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Surfactant Update
Whether it’s acquisitions, new product introductions or new plant openings, suppliers are making a variety of moves to compete in this market which impacts the entire household and personal products industry.
Tom Branna
Editorial Director
With raw material prices soaring, the threat of regulations growing and consumer demands expanding, surfactant suppliers in the global household and personal products industry have a variety of strategies to compete in this increasingly complex market. With its $750 million acquisition of Uniqema, Croda may have made the boldest move during the past year, but other suppliers have aggressive growth plans of their own.
On the finished product side, several suppliers told Happi that the skin care market continues to record the strongest growth among major product categories as aging baby boomers seek novel solutions to combat wrinkles and age spots.
It all comes at a time when suppliers are getting squeezed by higher production costs, as a result of soaring energy prices and insurance costs. Janet Kosiek, marketing and sales manager, home care, Degussa Goldschmidt Chemical, pointed out that the expense of transporting ethylene oxide by rail has increased significantly because of insurance and regulatory concerns associated with the transport of this material.
“In most cases, these factors have more than compensated for any easing of cost increases in select raw materials used in the production of surfactants,” said Ms. Kosiek. “And if the hurricane season develops as predicted, we will see further cost development with these drivers.”
Finding Solutions
To counteract rising costs, the U.S. market is increasingly interested in economical solutions, such as the switch from low active to high active surfactants, which contributes with a significant cost reduction for transportation and storage at the customer side, according to Josef Koster, director of marketing, Care Chemicals North America, Cognis.
He also noted that significant cost savings can be achieved via a switch from hot to cold production processes. “Cognis offers comprehensive solutions for both options,” he added.
Art Pavlidis, Hamposyl marketing and sales manager at Chattem Chemicals, noted that virtually every company is being squeezed by the continuing rise in energy costs that are filtering through essentially every raw material. As a result, each player in the market tries to “circle the wagons” to protect his own particular margins.
“This is not, of course, a long-term solution because the entire industry is interdependent; we all have to make a little money to stay in business,” said Mr. Pavlidis. “Suppliers will have to do a better job of making the case to their customers that the pain must be shared, and this is something that we will do.”
David Del Guercio, director, business line textile care North America, Degussa Goldschmidt Chemical Corporation, noted that for more than a year, surfactant suppliers have not been able to absorb raw material, energy and transportation cost increases without increasing the cost of products to the market.
“There were no circumstances where we were willing to pay increased costs, and not try to recover them, unless there were contractual agreements in place with customers limiting price movements,” said Mr. Del Guercio. “At this point in 2006, surfactant suppliers are definitely not in a position to take on more cost increases and not pass these on to our customers.”
Glynn Goertzen, vice president, commercial, Pilot Chemical, told Happi that buyers believe that the cost cycle has swung back in their advantage as suppliers are hungry to recapture lost volumes.
“They are counting on the fact that some suppliers will be playing the market in hopes that feedstocks have peaked and will be falling as we head into 2007,” said Mr. Goertzen.
RITA Corp is conveying a value-add message to its specialty surfactant customers, according to Dan Beio, vice president, R&D. “They can see that they are getting more than just a surfactant for their investment,” he told Happi. “Our Eucarol series of alkyl polyglucosides from Lamberti SPA is one example.”
According to Mr. Beio, these materials are natural, extremely mild and excellent foamers. Eucarols can be added to traditional surfactant systems to enhance the foam quantity and quality, while providing skin care qualities to the cleanser.
“These epidermal lipid-friendly surfactants are not only mild on their own, but even when mixed with traditional sulfonated surfactants, they can significantly reduce irritation,” he insisted. “Our customers are looking for value-added technology, and we are always looking for ways to meet these needs.”
What’s Selling and Why
When it comes to growth markets, few categories can beat skin care. But Joe Pavlichko, vice president, R&D, at Croda, pointed out that some sub-categories, such as anti-aging and skin whitening, are growing even faster. Croda and its Sederma division supply betaines to the market, as well as skin lighteners (Luviskin), anti-aging polypeptides (Matrixyl 3000) and UV protectants (Optisol).
Regardless if the subject is skin care or even hard surface care, when it comes to trends, nothing tops wellness, according to Mr. Koster of Cognis.
“The global wellness trend—people’s increasing focus on their physical and mental well-being—remains the most important driver of the personal care and home care market,” he said. “Under this umbrella the trend towards ecologically friendly and green products continues.”
Most suppliers who spoke to Happi agreed that demand for environmentally-friendly surfactants will continue to grow. According to Mary Clarke, Uniqema’s director of sales development, Americas, a technology development program is now well underway at Uniqema to create commercially viable alternatives to alkylphenol ethoxylates (APEs). Initial success has been seen in Uniqema’s laboratory using a combination of new and established Synperonic surfactant technologies, she said.
“If recent commentary by the Environmental Protection Agency regarding ‘greener’ surfactants and the suitability of APEs in existing products is any indication of the future, it appears as though the marketplace will welcome new commercial alternatives,” said Ms. Clarke. “We offer a series of Synperonic products that can support cleaning product makers with EEC Directive 82/242.”
Uniqema, she said, is interested in offering high performing bio-renewable alternatives to APE ethoxylates on a global basis.
A Wider Range of Uses
More surfactants are crossing over into nontraditional applications, according to Ms. Kosiek. For example, cationics that had been used predominantly for hair conditioning are now fairly mainstream in skin care emulsions.
“We expect more of this as the benefits of nontraditional uses are identified,” she added. “Benefit- and innovation-driven segments within the various finished-product categories for home care and personal care are doing well when they target specific consumer needs.”
While acknowledging that anionic surfactants are the stars in the personal and household care industry, Mr. Beio said RITA customers show high interest in its Promois polypeptide surfactants based on silk, wool, soybean and milk proteins. They are excellent foamers, mild, substantive to skin, and can help create interesting ingredient stories for claims support.
Regarding finished products, the RITA executive acknowledged the skin care category as still being the most prolific and innovative. He pointed out that new and exciting products from DNA repair to effecting cellular energy, have reached the market and that new research funded by many finished product companies and suppliers is opening up new doors of opportunities.
“We have been paying particular attention to ingredients activity and delivery,” he added. “This combination must be optimized, or the results will not be there. Our Rovi actives meet many of the new technology needs, while presenting the active in a liposome that is only 150nm.”
To preserve the integrity of the liposome, RITA recommends its Viscolam AT 100P thickener/emulsifier. When added to the water phase, this water-in-oil dispersion of the sodium polyacryloyldimethly taurate thickener inverts to an oil-in-water stable emulsion, without the use of traditional emulsifiers.
“It can handle high levels of oils and a wide variety of oils—it’s truly a unique ingredient,” said Mr. Beio. “This combination of active/liposome in the Viscolam delivery system sets us apart from our competition.”
Within the textile care segment, Mr. Del Guercio of Degussa Goldschmidt, said three areas offer the most growth potential for his company: vegetable-based products for fabric care, patented active ingredients for softergents and patented odor-absorbing technology for laundry detergents and fabric softeners.
Croda Expands Its Portfolio
At presstime, the Uniqema acquisition was still awaiting Croda International Plc shareholder approval. But once it goes through, the $750 million acquisition will provide a variety of opportunities for Croda, according to Kevin Gallagher, president of Croda Inc, Edison, NJ.
“The acquisition fulfills a long-term strategic goal for Croda by providing an enhanced global platform for future growth. It offers a great opportunity to create shareholder value,” he told Happi. “There are a number of ways that this acquisition will help strengthen Croda. It strengthens both our position as a leading global oleochemicals manufacturer as well as our position in supplying ingredients and technology to consumer care manufacturers. It also brings complementary products and technologies including alkoxylates, sunscreens and crop care.”
According to Mr. Gallagher, there are a number of synergies including new technologies with market focus, opportunities for savings in the supply chain, better use of existing facilities and a powerful global sales operation.
“Uniqema has some absolutely terrific technologies and Croda is extremely market focused, which makes for a good fit,” said Mr. Gallagher. “Uniqema’s nonionic technology is tremendous—the best in the world. After all, Uniqema invented the HLB system.”
Within the personal care category, there is opportunity to take advantage of Croda’s active technology with Uniqema’s delivery technology, said Mr. Gallagher.
“Croda and Uniqema are both companies with a great deal of strengths and resources to offer our household and personal care customers. The new company will become a significantly more powerful ‘innovation tool’ that can be used by our customers to achieve great success.”
At the same time, the union should yield a range of savings. Mr. Gallagher pointed out that the two companies use many of the naturally-occurring oils and fat-derived raw materials, “but we suspect that we’re not paying the same prices, so wherever there is a discrepancy, we should benefit. We also expect to see a savings in logistics, but we haven’t wrapped our minds around that yet.”
In fact, it’s too early in the acquisition process to discuss issues such as production redundancies and related issues, but Mr. Gallagher pointed out that several sites are expected to be instrumental to the company.
“The Uniqema facility in Atlas, DE is very important to Croda going forward, as is the current Croda manufacturing facility in Mill Hall, PA,” said Mr. Gallagher. “We also consider the Uniqema Chicago fatty acid plant to be an efficient state-of-the-art facility that is a valuable asset to the group.”
Mr. Pavlichko insisted that Croda’s broad portfolio of products, including sarcosinates (see p. 72 in this issue), thickeners and emollients, give formulators a variety of options that they can’t get from a single supplier. He noted that Croda is active in many personal care and home care segments, pointing out that Crothix is a good thickener and can reduce irritation levels of other surfactants, while Cromollient SCE works well in baby shampoos to make them more mild.
“We offer a whole range of products that optimize the system. That’s what separates us from our competitors,” said Mr. Pavlichko. “At the same time, claim substantiation is more important than ever. Anybody who knows Croda knows we have the resources to back up our claims.”
REACH is Within Sight
For years, trade associations have been warning its members that the European Commission’s Registration, Evaluation and Authorization of Chemicals (REACH) will have a major impact on the chemical industry. The initiative aims to improve the protection of human health and the environment through the better and earlier identification of the properties of chemical substances. Implementation is expected to begin in April. Yet, for all the warnings surrounding REACH, most suppliers say they have the issue well under control.
Mr. Koster told Happi that Cognis is in a favorable position concerning both the purchase of raw materials and the production process and will consistently continue the strategy of sustainable operations, supported extensively by the use of renewable resources based on natural oils and fats.
“We have worked continuously to safeguard the quality and safety of our raw materials and products,” he added. “Naturally, we will continue to do so in the future.”
Like many other surfactant suppliers, Cognis is working with relevant national and European Chemical associations in order to influence as far as possible the introduction of sensible and workable future developments. At the same time, the company is working with government authorities and scientific institutes to develop practical guidelines for implementation.
Mr. Pavlidis insisted that the impact will not be as significant on surfactant suppliers who are on top of their game in the global sense, who have set about developing surfactants that will satisfy the increasingly stringent environmental requirements of the EU, especially rapid biodegradability.
As they await REACH, several suppliers have been making strategic moves. Prior to its acquisition by Croda, Uniqema added significant new capabilities at the Atlas Point facility capacity to accommodate the production of the Mona line of specialty surfactant offerings at one central location in North America, according to Ms. Clarke. The installation of several reaction vessels served as key components of the Atlas Point Modernization program. A supply chain program engineered for just-in-time manufacturing has also been enacted.
“One very important reason why we have undertaken a major facility upgrade and redesign program in Delaware is to be able to properly manage the continuing shift in demand for higher performing surfactants and other specialties in market segments,” said Ms. Clarke.
According to Mr. Pavlidis, during the past year Chattem Chemicals has become the only producer of sarcosinate surfactants in the U.S.
“We now manufacture the entire Hamposyl line of specialty anionic surfactants—the N-acyl sarcosines and their salts, the sarcosinates—using the still-unique Schotten-Baumann technology to react the amino acid sarcosine with a fatty acid chloride,” he said.
But next year, Chattem will expand its specialty surfactant line with a variation of this technology.
“The time has come, in the personal care market, for mild surfactants that can be formulated into sulfate-free formulations,” said Mr. Pavlidis.
Other Moves by Industry Suppliers
Degussa Goldschmidt Chemical Corporation’s manufacturing group continues to work on production process improvements and optimization, according to Mr. Del Guercio. “We feel we can gain additional capacity as a result of the program at each of our production locations. At the same time, we have increased our R&D capabilities and our efforts to bring more innovations to our market.”
The company has also established a Conditioning Competence Center in Hopewell, VA to lead efforts in the hair conditioning segment, which encompasses both organic and specialty silicone chemistries.
“This center will focus on the technologies, products and evaluation capabilities needed to support our emphasis on these materials,” explained Ms. Kosiek.
Toward the end of 2005, Cognis launched a comprehensive program in the U.S. aimed at increasing efficiency and realizing growth potential in this important market. This initiative includes a thorough modernization of its U.S. production facilities, and ongoing improvements to its marketing, sales and distribution structures. Cognis is strengthening its position in the U.S. by investing in new production capacity at its Mauldin, SC and Kankakee, IL sites.
Whether it’s new plants, new products or new alliances, surfactant suppliers must keep moving forward to compete in this increasingly complex market.
