Ingredients for HI&I Cleaning Products: Trends, Market Development, and Forecasts
This article was originally written for Chemistry & Business, Cosmetics & Household Chemicals Market magazine.
Cleaning products have become an important part of our everyday lives. They are essential for maintaining health and hygiene standards in any setting, whether household, industrial, or institutional (HI&I). The market’s size for cleaning products is more than USD 100 billion and growing rapidly due to dynamic factors including a growing population, the rising awareness of health and hygiene concerns, and increasing income levels, particularly in developing countries. These factors have triggered sales of cleaning products to grow at double-digit rates in some countries in the last few years. As a result, sales of ingredients used in these products have also witnessed a strong performance and are forecast to grow further.
GLOBAL MARKET OVERVIEW
The global market for HI&I ingredients covered in Kline’s recently published Ingredients for Household, Industrial, and Institutional Cleaning Applications database is valued at USD 27.2 billion in 2018. With 28% and 23% shares, respectively, the United States and Europe are the two largest markets in the world. They are followed by China and Southeast Asia, which are the most advanced markets among developing countries. India, the Middle East, and Brazil make up the remaining main markets but are also the three smallest markets among the seven main regions covered in the Kline’s study. Remaining regions are clubbed under Rest of World and account for about 15% of the total market.
The household segment dominates this industry with more than 75% share in ingredients sales value. Convenient formats and sustainable products that are efficient drive the demand and future development of this segment. The end-use segment share varies from one region to another. For example, in Asia, the household segment accounts for close to an 85% share, while in Europe and the United States, it accounts for close to a 75% share.
The industrial and institutional (I&I) segment is more price sensitive compared to household applications; therefore, expensive ingredients such as enzymes and fragrances are less used in its product formulations. For example, the household segment accounts for 95% of enzymes sales and 85% of fragrances sales in terms of value.
Laundry care is the key HI&I application, accounting for close to a 60% share in total ingredients value, followed by hard surface cleaners and dish care applications. Floor care and deodorizers and disinfectants have a relatively low value share compared to other applications in total ingredients value. However, the application share varies across regions. For example, in developed markets such as the United States and Europe, laundry care has around 55% share in total ingredients value, whereas its share in Asia is more than 70% in total ingredients value. This is mainly due to a difference in usage of different ingredients when producing cleaning products in the developed and the developing markets. For example, enzymes are not used in dish care applications in Asia, while they account for close to a 4%-5% share in the United States and Europe. Similarly, in floor care, fragrances have almost 25% share in Europe, while the corresponding share in Asia is less than 5%.
In terms of ingredient categories, surfactants dominate the market, accounting for more than two-thirds of the total market value. Alcohol ethoxylates, alkyl benzene sulfonates, and alkyl ether sulfates are the largest surfactant types, holding more than 50% of the total market sales of surfactants. Surfactants are followed by fragrances and enzymes that account for close to 6% of industry sales. Fragrances and enzymes are among the most expensive ingredients used in this industry and therefore have a higher share in value compared to rheology control agents or bleach that are consumed in higher volumes.
BASF, DowDupont, Stepan, Novozymes, and AkzoNobel are the top five suppliers for HI&I cleaning ingredients. Together, they account for one-third of the ingredients’ sales value. Surfactants is the largest ingredient category, and it is not surprising to see the leading suppliers for surfactants – BASF, Stepan, and AkzoNobel – among the top five suppliers in the market. DowDupont and Novozymes are the leading suppliers for enzymes, allowing them to be in the top five suppliers in the market.
The top three suppliers in mature markets account for an approximate 30% share, whereas in developing markets, such as India and Southeast Asia, they are estimated at 50%. This is because in mature markets, there are many niche suppliers with a significant presence in one to two ingredient categories, causing the market’s fragmentation. Such niche suppliers either have a small presence or are not present at all in developing markets, as some specialty ingredients are too expensive for the price-sensitive regions.
Ingredients used in HI&I cleaning products are heavily influenced by consumers’ changing requirements of the cleaning products as well as regulations. Kline sees three key trends in the market:
- Increasing usage of environmentally friendly and safe ingredients
- Continued shift toward liquid cleaning products
- Increasing usage of fragrances and odor control agents in cleaning products
Environmental Awareness is Key
Consumers’ growing environmental awareness leads to an increase in demand of environmentally friendly cleaning products, which in turn leads to an increase in the demand of environmentally friendly or safe ingredients for manufacturing cleaning products. This trend is also supported by regulations. Europe is at the forefront of forming regulations to increase the usage of environmentally friendly ingredients in manufacturing cleaning products. For example, the Detergents Regulation (EC) No 648/2004 helped nonionic surfactants overtake anionic surfactants as the most-consumed surfactant in the HI&I industry, as nonionic surfactants are more biodegradable. Alkyl polyglucosides (APG) in particular have benefited from this market shift, as they are environmentally friendly and have good dermatological properties. Enzymes also benefit from this market shift, as they are both environmentally friendly and effective in energy-saving, lower temperature cycles. One restraint in this category, however, is that the cleaning products market remains a price-driven market, and the high price of natural products driven by use of more expensive ingredients may dissuade consumers.
Regulations such as the Classification, Labeling and Packing (CLP) regulations in the EU will adversely impact growth of some preservatives such as chloromethylizothiasolinone (CIT/MIT). As companies are required to label products containing ingredients whose concentration is above one-tenth of the concentration limit, CIT/MITs are being phased out as the new restrictions render it ineffective in a formulation. Growing consumer complaints of negative skin reactions also damper any potential growth for CIT/MIT, which is expected to decline at an annual rate of 5% in the EU. CIT/MIT is also expected to decline in Asia and the United States; however, the decline is expected to be at an annual rate between 1%-2%. Ingredients such as DMDM hydantoin, which are formaldehyde donors, are also expected to face decline as environmental norms become stringent around the world. Questions have also been raised about quats, which are the most- used preservative for cleaning applications. Quats are facing increasing scrutiny from scientific and regulatory bodies, with several scientific studies being conducted on them. While they are widely used as a disinfectant in the food industry, there are concerns that quats can penetrate the surface on which they are applied and mix with food items. Despite concerns, substitution of quats is not foreseen in the near future, as alternatives can be expensive.
The environmental awareness trend has also led to changes in cleaning practices. For instance, laundry care is shifting toward lower temperature washing to save energy and reduced water usage to conserve water. This continues to shape new product development within the laundry care application and is affecting the ingredients usage in the industry. For example, usage of ingredients such as percarbonates is declining as more consumers adopt liquid detergents and use less bleach products. This trend has helped ingredients such as enzymes to grow in the market, as they are effective and ensure performance at lower washing temperatures. As a result, enzymes have already achieved 100% penetration in household laundry products in Europe and the United States. Enzymes usage in I&I laundry care products is also increasing in Europe and the United States. For example, in the United States, some end-user segments, such as hotels, are increasingly focusing on water and energy conservation, leading to increased usage of laundry detergents that are effective at lower temperatures. Their usage in other applications is expected to grow in the future as the lower washing temperature trend becomes stronger. However, high prices of enzymes will adversely impact their growth in the market. Within the different type of enzymes, proteases and amylases are most commonly used in cleaning formulations.
Continuous Shift to Liquid Products
The second key trend is the continued shift of the cleaning market toward liquid products. The shift is more prominent in developed markets; however, the trend is catching up in developing markets such as China, Southeast Asia, and Brazil. For example, in China, demand for liquid laundry detergents is growing at 10%, while the demand for powder detergent is growing at 1%. India is the only market where liquid detergents are facing problems in penetrating the market. India is a price-sensitive market, and most consumers prefer powder detergents that are lower priced. Further, only two to three liquid detergents are available in the market. However, as demand for liquid detergents grows in other markets, the growth in the usage of ingredients that are used in powder detergents is declining. At the same time, demand for ingredients that are used in liquid detergents is growing in the market. For example, this trend is favoring the usage of alcohol ethoxylates while the usage of percarbonates is declining, as percarbonates cannot be used in liquid formulation.
Fragrances and Odor Control Agents
The third key trend in the market is the increased usage of fragrances and odor control agents in cleaning products. This trend is mainly a spillover from the personal care industry. Consumers now want cleaning products that are not only effective but also provide aesthetic value, as sensorial perception of a product is becoming important to choose a product. We see this trend in Asia, Europe, and North America but not so much in Brazil as of now. In the Middle East, the preference is toward local fragrances.
Convenience and Other Trends
There are other trends in the market that could impact ingredients usage in the long term. For example, consumer requirements of convenience in cleaning is leading to changes in the design of cleaning equipment that could impact the type of cleaning products being used which, in turn, could have an impact on the ingredient choices of formulators. For instance, new washing machines with auto-dispensing capabilities along with tanks for detergents are growing in the market. Such machines increase the convenience of washing for consumers, as the consumer does not have to put detergent into the machine every time for washing clothes. As the usage of such machines grows, it is likely that the market for specialized detergents, such as detergents for delicate garments or for colored clothes, will be adversely affected. Ingredients used in such detergents are likely to face decline in such a scenario.
Another trend seen in the market is the growth of sales in cleaning products through the online channel. With the advent of new technologies, including voice assistant technologies such as Alexa from Amazon, it is likely that sales of cleaning products through the online channel will grow in the future. This trend could lead to changes in the competitive landscape for formulators, as smaller formulators are able to compete more effectively on the online channel. Thus, as sales through the online channel grow, the importance of smaller formulators will grow in the market. This provides an opportunity to focus on smaller formulators to grow in the market.
Based on the trends seen in the market, it is expected that the market for HI&I cleaning ingredients is expected to grow at a CAGR of 5%-6% until 2023. Growth will be led by the developing markets of Asia and South America, as the growth in the mature developed markets of Europe and the United States slow down to 1%-2% CAGR. Fragrances, followed by surfactants and enzymes, will be the fastest-growing ingredient groups.