Soaps and Detergents
SIC 2841
NAICS 325611
Industry manufacturers formulate personal and laundry soaps, synthetic organic detergents, inorganic alkaline detergents, and related compounds. The soap category includes granulated, liquid, cake, flaked, and chip soap; textile soap; scouring and washing compounds; and dishwashing compounds and presoaks. Manufacturers of shampoos and shaving preparations are discussed separately under Toiletries and Cosmetics.
Following a trend begun in the late 1990s, during the mid-2000s the global soap and detergent industry faced tight competition in established markets and had shifted its focus to Asia, Eastern Europe, and Latin America for new growth. Amid a late 1990s economic downturn in several Asian markets—and a slowdown in Latin America—multinational soap makers found themselves squeezed for new markets. Faltering economies in these regions, along with a slowdown in the United States, and fierce competition, these tough market conditions forced soap and detergent companies to develop new products while controlling costs and price. Many firms also looked to acquisitions or joint ventures to solidify their global position in the industry.
Among the established markets such as Western Europe, Japan, Canada, and the United States, soap and detergent producers competed largely on price and their ability to satisfy changing consumer preferences, which varied from region to region. For example, liquid detergent sales continued to be stronger than powder sales in the United States, where washing machines were manufactured to work well with liquid detergents. However, demand in Europe for concentrated powder tablets continued to grow, especially in the United Kingdom. New products were often developed to appeal to a specific consumer region. A water-soluble capsule containing concentrated liquid detergent was launched in Europe by both Unilever and Proctor & Gamble— but was not marketed in North America.
Laundry detergents form the largest component of the industry in terms of sales value, accounting for as much as 50 percent of industry revenues in the United States and approximately 40 percent in Europe. In the United States alone, laundry detergent sales reached US$3.3 billion in 2004. Liquid detergents accounted for most sales by far, exceeding US$2.4 billion while powders accounted for only US$850 million. Worldwide, the laundry detergent market was worth about $35.8 billion in 2005, according to Euromonitor (Chicago). Western Europe accounted for 29 percent of this total, followed by Asia/Pacific (25%), North America (18%), and Latin America (7%). Africa/Mideast and Australia accounted for only 5 percent and 1 percent of the market, respectively.
Although bar soap remained the most popular cleansing product among U.S. residents, with penetration into approximately 75 percent of the nation's homes, sales in that category were declining as consumers turned to newer forms of cleansers such as shower gels, body washes, and liquid soap. According to Research and Markets (Dublin), the U.S. market for soap and bath/shower products was worth about $1.6 billion in 2006, with bar soap accounting for just under half of those sales. Although bar soap remained the largest segment, more growth was seen in the other segments.
The soaps and detergents industry is dominated by a handful of major multinational players originating in Europe and the United States. Although some are just regional powerhouses, a few leading firms are thoroughly internationalized and hold significant, and sometimes dominant, market positions in numerous countries. In most nations a second tier of companies usually operates on the national level and often produces for the low-price (or even generic brand) market.
Top-tier companies have found it necessary to compete in diverse global markets in order to sustain the growth rates and profits their shareholders seek. Often their home markets, such as Western Europe, are relatively saturated and afford few opportunities for growth. In a small number of cases, companies have pursued growth through acquisitions—sometimes simply at the product level rather than the company level—in order to better their stance in a particular product category or regional market. More often, however, leading soap and detergent manufacturers have battled one another for shares of these finite markets through discounting and product innovation, or have entered emerging markets where use of competitive products may be minimal.
Companies also keep track of distribution channels. Procter & Gamble (P&G) took the lead in developing a policy of everyday low pricing, reducing the traditional coupon and trade promotion discounts that retailers had long known. Such an arrangement encourages sales, especially to consumers who do not use coupons and who make purchase decisions based on in-store price comparisons. Although angry retailers initially reduced support for affected P&G brands, because the lower prices were believed to also cut into the retailers' profit, product sales increased by about 4 percent in 1993; subsequently, about 90 percent of the firm's brands were similarly priced.
The soap and detergent industry is under pressure to reduce production costs due to rising competition from private label, or store brand, products. Though private labels continued to make inroads in the late 1990s, in most leading economies they still accounted for a relatively small share of the market.
Additionally, manufacturers deal with fluctuating costs for necessary raw materials, such as ethylene- and benzene-based ingredients. Europe, in particular, suffered from overcapacity for basic materials production, which depressed prices in that category. (Some soap and detergent makers produce raw materials as well, and thus can be hurt by low prices.) Other ingredients, notably phosphates, face environmental controversies, and some countries either have banned phosphate-based detergents or regulated their use.
Traced back to ancient Rome, soap has been an integral part of human civilization. While the first soaps, made from wood ashes and animal fat, were used for medical purposes, by the second century A.D. soap was used to clean. During the Middle Ages, soap was still homemade but had developed into use for personal and laundry cleaning. In the late eighteenth century, soap evolved from a homemade product into a full-fledged industry, propelled by Nicholas LeBlanc's discovery of a method to manufacture soda ash from brine. However, it was not until the nineteenth century that cake soap went from being a luxury to a common-use item.
In 1806 William Colgate founded a company to make soap, starch, and candles. By 1906 the firm was producing 160 different types of soaps. In 1876 Fritz Henkel formed Henkel & Cie in Aachen, Germany, to manufacture a universal detergent. Just two years later, he launched "Henkel's Bleaching Soda." As early as the 1880s, Henkel was making water glass—a detergent ingredient. Henkel's "Persil" (a brand name later used by Unilever) eliminated the need to rub or bleach clothes, and was brought to market in 1907.
William and James Lever presented the first packaged, branded laundry soap, Sunlight, in 1895. Initially serving Britain, Lever Brothers, the predecessor of today's Unilever, was marketing soaps in the United States, South Africa, and Australia less than 20 years later. Another industry milestone occurred in 1898 when J.B. Johnson launched Palmolive soap, which used palm and olive oils.
The worldwide soaps and detergents industry grew rapidly in the twentieth century. However, as with many other areas of life, it was forever changed during World War II when natural ingredients for soap became rare. Synthetic detergents were developed as substitutes for all soaps except those used for personal bathing. By the 1950s detergents surpassed the use of soaps in laundering and dishwashing. While the majority of the manufacturers sold their products in traditional markets, companies such as Amway Corp. revolutionized the industry when distributors sold products in-home rather than via traditional retail methods.
Heading into the 2000s, consumers throughout the world were demanding more than mere cleansing properties from soap products. Bath and shower products, worth US$20.5 billion in 2003, continued to meld with those traditionally found in the skin care category as people looked for soaps that exfoliated, moisturized, and toned their skin. In addition, a growing number of people looked for soaps that offered certain emotional benefits, namely relaxation. For example, a number of specially scented soaps offered so-called aromatherapy to bathers, or a "spa at home" experience. Some industry observers correlated the popularity of these products to rising levels of stress.
The Proctor & Gamble Company (P&G) and Unilever continued to hold a leading market share in the detergents sector. According to data from Chicago-based research firm Information Resources Inc., in 2003 U.S. laundry detergent sales totaled US$3.2 billion, US$2.4 billion of which was liquid detergent and US$869 million of which was powder. P&G's detergent sales...
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