Celeste Mastin, President & CEO of H.B. Fuller, provides a look behind the curtain of H.B. Fuller’s innovative approach to digital, including how AI and other technologies drive efficiencies for the business now and in the future. In this wide-ranging interview, Celeste provides insights into how H.B. Fuller embraces digital transformation to build collaborative experiences with its customers, provide best-in-class experiences, accelerate strategic acquisitions and more.
Read the Transcript.
Ali Amin-Javaheri: Hello and welcome everyone. I’m your host, Ali, Co-Founder & CEO of Knowde. Our goal is to share perspectives on the changing digital landscape in our industry. Today’s conversation has been a long time in the making. I’ve been so excited to have Celeste on here since we started this podcast. She’s one of my favorites, so let’s jump right in.
Welcome Celeste Mastin, President & CEO of H.B. Fuller. Let me give a little bit of background on H.B. Fuller. They are a global leader in adhesives, sealants and other specialty chemicals. Although you may not realize it, H.B. Fuller plays a very critical role in almost every product used every single day. Their adhesives are used in every kind of finished good, from electronics to building materials to packaging and everything in between. A single fact that I’ve held onto since I’ve spent a little bit of time with their team is that each sheet of standard toilet paper contains five different H.B. Fuller products. They’re the enabler for everything, the brand behind the brands. It’s these sort of facts and stories I think the world just needs to know.
Celeste, thanks so much for making the time. Before we jump into the conversation, is there anything more you want to share about H.B. Fuller?
Celeste Mastin: Thank you Ali for having me and thank you very much for the Digital Innovation Award on behalf of H.B. Fuller. We’re really proud of that.
As you mentioned, we are the largest pure play adhesive company in the world. Adhesives represent about an $80 billion market and you said it well – we’re invisible, and a very small part of our customers’ product, but we are critical to enabling our customers, product attributes, and the manufacturability of those products. We are a 135 year old company trying to not act like we’re a 135 year old company. We’ve added a dozen new different technology platforms in the last decade. We’re very focused on lifting our portfolio up to participate in even greater ways in the most demanding applications that our customers have – the most demanding, challenging problems they need to solve. That’s where we belong. We aspire to a 20% EBITDA margin which will really enhance our shareholder returns.
Ali: At the end of the day, their products can’t exist without your products. The brand behind the brands. I know H.B. Fuller prides itself on being a trusted partner with their customers and I would imagine it’s even more so in the case of some of the applications you mentioned. This partnership takes the form of collaborative product development to meet their customer’s unique needs.
Have you thought about how digital can play a role in supporting these collaborative relationships with the customers?
Celeste: It’s a great point. We’re not a typical chemical company. If you look at our SKU base, over half of our SKUs are custom tailored: one SKU to one customer. We create a lot of bespoke solutions and we’re introducing 5,000 new SKUs per year, so we have to manage fragmentation profitably. One way to enable that is through AI and digital technology.
We’re looking for ways to build efficiencies in all aspects of our business. With AI we’re early in the journey as it relates to our customer. We have some concepts for transactional execution, improvement, and transparency that relate to this and also to focus our product development.
Ali: That makes sense. With 5,000 new products per year you’re doing a heck of a lot of product development with your customers. I would imagine you have a select portfolio that’s also readily available — standard SKUs that are the ones that you probably promote on your website.
Celeste: Those are the ones we promote on our website. A lot of times those are a starting point for a customer so they need to be available. They will come to us. They will start with basic product requirements and as we work closely with them and learn more about all the many variables — their specific product requirements, their manufacturing environment, their substrates that can influence the job that the adhesive has to do — we then begin down the custom tailoring path. But having that standard product line available to some customers that can use that with less demanding applications and having that available to customers where we’re going to build on it is a big part of this.
Ali: Makes perfect sense. I know you recently redesigned your website. Your catalog is now online. I would imagine the next step is, “Okay, customer, you’ve been browsing the site, you’re looking at the standard products, but let’s engage in a conversation now that you’re here.”
Celeste: Exactly. In the six months since we’ve streamlined and modernized our website, our total users have increased by 11%. Even more importantly, the amount of time that customers are spending on the site has increased by 22% — so we know we’re bringing customers into the right pages and they’re finding the information that they need there to meet their needs.
Ali: Amazing. So that’s from a website perspective. Are there other digital initiatives that you are working on right now?
Celeste: Yes. We have all the backend systems that you would expect a big company to have. We’re on a decade long labor of love rollout with our ERP system, we’ve got CRM systems. I recognized we need to go further. When I started as COO I created two new executive level positions in the company: one was the VP of Digital Transformation for our Customer Experience and the other was a VP of Digital Transformation for our Supply Chain Excellence program — not just as it relates to customers, but as it relates to operational efficiency. We’ve recognized that we need to improve and that AI and digital transformation is the way to get there.
Ali: Love it. Speaking of AI, it’s obviously top of mind for a lot of different executives. We’ve been hearing a number of different use cases for how it can be used. Let me throw one idea out at you that’s probably the most common use case:
A customer comes to your website and they’re browsing your standard products. They want to engage with somebody, but maybe they’re not ready to engage your TS&D person — they just want to be able to ask some technical questions without taking up somebody’s time. With AI, you’re able to organize all the knowledge across your organization and put a very smart chat bot on top of it to answer these customer questions. Is that a direction that you could see yourself going in?
Celeste: Absolutely. In fact, we are exploring that. It is challenging in our environment because we have 28,000 SKUs over 30,000 current customers and we’re constantly custom-tailoring this portfolio. It is important for us to be able to harness those questions and take a crack at them early because it pulls the customer into the recognition that we are here as a solution provider. If nothing else it can get the conversation started such that our team can then take over live and help the customer continue to build out a product that will meet their needs.
Ali: Makes perfect sense. Look, I’m no expert in adhesives. However, just looking at the market from afar, I know that there are a considerable number of suppliers and thus there have been some acquisitions over the past handful of years. Has H.B. Fuller been active in these acquisitions, and how do you think about bringing these organizations together, especially from a data and tech perspective?
Celeste: We’ve been very active. In the global adhesive market, there are three large players. We are one of them, and we’re the largest pure play. Then 75% of the market is composed of much smaller companies. That fragmentation has led to M&A activity.
As it relates to H.B. Fuller, we have what I would call a proactive and proprietary M&A strategy. Proprietary meaning we are typically pursuing acquisition targets that others are not — that have some special unique technology or market position which we can use to satisfy our stated top 20 growth opportunities. We’ve been successful in acquiring many of those companies. In fact, since I’ve been here, we’ve acquired 10 that I would characterize in that way. We’ve really built a rigorous integration capability, and within that integration capability, those people having quick access to an understanding of our broader technology is very helpful.
We have put in place digital asset management tools which have been very helpful for people within the companies we acquire to understand what technology they can access to satisfy the customers that came along with them. It also has been really helpful for our legacy employees, both our R&D technologists and our sales people to recognize that we have this very broad range of technology — everything that’s out there to solve a customer’s need.
Ali: 75% is a lot.
Celeste: It’ll keep us busy for a while.
Ali: I can’t even imagine all the different types of niche technologies that are in that 75% and having the ability to bring that all together and expose that capability to all your customers. In my mind, digital is the only way to do that.
Celeste: It really is. I have a couple of examples of our two most recent acquisitions. We identified in our top 20 growth opportunities that we wanted to pursue more structural adhesive business, so we bought ND Industries. They had a multitude of technologies, many similar to our own, but a little different. They also had a great anaerobic technology and application and coating expertise. So you’re right, figuring out how we take their product range — which almost overlapped ours but for the anaerobics — and then introducing our team to the anaerobic technology and seamlessly providing that throughout the organization has been enabled by this journey.
Ali: I’m used to hearing about massive fragmentation on the customer side. I think yours is way beyond the scope of most chemical companies just because, who doesn’t need adhesives? But this much fragmentation on the supply side as well is super unique, and that’s probably why there’s a lot of distribution in this market.
Let’s actually talk about distribution for a second. I know that you have pretty extensive experience on both the manufacturing and distribution sides of this industry. How have you seen the dynamic between the suppliers and distributors evolve over time?
Celeste: It’s always an interesting dynamic and companies approach it in different ways. At H.B. Fuller, we view our distributors as customers and we treat them that way. Of course, we expect them to help us build out our brand and to serve our joint customers well, and we know that they have needs of us. They want us to be transactionally easy to do business with. Through digital transformation and supply chain, we are utilizing those capabilities to make that happen. They also expect us to provide insight about our technology and its application. That’s something we do regularly and pretty proactively, but it is being transactionally easy to do business with that does matter to a distributor and where I see this initiative really helping those relationships.
Ali: Distributors are certainly your customers and probably more than that. Some of them are probably strategic partners. I think there is an untapped opportunity out there to bring producers and distributors a little bit closer together to meet customer challenges in new ways. I’m really curious to see how tech evolves that relationship over time.
Celeste: We’ve talked about customers and we’ve talked about distributors, but we can’t forget raw materials either.
Ali: Your suppliers?
Celeste: Yes, my suppliers. We’re working with a huge raw material supply base. There’s over 30,000 distinct raw materials that we’re buying and 87% of those are specialty chemicals — so these are materials that are not readily available. On average about 10 different raw materials go into one adhesive formulation, so there’s a lot of complexity on the formulating side and our supplier’s side as well that AI and digital transformation is going to play a role in helping us simplify.
We’re not really a chemical company. We’re much more of a formulator. We’re more of a coatings company, than a chemical company in the true sense of the word. As a consequence, our digital needs and our need for AI takes an even more pronounced role because what we have to do is manage fragmentation profitably and these tools should enable us to do that.
Ali: With a business that’s this complex with that many suppliers, that many raw materials, and that many customers — applause to your team. Now I better understand why you have a digital leader at the front of the house and one at the back of the house. That makes a lot of sense.
As we wrap up here, any words of encouragement you want to share with employees of H.B. Fuller, especially those that are working on some of your digital initiatives?
Celeste: So our employees know that in our industry, speed wins. It’s getting the customer a solution faster than anyone else that we really hang our hat on. Because speed is what wins, enhancing speed is critically important — digital technology and AI are our ways to enhance speed. So this work is incredibly important to H.B. Fuller and our customers. This work will make us even better, even more dynamic and an even more successful company in the decade and next 135 years to come.
Ali: I agree with you. Knowde spends a lot of time in lots of different markets with lots of different customers, but from our perspective, H.B. Fuller is leading the way in adhesives and in all things digital. I’m much more familiar with the front of the house than the back of the house – but you guys have raced out ahead, and I applaud you and your team for doing that. There’s no doubt that customers are gonna respond to this.
Celeste, thank you for your insights. Everyone loves listening to these informal conversations, especially from people like you that help shape our industry. Thank you for everything you do for the industry, and let’s just keep pushing it forward.
Celeste: Let’s push it forward. Thanks a lot, Ali.
Ali: Thank you, Celeste.
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