Slow Growth for Chemical Specialties

November 9, 2005

Major categories may be slumping, but household cleaning cloths have posted solid gains.

In the chemical specialties market, it’s not the formula in the bottle that’s making news these days. Rather, it’s the whirlwind of activity swirling around the companies that market these disinfectants, cleaners and related consumer products.

For example, Procter & Gamble is cutting 9% of its workforce in an effort to slash costs. Church & Dwight and USA Detergents, both suffering from a lack of critical mass in the highly competitive household product category, are considering a merger. Alticor (the parent company of Amway and Quixtar) underwent a major restructuring last year after several less-than-stellar quarters. Clorox¹s bottom line is still hurting after a string of acquisitions and Dial executives have said they will make a decision on the company¹s future by August.

According to some analysts, excessive price increases and overspending on product flops combined with rising raw materials costs and economic problems in some markets have teamed up to hurt Procter & Gamble’s operating earnings for the past four quarters. A.G. Lafley, P&G’s chief executive officer, recently told financial analysts, “The bottom line is we’re not winning consistently with consumers. They’re often voting for competitors’ brands, not P&G brands.”

Mr. Lafley noted that sales growth at P&G has been flat and operating profit has declined for four quarters. At the same time, investments in new products and new markets have not generated the returns the company hoped for, but marketing expenses have grown to support those initiatives. Although cuts will be across the board, they will touch most lightly on the company’s best-performing division, its fabric and home care brands, and fall most heavily on the lagging food and beverage division.

As the chart on p. 53 demonstrates, most established sectors in the household cleaning products category recorded little or no growth during the past year, according to Information Resources, Inc., (IRI) Chicago. In fact, for chemical specialties manufacturers, the biggest opportunities for sales gains appear to be in non-traditional segments such as household cleaning cloths and air freshener segments (see chart below).

Fast and Thorough
When consumers finally do get around to making a purchasing decision on household cleaning products, they’re often opting for products that do the job quickly and easily, according to industry experts.

“We continue to see consumers leading fast-paced lifestyles, yet they are not willing to sacrifice a clean home. They demand efficient cleaning in a quick, convenient method,” noted Lisa Zigmont, home care marketer, Quixtar Products, Ada, MI. “With that said, products that offer optimal cleaning performance with a ‘spray-and-go’ or ‘wipe-and-go’ method will continue to be high on the list, as well as portable, quick cleaning products that can be stashed in the mini-van or backpack.”

Kristen Nostrand, P&G marketing director, concurred. “Overall cleaning performance and convenience are primary drivers in the household cleaners market,” she said.

One of the latest easy-to-use products from P&G is Downy Wrinkle Releaser, a spray that enables consumers to easily remove wrinkles anytime, anywhere without ironing.

While most brands continue to flounder in the household cleaning category, there have been some successes, albeit on a smaller scale. Huntington Harbour, CA-based Sunshine Makers, manufacturer of Simple Green household cleaners, has enjoyed good sales growth during the past year. According to IRI, sales of Simple Green rose more than 7% for the year ended Jan. 28. At the same time, sales of all-purpose cleaners and disinfectants increased less than 1%.

“We promote it as an all-purpose cleaner, but because the consumer dilutes it, it has a wide variety of applications,” explained Jessica Carter, marketing director, Simple Green. In fact, Simple Green works as an automotive degreaser, carpet cleaner and hard surface cleaner.

The company also markets a marine product, a bicycle product that comes in a shaving cream format to cling to bike chains and a scrubbing pad that contains enough Simple Green for 1,000 squeezes, making it ideal for camping.

To help promote the Pro-Series Simple Green line up of car care products, the company has been very active on auto racing circuits such as CART and the Trans Am series. “Auto enthusiasts love Simple Green because it does such a great job on whitewalls and other car cleaning jobs,” explained Ms. Carter.

The lure of creating natural ingredients-based household cleaning products has even sparked the fancy of a personal care product manufacturer. The Thymes, a Minneapolis marketer of bath, body and home fragrance products, has entered the home cleaning category with the introduction of Mandarin Coriander all-purpose cleaner and diswashing liquid. The company maintains that the products are made from biodegradable, nutrient-rich ingredients that are gentle on skin, yet tough on dirt. The Thymes products are sold in more than 4000 specialty retailers in the U.S. and around the world. The company, which was founded in 1982, has grown 25% a year for the past 10 years. Retail sales reached $35 million last year.

Room for Innovation
But smaller companies aren’t the only ones introducing novel products. For example, Marvin Matises of the Galileo Idea Group, Naperville, IL, noted that P&G’s new Swiffer WetJet may take the household cleaning industry in a new direction. The cordless, battery-operated sweeper includes 30 cleaning pads and one cleaning solution cartridge. Three different cleaning solutions are available: an advanced cleaner, a wood cleaner and an antibacterial cleaner. It was introduced originally in Canada with a U.S. introduction expected in the near future. In addition, P&G plans to sell the cleaning device on QVC.

“Swiffer WetJet represents a truly innovative new product for hard floor cleaning,” noted Mr. Matises. “It makes the wet mop and heavy bucket obsolete, because the cleaning solution is in the sweeper.”

According to P&G, the user just pushes a button while the cleaning solution is sprayed out and the cleaning pads pick up the dirt, so it eliminates the need to dip a mop head into solution, rinse and squeeze. Each cleaning pad cleans approximately two large rooms and is then tossed out. Each cleaning solution cartridge cleans approximately six or seven large rooms.

“This represents a truly convenient solution to a messy and undesirable task,” noted Mr. Matises.

According to Mr. Matises, the original Swiffer, with first year sales approaching $200 million, was a successful “new to the category” introduction. Moreover, its retail prices of $15 for the kit and $4 for refill dusting cloths are higher than traditional price points and demonstrate that consumers are willing to pay the price for an innovative new product that solves a real problem.

However, with a retail price of about $45 ($70 Canadian), Swifter WetJet will surely test how the consumer perceives the value or price/benefit relationship of this new product, observed Mr. Matises. “It will be closely watched by all manufacturers in the category.”

But not all easy-to-use innovations involve batteries and come with high price points. Mr. Matises noted that new Pine-Sol Spray & Mop Floor Cleaner is positioned as the bucket-free way to clean floors.

“This really represents a reaction to the bucket-free convenience targeted by the Swiffer line, but at a much lower price ($2.59 a bottle),” said Mr. Matises. “While Pine-Sol Spray & Mop Floor Cleaner requires more effort than Swiffer WetJet, it still eliminates the need for a bucket and a messy mop.”

He noted that Pine-Sol Spray & Mop Floor Cleaner leverages the trend for more convenient cleaning and its lower retail could make it very desirable. “Pine-Sol is a leader in floor care, so that should give the line extension a degree of cleaning credibility,” observed Mr. Matises. “After that, it is up to the product to perform, so that consumers can make a real judgment of value.”

Larger companies such as Clorox and Procter & Gamble continue to scramble in the household cleaning products segment as they search for the right mix of chemistry and convenience. But it still remains to be seen if even the most innovative product can overcome consumer aversion to household cleaning chores.