Uh, oh. Here we go again. The global economy looks as if it’s beginning to slip back into recession—and that’s bad news for marketers of household and personal care products and their surfactant suppliers. Surfactants, of course, are found in a wide range of products, including shampoos, personal clean- sers, laundry detergents and household cleaners, so suppliers are acutely aware of when the economy begins to weaken. And right now, in the U.S., Western Europe and Asia, the economic recovery appears to be slip sliding away. For example, in the U.S., instead of growing at a 2.4% annualized pace in the second quarter, real gross domestic product will likely be cut to a 1.3% annual rate, according to some economists.
“We would like to believe the recession is over, and are fortunate to have participated in strong sales results earlier this year,” noted Bill Klein, global product manager, surfactants, AkzoNobel Global Personal Care. “However, the overall economy is still struggling to create jobs and the recovery is reported weaker than expected. Consumers remain very concerned and this is reflected in their spending, which is impacting our customers (retailers).”
Croda, like many other suppliers, posted strong second quarter results, but Damian Kelly, business development manager, home care and functional specialties at the company, observed that there is still uncertainty about the second half of the year due to persistent high unemployment and a stagnant property market.
The rocky economy isn’t anything new to surfactant suppliers who have lived through the heady gains of 2007, the downturn of 2008 and the surprisingly strong rebound of 2009. For example, David Del Guercio, senior vice president and general manager, consumer specialties business unit, household care, Evonik Goldschmidt, has referred to 2010 as good so far, but not great, noting that sales have yet to return to 2007 levels—which by many accounts was a spectacular year for the industry. Still, the Evonik Goldschmidt executive said his company has posted gains across all categories—hard surface, fabric softener, laundry and in specialized areas like car care.
“The car care category, on a relative basis for our business, was most affected by the recession, so it has come back mostly to pre-recession levels,” he explained.
Building on that momentum, Evonik Goldschmidt is launching Carspray 800, a biodegradable, cationic emulsifier for automatic car wash rinse aid formulations. It is said to provide superior beading, is an excellent emulsifier, substantive to surfaces, protects finishes and promotes gloss.
European and North American customers remain cautious, according to Oliver Hufer, vice president, home and personal care, Rhodia. Customers in these mature markets are taking advantage of discounted branded products or are trading down to lower price point brands, including private labels.
“However, in all instances, consumer goods companies are looking for cost-effective solutions to improve the competitiveness of their formulated products,” he asserted. “Rhodia has developed a product portfolio that enables our customers to develop products that meet their aggressive price/performance targets.”
According to Ken Rizzi, global business manager, functional additives, Air Products, demand is rising for the company’s products driven by Asia and a stabilization of a number of industries in North America.
“The recession may be over, but customers seem to be delaying placing orders until the last minute,” observed Art Pavlidis, Hamposyl and catalyst marketing and sales manager, Chattem Chemicals, Inc. “Presumably, this is done to keep inventories low and to manage cash flow.”
What They’re Buying...or Not
Much has been made of this “new” consumer who has traded down from premium brands to private label products. Or, if they’re still buying premium products, they are getting the most out of them by adding water to shampoos, squeezing out that last drop of toothpaste, or diluting that household cleaner more than recommended.
“Consumers are certainly buying again; but this doesn’t necessarily mean that all of them are purchasing lower priced products,” observed Kathy Rainone, account manager, DeWolf Chemical. “Some consumers are just stretching the life of their higher-end products—products that they normally would buy, recession or not.”
But at the same time, Rainone noted that consumers continue to have high expectations for the products they purchase—no matter the price.
“They expect optimized performance from these less expensive products,” she said.
With consumer buying patterns more in a holding pattern, these days, marketers are making a variety of moves.
“We have seen some reformulation of personal care products with the intent to use lower cost raw materials,” explained Pavlidis. “The consumer is being more selective in these economic times.”
According to Rita Köster, global marketing director, home care/I&I, Cognis Corporation, the market demonstrated a consumer downshift in product purchasing behavior; i.e., if consumers were buying premium products they considered value brand products or if they purchased value products they looked to private label options.
“However, throughout the downturn user demand for environmentally compatible solutions has shown remarkable resilience, remaining robust in mature markets and continuing to grow in emerging regions,” Köster told Happi. “The Cognis business has continued to be successful because it is well positioned to support each type of customer with our broad portfolio of products and concepts including our natural-based products for customer looking for sustainable innovations.”
AkzoNobel, too, has a broad range of product offerings that has enabled the company to weather the recession.
“Although consumers are still buying, they are much more cautious and we believe much more conscious about pricing,” noted Klein. “More and more consumers are looking for discounts or products on sale. In addition, there are a number of consumers who have traded down, buying less prestige products that still provide the benefits they are looking for.”
He added that AkzoNobel Global Personal Care is fortunate to have a full line of polymers and surfactants that are used in all types of applications and segments, including value, mass market and prestige.
But Del Guercio of Evonik Goldschmidt observed that those consumers, who last year had downgraded to value brands, saw the difference in performance.
“So are they coming back to premium? That’s what we hear. And relative to our business, that’s what we’re seeing,” he said.
According to Del Guercio, consumers’ confidence and ability to predict their economic situation have improved and, consequently, they are going back to the products they like, whether it’s a household cleaner that has a more pleasant smell than a private label alternative or a laundry detergent that cleans a bit better than a store brand.
In contrast, Kelly noted that consumers are still nervous about the economy, but that does not appear to be affecting their choice of personal care or home care products.
“Consumers see value in higher priced products and the trend in buying ‘green’ continues as sales of green consumer products continue to grow,” he said.
Lots of Moves
Despite the precarious economic recovery, some suppliers have made major moves to expand their position and product offerings in the surfactant industry. Most recently, for example, BASF purchased Cognis, adding a wide range of surfactants to its portfolio, and Rhodia added two companies and expanded its product portfolios.
In the past 18 months, Rhodia has acquired two key players in the surfactant market: the McIntyre Group in March 2009 and Feixiang Chemicals Company in June 2010, a deal which is expected to close in the next couple of months. With these two moves, Rhodia strengthens its leadership positions in the surfactant business for the home and personal care market, while enhancing its footprint in the world’s fastest growing regions, according to company executives.
“The combination of McIntyre, Feixiang and Rhodia’s product portfolios bring significant
synergies,” observed Stewart Warburton, global marketing director, home and personal care, Rhodia. “In addition, Feixiang Chemicals enables Rhodia to back-integrate in the surfactant value chain (amines), thus reinforcing our competitiveness.”
At the same time, Rhodia is investing in the two acquired McIntyre sites (Halifax, UK and University Park, IL) to optimize and increase production capacity and enhance competitiveness. In Latin America, Rhodia is transferring acquired McIntyre technology to strengthen surfactant expertise there, and in India, Rhodia recently invested in new capacity at its Roha plant and established a technical service center at the same location to serve key accounts and local customers in this fast-growing market.
In May—prior to its acquisition by BASF—Cognis strengthened its presence in the Asia-Pacific region by opening a new state-of-the-art production facility for alkyl polyglucoside (APG) surfactants at its site in Jinshan, China. Along with two production sites for APG surfactants in Düsseldorf, Germany and Cincinnati, OH, the Jinshan facility will enable Cognis to better serve the increasing demand for green solutions in the Asia-Pacific region, according to Cognis executives. In January, a Malaysian affiliate was opened with the goal to double sales in the country during the next five years.
Surfactants play a key role in detergent and household cleaner formulations.
Cognis also strengthened its presence in Latin America by opening a new SO3 sulfation plant at the Ecatepec site in Mexico in November 2009. The new state-of-the-art facility produces ingredients for use in products such as shampoos, shower gels, paints, paper coatings and agrochemical applications. Cognis also expanded its sulfation unit in Avellaneda, Argentina. Both investments complement the company’s existing sulfation facilities in Brazil and the U.S., and by increasing the capacities and quality of its products, will enable Cognis to target new, growing markets in the region.
Clearly, suppliers are focused on emerging markets, an increasingly important growth area for suppliers in contrast to the more mature U.S. and Western European markets. According to a recent surfactant report from SRI Consulting, growth has been strongest in Latin America and Asia for several reasons.
“It is a combination of different impacting factors including population growth, industrialization, change in number of citizens considered to be middle class, and substitution (soap to detergents),“ observed Hossein Janshekar, analyst and lead author of the report.
Innovations on Hold?
Emerging markets have been a growth area for a lot of household and personal care companies, but when the global economy headed south in 2008, many marketers around the world put the brakes on major new product launches, and instead chose to focus on making incremental improvements in areas such as sustainability.
And while each company has its own definition of sustainability, in the household product arena at least, it seems as if more companies are striving to attain the Environmental Protection Agency’s Design for the Environment (DfE) certification. Once approved, it allows manufacturers to put the DfE label on household and commercial products, such as cleaners and detergents, that meet criteria for human and environmental health. According to EPA, the DfE label enables consumers to quickly identify and choose products that can help protect the environment and are safer for families.
To assist all of its customers, Stepan Company offers flexible feedstock alternatives, data submissions to third-party certificating bodies and new prototype formulation development.
“Our R&D development efforts are focused on making it easier for our customers to comply with various certification standards such as U.S. EPA/DfE, state VOC regulations and natural standards,” explained Anne Gariepy, market manager, general surfactants group, Stepan Company. She continued, “This flexibility enables Stepan to tailor solutions for the markets we serve. For example, Stepan's hard surface care lab has been working on a household autodish formulary in response to the 2010 state regulations prohibiting the use of phosphates (up to 0.5%) in household automatic dishwash detergents.“
Cognis executives agree that whether or not a product has an eco-label is increasingly influencing the consumer’s purchasing decision.
“As part of our commitment to supporting our customers in positioning and marketing their products, we want to help them to obtain environmental certification,” explained Josef Koester, director marketing and technology, Care Chemicals NAFTA, Cognis Corporation.
Detergent Leaders To Meet in Montreux
For a few days next month, fierce competitors such as Procter & Gamble, Unilever and Henkel will meet not only on supermarket shelves, but on the banks of Lake Geneva, when the American Oil Chemists’ Society (AOCS) presents Montreux 2010, the 7th World Conference on Detergents. The conference, which features keynotes from the chief executive officers of the Big 3 detergent makers, Procter & Gamble, Unilever and Henkel, will be held Oct. 4-7 at the Montreux Music & Convention Center.
More info: http://montreux.aocs.org
To deliver on this commitment, Cognis ensured that many of its raw materials are listed with
various certification bodies, and also offers customers a range of formulations that are eligible for numerous eco-labels. Cognis also offers a variety of formulation combinations that meet the necessary eligibly criteria of various labels and offer proven stability.
On the personal care side of the surfactant industry, consumers are buying higher amounts of lower priced items, but are also still treating themselves to the higher end products as well—just not as often, explained Dan Beio, VP-R&D, RITA Corp. As a result, personal care marketers have shifted their marketing and subsequent development strategies to accommodate this philosophical shift.
Much more attention is being paid to less expensive support products, Beio told Happi. He said, “We are seeing more support claim ingredients showing up in these products to take up the slack for the more expensive cornerstone treatment products.’’
For its part, RITA is spending more time searching globally for new and less expensive sources of supply. “We have been very successful in helping our customers drive cost out of their products by offering lower cost alternative ingredients,’’ he said.
As they grapple with the consumers’ new attitudes about value, suppliers have been forced to face a wide range of regulatory issues.
“There is no doubt that REACH is impacting how we approach, develop and launch new products in Europe,” said Klein of AkzoNobel. “Regarding the emphasis on green or sustainability, AkzoNobel has been a corporate leader in this area across all its business activity.”
According to Klein, AkzoNobel is No. 2 on the Dow Jones Sustainability Index, and its goal is to be the leader.
“Our corporate goal is to be the forerunner in the responsible use of resources through innovation and improvement in existing products and pro- cesses,” he explained. “Many of our products marketed to the personal care industry are based on natural raw materials or feedstock, such as starch (corn, potato, tapioca) or natural oils (palm, soy, coconut). We have a number of products that are all-natural or eco-certified that provide unique consumer-perceivable benefits.”
Not long after initial registration for the European Union’s REACH program was closed, in the U.S., reform got underway of the Toxic Substances Control Act—a process that has more than a few suppliers wary.
“Croda is nervously watching the situation over TSCA reform in the USA which as currently written looks to stifle new product innovation,” said Kelly. “Innovation is what Croda is all about and any new regulations that could prevent innovation will impact our ability to bring better performing products to the markets we serve.”
Cognis executives note that several countries, including the U.S., have started to ban the use of phosphates in automatic dishwashing detergent (ADD) products. Koester noted that in recent years issues have been raised in regard to their environmental compatibility: phosphates are said to significantly contribute to the eutrophication of water, which disturbs the natural balance of organisms and reduces water quality.
“The ADD market therefore demands alternative, phosphate-free ingredients that provide the same level of performance as conventional solutions,” said Koester. Cognis’ Dehypon GRA is a granular rinse aid surfactant that enables manufacturers to create phosphate-free ADD products that combine environmental soundness with excellent performance properties, according to Koester.
Chattem Chemicals recognizes the market demand for “green” chemicals and, to that end, has listed two of its specialty surfactants, Hamposyl L-30 (sodium lauroyl sarcosinate) and Hamposyl M-30 (sodium myristoyl sarcosinate) on the CleanGredients list.
“Both products meet the requirements for aquatic toxicity and biodegradation using criteria defined by the U.S. EPA DfE program,” said Pavlidis.
Stepan recently released two naturally derived, EO/PO-free surfactants. Ammonyx LO Special is a naturally derived lauramine oxide that can be used in household and I&I applications as an efficient grease remover, lime soap dispersant (in neutral to alkaline pH), and is stable in the presence of both hydrogen peroxide and sodium hypochlorite. Amphosol CDB Special is a naturally derived cetyl betaine that can be used as a secondary surfactant in personal care for sulfate-free or traditional anionic surfactant systems.
“This ingredient has been formulated for cold processing and easy handling and offers mildness, foam stabilization and viscosity enhancement,” explained Rob Lonergan, market manager, general surfactants group, Stepan Company.
For home care formulations, Croda continues to expand its line of NatSurf natural-based cleaning surfactants. According to Kelly, NatSurf delivers better cleaning performance on all types of household surfaces.
Rhodia has rolled out several new products during the past year. Rhodapex ESB-70 NAT, is a vegetable-based SLES utilizing bio EO instead of the market standard of petrochemical-derived EO. New Miracare LAC-394 is a preservative-free surfactant solution that is described as a free-flowing and fast dispersion enabling formulators to create excellent cleansing, foaming and viscosity building products that are suitable for use as shampoos, body washes, bath products and liquid soaps. Mackanate Ultra SI is a unique silicone-based sulfosuccinate with excellent foam stability, according to Rhodia. Lastly, Dermalcare MAP is a naturally derived monoalkyl phosphate surfactant that provides a refreshing in-use cleaning experience and leaves the skin feeling smooth and silky.
Two years ago, AkzoNobel purchased ICI and enlarged its organization and presence in the personal care market. Since then, the company has constantly increased its manufacturing capability and product offerings into key market segments within personal care, according to Klein.
“We have also strengthened our environmental profile and economic performance by taking actions to insure the most efficient use of energy and materials in our operations,” he added.
Elsewhere, AkzoNobel strengthened its presence in the Asia and Latin and South America regions and continues looking at opportunities to penetrate and expand in these markets.
Beio noted that RITA has been a “green” company since its inception more than 50 years ago—its heritage product, lanolin, is a natural renewable ingredient. And over the years, RITA expanded its product mix with an eye toward natural and green ingredients to help set it apart from the competition.
“Our Pationic lactylate technology is an example of a product mix whose time has come,” explained Beio. “These versatile emulsifiers and surfactants are finding their way into many new formulations based on lactic acid and green fatty acid starting points.”
At the same time, the Ritafactant line of natural based surfactant blends of lactylates, alkyl polyglucoside and other natural surfactants are popular in hair and body shampoo formulations.
Del Guercio explained that Evonik Goldschmidt is working with customers on specific projects that will reach the market anywhere from 12 months to four or five years down the road. And while he wouldn’t divulge specifics, he noted that several involve improved cleaning performance in cold water or improved aesthetic attributes in a finished product.
New products from Cognis include Polyquart Ecoclean, a starch-based polymer that promises to close the gap for formulating environmentally-sound hard surface cleaners with up-to-date convenience claims like excellent wetting with spotless drying and being easy to clean again.
Glucopon 420 UP is Cognis’ newest APG surfactant. It is said to be ideal for home care and I&I applications including liquid laundry, manual dish detergents, all-purpose cleaners and window cleaners. It is 100% derived from natural sources, readily biodegradable, has GRAS status, and is DfE-certified.
And so, while uncertainty pervades the global economy, many surfactant suppliers remain confident that they can offer innovative chemistries to their household care, personal care and I&I customers.
Looking for a new surfactant system for your household care, personal care or industrial and institutional cleaning product? A list of them can be found online at Happi.com.