Consumers forego a sponge and ammonia in favor of high-performance
formulas that get dispensed from high-margin devices.
For today’s consumer, clean is often clean enough, but is it convenient enough? Every household cleaning product on retail shelves today does a great job of cleaning hard surfaces or disinfecting kitchen counters and bathrooms. But only the ones that are truly convenient to use will capture the fancy of time-strapped consumers, insist industry experts.
“Convenience is a key issue,” said Anna Wang, an analyst with Kline & Co., Fairfield, NJ. “Sales growth will be driven by products that consumers view as being multifunctional, convenient and safe.”
Concerns about product safety are also swaying consumers to try household cleaning products that are marketed using a green message. Despite all this activity, Kline estimates that sales of household cleaning products (including laundry detergents) rose less than 1% last year to about $12 billion at the manufacturer’s level. According to Kline’s research it was the first time the category actually rose since 2002.
Here’s how that $12 billion is segmented:
• Laundry care, $5.8 billion;
• Multipurpose and specialty, $2.8 billion;
• Dish care, $1.5 billion;
• Deodorizers and disinfectants, $1.2 billion; and
• Waxes and polishes, $600 million.
Sales of deodorizers and disinfectants jumped 8.7% last year, driven by big gains in air freshener sales. Sales of multipurpose and specialty products were up on the growing popularity of bathroom cleaners. In fact, after air fresheners, bathroom cleaners posted the highest gains. Ms. Wang credited the sales growth to higher consumer demand for devices such as the BathWand, which is just one example of how marketers are reshaping the household cleaning category to fit the consumer’s busy lifestyle.
“Growth is driven by innovative new products,” observed Keith Sugden, category group director, research and development, surface and germ protection, Reckitt Benckiser USA. “Successful products deliver in three key areas: convenience, improved performance and value.”
At the recent World Conference on Detergents, Mr. Sugden reviewed some of the leading ideas that have been rolled out in recent years including wipes and toilet bowl cleaners, but he pointed out that the segments may be suffering from too much of a good thing as sales of these products have begun to stagnate. As a result, marketers must look elsewhere for growth and Mr. Sugden said “green” or “environmentally-friendly” cleaners is a good place to start.
“Sales of natural household cleaners have risen 12% to $102 million,” he told the audience. “There is a shift in the marketplace toward environmental sustainability.”
Some marketers are shifting faster than others. For years, smaller brands such as Method, Mrs. Meyer’s Clean Day and Seventh Generation have marketed products that they bill as environmentally-friendly. Among the major players, earlier this year, Clorox rolled out Clorox Anywhere, a very dilute chlorine solution that Mr. Sugden described as being “very green, very simple and very good.”
And more are on the way. Procter & Gamble, for instance, has applied for a “Natural Expressions” trademark, noted Mr. Sugden.
A Consumer-Centric Industry
Compared to other consumer product categories such as electronics and beauty, home care may seem rather staid, but Jorge Mesquita of Procter & Gamble, insisted that innovative ideas have made the home cleaning process fun for consumers and profitable for companies that compete in the space.
He called the global home care market a $48 billion category that posted 5% annual growth a year from 1997 to 2005 and enjoys 10% margins. At the same time, companies are dedicating as much as 10% of sales to marketing expenditures, which has helped create several strong brands around the world. Moreover, robust R&D programs have led to many market innovations. Air care, for example has posted 9% annual growth to become a $7 billion segment.
What’s driving the growth?
“Home care is extremely consumer-centric—we understand a woman’s needs” insisted Mr. Mesquita. “She wants to create a home that her family loves; one that is clean, safe and pleasant. But we can do better.”
He said home care marketers must keep the focus on the consumer and not roll out a product that’s doomed to fail, simply because company executives fell in love with a particular technology.
“We must not define innovation too narrowly,” he added. “The consumer wants function and beauty.”
Air Care Continues to Shine
Some successful home care products that do both include Glade Scented Candles, Febreeze Air Effects and Cillit Bang.
“Air care is the most noticeable example, where products are no longer simply used to cover up unpleasant smells, but rather as a way to create a pleasant household ambiance,” said Irina Barbalova, account manager, household care, Euromonitor International.
She noted that the aromatherapy concept has also made inroads into a number of industry segments, including laundry, dishwashing and surface care. The unique selling point used in advertising is often related to the therapeutic benefits of the fragrance used rather than the efficacy of the product. A prominent example of this is P&G’s Lenor Sleep Sensations fabric softener with lavender and chamomile for promoting sleep, marketed as “making any moment a little luxury.” Other examples include Henkel’s launch of the Vernel Aromatherapy fabric softener range in early 2006 across Europe.
During the past year, the most dynamic area on the household care arena was once again air care. Much of the growth in this segment can be attributed to an increased focus on design that is now prevalent throughout the industry. Last year, SC Johnson launched Glade Scented Oil Candles, which feature a traditional candle that melts into a pool of oil emitting a fragrance. This product is based on the “scenterior design” concept which SC Johnson is heavily promoting, associated with personalizing the home with scents that fill an entire room and complete the interior design. As a result, Glade Scented Oil Candles boosted sales of candle air fresheners by nearly 30% in 2005 in the U.S. market, according to Euromonitor International. The product also hit supermarket shelves in the UK earlier this year and is currently being supported by an extensive marketing campaign.
The concept of improved aesthetic design is also reflected in the recently improved shape of such products as SC Johnson’s Glade Wisp. This battery-powered device automatically releases a “puff” of fragrance every couple of minutes. Glade Glass Scents, on the other hand, combine the trend for improved design with a more traditional format, the gel air freshener, containing natural fragrance oils set in a beautiful etched glass design.
Alongside aesthetic appeal, technology features in products continue to be developed. Electric air fresheners are becoming truly portable, with a number of new products operating on a battery and proving extremely popular among consumers seeking novelty and ease-of-use.
Manufacturers are equally interested in creating a wide range of novelty scents. P&G’s ScentStories appliance, for example, is available in a multitude of fragrance options, such as Exploring a mountain trail or Relaxing in the hammock, exemplifying the shift from traditional freshening scents to those associated with experience and featuring mood-enhancing properties, said Ms. Barbalova.
With the U.S. introduction of Febreze Noticeables earlier this year, a new product format emerged, offering “blendables” or 2in1 fragrances, alternating automatically throughout the day. The product offers such combinations as Morning Walk/Cleansing Rain and Calypso Breeze/ Hawaiian Paradise, reflecting consumer demand for more exotic scents.
Another way companies can improve their new product launches is by looking outside their industry. BASF, for example, developed melamin as a filler in car bumpers. But P&G took the material and created Mr. Clean MagicEraser, a $100 million brand.
“We can’t get complacent. We must keep the consumer in the center,” he said.
Yet, even with all the innovation, companies must keep an eye on their bottom line. Mr. Mesquita noted that high energy prices are here to stay, so companies must move quickly to eliminate all non-value costs.
“We must work with suppliers and retailers to design costs out of the equation,” he concluded.
According to analysts at Euromonitor, in recent years there has been a gradual shift in marketing language, which is increasingly mirroring that of the personal care industry. Whereas earlier emphasis was put simply on efficiency of the products (they do the job, and they do it well), they are now associated with “experience” and a way to create a personal touch to the home environment.
Power Cleaners Boost Performance
A notable area of development during the past two years has been the introduction of more powerful and therefore more convenient formulas across a number of household care sectors, with most visible results in surface cleaners. All key manufacturers have launched their premium “power cleaning” product versions, claiming new and improved technology and superior cleaning performance. The launch of Cillit Bang by Reckitt Benckiser in the UK was one of the biggest success stories in 2005. The product has been further diversified since to include other alternatives, such as Cillit Bang Stain and Drain, rolled out across Europe during the first half of 2006.
A number of other product areas have benefited from the “power cleaning” trend in the past year, such as laundry aids with the 2006 launch of Vanish Oxi Action Crystal White for superior stain removal and whitening, and even chlorine bleach with Unilever’s introduction of Domestos 5x in the UK in February 2006, which reportedly lasts five times longer than standard bleach.
A New Era for Wipes?
Euromonitor International research shows that after six years of consecutive growth, global sales of wipes and floor cleaning systems declined a bit (-0.2%) in 2005, as the novelty factor continued to fade. Particularly susceptible to this shift were the most notable product sectors created in recent years, namely dry electro-static refill wipes and starter kits, wet floor wipes and all-in-one floor cleaning systems. Many consumers who originally converted to the idea of cleaning their floors the trendy way, own the starter kits already, so sales of these products are falling faster than refill wipes.
Euromonitor analysts predict that new wipe technology may be seen in terms of fragrances used and the introduction of more scented solutions, which are already quite prominent in the non-wipe arena of both personal and household care.
“Furthermore, with the rise of ‘power cleaners’ across other product areas, the trend is likely to spill over into wipes and encourage further purchases,” observed Ms. Barbalova.
Some examples of this are already evident, with Procter & Gamble’s Flash Ultimate surface cleaner in the UK being available in a wipe format and the introduction of Dettol 4-in-1 wipes by Reckitt Benckiser earlier this year, available in a pink grapefruit fragrance.
Gadgets Still on the Agenda
The number of device-like products introduced in recent years has changed the face of the household care industry, according to Euromonitor analysts. Convenient and easy-to-use gadgets have made household chores seem more appealing to consumers, and at the same time their premium price tag has helped sustain industry revenues across surface care and toilet cleaners alike, said Ms. Barbalova, who added that novelty products, such as Clorox BathWand in bathroom cleaners, Mr. Clean Magic Eraser Duo in multi-purpose cleaners, and all floor cleaner versions of the Swiffer brand have aided growth levels in their respective sectors in the U.S. in the past few years.
“So when everyone thought innovation had come to a standstill, the next breakthrough launch happened, but this time in the least expected sector—laundry detergents,” observed Ms. Barbalova. “In July, Orange Glo announced the introduction of what it describes as the biggest leap forward in laundry care for 30 years, the Toss-N-Go system.”
Yet, the Orange Glo R&D team insists it has solved these problems. The Oxi Clean Toss-N-Go dispenser, which contains a tablet large enough for 25 washes, controls the amount of detergent released in each wash, meaning that it can stay in the drum until it needs replacing, which the company claims will save time and mess. Executives at Church & Dwight were certainly impressed. After all, the company spent $325 million to acquire privately-held Orange Glo earlier this year. With sales of nearly $200 million, Orange Glo was one of the first companies to launch oxygen-based laundry care products.
New Opportunities in China
Although the U.S., Western Europe and Japan currently represent the biggest markets for multinational household cleaning product companies, growth opportunities abound in fast-growing China, where the middle class population is exploding.
“It’s a perfect time (to be in China),” said Lois Dougan Tretiak of the Economist Intelligence Unit. “The government is determined to provide a better life for its people.”
Ms. Dougan Tretiak told attendees at the World Conference on Detergents that this market of 1.3 billion consumers is expected to average annual grow of 9.3% through 2010.
While she predicted that the government will crack down on dissidents ahead of major events such as the 17th Party Congress (2007) and the Olympics (2008), the overriding issue of concern for officials is domestic income disparities. Urban dwellers’ disposable income is three times higher than for those in rural locations, with the highest incomes found in coastal cities.
The good news for consumer product companies is that China’s middle class of 250 million has more money to spend on household products. She noted that nearly 95% of the population in cities such as Beijing, Shanghai, Guandong, Tianjin and Chongquing have washing machines. Yet, less than 1 in 100 have dishwashers, which represents a huge long-term growth opportunity. At the same, traditional retailing venues are expanding as domestic players become more sophisticated and multinationals gain more access to the market.
Despite these advances, multinationals still face several challenges, including intellectual property protection, growing competition from domestic players and rapid economic growth.
“China is growing too rapidly,” said Ms. Dougan Tretiak. “The government’s overriding concern is to narrow the gap between cities and countryside, coastline and inland.”
Despite these problems, there continues to be heightened demand for laundry detergent and household products, she concluded.
While demand in China is focused on household cleaning staples such as detergent and hard surface cleaners, back in the U.S., there’s growing demand for products considered to be “green cleaners” by consumers. In fact, Ms. Wang of Kline said sales of these so-called natural cleaners will grow at a faster pace than the industry overall. Looking out over the next five years, Kline estimates sales will rise just 1% annually.
“The overall industry will struggle. It’s mature, consumers just don’t clean as much as they did in the past, so the industry will post modest gains at best,” said Ms. Wang. “The good news is that companies who focus on devices, especially those for the bathroom, can command higher prices.”
Regulations Impact Innovations
For a lot of chemical suppliers, the Ides of March have nothing on the First of April. That’s when REACH regulations begin to go into effect and industry experts warn that REACH will have a major impact on the cleaning products industry. Ernie Rosenberg, president of the Soap and Detergent Association, recently told the attendees at the World Conference on Detergents that the European Union’s REACH (Registration, Evaluation and Authorisation of Chemicals), along with the United Nation’s GHS (Globally Harmonized System for Classification and Labeling of Chemicals), are the two most pressing formal governmental regulations that will directly regulate household cleaning and detergent products.
Although REACH is expected to be adopted this Spring, the first pre-registration won’t go into effect until 12-18 months after that, with the first registrations occurring in 2011. According to Mr. Rosenberg, although REACH will have large direct costs in terms of more testing and paperwork, the biggest headache for formulators could be how REACH impacts formulation and product innovation.
“Forced sharing of use information with suppliers and of toxicity data among competitors can constrain product formulation and adversely affect innovation,” warned Mr. Rosenberg. “Downstream users may not be able to get chemicals they need registered.”
Furthermore, REACH implementation will require more safety evaluations and 1,500 or more chemicals will be listed as candidates for authorization.
“The authorization list will be the more dangerous kind of list, the kind that requires a regulator to affirmatively find a chemical safe for a use or uses,” explained Mr. Rosenberg. “Until, and maybe even in, authorization is granted for a chemical’s use, it may be blacklisted.”
Although the GHS remains a work in progress—countries are rushing to adopt it in 2008—it will affect all products, including those regulated as pesticides; e.g., hard surface antimicrobials. Canada, the U.S., Japan and others are working on regulations or other programs to adopt GHS, while the EU has a labeling regulation out for comment, said Mr. Rosenberg.
Key issues surrounding GHS include:
• Will GHS distinguish between classification and labeling?;
• Will labeling for chronic hazards be risk-based or strictly based on toxicity?;
• Will labeling for chronic hazards be risk-based or strictly based on toxicity?; and
• Will GHS be globally harmonized?
At the same time, Mr. Rosenberg warned that state REACH-like proposals are under development in the U.S., along with state biomonitoring legislation in California, and state and local restrictions on phosphates in automatic dishwashing detergents.
“For all these developments, there will be winners and losers,” he told the audience. “People will still need cleaning products. The question for you is: will they be yours?”
Several Challenges Remain
Industry executives may scoff at the idea that regulators know what’s best for the industry, but there’s no doubt that consumers are increasingly aware that what they purchase and how they use it is having an impact on the environment. That’s why the industry must continue to strive toward sustainability, insisted Mehmood Khan, global leader of innovation, Unilever.
“A balanced business can only survive if it delivers value to all of its stakeholders,” explained Dr. Mehmood.
But in order to reach sustainability, marketers must first overcome poverty and Unilever is doing just that in India through Project Shakti, a program where women across the country have become direct-to-consumer sales distributors for Hindustan Lever’s soaps and shampoos. The company provides training in selling, commercial knowledge and bookkeeping to help them become micro-entrepreneurs.
“It worked in my village to give hope to these women, but now we need to do it around the world,” insisted Dr. Khan. “But it can only start when you look at your own values and the values of our industry.”