggregates (Aggregate customers)

35

27%

20%

14%

14%

10%

8%




Quality of product

Buidling regulations

Price of product

Primary to Secondary/Recycled (51)

Base: All aggregate customers who could not switch or switch less than 25% Q Why would you not be able to change any/more of your purchasing from …to…?

Customers

From Crushed Rock to Sand and Gravel

Top reasons Customer request


From Sand and Gravel to Crushed Rock

Top reasons Customer request Quality of product



21%

12%

4%

21%

76%

88%

96%

79%

12%

7%

2%

49%

81%

87%

97%

46%



From secondary/recycled to primary (117)


Yes No

Switching aggregates in the last 3 years (Aggregate customers and RMX competitors)

36

Base: All aggregate customers and RMX competitors purchasing each product Q In the past 3 years have you switched any of your aggregates purchased from …to ….?

Aggregate Customers RMX Competitors for use in production of RMX

Customers

(72)

(57)

(64)

(34)


Reasons for switching between aggregates (Aggregate customers)

37

Base: All aggregates customers who have switched between aggregates Q What was the main reason for the switch from …to …?

41%

20%

20%

10%

9%

5%

Price of primary increased

Price of secondary/recycled decreased

Environmental/Green concerns

Lack of availability of primary

Customer Request

Quality of primary was not good enough

Primary to secondary/recycled (124)

Crushed Rock/Sand and Gravel

Customers

The price of crushed rock INCREASING was the main reason for switching from crushed rock to sand and gravel Main reason for switching from sand & gravel to crushed rock was an INCREASE in the price of sand & gravel



Cement


Ability to change from CEM 1 TO CEM 2/3 (Cement customers and RMX competitors)

39

Base: All cement customers, excluding merchants, (41) and RMX competitors (56) who buy CEM1 Q Thinking about your purchases in the last 12 months, could you have changed any of your purchases from CEM1 to CEM2 or CEM3?

Yes, 38%

No, 59%

Don't know, 4%

Whether possible? Proportion which could be switched

Around two-thirds could switch at least half of their purchases from CEM 1 to CEM 2 or CEM 3

Yes RMX Competitors for use in production

of RMX

Cement Customers

Yes, 15%

No, 76%

Don't know, 9% Of the 6 respondents who

could change half could change all of it

Yes


15% of cement customers have changed from CEM 1 to CEM 2 or 3 in the last 3 years


34%

18%

8%

8%

5%

Quality of product


Price of product


Building regulations

Reasons for not being able to switch at all/less than 25% from CEM 1 to CEM 2/3 (Cement customers and RMX competitors)

40

Base: All RMX competitors (38) and cement customers (31) who could not switch or could only switch less than a quarter Q Why would you not be able to change any/more of your purchasing from …to…?

41%

10%

10%

7%

Quality of product

Price of product

Types of projects involved



Cement Customers


N.B. Small base sizes N.B. Responses of 5% or more for at least one product category shown


RMX


Ability to switch RMX purchasing from fixed plants to volumetric trucks or mobile plants (RMX customers)

42

Base: All RMX customers who have fixed plants (191) Q Thinking about your purchases of RMX in the last 12 months, could you have change any of your purchases from ... to ...? Q Approximately what proportion of your purchases in the last 12 months, do you think you could have changed?

Yes, 25%

No, 69%

Don't know,

7%

Whether possible? Proportion which could be switched

Only around a third could switch more than a quarter of their purchases from fixed plants to volumetric trucks

Yes

From fixed plants to volumetric trucks

Yes, 15%

No, 81%

Don't know,

4% From fixed plants to mobile plants at sites

Only around a fifth could switch more than a quarter of their purchases from fixed plants to mobile plants

Yes

Customers


Reasons for not being able to switch at all/less than 25% to volumetric trucks or mobile sites (RMX customers)

43

Base: All RMX Customers who could not change any or less than 25% of their purchasing (n=193) Q Why would you not be able to change any of your purchasing from ... to ...?

22%

11%

16%

5%

7%

5%

5%

6%

15%

22%

0%

3%

0%

2%

1%

0%

Trucks/Mobile sites cannot cope with volumes


Price of trucks/mobiles


Quality of trucks/sites

Quality of service


Delivery times

From fixed sites to volumetric trucks

From fixed sites to mobile site

Customers



Suppliers 5


Aggregates


Ease of purchasing aggregates (Aggregate customers and RMX competitors)

46

Base: All aggregate customers (292) and RMX competitors (71) Q How easy of difficult is it to ……obtain quotes from different suppliers of …? …. compare prices between different suppliers of …?

13%

37%

40%

40%

10%

9%

15%

7%

21%

4%

RMX Competitors

Aggregate Customers

Very easy Fairly easy Neither/DK Fairly difficult Very difficult Don't know

Obtaining quotes from different suppliers Comparing prices from different suppliers

17%

51%

49%

38%

4%

3%

8% 18%

2%

3%

2%



Purchasing behaviour for aggregates in the last 3 years (Aggregate customers and RMX competitors)

47

Base: All aggregate customers (292) and RMX competitors (72) Q Which of the following best describes your purchasing behaviour in terms of aggregate suppliers in the last 3 years?

36%

51%

9%

3%

1%

10%

51%

32%

1%

6%

Bought regularly from a lot of different suppliers

Bought regularly from 2-3 suppliers

Bought regularly from one supplier

Not bought regularly, but use different suppliers

Not bought regularly, but use one supplier

Aggregate Customers

RMX Competitors



Base: All aggregate customers (292) and RMX competitors (72) Q Which suppliers have you purchased aggregates from in the last 12 months?

48

Suppliers purchased aggregates from in the last 12 months (Aggregate customers and RMX competitors)

3%

26%

37%

37%

43%

75%

72%

89%

13%

17%

25%

26%

24%

32%

67%

71%

Internal purchase

Aggregate Industries

Cemex

Hanson

Lafarge

Tarmac

Other

Any of large 5 suppliers

Aggregate Customers

RMX competitors

Main supplier ** Aggregate RMX Customers Competitors

* 4%

8% 10%

13% 14%

14% 11%

18% 11%

40% 18%

34% 51%

70% 54%


** allowed to mention more than one main supplier * =<0.5%


49

Independent suppliers for aggregates (Aggregate customers)

Yes, 67%

No, 29%

Don't know,

4%

Any independent suppliers in the area?

Yes

41%

33%

4% 7%

15% Not all likely

Not very likely Neither

Fairly likely

Very likely

Likelihood to use in the future?

Being too expensive was the key reason mentioned for not purchasing from independent suppliers

Q Are there any independent aggregate suppliers from which you can purchase aggregates from in your area? Q How likely or unlikely are you to consider purchasing aggregates from independent suppliers in your area in the future? Q Why do you not purchase from independent suppliers?

Base: All only buying from large national suppliers (N= 113)

Base: All only buying from large national suppliers who have independent suppliers in their area (N= 69)

Customers


Switched suppliers for aggregates in the last 3 years (Aggregate customers and RMX competitors)

50

Aggregate RMX Customers Competitors Completely switched 10% 15% Some of purchasing 44% 35% Not switched 43% 49%

Switched suppliers in the last 3 years?

Aggregate Customers (158) From one of the large nationals to another large national 46% From one of the large nationals to an independent 30% From an independent to a large national 5% From an independent to another independent 11%

SWITCHED

Base: All aggregate customers (292) and RMX competitors (72) Q Thinking of any suppliers you have used, which of the following, if any actions have you taken in relation to you suppliers? Q The last time you switched suppliers for aggregates, either partially or completely was it …?

Type of supplier switched to

The base size is small for RMX Competitors, but as for aggregate customers the highest response was switching from one of the

larger nationals to another large national



Reasons for switching suppliers for aggregates in the last 3 years (Aggregate customers)

51

70%

18%

14%

13%

6%

Price of product

Quality of service poor

Quality of product


Delivery times too long

Aggregate Customers

Base: All aggregate customers (158) Q What reasons made you switch suppliers?

The base size is small for RMX Competitors, but the reasons for switching mirrored that of

aggregate customers




Experienced any of the following in purchasing aggregates in the last 3 years (Aggregate customers and RMX competitors)

52

Base: All aggregate customers (292) and RMX competitors (72) Q In the last 3 years, have you experienced any of the following in purchasing aggregates from any suppliers?

44%

43%

23%

14%

66%

34%

56%

40%

15%

19%

64%

36%

Suppliers quoting 'very high' prices

Not having enough suppliers who will deliver

in area

Suppliers giving longer delivery times

Suppliers refusing to quote/supply

Experienced any of the above

None

Aggregate Customers

RMX competitors

Regions with too few suppliers


Aggregate Customers Those based in Wales were the most likely to have too few suppliers.

Around a third of customers in other areas experienced this issue

RMX Competitors Around a third of those based in the North/West

and South East claimed to have too few suppliers


48%

14%

47%


Other suppliers

Don't know/refused

53

Base: All aggregate customers (42) who have experienced suppliers refusing to quote or supply Q Which suppliers refused to quote or supply in your area?

Reasons for refusing to quote/supply?

Around four fifths of aggregate customers did know the reason suppliers refused to quote and most of these customers also had the reason explained to them by the supplier

“The job was too small”

“It was not commercially viable”

Suppliers refusing to quote/supply for aggregates (Aggregate customers)

N.B small base size

“Don’t have a quarry in the area”


Base for RMX too small to show


54 Any occasions when you

attempted to renegotiate?

Successful in renegotiating?

Suppliers giving longer delivery times for aggregates (Aggregate customers)

Yes 52% No 48%

Only about one in ten aggregate customers felt they were never successful in renegotiating

50%

17%

43%


Other suppliers

Don't know/refused

Base: All aggregate customers (66) who have experienced suppliers giving longer delivery times for aggregates Q Which suppliers gave longer delivery times?

Customers

Base for RMX too small to show


51%

21%

35%

68%

20%

18%


Other suppliers

Don't know/refused

Aggregate Customers

RMX Competitor

55

Aggregate RMX Customers Competitors Yes 53% 40% No 47% 60%

Successful in renegotiating? Aggregate Customers

Always 10% Sometimes 78% Never 10%

Suppliers quoting very high prices for aggregates (Aggregate customers and RMX competitors)

Any occasions when you attempted to renegotiate?


Base: All aggregate customers (129) and RMX competitors (40) who have experienced suppliers quoting very high prices for aggregates Q Which suppliers quoted very high prices?

N.B small base size for RMX competitors



Cement


Ease of purchasing cement (Cement customers and RMX competitors)

57

Base: All cement customers (67) and RMX competitors (72) Q How easy of difficult is it to ……obtain quotes from different suppliers of …? …. compare prices between different suppliers of …?

18%

18%

32%

39%

10%

6%

18%

12%

21%

12%

1%

13%

RMX Competitors

Cement Customers

Very easy Fairly easy Neither/DK Fairly difficult Very difficult Don't know


24%

27%

40%

43%

6%

1%

8%

9%

19%

15%

3%

4%



Purchasing behaviour for cement in the last 3 years 58

Base: All cement customers (67) and RMX competitors (72) Q Which of the following best describes your purchasing behaviour in terms of aggregate suppliers in the last 3 years?

4%

36%

52%

0%

7%

0%

46%

53%

0%

0%






Cement Customers

RMX Competitors




Base: All cement customers (67) and RMX competitors (72) Q Which suppliers have you purchased cement from in the last 12 months?

59

Suppliers purchased cement from in the last 12 months (Cement customers and RMX competitors)

0%

1%

13%

12%

43%

36%

16%

27%

75%

0%

0%

19%

24%

46%

10%

21%

26%

76%

Internal purchase


Cemex

Hanson

Lafarge

Tarmac

Other Importer

Other UK based


Cement Customers

RMX competitors

Main supplier ** Cement RMX Customers Competitors 0% 0% 0% 0% 9% 13% 3% 15% 33% 39% 24% 6% 10% 14% 21% 22% 66% 69%

** allowed to mention more than one main supplier

RMX Competitors tend to be using different suppliers for aggregates compared to cement


Base: All cement customers (60) and RMX competitors (72) who do not use any importers of cement Q Have you used any importers of grey cement in the last 5 years? Q Why did you not purchase grey cement from importers?

60

Importers of cement

Yes, 25%

No, 68%

Don't know,

6%

Used any importers?

Reasons for not purchasing from importers

Main reasons for not purchasing from importers Better quality in UK Better reliability of supply No importers available in area

RMX Competitors

Cement Customers

No

Yes, 18%

No, 78%

Don’t know,

3% No



Switched suppliers for cement in the last 3 years (Cement customers and RMX competitors)

61

Cement RMX Customers Competitors Completely switched 12% 24% Some of purchasing 30% 19% Not switched 57% 56%



Base: All cement customers (67) and RMX competitors (72) Q Thinking of any suppliers you have used, which of the following, if any actions have you taken in relation to you suppliers? Q The last time you switched suppliers for aggregates, either partially or completely was it …?

Price was the key reason for switching

Although the base size is small, the majority of RMX competitors switched from one large national to another large national

Similarly the base size for Cement customers is also small, but again the highest response was switching from one large national to another large national



Experienced any of the following in purchasing cement in the last 3 years (Cement customers and RMX competitors)

62

Base: All cement customers (71) and RMX competitors (71) Q In the last 3 years, have you experienced any of the following in purchasing cement from any suppliers?

46%

37%

16%

10%

52%

46%

33%

40%

19%

7%

60%

40%

Not having enough suppliers who will

deliver in area





None

Cement Customers

RMX competitors



Cement Customers Although the base is very

small, those based in Scotland experienced this

issue to the greatest extent

RMX Competitors Similarly, although a very small base, Scottish based

businesses claimed to experience this issue the

most


63

Of those who had experienced high prices, nine in ten RMX competitors said it was from one of the large nationals and two-fifths attempted to renegotiate prices

Suppliers quoting very high prices for cement (Cement customers and RMX competitors)

Around half of Cement customers claimed that they experienced very high prices

from one of the large nationals and most tried to renegotiate

N.B Small base sizes, therefore no actual percentages have been given



RMX and Asphalt


Ease of purchasing RMX and Asphalt (RMX and Asphalt customers)

65

Base: All RMX customers (251) and asphalt customers (270) Q How easy of difficult is it to ……obtain quotes from different suppliers of …? …. compare prices between different suppliers of …?

35%

34%

46%

46%

6%

8%

7%

5%

3%

4%

Asphalt Customers

RMX Customers

Very easy Fairly easy Neither/DK


52%

43%

35%

44%

6%

4% 4%

Customers


Purchasing behaviour for RMX and Asphalt in the last 3 years (RMX and Asphalt customers)

66

Base: All asphalt customers (270) and RMX customers (251) Q Which of the following best describes your purchasing behaviour in terms of aggregate suppliers in the last 3 years?

31%

50%

13%

3%

3%

14%

55%

22%

4%

5%






RMX Customers

Asphalt Customers

Customers


67

Suppliers purchased RMX and Asphalt from in the last 12 months (RMX and Asphalt customers)

1%

25%

69%

53%

57%

71%

61%

95%

1%

41%

36%

36%

32%

80%

47%

85%

Internal purchase


Cemex

Hanson

Lafarge

Tarmac

Other


RMX customers

Asphalt Customers

Main supplier ** RMX Asphalt Customers Customers 0% 0% 8% 16% 29% 13% 19% 12% 26% 16% 34% 51% 14% 21% 84% 69%

Base: All RMX Customers (251) and Asphalt Customers (270) Q Which suppliers have you purchased .... from in the last 12 months, including internal purchases if applicable?

Customers

** allowed to mention more than one main supplier


43%

13%

44%

40%

3%

47%

Likely

Neither/don't know

Not likely

RMX Customers

Asphalt Customers

68

Independent suppliers for RMX and Asphalt (RMX and Asphalt Customers)

Yes, 49%

No, 46%

Don't know, 5%

Any independent suppliers in the area?

Yes

Likelihood to use in the future?

Base: All RMX Customers (N= 93) and asphalt customers (n=136) only buying from large national suppliers Q Are there any independent .... suppliers from which you can purchase in your area?

RMX Customers

Yes, 27%

No, 67%

Don't know, 6%

Yes

Asphalt Customers

Base: All RMX Customers (N= 46) and asphalt customers (n=37) who do have independent suppliers in the area Q How likely or unlikely are you to consider purchasing .... from independent suppliers in your area in the future?

Being too expensive and not having enough suppliers in the area were the main reasons for not using mentioned by Asphalt Customers

Being too expensive was the key reason for not using independent suppliers amongst RMX Customers

Customers


Switched suppliers for RMX/Asphalt in the last 3 years (RMX and Asphalt Customers)

69

RMX Asphalt Customers Customers Completely switched 12% 8% Some of purchasing 36% 36% Not switched 49% 55%


RMX Asphalt Customers Customers (122) (118) From one of the large nationals to another large national 81% 78% From one of the large nationals to an independent 11% 14% From an independent to a large national 2% 0% From an independent to another independent 2% 5%

SWITCHED

Base: All RMX customers (251) and asphalt customers (270) Q Thinking of any suppliers you have used, which of the following, if any actions have you taken in relation to you suppliers? Q The last time you switched suppliers for RMX/asphalt, either partially or completely was it …?


Customers


Reasons for switching suppliers for RMX/Asphalt in the last 3 years (RMX and Asphalt customers)

70

65%

26%

15%

11%

7%

81%

14%

8%

6%

7%

Price of product

Quality of service poor


Delivery times too long

Quality of product

RMX Customers

Asphalt Customers

Base: All RMX customers (122) and asphalt customers (118) Q What reasons made you switch suppliers?

Customers



48%

47%

26%

18%

71%

28%

41%

41%

21%

13%

61%

38%

Not having enough suppliers who will deliver

in area





None

RMX Customers

Asphalt Customers

Experienced any of the following in purchasing RMX and Asphalt in the last 3 years (RMX and Asphalt customers)

71

Base: All RMX customers (252) and Asphalt customers (270) Q In the last 3 years, have you experienced any of the following in purchasing cement from any suppliers?

Customers


RMX Customers Although small bases, those

in Scotland and Wales claimed to experience this

issue the most

Asphalt Customers Those in the South East and Wales claimed to

experience this issue to a greater extent – Counties in

East Anglia had a particularly high number of

mentions


60%

11%

35%

75%

17%

20%


Other suppliers

Don't know/refused

RMX Customers

Asphalt customers

72

Base: All RMX customers (45) and Asphalt customers (36) who have experienced suppliers refusing to quote or supply Q Which suppliers refused to quote or supply in your area?

Reasons known for refusing to quote/supply?

RMX Asphalt Customers Customers Yes 89% 64% Varied by supplier 7% 6% No/don’t’ know 4% 31%

“there wasn’t a plant in the area “(RMX)

Reasons for refusing to quote/supply explained by

supplier?

“ Uncompetitive as too far” (RMX)

Suppliers refusing to quote/supply for RMX and Asphalt (RMX and Asphalt customers)

Where the reason was known, nine in ten respondents said it was explained to them by the supplier

Customers

“Price-fixing” (RMX)

“We were too far away” (asphalt)

“ too busy as they were committed to other work” (asphalt) N.B. Small base sizes


59%

15%

48%

55%

14%

36%


Other suppliers

Don't know/refused

RMX Customers

Asphalt customers

73 Any occasions when you

attempted to renegotiate?


Suppliers giving longer delivery times for RMX and Asphalt (RMX and Asphalt customers)

RMX Asphalt Customers Customers Always 17% 3% Sometimes 66% 77% Never 17% 20%

Base: All RMX customers (66) and Asphalt customers (56) who have experienced suppliers giving longer delivery times for aggregates Q Which suppliers gave longer delivery times?

RMX Asphalt Customers Customers Yes 36% 54% No/don’t’ know 64% 46%

Customers


66%

17%

28%

70%

17%

23%


Other suppliers

Don't know/refused

RMX Customers

Asphalt customers

74

Suppliers quoting very high prices for RMX and Asphalt (RMX and Asphalt customers)

Any occasions when you attempted to renegotiate?


Base: All RMX customers (119) and Asphalt Customers (110) who have experienced suppliers quoting very high prices for aggregates Q Which suppliers quoted very high prices?

RMX Asphalt Customers Customers Always 16% 10% Sometimes 68% 73% Never 16% 18%

RMX Asphalt Customers Customers Yes 47% 46% No/don’t’ know 53% 54%

Customers


Expected effect of merger

6


Base: All aggregate competitors (41) and RMX competitors (72) Q If the proposed joint venture takes place, what actions, if any would you take in relation to your … production?

76

Actions expected to take if Tarmac and Lafarge merge - Spontaneous (Aggregate and RMX competitors)

2%

2%

0%

2%

0%

2%

2%

83%

7%

10%

7%

7%

3%

7%

0%

3%

15%

64%

10%

26%

Increase price

Decrease price

Increase output

Decrease output

Open a new site

Close a site

Other

None - no action

Don't know

Any action

Aggregates Competitor RMX Competitor

Competitors


77

Actions expected to take if Tarmac and Lafarge merge - prompted (Aggregate and RMX competitors)

29%

2%

5%

59%

5%

37%

26%

7%

14%

43%

10%

47%

Increase price

Decrease price

Other

None - no action

Don't know

Any action

Aggregates Competitor RMX Competitor

17%

2%

0%

0%

2%

73%

5%

22%

36%

8%

14%

7%

4%

40%

11%

49%

Increase output

Decrease output

Open a new site

Close a site

Other

None - no action

Don't know

Any action

If the prices they charge for the same types of product you

produce increase

If the volumes of aggregates/RMX they produce

decreased

Base: All aggregate competitors (41) and RMX competitors (72) Q If the proposed joint venture takes place, what actions, if any would you take in relation to your … production?

Competitors


Summary 7


79

Summary Purchasing Aggregate Customers tend to be buying a whole range of aggregates whilst RMX

Competitors tend to use primary only – in particular sand and gravel.

CEM 1 is purchased to a greater extent than any other type of cement by both Cement Customers and RMX Competitors - around two fifths only buy CEM 1.

Price was generally the most important factor when deciding what product to purchase, with quality the second most important factor. For RMX Competitors quality was as important as price for both cement and aggregates.

Switching Aggregate purchasers claimed it was easier to switch between primary and

secondary/recycled aggregates than between crushed rock and sand and gravel, but still only a third of Aggregate Customers said they could switch. Availability and customer requirements were mentioned as the main reasons for

not being able to switch.

Two fifths of RMX Competitors could change from CEM 1 to CEM 2/3, but only 15% of Cement Customers could change.

Quality of product was the key reason for not being able to change.


80

Summary Suppliers Customers tended to find it easier to obtain quotes from suppliers than Competitors for both aggregates and cement.

BUT Cement Customers were less likely to say it was easy compared with Aggregate Customers (57% compared with 77%).

Just over a third of Aggregate Customers (36%) are buying regularly from a lot of suppliers, but the equivalent figure for Cement Customers is only 4% and 52% are relying on ONE supplier. Quoting very high prices and not having enough suppliers who will deliver in their area was experienced by approximately two fifths of purchasers across all products.

Potential Impact of Joint Venture The majority of Aggregate and RMX Competitors would take no action regarding their own production should the joint venture take place

However, around one quarter would increase prices if the joint venture increased equivalent prices and a third of RMX competitors would increase their volumes if the JV decreased their RMX production.


Appendix 8


15%

0%

7%

6%

34%

43%

12%

3%

3%

13%

32%

47%

National

Northern Ireland

Wales

Scotland

South East

North & West

Aggregates Customer

Asphalt Customer

Location of fixed sites/projects 82

Customers

Base: All aggregates customers (60), asphalt customers (270) and cement customers (28) Q in which county(ies) or regions is/are your fixed site(s) /projects located?

Bases too small to show for Cement Customers and RMX Customers as very few fixed sites


Expenditure with Anglo American/ Lafarge in last 3 years

Base: All customers: Aggregates (292), Asphalt (252), RMX (270), Cement (67) Information taken from sample not survey and based on the product that the respondent was asked about and may not represent total spend with AA/Lafarge

Business spend on products (from sample)

83

Aggregate Customers

Asphalt Customers

45%

23%

28%

4%

Low Up £49,999 Medium £50,000-£99,999 High £100,000 +

Customers

46%

14%

40%



Expenditure with Anglo American/ Lafarge in last 3 years

Base: All customers: Aggregates (292), Asphalt (252), RMX (270), Cement (67) Information taken from sample not survey and based on the product that the respondent was asked about and may not represent total spend with AA/Lafarge

Business spend on products (from sample)

84

RMX Customers

Cement Customers

34%

36%

30%


Customers

12%

10%

37%

41%

Low Up £24,999 Medium £25,000-£49,999 High £50,000 + Not available


12%

5%

37%

47%

5%

27%

29%

41%

Wales

Scotland

South East

North & West

Aggregates Competitor

RMX Competitor

Location of fixed plants 85

Base: All aggregate competitors (41) and RMX competitors (43) with fixed plants Q in which county(ies) or regions is/are your fixed plant(s) located?

Competitors


Number of fixed sites

Q. How many fixed sites do you own or operate in the UK?

86 Aggregate Customers

Base: All customers who have fixed sites: Aggregates ( 60)

N.B. Question not asked of Asphalt Customers, RMX Customer base too small to report on as only 5% (13) have fixed sites

48%

10% 5%

30%

7%

Not stated

6+

4-5

2-3

1

Average 7

Although the base size of cement customers is small, the majority

only have one fixed site (around two thirds)

Customers


Types of projects involved in 87

Base: Aggregate customers (212), Asphalt customers (270) and RMX customers (223) Q Which of the following types of project was the ... you purchased in the last 12 months used for?

71%

71%

63%

53%

43%

25%

51%

66%

41%

47%

51%

22%

80%

60%

60%

71%

34%

24%

Commerical projects

Local authority

Private projects

Industrial projects

Highways projects

Local roads

Other

Aggregate Customers

Asphalt Customers

RMX Customers

Cement Customers are buying cement for a whole range of

projects with the highest response being for industrial

projects

Customers


Base: All Aggregate Competitors (41)

Volume of aggregates produced in last 12 months (Aggregate competitors)

88

Q. What was the total volume of .... your business produced/purchased in the last 12 months

Values shown in tonnes

21%

21%

58% High (75,000 or more)

Medium (50,000-74,999)

Low (Up to 49,999)

Competitors



15%

15%

17%

5%

59%

59%

39%

59%

44%

Primary Rail Ballast

Primary High Purity Limestone

Primary PSV

Primary dolomite

Primary crushed rock

Primary sand and gravel

Secondary

Recycled

All in one

Aggregates produced (Aggregate competitors)

89

Base: All Aggregates competitors (41) Q Which of the following aggregates does your business produce? Q Which of the following grades of primary aggregates does your business produce?


Grades Coarse 85% Fine (natural) 71% Fine (from coarse) 73% Other 34%

Prim

ary 15% only produce one type of aggregate

• Sand and Gravel had the highest mentions

85% produce more than one type of aggregate 24% only produce primary aggregates

Competitors


Base: All Aggregate customers (272)

Volume of aggregates purchased in last 12 months (Aggregate customers)

90

Q. What was the total volume of .... your business purchased in the last 12 months

Aggregate Customers


33%

30%

37%

High (20,000 or more)

Medium (5,000-19,999)

Low (Up to 4,999)

Customers


Base: All cement customers (67)

Volume of cement purchased in last 12 Months (Cement customers)

91

Q. What was the total volume of .... your business purchased in the last 12 months

Cement Customers


28%

45%

27%


Medium (500-7,499)

Low (Up to 499)

Customers


Base: All RMX competitors excluding don’t knows (63)

Volume of RMX produced in last 12 months (RMX competitors)

33%

29%

38%


Medium (7,500-19,999)

Low (Up to 7,499)


Values shown in cubic metres

Competitors

RMX Competitors


35%

40%

26%


Medium (1,000-9,999)

Low (Up to 999)

35%

36%

29%

High (10,000 or more

Medium (1,500-9,999

Low (Up to 1,499)

Base: All RMX customers excluding DKs (198) and Asphalt customers excluding don’t knows (270)

Volume of RMX/Asphalt purchased in last 12 months (RMX and Asphalt customers)

93


Values shown in cubic metres

RMX Asphalt


Customers


66%

41%

51%

51%

47%

25%

Private projects

Industrial projects

Commercial projects

Local roads

Highways projects

Other

Types of Asphalt purchasing in last 12 months (Asphalt customers)

94

Base: All Asphalt customers (270) Q Which of the following types of project was the asphalt you ;purchased in the last 12 months used for?

Types of project being purchased for

Customers


Ability to produce fine aggregates from coarse (Aggregate competitors)

95

Base: All aggregate competitors (41) Q Thinking about your primary aggregate production, could your business manufacture fine aggregates by crushing coarse aggregates? Q Have you done this in the last 3 years? Q In the last 3 years, approximately what proportion of your coarse aggregate production did you manufacture into fine aggregates? Q Is the cost of producing fine aggregates from coarse aggregates higher or lower than producing fine aggregates from natural sources?

Whether possible? Done in

last 3 years

Cost of manufacturing fine compared with

natural sources

The cost is higher according to

most aggregate producers (c.two-

thirds)

Yes Around four fifths of aggregate producers

either currently produce or could produce fine

aggregates from coarse

The majority of aggregate

producers have done this in the last

3 years (c.70%)

Yes

Competitors


Ability to switch RMX production from fixed plants to volumetric trucks (RMX competitors)

96

Base: All RMX competitors (39) who do not have volumetric trucks Q Thinking about your RMX production, could you switch any of this production from fixed plants to volumetric trucks?

Whether possible? Reasons for not being able to switch RMX Production from fixed to volumetric trucks

The main reasons cited were • Too costly • Technical reasons due to process • Product not competitive

Approximately two thirds of RMX competitors

would NOT be able to switch production from

fixed plants to volumetric trucks

Competitors


47%

42%

44%

75%

17%

Spot market (one off purchase)

Long term contract

Following a tender

After receiving quotes

Rate cards

Base: All aggregate customers (292) Q What was the main way in which you purchased aggregates in the last 12 months?

97

Main ways of purchasing aggregates in the last 12 months (Aggregate customers)

Average number of suppliers

4

3

4

Customers


22%

52%

21%

48%

12%

Spot market

Long term contract

Following a tender


Rate cards

Base: All cement customers Q What was the main way in which you purchased cement in the last 12 months?

98

Main ways of purchasing cement in the last 12 months


3

4

3

Customers


44%

45%

51%

79%

15%

41%

40%

41%

71%

24%

Spot market

Long term contract

Following a tender


Rate cards

RMX Customers

Asphalt Customers

Base: All RMX Customers (251) and asphalt customers (270) Q What was the main way in which you purchased RMX/asphalt s in the last 12 months?

99

Main ways of purchasing RMX and Asphalt in the last 12 months


3

3

3

3

4

3

RMX Asphalt

Customers


Importance of vertical integration (supplier produces own products)

100

Base: All RMX Customers (46) and asphalt customers (37 not using independent suppliers Q How important or unimportant is it to you that your ….. supplier is vertically integrated, that is they produce their own aggregates?

16%

11%

24%

7%

14%

11%

14%

24%

27%

43%

5%

4%

Asphalt Customers

RMX Customers

Very important Fairly important Neither/DK

Customers

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