II Rebounds

November 22, 2005

Driven by demand in the food service and lodging segments, the industrial and institutional cleaning industry is growing again.

Admit it, with more deadlines than ever, margins getting squeezed and a seemingly endless array of new regulations, you really need a vacation. And if you’re like most Americans, you’ve already taken one and are ready for another! According to the Travel Industry Association of America (TIA), U.S. domestic air travel increased 6.3% for the year ended Aug. 31, 2004 and international air travel soared 10.5% in that time. More good news is that eating and drinking receipts rose 6.6%.

This mostly-good news has provided a boost to the industrial and institutional cleaning segment. Eric Aubay, business development manager, Rhodia Home Care, noted as the economy rebounds, there are more rooms, sheets and trucks to clean. Still, pressure on cleaning costs is still very high and demand for fast solutions remains great.

“A trend that has been seen recently in this market is that by using new cleaning ingredients, the cleaning job can be done easier and faster; and consequently savings can be achieved on labor costs,” said Mr. Aubay.

Buoyed by a bounce in air travel and hotel occupancy rates as well as consumers’ insatiable appetite for eating out, the industrial and institutional cleaning market posted a 3% gain in sales last year, according to industry experts.

Of course, not all segments in the diverse I&I category were as buoyant as others. Floor care, for instance, has been depressed by building service contractors who, in an effort to cut costs, have reduced the number of strips and topcoat applications they perform during the year, in favor of more cleaning and general maintenance.

A hearty appetite in food service: More people are eating out than ever before, driving demand for I&I cleaning products.
By segment, Kline, a Fairfield, NJ-based research group, breaks the market out this way:
• Jan/san, $3 billion.
• Food service, $1.7 billion.
• Industrial, $2.5 billion.
• Food processing, $950 million.
• Laundry, $650 million.

“The kitchen chemical business has staged a nice rebound from 9/11,” observed Bruce Boynick, a senior associate with Kline. “Restaurants have carried the overall market, but the lodging business has come back significantly after suffering a heavy blow from the terrorist attacks.”

Some subsegments within kitchen chemicals have fared better than others. While office cafeteria sales have slipped, demand in restaurants and emerging segments such as assisted living and retirement centers has provided a boost.

Kline recently published Food Service Cleaning Products USA 2004, the fifth edition of Kline’s comprehensive market research study for this market. It explores the sale and distribution of 17 different product categories through 12 end-use segments, including the new addition of assisted-living centers.

Several suppliers contacted by Happi agreed that sales to the food service channel are improving.

“We have experienced a strong rebound in sales of products associated with the I&I end use segment, which generally translates into an improving economic environment,” said Richard Wylot, business manager, Solvay Chemical North America. “This is particularly true for the various grades of hydrogen peroxide and peracetic acid products used in the food and beverage industry.”

What products are proving to be popular with endusers? I&I suppliers agreed that products that reduce labor costs and have a favorable environmental profile are gaining market share.

“Today, you have to provide a product that allows the end-use customer to get a real cost savings and provides a better looking floor, too,” noted Mike Locco, market manager, Rohm and Haas Floor Care. “Our Duraplus product line is our fastest growing product line globally because it was specifically designed to meet the growing need for low maintenance, easy-to-use products that improve the appearance of the floor.”

In addition, he noted that large supermarkets and non-food retail outlets are moving away from high maintenance floor finish products and predicted that there will continue to be a product shift away from polishes requiring high/daily burnish maintenance.

“You’ll see far more products that require weekly, monthly or no burnishing at all,” predicted Mr. Locco. “In addition, demand will increase for new floor cleaners and polish removers that are more environmentally-friendly and offer improved cleaning and stripping efficiency.”

Keep It Green
Interest in environmentally-preferred products has grown significantly in the past few years driven by many of the same general environmental concerns most industries face, including low VOC, metal-free, phthalate-free and APE-free issues. Successful products will be those that meet or exceed current product performance while satisfying new environmental standards.

“Rather than seeing dramatic growth, we expect to see a shift in the U.S. market to safer cleaners that are derived from renewable resources,” said Robert B. McKay, senior vice president, Seppic. “Thus, we see a bright future for APGs and other green-based surfactants. This is being driven by the EPA and federal government today, and will quickly catch on and resonate throughout the jan-san industry.”

Air quality too, is playing a more important role in the formulation of I&I cleaners, noted Virginia Lazarowitz, market manager HCI North America, Cognis. This trend is impact both fragrance and solvent loads in finished product formulations.

“People are more aware of indoor air quality. They do not want their work spaces to smell like chemicals,” said Ms. Lazarowitz. “At one time high fragrance loads were used to mask the chemical odors. Today, this practice is declining as many people find this objectionable. Cleaning with low odor solvents or without solvents and their accompanying odors is desirable. This crosses all types of products.”

Ms. Lazarowitz said one of the new challenges for the industry is the Rural Farm Investment Act of 2002. Section 9002 requires the U.S. government to purchase products that are composed, in whole or in significant part, of biological products or renewable domestic agricultural materials (including plant, animal, and marine materials) or forestry materials.

“The alkyl glucosides, sold by Cognis as Glucopons, meet this Federal Government requirement as about 51%-63% of the molecule is derived from corn grown in the U.S.,” said Ms. Lazarowitz.

In addition, the California Air Resources board has decreased the VOC levels for many products. This too can be a challenge for the formulator.

Schools may no longer be a big growth segment for I&I markets, due to a slowing birth rate in the U.S.
“Cognis has developed technology that allows cleaning without the use of solvents. This product should help the I&I formulator to meet this challenge.”

“The new VOC regulations definitely have people’s attention, especially in the Northeast and Mid-Atlantic states which face new regulations,” agreed Melinda Burns, marketing manager, InVista.

To help formulators survive and thrive in these regulations, InVista has introduced DBE LVP to the I&I market. These low-vapor pressure dibasic esters meet the standard of being an LVP for institutional products.

“There’s growth for green cleaning alternatives across all product categories in the I&I market,” insisted Ms. Burns. “People are looking for innovative ways to get the efficacy they need, as well as something safe.”

For companies developing more environmentally-friendly laundry detergents, Ciba offers Tinopal CBS-X, a degradable fluorescent whitening agent.

According to Ciba, bleaching additives and stain removers represent the most dynamic part of the laundry market. The company’s new oxidation catalyst, Ciba Tinocat TRS KB1, is said to be a highly effective oxidation catalyst for use in powder laundry bleach products for effective stain removal. It is a granulated metal catalyst that activates formulations containing peroxygen compounds to deliver active oxygen even at lower temperatures, resulting in better stain bleaching results compared with not-activated peroxygen.

Boosting the efficiency of detergent enables the user to clean at lower temperatures and use less detergent, resulting in energy savings, which also benefit the environment. The company is working worldwide with a number of partners in the laundry detergents industry to bring new laundry products containing this technology to the market.


At What Cost?
At the same time, cost and convenience remains important. Mr. Aubay of Rhodia noted that the most promising sectors are the ones where labor is still a large part of the cost and new ingredients that make the maintenance job easier and faster have a promising future.

Other suppliers say delivery systems could provide the answer to the dilemma of rising labor costs. Steve Carbone of Ciba noted that people are constantly looking for ways to clean more efficiently and spend less time cleaning.

“The industry is seeing more products being sent to market that are for sanitizers and hard surface care, floors, countertops, glass and new delivery systems, for example new disposable toilet cleaners devices, no bucket washing and wipes.”

What Lies Ahead?
While marketers roll out an array of new cleaning chemicals and equipment to entice BSCs, they can’t expect these new launches to drive the market much faster. In fact, Kline estimates the U.S. I&I market will post 3% growth year on year, for the next five years.

What trends are impacting the industry? Mr. Boynick said consolidation will continue to impact each point in the I&I channel. Marketers are gobbling up smaller players and distributors such as Sysco and UFSS continue to gain share. Among I&I manufacturers, Ecolab and JohnsonDiversey dominate.

According to Mr. Boynick, Ecolab is the I&I leader and holds No. 1 positions in kitchen, laundry and food processing. JohnsonDiversey is the No. 2 player, with a leading position in janitorial. Although there are vibrant independents in each segment, forces such as market consolidation at the enduser levels and in the distribution channel, favor larger players.

Some of the big distributors such as Sysco, USFS and Gordon will continue to gain share and some have even encroached on the traditional I&I manufacturers’ turf by introducing private label cleaning supplies.

“In a real sense, distributors and branded suppliers are both partners and competitors in the marketing channel,” said Mr. Boynick.

Meanwhile BSCs continue to gain a larger share of the market as well. According to Rohm and Haas, contract cleaners account for 30% of the janitorial and housekeeping market and have enjoyed the biggest gain in the past few years. “Contract cleaners are expected to continue to grow at about twice the overall market rate as building owners continue to outsource building maintenance,” said Mr. Locco.

Of course, some issues such as labor costs and environmental regulations never go away.
With the holidays approaching, the food and beverage industry will have something to cheer about.
As the keynote speaker at the 15th Congress of the World Federation of Building Service Contractors Congress in Montréal, Greg Lawton, president and chief executive officer of JohnsonDiversey, told BSCs that they have an opportunity to take their cleaning programs beyond appearances to providing safe, healthy, high-performing facilities.

“What we’re here to talk about, ultimately, is growing your business and improving your profitability while minimizing the impact that cleaning has on human health and the environment,” said Mr. Lawton.

He told the audience that building owners worldwide are becoming increasingly aware of the impact that facilities have on the satisfaction and productivity of employees and occupants. To compete effectively, owners need new approaches to cleaning and maintenance that do not simply focus on lowest cost and minimal effort.

“There is emerging recognition that a definite link exists between worker productivity, improved business performance and a healthy environment, both indoors and outdoors,” he said.

“The greatest challenge is addressing productivity in the labor channel, since chemicals represent just a fraction of cleaning costs,” noted Mr. Boynick. “The other issue is addressing safety and liability concerns. Liability insurance is rising, especially in California. Successful, adroit marketers will address productivity and safety.”

And at the same, continue to roll out an array of products that keep all those floors, windows and hard surfaces outside the home looking great.

Looking for a new ingredient for your I&I cleaner or floor polish? A list of them begins on p. 90 in the print version of Happi.

Related End-User Markets:

Related Raw Materials:

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