Issue Date: January 25, 2010
Beyond The Basics
Back in June 2009, while the U.S. was still mired in recession, Procter & Gamble began test-marketing Tide Basic, a lower priced version of its storied laundry detergent. The no-nonsense addition to the nation’s leading detergent line seemed like a logical response to tough economic times—and one that the rest of the industry would surely follow.
That didn’t happen. In fact, throughout 2009, the laundry products aisle in the supermarkets and big-box stores of the U.S. and Western Europe positively bristled with new brands, novel product forms, and line extensions. Rather than go back to basics, the fabric care industry thumbed its nose at the economy and pushed ahead with detergents and other laundry aids full of new bells and whistles.
The chemical companies that supply cleaning products makers with raw materials have been happy to help. They are at their best trying to come up with ingredients that make cleaning more efficient and environmentally friendly, and they weren’t eager to revert to a game of incremental gains in which price is the biggest selling point.
“We saw this as a short-term financial blip,” says Gary Dee, director of BASF’s North American home and personal care chemicals business, about 2009’s economic reversal. “We knew there’d be some focus on value brands on the part of the consumer, but the focus of our customers is still on innovation. We have no doubt that the market is willing to pay for innovation.”
Indeed, with the exception of Tide Basic, most of the laundry product launches of the past year are fairly high-end formulas. For example, in Western Europe Henkel came out with fabric softeners containing microencapsulated fragrance, while in the U.S. it launched the novel—and premium priced—Purex Complete 3-in-1 detergent sheet.
Clorox’ Green Works natural products line finally reached the laundry aisle with a liquid detergent and companion stain remover. And P&G went national with its high-end Tide Total Care while launching Tide Stain Release, an extension to the Tide detergent line. It also came out with Bounce Dryer Bar, a stick-on fabric softening and static dissipation bar that stays inside the dryer for months at a time.
Although the big cleaning products firms knew that some shoppers were hurting financially, Keith Grime, a former R&D executive with P&G and now head of JKG Consulting, explains that they decided to stick with the core strategy of product differentiation. In his view, “An overreactive focus on low-cost, low-priced products will ultimately drive market commoditization and allow price to become the primary variable.”
Still, the recession was a challenge for laundry product makers—and especially for their premium brands. In its 2009 annual report, P&G reported lower shipments of premium-priced Tide and Ariel detergents but growth in its less expensive Gain detergent line. Overall, P&G’s fabric and home care sales were down 2% during the 2009 fiscal year, which ended on June 30. On the other hand, Church & Dwight said higher sales of its value-priced Arm & Hammer and Xtra laundry detergent brands helped propel its U.S. consumer product sales up 9.1% in the third quarter of 2009.
The consumer shift toward basic cleaning products reverberated at chemical suppliers. David Del Guercio, director of Evonik Industries’ household care business in North America, says his unit’s sales volume fell 3-5% in 2009. Interestingly, he thought the decline would be as high as 10%, given that Evonik’s main end market is fabric softeners, which aren’t as necessary to cleaning as detergents. “But it seems that those who buy them are dedicated to them and see them as a necessity,” Del Guercio says.
Novozymes, a leading enzymes producer, reported that detergent enzymes sales were up 2% through the first three quarters of 2009—a decent number but still well down from the 15% sales gain reported in the same period in 2008. Anders Lund, marketing director at Novozymes, attributes the slowdown to consumers trading down from premium brands to less expensive ones, which contain fewer enzymes, and to lower consumption of detergents overall.
The year wasn’t so bad for chemical companies that do a lot of business with private-label manufacturers, notes John Cate, global business director for fabric care and cleaning applications at AkzoNobel Surface Chemistry. In the U.S., the big player in this market is Sun Products, maker of Costco’s Kirkland and Walmart’s Sam’s Choice detergent brands. “We found our customer base in the private-label sector did very well last year—and at the expense of the big brands,” Cate says.
The recession’s impact was also mild in Europe, according to Thomas Müller-Kirschbaum, senior vice president for R&D, technology, and supply chain for the laundry and home care business at Henkel, one of Europe’s leading cleaning products makers. Müller-Kirschbaum speculates that government programs, particularly in Henkel’s home country of Germany, kept people working and able to buy premium home and fabric care products.
In fact, after adjusting for foreign exchange, Müller-Kirschbaum’s business grew 3% in the first three quarters of 2009. In his view, the harsher business conditions were actually in 2008, when Henkel’s laundry profits were squeezed by high raw material prices. “In 2009, the raw material situation was better and we didn’t have to go back on price because we had innovative offerings instead,” he says.
Even in the U.S., Nilesh Shah, global R&D director for Dow Chemical’s home and personal care business, believes that any consumer shift away from premium brands has been modest. Moreover, Shah says Dow’s fabric care industry customers haven’t been clamoring for low-cost formulas. “Customers are always looking to be cost-effective in their formulas, but there’s no real indication of a desire for value-priced product lines,” he says. “If anything, people are trying to build in specialty performance advantages as a way to stand out from the crowd.”
As to Tide Basic, given the length of product development cycles, P&G was likely developing the new version before the recession hit, Shah notes. “I think this is more a segmentation of the market than anything else,” he says.
Indeed, Dawn French, director of R&D for P&G’s North American fabric care business, points to a desire to offer multiple products over a variety of “value equations” as P&G’s primary motive for experimenting with Tide Basic. It’s still in test marketing, she says, and the company hasn’t decided whether to roll it out more broadly.
French won’t go into specifics about what differentiates Tide Basic from more expensive versions of the detergent, but she acknowledges that they are there. “For Tide Basic, we looked at the most common stains and environments,” she says. “In Tide, we throw in the whole gauntlet of chemistry—all our surfactants, enzymes, and polymers.”
Perhaps as telling about the consumer mood these days as the testing of Tide Basic is Clorox’ decision to launch its Green Works laundry detergent in the depths of the recession. The premium-priced liquid is the latest in a string of Green Works cleaning products that are bringing naturally derived ingredients into the mainstream.
Although Clorox is confident of the detergent’s success, it recognizes that the bad economy has taken a toll on all premium-priced products, environmental ones included. In fact, data gathered in the winter of 2007–08 by Packaged Facts and the Hartman Group, two market research firms, showed that 39% of consumers agreed either “a little” or “a lot” that they would pay more for environmentally friendly products. By the spring of 2009, the figure had dropped to 32%.
Clorox debuted its first Green Works product, a hard-surface cleaner, in the sunny economic climate of early 2008. Sumi Cate, a group R&D manager at Clorox, explains that it took until the middle of 2009 to launch a detergent with natural ingredients because “a year-and-a-half ago, the technology wasn’t really there.”
For Clorox, Cate says, the breakthrough was a natural surfactant system the company calls syndetics. Covered by three patents that Clorox was granted in the fall, the syndetic formula includes a base anionic surfactant plus hydrophilic and hydrophobic ones. Judging from the product’s label, the anionic is methyl ester sulfonate, the hydrophilic is alkyl polyglucoside, and the hydrophobic is cocodimethyl amine oxide.
The patents explain that typical anionic surfactants can interact with themselves in the wash water, forming a separate phase that saps cleaning power. Clorox adds hydrophilic and hydrophobic surfactants that it believes affect the spacing and order of the anionic surfactant in a manner that reduces oil-water interfacial tensions and promotes cleaning. Cate claims the reduction is more rapid than can be achieved with traditional surfactant systems.
Developing the technology required Clorox to work with several chemical companies. Cate won’t name them, but the patents suggest firms such as AkzoNobel, Stepan, and Cognis, all of which manufacture at least some surfactants from natural ingredients.
“I’ve seen a huge change in raw material suppliers,” she says. “More companies are beginning to offer natural and sustainable chemistries.” Cate says Clorox is still looking for natural ingredients with which it can preserve its cleaning products. She’d also like a wider diversity of plant-based surfactants. “There have been years of research on petrochemical raw materials, and that level of research with natural feedstocks has just begun,” she says.
Green Works products are all the number one natural cleaner in their respective segments, Clorox claims. In laundry detergents, however, it will be going up against Henkel’s Purex Natural Elements, a value-priced brand that Müller-Kirschbaum says is the current U.S. leader among natural detergents. In fact, he says sales are up a double-digit percentage versus a year ago, whereas the natural detergents category as a whole is flat to down.
Unlike P&G, which so far has eschewed natural detergents, Henkel is increasingly a player. Following the example set by Purex, in Europe last year the company launched a laundry detergent as part of its premium-priced Terra Activ line. Yet unlike Purex detergent, which claims that 95% of its ingredients are from renewable raw materials, the bar for Terra Activ detergents is set at just over 60%.
To explain why, Müller-Kirschbaum recalls sitting on a panel last year and being questioned by a representative from a small Belgian maker of green household products about the modest renewable content of the Terra Activ detergent. He responded by relating Henkel’s experience from the 1990s, when for environmental reasons it removed phosphates from automatic dishwasher detergents only to see product performance deteriorate and market share plummet.
“I would like to see products that have an even higher share of renewable materials,” he says. “But if we are going to combine performance and sustainability, we cannot make a compromise in the wrong direction.”
As part of its goal to strike the right balance, Henkel has been working with a tool it calls the Smart Carbon Index, which measures a product’s performance, contribution to climate change, and biodegradability. According to Müller-Kirschbaum, applying it to the three core detergent ingredients—surfactants, polymers, and enzymes—reveals a need for more sustainable cleaning polymers. “Give me better biodegradable polymers,” is the message he sends to the chemical industry.
At Dow, which became a leading maker of acrylic detergent polymers through its 2009 acquisition of Rohm and Haas, Shah is well aware of the problem. “People have wanted biodegradable polymers for a long time,” he says.
Shah recalls that about a decade ago Rohm and Haas did a lot of work on aspartic acid-based polymers, which are biodegradable, to potentially replace polyacrylates, which are not. “We had to walk away from that technology when the brand owners saw the cost of implementing it,” he says. “Every year we get those requests, but the costs are still in the wrong place. In my view, we’re still years away.”
Dow is having more success providing other detergent ingredients that are both biodegradable and based on renewable raw materials. The firm’s line of Ecosurf SA surfactants are manufactured from seed oils, and Shah says customers are testing a new disulfonate surfactant based on glycerin, a renewable ingredient.
AkzoNobel claimed success with biodegradable polymers in December 2009 when it launched a line of products created by reacting a polysaccharide with existing synthetic polymers. “We can take any synthetic polymer that had been used for any application, and we can hybridize it,” Cate says, so that up to 75% of it is polysaccharide, a renewable raw material.
One version of the polymer, used to inhibit scale in oil drilling, meets strict biodegradability standards for drilling in the North Sea, according to AkzoNobel. Cate expects to soon commercialize a related polymer that is added to powdered laundry detergents to aid dispersion and prevent soil redeposition.
Some detergent industry suppliers are using special designations and even special events to highlight their sustainable product offerings. In 2007, Cognis debuted Green Chemical Solutions, a guide to its products that helps customers decide how “green” they want their brands to be. Last October, Clariant launched the EcoTain label to identify those products and services it considers eco-friendly and sustainable.
For Clariant, one example is Praepagen HY, a biodegradable hydroxyethyl quaternary compound, notes key account manager Matthias Löffler. In addition to being derived from vegetable sources, it acts as a booster, allowing customers to cut back on surfactant concentration while maintaining performance. It had good success last year in the European hand dishwashing liquid market, he says, and is being targeted at liquid laundry detergents as well. During 2009, Löffler adds, Clariant developed new EcoTain products such as an emulsifier based on sunflower oil, biodegradable cationic softening agents, and a novel amine oxide surfactant.
Novozymes took advantage of its Danish home base to hold a detergents sustainability summit a week before the big climate-change meeting in Copenhagen late last year. Novozymes also has been pitching a new multienzyme package it calls DREAM (for detergent reformulation, enzymes adding more). With the package, the company claims, customers can replace up to 25% of surfactants and builders—ingredients often based on nonrenewable resources.
Although enzymes are naturally derived, Novozymes touts them just as much for the broader environmental improvements they can bring to detergents—including the elimination of phosphates and good cold-water performance—and for the decoupling from petroleum-based raw materials they provide.
That makes sense to Grime, the former P&G executive, because quite apart from the ecological argument for renewable raw materials, he points out that they provide a defense against the economic vulnerabilities of petroleum-based raw materials. “No one would want to repeat the stress of formulating in the uncertain economic and supply environment of the last couple of years,” he says.
Yet many in the industry are convinced that natural raw materials are not the only path to sustainability—and perhaps not even the best one. Rather than devise only natural ingredients, BASF focuses on products that it believes offer more significant improvements. For example, Dee says the firm is developing sustainable cleaning formulas that work in water-saving front-loader washing machines. And he points to Luvipur 10, a polymer launched last year that allows detergent formulators to reduce their use of anionic surfactants such as linear alkylbenzene sulfonates.
P&G doesn’t ignore natural raw materials. Last year, in fact, it formed a partnership with the industrial biotech firm LS9 aimed at using LS9 fermentation technology to produce sustainable chemicals for P&G consumer products.
But for now, French, the R&D chief, maintains that P&G’s recent compaction of its liquid laundry detergents and its launch of Tide Coldwater, specially formulated for washing in cold water, make better environmental sense than adopting natural ingredients. “We’ve been able to show significant home energy savings, since 80% of the energy used to wash your clothes goes to heating water,” she points out.
Amid attention to the environment, good old convenience still drives innovation in the fabric care business. Last year, Henkel came out with Purex Complete 3-in-1, which combines detergent, fabric softener, and static reducer into one sheetlike product. As Müller-Kirschbaum explains, the product’s controlled-release technology descends from an automatic dishwasher detergent Henkel launched in Europe in 1999. In that product, the release of a rinse aid was triggered by the high temperature of the rinse water.
In the new Purex, concentrated detergent dissolves when the sheet is thrown in the wash, but the fabric softener and antistatic agents stay embedded in an insoluble matrix. They are activated when the sheet is thrown in the dryer with the rest of the laundry. “It has a melting point beyond the wash temperature but below the dryer temperature,” Müller-Kirschbaum says. “That’s the whole secret.”
Henkel claims that Purex Complete contributes to sustainability because it uses minimal packaging and is less expensive to ship than competing liquid detergents. But Müller-Kirschbaum also likes the new product for its boldness and for how it exemplifies the globalization of Henkel’s R&D organization. “It’s a game-changing innovation,” he says.
Purex Complete isn’t the only fabric-softening innovation to hit U.S. stores recently. Long sleepy, the fabric softener section of the laundry aisle saw a flurry of new product forms in 2009. Notably, P&G launched Bounce Dryer Bar, and Church & Dwight came out with Arm & Hammer Total 2-in-1 dryer cloths, which combine the functions of a liquid fabric softener and a dryer sheet into one thick cloth.
Evonik’s Del Guercio says introductions of new product forms kept his fabric softener product development people busy in 2008 and 2009, often going beyond their usual role as chemistry providers to help customers perfect new product forms. “These things don’t just happen in three months,” he points out. “It’s not just making and delivering a molecule.”
Del Guercio is looking forward to more outside-the-box innovation in 2010. Given the economic turmoil of the past 12 months, he’s seen a flurry of turnover in the ranks of the cleaning products industry. It makes for a lot of hand-holding by chemical suppliers but also for a lot of potential as well. “There are new people coming in, and with that comes new ideas,” Del Guercio says. “That creates opportunity.”
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