Surfactant industry executives from around the world gathered in Paris in June to discuss a wide range of topics including sustainability, new product development and slow growth in mature markets.
By Tom Branna
As one might expect, sustainability was a major topic of conversation at the 7th World Surfactants Congress held June 22-25 in Paris. After all, with concerns about the environment, carbon footprints and limited resources on the rise, it’s only natural for sustainability to be a cornerstone of the congress.
But, in fact, much of the talk in and out of the conference rooms focused on sustaining profits, and nearly every supplier agreed that with raw material prices soaring, marketers must accept price increases from their suppliers.
Despite the difficult economic situation, the World Surfactant Congress (which included 100 oral presentations, 130 posters and 40 exhibitors) attracted more than 1000 participants, up from 850 at the last Congress held in Berlin in 2004.
“It is quite successful,” observed Bernard Brancq, the congress chairman. “The number of companies in the industry has actually contracted since 2004, yet attendance is up.”
“A lot of our sales reps weren’t around during the oil crisis in 1973,” explained one supplier. “They have no idea how to negotiate in this environment.”
Slow Growth in Europe
According to Mr. Brancq, surfactant growth in the future is expected to be less than 2%, compared to about 3% today. More growth is expected in Europe than in North America, while at the same time demand in BRIC countries (Brazil, Russia, India and China) is expected to grow 10% a year. But he warned that rising costs must be shared among producers, marketers and customers.
At the same time, he noted that the industry has become inundated with regulations, noting that REACH costs may ultimately account for 1.5-1.7% of European GDP.
“We are overloaded with regulations,” Mr. Brancq insisted. “Politicians must understand the surfactant industry better.”
Helping attendees understand surfactants better was Dominique Langevin, a researcher with L’Oréal. Prof. Langevin told the audience how she’s had a “passion for surfactants,” having worked with them for 30 years. Her research has led to studies of complex system rheology and microrheology at the nanoscale.
The Congress, sponsored by CESIO (the European Committee of Surfactants and their Organic Intermediates), gave industry suppliers ample opportunities to detail new products. For example Sacha Herwerth of Evonik Goldschmidt explained how a new cocamidopropyl betaine contains 47% active material, which offers a better environmental profile than standard 30% active CAPB.
“Our product costs less to ship, uses less water in production and less packaging too,” said Dr. Herwerth.
But at the same time, a red blood cell test confirmed that the Evonik material is less irritating than a 30% CAPB. Moreover, this concentrated CAPB produced better foam and produced a 46% reduction in moisture loss compared to 30% market quality CAPB.
With talk about sustainability and environmentalism dominating the event, Olivier Dubigeon of Sustainway told the audience that while many consumers insist that they consider the environment when making a purchasing decision, less than 10% of them actually act on their convictions. That said, there is a growing interest in LOHAS; i.e., Lifestyles of Health and Sustainability, among consumers. He also warned the audience that there is a growing mistrust of big brands and more alternative consumers see brands as a parasite. In fact, while 61% of consumers trusted big brands in 2004, that percentage dropped to 41% by 2007, according to Mr. Dubigeon.
To survive and thrive in this environment, he urged the audience to build a Corporate Social Responsibility program and noted that the International Standards Organization is in the process of developing ISO 2600, a guidance document on social responsibility.
Of course, ISO standards are small potatoes when it comes to REACH, the all-encompassing legislation designed by the European Union to limit access to markets and generate billions in fees. While more than a few industry observers have suggested that a bloated bureaucratic system puts REACH out of reach—especially at current deadlines—that hasn’t stopped consultants from issues doomsday warnings that REACH deadlines are rapidly approaching. One of them, Peter Douben, who operates www.reachwise.eu, insisted that REACH is a business issue as much as a compliance issue and one that will affect all parts of a company.
He urged the audience to inventory their portfolios and then analyze them to see which materials are truly critical. After completing this “inward-looking” exercise, companies should look outward and consider pre-registration, which would trigger the Substance Information Exchange Forum. At the same time, Dr. Douben suggested that companies should know what their competitors are doing, since their decisions are likely to have an impact on product pricing.
The June 24 program opened with an entertaining roundtable discussion featuring six executives from key surfactant suppliers: Eva Osterberg, Akzo Nobel; Thomas Greindl, BASF; Richard Ridinger, Cognis; Mike Humphrey, Croda; Daniele Ferrari, Huntsman and Paul-Joel Derian, Rhodia. Although they may be competitors, for this presentation, they presented a united front by calling for marketers to bear some of the costs associated with sustainability.
“I have a problem with people who pay lip-service to sustainability,” observed Mr. Humphrey. “You can’t be sustainable if you’re not (in business) tomorrow. I hope our customers are in the audience.”
Mr. Greindl noted that costs have doubled in the past 12 months and he pointed out that suppliers cannot absorb all these increases. “We’ve become more efficient, but we can’t do it alone,” he noted.
Similarly Mr. Ferrari said that while suppliers have been impacted by the surge in raw material costs, “the other side of the value chain hasn’t gone through the pain that we have.”
Still, the surfactant industry’s woes can’t be totally blamed on marketers. As Mr. Derian observed, the chemical industry has been guilty of adding volume and absorbing process improvements for too long.
“We’re too nice to our customers; we must review our own behavior,” he insisted. “We’re below the reinvestment level.”
The chemical industry consumes just 5% of all crude and vegetable oil volume, but with the competition for feedstocks heating up between the food and fuel industry, supply is reaching a crisis level. Still, Mr. Ridinger insisted that from crises emerge opportunities.
“I agree that there is a crisis, but it will push us toward innovation,” he told the audience. “We need new technology and more efficient use of resources.”
Ms. Osterberg of Akzo Nobel concurred.
“When we’re really squeezed, this is where innovation counts,” she said.
While biochemistry may provide some answers to feedstock issues, Ms. Osterberg suggested that higher active content offers another solution to rising costs.
Huntsman has formed a joint venture in the Middle East to secure adequate feedstocks, said Mr. Ferrari. But at the same time, he reminded the audience that suppliers and their customers must work together to find solutions to the current feedstock issues.
Mr. Greindl agreed that regulatory and cost pressures can trigger innovation. BASF, for example, recently rolled out Lutensol M, which the company calls a cost-effective alternative to standard ethoxylates.
While they grapple with tighter feedstocks and rising costs, all the surfactant suppliers agreed that REACH poses its own set of problems.
“The idea behind REACH is good,” noted Mr. Ridinger. “But can authorities deal with all the data that are coming their way?”
At first glance REACH and green chemistry would appeal to the growing group of consumers who say they are willing to pay for environmentally-friendly solutions. But as Mr. Humphrey pointed out, “if the consumer really was willing to pay for it, then The Body Shop would have ruled the world!”
And as everyone knows, L’Oréal owns that brand today.
A Look at the Markets
Although the surfactant industry is beset with problems, several analysts noted that there are plenty of opportunities around the world for the industry. Guido Bognolo, WSA Associates, Belgium, pointed out that all the APE restrictions in Europe have created growth opportunities for nonionic surfactants. And while developed markets in Europe are growing along with GDP rates (about 3% YoY), BRIC countries are growing at double that rate. One bright spot has been the growing use of methyl ether sulfate (MES) around the world. For example, Lion produces 40 tons of MES each year, Stepan produces 50 tons and Huish 80 tons. Moreover, another plant is expected online in China.
|A look at the global surfactant market was provided by (l-r): Pierre Renaud, session chairman; Guido Bognolo, WSA; Joel Houston, Colin A. Houston and Associates and Shigeru Sekine, Nikko.
Joel Houston of Colin A. Houston & Associates looked at the vast changes taking place in the 1.7 million ton North American primary surfactant market. Some of the key issues impacting the surfactant market include petroleum dependence, food vs. fuel issues, carbon footprint and rising environmental standards. At the same time, the industry has had to cope with a number of plant closings and continued consolidation among industry suppliers.
On the finished product side, more companies, including market leader P&G, are opting for concentrated product forms. And while P&G set up a committee back in 2005 to look for alternatives to petroleum feedstocks, they have not released any findings to date, noted Mr. Houston.
Mr. Houston noted that several unconventional feedstock options have been proffered, including biotech approach from carbohydrates, extracting surfactants from wastewater treatment sludge and using algae as a fuel source, which could also be implemented for making surfactant intermediates.
Shigeru Sekine of Nikko Chemicals estimated the Japanese surfactant market was worth €1.3 billion. However, while Japan may be the world’s third largest chemical market, the speaker noted that world opinion in recent years has moved from “Japan bashing” to “Japan passing (in favor of China).”
Farrokh Mahlihi, Fargol Research Group, called the Middle East region an attractive vibrant market that has developed a lot during the past 50 years. Moreover, young consumers (newborns to 14 years-old) account for 30% of the population, a sure indication of more growth opportunities. At 3.6kg per person, laundry care products represent the biggest category in home cleaning. Dishwashing products are next and surface care lags far behind in third place. In fact, Mr. Mahlihi noted that in many countries, laundry detergent is used for hard surface cleaning.
With feedstock prices continuing to soar, Harald Sauthoff of Cognis reviewed the impact of biofuels on the sustainability of the vegetable oil market. He called the current situation a crisis, as 25% of U.S. corn production is now going toward the biofuel market and 6% of all vegetable oil is earmarked for the that segment. However, Mr. Sauthoff insisted that just 0.3% of global crude use would be replaced by biofuels.
The good news is that developing sustainable palm oil feedstocks is possible and that these solutions are less destructive on the rain forest, he said.
As suppliers and their customers develop environmentally-friendly solutions for consumers, more than a few outsiders are willing to evaluate these efforts. One of them is Remi Reuss, of the Institut National de la Consummation, who maintained that his group helps consumers make the right choice about the products they purchase. For professionals, the company’s services provide “a true measure of information and transparency.”
While current market conditions are causing headaches for many suppliers, they offer more opportunity for enzyme producers, according to Marion PJ van Deurzen, Genencor. That’s because enzymes make it possible for marketers to formulate effective compact products at lower wash temperatures and shorter wash cycles, while reducing raw material costs.
Surfactants for Sustainable Products
Although industry researchers are hard at work on the sustainability issue, company executives must remember to consider how consumers use their products. Charles Bragg of Procter & Gamble provided a detailed look at the global detergent market in his plenary lecture, “Surfactants for Sustainable Consumer Products.”
“Any talk of sustainability must take into account product usage,” explained Dr. Bragg. “To understand life cycle analysis, we need to understand how she uses our products.”
For example, in emerging markets, a consumer may spend three or
“It’s a long and difficult process,” he noted.
In fact, 75% of the energy consumed during a laundry detergent’s lifecyle is consumed during the in-use phase. When it comes to creating sustainable products, product use is the most important factor, followed by ingredients and packaging. Yet, the consumer perceives that packaging is No. 1, followed by ingredients and usage.
“It is a major consumer misconception,” observed Dr. Bragg.
Therefore, to succeed in consumer product sustainability, Dr. Bragg suggested a three-step approach:
• Use fewer resources during manufacturing;
• Use fewer resources in use; and
• Educate consumers how to use a product properly.
To create more sustainable detergents, Dr. Bragg suggested using more sustainable feedstocks, using compaction wherever possible, using low volume materials such as polymers and increased use of bio-based ingredients, such as enzymes, to replace surfactants.