Irans Household Cleaning Market

By Farrokh B. Malihi, Fargol Research Group | April 5, 2011

Despite turmoil in the region, Iran has great economic growth potential, thanks to its young, educated workforce and a wealth of natural resources, which include 10% of the world's oil reserves and 14% of the world's natural gas reserves.

The Middle East is a sub-region of Asia comprising the lands that extend from the eastern Mediterranean Sea to the Persian Gulf. With a population of about 350 million, it is home to numerous ethnic groups including Persians, Turks, Arabs, Jews, Kurds and Armenians. Throughout history, the Middle East has been a major center of world affairs, and has been a strategically, economically, politically, and culturally important region. The Middle East includes relatively poor to very wealthy nations resulting in significant differences in market development and consumption profiles. Iran, Turkey, Egypt and Saudi Arabia cover the largest land area, and account for 75% of the total population.1,2 The three largest economies in 2008 in terms of Gross Domestic Product/Purchasing Power Parity (GDP/PPP) were Turkey, Iran, and Saudi Arabia.2,3

An overview of the soap and detergent market in Middle East was presented in the April, 2007 issue ofHappi.4 The following article will cover a more in depth review with focus on individual countries. This first segment will focus on the Iranian market for household cleaning products. Demographic characteristics, major product categories and key developments and trends in this market will be reviewed.

Here’s a look at some of the products and brands that are prevalent in Iran.
According to the World Bank’s World Economic Indicators 2008 report, Islamic Republic of Iran ranked 18th among national economies with a GDP/PPP of $844 billion.1 The economic structure has improved during the past two decades but continues to be influenced by high inflation and unemployment. Iran has a diversified manufacturing sector despite restrictions imposed by other countries. The country ranks 69 out of 139 in Global Competitiveness Report.2 Oil remains the core element in Iranian economic performance and accounts for about 90% of total export earnings, and 45% of government’s budget. Major increases in oil prices in recent years has resulted in an increase in per capita income and purchasing power. With a young, educated workforce, diversified agriculture and manufacturing base, and a wealth of natural resources including 10% of world oil reserves and 14% of world natural gas reserves, the country has great potential for economic growth.

Iran’s population in 2008 was about 73 million.2 The high growth rate during the 1980s and 1990s has since slowed to approximately 1.3% a year. The population is young, with more than 50% less than 20 years-old. Urbanization has accelerated since the 1960s and by 2004, more than 65% of the population lived in towns or cities. Basic literacy rates are high, and estimated at more than 80% in those over six years old, well above the regional average. More than 3 million people are currently enrolled in local colleges and universities, of which 55% are young women. Young and educated women who deal with housework have a direct effect on the demand for household care products. They also have a good chance of finding better paying jobs which increases their purchasing power.5

The growth in urbanization combined with a young population, and an increase in the number of educated females has benefited the household care industry. As young and educated consumers search for improved quality and more sophisticated products, local companies have introduced new products with improved performance and attractive packaging and fragrance to meet this demand. There is, however, a broad distribution of income in the country resulting in significant differences in the consumption profile and consumer habits in this market.

The growth of supermarkets is changing the retail landscape in Tehran (above) and other cities in Iran.
The Market
The Iranian household care market has grown substantially during the past 20 years. This growth was due to population growth, increased urban population, improved economy and rising disposable income. Local manufacturers dominate the household care market in Iran and include Paxan, Tolypers, Mahd Taban, Henkel-Pakvash, Paknam, Pakshoo, Pars-Kondor and Darugar-Kaf. Their strength is due to their long-term presence in the market, new product introduction, strong distribution and brand recognition among consumers. The presence of multinationals is limited to Henkel, which has acquired major share in Pakvash Company; as well as Unilever, which recently commenced operation of plant for production of soap and personal care products and imports. Lifting of subsidies in recent years has led in increased competition and new product launches among manufacturers. Laundry detergents, dishwashing liquids and chlorine bleach hold major share of sales in household care market.

The retail infrastructure is rapidly changing in Iran, particularly in Tehran and other large cities as the overall retail value share of supermarkets has increased significantly. Many consumers prefer to shop at these large supermarkets which provide the convenience of one-stop shopping for groceries and household cleaning products. Supermarkets’ growth comes at the expense of small neighborhood shops which offer a limited range of products, as the supermarkets give companies the opportunity to promote new products.

Laundry Care Products
Production of laundry detergent powders in Iran began in the late 1960s with the startup of the first spray dried powder production site in Tehran province. Per capita consumption of laundry detergent is approximately 5kg a year, significantly below that of developed markets. During the past 20 years, population growth, increased consumption and the startup of new plants boosted powder production to about 520,000 tons in 2010, a gain of about 6% annually during the past decade. More than 30% of this volume is for automatic wash and 70% is for all-purpose powder detergents (APD) for handwash. Share of products for automatic wash in Tehran and other large cities is estimated to be more than 50%. In addition to laundry, significant volume of APDs is used for household cleaning tasks. Even in households equipped with washing machines, delicate fabrics and baby clothes are often washed by hand.6

Sales of automatic wash detergents (AWD) have grown in recent years as penetration of automatic laundry machines, especially in large cities, has increased. Washing machine penetration is estimated at about 40% and includes front load, top load, as well as twin tub economy washing machines. This figure is significantly higher in Tehran and other large cities.

In addition to powder detergents, laundry liquids and laundry bars (both synthetic and natural soap) are used in Iran. Consumption of laundry liquids has grown steadily in the past five year and was estimated at 12,000 tons in 2008. Laundry liquid sales are still limited due to higher price per load compared to laundry powders, which sell significantly below international prices. Laundry liquids are widely used for delicate fabrics and black garments.

­Consumption of fabric softeners in the Iranian market remains low compared to developed markets. The market, however, is competitive and volume has increased steadily during the past decade to reach an estimated 15,000 tons in 2008.

Major hand wash powder detergent brands (high foam) share the same technology based on conventional low-density linear alkylbenzene sulfonate (LAS)/ sodium tripolyphosphate (STPP). Although there are no specific bans limiting phosphates, there has been a partial replacement of STPP with zeolite in certain brands. All detergent powders are of low density powder form and are manufactured by spray dried process.

Formulation of machine wash powder detergents (low foam) is similar to conventional low-density European products with perborate bleach. There are more variations in the machine wash powder formulations, which now include TAED/perborate bleach technology for low temperature wash and multi-enzyme technology to boost performance. New product innovations are based on better formulas, attractive package design and new fragrances.

Dish Care Products
Manual dishwashing liquids dominate in Iran, as automatic dishwashers have a low penetration. The dishwashing process is carried out under running water, so-called direct application, which makes it difficult for consumers to detect minor performance differences among brands. The current market for dishwashing liquids in Iran can be described as innovative and competitive. Per capita consumption is relatively high and is estimated at about 2.5 kilograms a year. Total production exceeded 220,000 tons in 2008 indicating an average growth rate of about 8% annually since 1993.

During the past 10 years, the market has been dominated by four or five brands from the major detergent manufacturers that together command more than 75% of the market. New products boast improved formulations, pleasant fragrance and attractive packaging and aesthetics. They include concentrated dishwashing liquids, antibacterial dish liquids and products for sensitive skin. Some of these new products are formulated with significantly higher level of surfactants and are packaged in clear PET bottles with pleasant fragrances and attractive colors.

These developments have resulted in market segmentation that now includes new premium brands with improved formula and higher actives, and conventional value brands with low actives. Premium brands include LAS as well as ether sulfates, nonionic and amphoteric surfactants, and are formulated at about 25% active content. The value brands, which still dominate this market, are primarily based on LAS/fatty amide composition with 16-20% actives.

The dish care category has added automatic dishwasher products in both powder and tablet forms. Sales growth is limited, however, due to the low penetration of automatic dishwashers.

Surface Care
In comparison to the developed markets, the Iranian surface cleaner market can be characterized as “less developed” with only a limited range of products. This is primarily due to the presence of relatively low cost all-purpose powder detergents (high foam), which has influenced consumer habits and practices in household cleaning. All-purpose powder detergents are used by many consumers for general household surface cleaning, particularly for cleaning large surfaces such as floors and walls. Other low cost cleaners, including chlorine bleach, alkaline and acidic cleaners, are used alone or in combination with powder detergents.6

Hypochlorite-based liquid bleach consumption is estimated at approximately 100,000 tons. It has widespread applications as an effective bleaching and disinfectant product for large surfaces such as kitchen and bathroom floors. It is used in dilution form either alone or in combination with high foam powder detergents. Acidic toilet bowl cleaners have an estimated consumption of more than 30,000 tons. Powder cleansers have also been in the market for many years, and are frequently used by consumers to remove heavy-duty soils such as greasy soil in the kitchen and soap scum soil in the bathroom. Total production for these products is estimated at about 10,000 tons a year.

New product introductions by major surface care manufacturers have focused on task specific products that are convenient and save time. Examples include window cleaners, multi-surface spray cleaners, oven cleaners and carpet cleaners. These products are particularly appealing to the young educated consumers in professional jobs who have limited time for household cleaning.

1. The World Bank: World Economic Indicators Database. Population 2008
2. The Global Competitiveness Report 2010-2011, 2010 World Economic Forum
3.The World Bank: World Economic Indicators Database. GDP (PPP) 2008
4. F. B. Malihi, Household and Personal Products Industry, April 2007
5. Statistical Center of Iran, Year Book, 2006
6. F. B. Malihi, Proceedings of the 5th World Conference on Detergents, Montreux, Switzerland, 2002

About the Author
Farrokh B. Malihi is founder and managing director of Fargol Research Group, an international consulting firm specializing in surfactant technology, detergents and personal care products. Prior to that, he was a section manager for household product development at Colgate-Palmolive Technology Center in Piscataway, NJ. He completed his graduate studies in chemical engineering-polymers & surface sciences at Carnegie-Mellon University, Pittsburgh, PA. He holdstwo U.S. patents and three international patents on detergent formulation and processing. He has published more than 30 technical papers in the field of polymers and surfactant technology, and has been a frequent speaker at international conferences. Email: info@fargolgroup.com

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