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 a