Less Sunny Skies

THE SOAP & DETERGENT Association's annual conference, held late last month in Florida, was its last at the storied Boca Raton Resort & Club after a 37-year run. Next January, the event will be held at the nice but decidedly less opulent Grande Lakes Orlando resort.

Conference goers insist that their companies are doing nothing more than leaving a hotel that cared less and less about their needs as the years wore on. Yes, they acknowledge, the new location is less expensive, but the move should in no way be construed as a retrenchment by an industry under pressure.

Still, a person attending the conference could be forgiven for concluding that the industry is on the defensive. On Monday, Jan. 26, the event's first day, retail giant Wal-Mart voiced its displeasure with the environmental profile of the detergents it sells in its Americas region, which includes Canada, Puerto Rico, Mexico, Central America, Brazil, and Argentina.

At its quarterly sustainability meeting, Wal-Mart called for a 70% reduction in the phosphate content of the region's laundry and dish detergents by 2011, fingering them as a "significant contributor" to phosphate-based water pollution.

The giant retailer's initiative comes after several states pressured the U.S. cleaning products industry to drop phosphates from automatic dishwasher detergents by mid-2010. Laundry detergents sold in the U.S. haven't contained phosphates for many years.

Then on Wednesday, Ernie Rosenberg, SDA's president, warned attendees at an issues briefing breakfast that the U.S. regulatory climate for cleaning products manufacturers is going to get worse under the new, environmentally minded Obama Administration. Rosenberg ran down a litany of potential new regulations that he said threaten the innovative capabilities of the industry.

These environmental hurdles are appearing in an economic climate that has buffeted companies of all types. Clariant, one of the big players in detergent raw materials, announced that same Wednesday that it was cutting 1,000 jobs. At evening receptions, some executives hinted darkly about competitors that are only months away from bankruptcy or being acquired because their sources of financing have dried up amid the credit crisis.

YET ALONG with the ominous talk, others at the meeting insisted things aren't that bad. They pointed out that the cleaning products industry is relatively recession-proof. And they argued that growing environmental consciousness on the part of governments, consumers, and retailers should be viewed not as a threat but as a challenge to be solved with science.

Jorge Mesquita, head of Procter & Gamble's multi-billion-dollar fabric care business, said P&G laundry detergents aren't doing quite as well as they were last year, but sales growth hasn't turned negative. "People do wash their clothes in good times and bad times," he reminded reporters at a briefing.

Tony Frencham, global business director of Dow Chemical's fabric and surface care business, seconded that notion, although he conceded that his customers who formulate industrial cleaning products are more exposed to the vicissitudes of the economy. The health of their business, he noted, depends on bustling factories, hotels, and airports.

Not surprisingly, Dow was one of the companies whose finances were being questioned by competitors, particularly in light of the delay of its acquisition of Rohm and Haas. Frencham said the plan for his business remains intact: join it with Dow's personal care business and then, when the deal finally happens, combine the new Dow unit with similar activities at Rohm and Haas. The result will be a new business dedicated to household and personal care.

Although P&G's Mesquita said he wasn't aware of Wal-Mart's phosphates reduction announcement, he cautioned not to take it as evidence of a rift between the soap and retail giants. Mesquita noted that P&G and Wal-Mart are often on the same page regarding environmental matters. In fact, he said, P&G created its new, more concentrated liquid laundry detergents in partnership with Wal-Mart.

Regarding automatic dishwasher detergents, Sharon J. Mitchell, senior vice president of R&D for P&G's fabric care business, said the company is already preparing for the elimination of phosphates in the U.S.

P&G anticipates turning to a combination of enzymes and specialty polymers to perform the sequestering and water-softening functions that phosphate "builders" provide. "Consumers will not have to trade off," Mesquita promised.

At Henkel, perhaps P&G's biggest detergents rival, Thomas Müller-Kirschbaum, senior vice president of R&D, technology, and supply chain for laundry and home care, cautioned that removing phosphates from automatic dishwasher detergents isn't so easy, especially in regions with spot-forming hard water. He said Henkel tried it in Europe about 10 years ago, to the detriment of product performance. The company went back to the old formula and vowed never again to make ingredient changes that compromise the quality of its brands.

Compared with phosphates from agriculture and human activity, Müller-Kirschbaum pointed out, phosphates in dishwashing detergents have an almost negligible effect on the environment. Middle Eastern countries such as Egypt, he noted, even require phosphates because of the cleaning performance they bring to detergents.

Henkel doesn't sell automatic dishwashing detergents in the U.S., but Müller-Kirschbaum acknowledged that regulators in Europe, where its Somat brand is a leader, could opt to follow the U.S. action. He noted that Henkel is a pioneer in builder systems and that, if necessary, it would be ready with alternatives based on silicates and other chemistry.

David Del Guercio, the North American household care business director at chemical maker Evonik Industries, observed that an action such as Wal-Mart's can be an opportunity for a company like his. Although Evonik doesn't sell chemicals that directly replace phosphates, it does produce surfactants and sodium percarbonate bleach that customers might need as they rework detergent formulas.

Perhaps because he has a businessman's optimism, Del Guercio called the mood at the convention "hopeful." He said customers want to know that Evonik isn't cutting its funding of household care chemistry R&D, despite the tough economic times. Customers are also seeking reassurances that Evonik is financially sound and, as Del Guercio said, that it "is a company that will be there tomorrow."