Soaps & Detergents

INDUSTRIAL CODES

NAICS: 32-5611 Soap and Other Detergent Manufacturing

SIC: 2841 Soap and Other Detergents (except Specialty Cleaners)

NAICS-Based Product Codes: 32-56114111, 32-56114121, 32-56114211, 32-56114311 through 32-56114411, and 32-56117111 through 32-56117211

PRODUCT OVERVIEW

Soap is a substance that when mixed with water produces suds for washing and cleaning. Suds are produced by the surfactant that holds dirt and oil particles in suspension so they can be rinsed off with clean water. Soap, as such, is not found in nature, but it can be produced using simple processes to combine animal or vegetable fat with wood ashes or lye. In this way, soap is similar to other useful items produced by resourceful people most likely first by accident and then by design, such as bread, beer, wine, and cheese. More than likely, the soap making process was discovered independently across the world in various regions, since cooking was done over a wood fire, resulting in animal fat falling onto wood ashes. When it rained, suds appeared in the fire pit. People then discovered that these suds had cleansing properties.

Soap is one of the first consumer products that humans come into contact with as newborns. Thereafter, few manufactured products are used more frequently than soap. The first tangible proof of soap making is found in ancient Rome, where the Roman historian Pliny described soap made from animal fat and wood ashes. Traditionally, soap was made at home, probably once or twice per year. With some work and luck it could be made for no cost using materials already in the home. The earliest soap industries appear to have begun in what are now Italy and Spain, where olive oil was common and contributed to a superior product. By the fifteenth century soap making had spread to southern France, including the port of Castile. Northern soap makers produced soap with animal fat, which made a coarser product. The result was a lively trade of fine bar soaps from southern to northern Europe by the seventeenth century.

For many years, bar soap was considered a luxury. Castile soap with olive oil remains a luxury to this day. The earliest soap was recommended by doctors and viewed as having medicinal properties. Soap was first sold commercially by druggists and pharmacists. After the industrial revolution, soap came to be seen primarily as an agent for cleaning and washing. In the first decade of the twenty-first century, soap came full circle and in many ways returned to its roots as a product with medicinal and healing properties. The recent introduction of multipurpose face and personal cleaning soaps that exfoliate, tone, and moisturize, and botanical soaps that heal by creating a spa-like environment that ease tension, are examples of soaps that serve purposes beyond cleansing.

MARKET

According to the U.S. Census Bureau report titled "Soap and Other Detergent Manufacturing: 2002," a part of the 2002 Economic Census, the value of all shipments of soaps and detergents in that year was $17 billion. As a whole, the detergents and soaps industry grew approximately 19 percent between 1997 and 2002. The $17 billion industry includes commercial, industrial, and institutional soaps and detergents, and toothpaste. Figure 198 presents the product breakdown for the Soap and Detergent manufacturing industry as a whole.

In 2002 the total shipment value for household detergents was $4.4 billion (or 26% of the $17 billion industry) while the total shipment value of household soaps was $1.8 billion (or 11% of the industry). Each is considered separately.

When distinguishing between soaps and detergents, the term soap is used to describe substances used for washing the body. The term detergent is used to describe substances used for cleaning household items such as clothes and dishes. Soaps and detergents for personal or household use are nondurable consumer goods. Nondurable goods are purchased for consumption within a short period of time (from minutes to three years). Because nondurable goods are consumed by their use, consumers need to repeatedly replenish their supply.

Household Detergents

Between 1997 and 2002 the value of shipments of all household detergents declined 38 percent, from $7.2 billion down to $4.4 billion in 2002. Household detergents are classified by the U.S. Census Bureau according to whether they are dry or liquid with major product classes described as:

• Dry light-duty laundry detergents
• Dry heavy-duty, phosphate based, laundry detergents
• Dry heavy-duty, phosphate free, laundry detergents
• Liquid light-duty, laundry detergents
• Liquid heavy-duty, laundry detergents

For more than 100 years manufactured laundry detergent was primarily sold as a dry product. In 1998 liquid, for the first time, overtook powder as the best selling type of laundry detergent and continued to gain ground through 2002. As a result of a trend away from dry products, liquid light-duty shipments increased almost 30 percent from a 1997 base of $875 million to $1.1 billion in 2002.

The top laundry detergent manufacturers in 2005, with their respective market shares, were Procter & Gamble (60%), Unilever (14%), Church & Dwight (10%), Henkel (8%), and Colgate Palmolive (3%), according to Market Share Reporter 2007. That same year, nine of the top ten laundry detergent brands were liquid. Tide Liquid led with 31.4 percent of total laundry detergent sales, followed by All Liquid (7.7%), Purex (7.1%), Gain Liquid (5.7%), and Xtra Liquid (4.2%).

Procter & Gamble's notably large laundry detergent market share of 60 percent is attributable directly to Tide. Procter & Gamble introduced Tide in 1946. Tide has been a nationwide bestseller since Procter & Gamble expanded it nationally in 1949. Procter & Gamble's introduction of new products under the Tide brand name sheds light on current market strategies of the entire detergents and soaps industry in the United States, Europe and the world.

Procter & Gamble launched a series of liquid detergents in the early 1980s and in the 1990s it rolled out a line of detergents that all had the prefix Ultra: Ultra Tide Powder, Ultra Tide Liquid, Ultra Tide Powder with Bleach, and Ultra Tide Liquid with Bleach. The word ultra means the liquid was concentrated, therefore the consumer could use less per load of laundry. Then Tide Compact Liquid Polybag Refills and Tide Compact Liquid with Bleach joined the product line.

In February 2007 Tide Simple Pleasures was advertised in the upscale In Style magazine between Godiva chocolate and Nissan automobiles. Tide Simple Pleasures was advertised as being inspired by natural essences and available in three scents: vanilla & lavender, water lily & jasmine, and rose & violet. The industry-wide trend toward line expansion includes constant evolution into trendier scents. As a result, Procter & Gamble introduced Tide Pure Essentials, marketed as "a new wellness-inspired line of detergents" that contain citrus extracts and baking soda, with scents of white lilac and lemon verbena.

Household Soaps

Household soap products are classified by the U.S. Census Bureau according to whether they are bar or liquid with major product classes described as:

• Deodorant bar soaps, excluding medicated
• Nondeodorant bar soaps, excluding medicated
• Liquid toilet soaps, excluding medicated

Household soap has historically been primarily a bar product. At least 75 percent of U.S. homes have bar soap, a market penetration rate only dreamt of by manufacturers of other nondurable consumer goods. This high penetration rate is the result of more than 100 years of manufacturing, when household soap came to be defined as bar soap for personal use. In the 1950s deodorant soaps gained popularity under such well-recognized brand names as Dial and Lifebouy. At that time, the bar soap market was bifurcated into nondeodorant bar soap and deodorant bar soap and remains so.

Deodorant bar soaps are more popular than nondeodorant. Between 1997 and 2002, shipments of deodorant bar soaps increased 56 percent from $742 million to $1.2 billion. During the same period, shipments of nondeodorant bar soaps decreased 46 percent from $412 million to $222 million.

According to Market Share Reporter 2007, the top U.S. bar soap manufacturers in 2005 were Unilever with 43 percent of the market, Procter & Gamble with 20 percent of the market, and Henkel and Colgate Palmolive with 16 percent and 12 percent, respectively. The size of the bar soap market in the United States in 2005 was $780 million. Bar soap took 49 percent of the soap market that same year, down from 55 percent in 2003. Bar soap lost market share to liquid soap.

Liquid toilet soap was first introduced in 1980 by the Minnetonka Corporation, the Bloomington, Minnesota company that invented Softsoap. After the introduction of Softsoap, the household liquid toilet soaps class was designated. This class grew 50 percent in the five year period between 1997 and 2002, from $370 million to $554 million. In 2005 Softsoap led with 47 percent of the market. Dial and Ivory Liquid followed with 27 percent and 3 percent market share, respectively.

Unilever's notably large nondeodorant bar soap market share of 43 percent is attributable to the success of the Dove brand. Unilever introduced the Dove bar in 1957. It consistently captures close to 50 percent of the nondeodorant bar soap market. To build on the success of this well-known bar soap, Unilever's Dove line expansion includes the Dove bar in various colors, scents, and both liquid and bar forms. The bar soap landscape began to change in the early twenty-first century as liquid soap and body washes gained market share.

KEY PRODUCERS/MANUFACTURERS

The bar soap branded as Ivory has been manufactured by Procter & Gamble since 1882. Many Americans grew up with Ivory Soap and it may evoke memories of their youth. Due primarily to the success of its Tide laundry detergent product line, Procter & Gamble has dominated the U.S. detergents and soaps industry for more than 60 years, along with Unilever, whose dominance is attributed to the success of Dove. Other leaders are Church & Dwight, Colgate Palmolive, and the German-based Henkel, which recently acquired Dial Corporation.

In the first five years of the twenty-first century, three of the largest detergent and soap manufacturers cleaned house. Colgate sold its European detergent business unit in 2003 to Procter & Gamble and in 2005 divested its North American laundry detergent brands which included Fab and Cold Power. Procter & Gamble acquired Gillette. Church & Dwight acquired USA Detergents, increasing its U.S. laundry detergent market share to 9 percent and securing its position as the third largest in the United States. Henkel purchased Dial Corp in 2004 and in the same year divested its stake in Clorox.

Church & Dwight Co., Inc.

Founded in 1846 and based in New Jersey, Church & Dwight is the world's leading producer of sodium bicarbonate (baking soda), a natural product which cleans and deodorizes. This company sells over half of its U.S. products including powder and liquid laundry detergents under the Arm & Hammer brand name and derivative trademarks.

Colgate Palmolive

Colgate was founded in 1806 by William Colgate. The world leader in toothcare posted worldwide sales of $9.3 billion in 2002. After selling their North American laundry brands in 2005, they posted worldwide sales of $10.5 billion in 2004. Sales were derived from four consumer product categories: oral care, personal care, home care, and pet nutrition.

Colgate Palmolive's brands include, most notably, Irish Spring and Softsoap. In 2007 Irish Spring was available in bar and liquid form. Softsoap has been a leader since it invented the market in 1980.

Henkel KgaA

Laundry detergent was the first Henkel business and Persil has been its leading European brand since it was launched in 1907. Henkel holds the number three market position worldwide in the laundry detergents market. In order to break into the North American laundry detergent market, Henkel acquired The Dial Corporation in 2004. Dial manufactures Dial soap and Purex laundry detergents. By 2005 Purex laundry detergents were the leader in the value segment, and Purex was the number two selling laundry detergent overall.

Procter & Gamble

Cincinnati-based Procter & Gamble has been an industry leader since its establishment in 1837 as soapmakers and candlemakers. In 1879 it became nationally known with the introduction of Ivory bar soap, "the soap that floats." The most popular soap operas owe their existence to Procter & Gamble's innovative marketing idea of sponsoring radio soap operas because in 1933, Procter & Gamble sponsored the radio show Ma Perkins, one of the earliest of the soap opera genre.

Unilever

From soap to soup Unilever's portfolio of more than 400 brands includes worldwide favorites as divers as Dove soap, which consistently captures nearly 50 percent of the U.S. bar soap market, and Knorr soup. Unilever is an international manufacturer of food, home care, and personal care products. By 2005 Unilever was using its success with Dove as a platform to address the problem of female negative self-image. In the United States, its Dove Self-Esteem Fund works in partnership with the Girl Scouts, and in the United Kingdom and Canada through BodyTalk school programs. Whether the Fund will meet its goal of raising female self-esteem is a unknown, since critics claim the problem was created by mass marketing of consumer personal care products.

Globally, other prominent companies involved in this industry include Reckitt Benckiser, Kao, and Lion.

MATERIALS & SUPPLY CHAIN LOGISTICS

The materials needed to make Dove white bar soap, a consistent bar soap leader, are listed with those present in the highest quantity listed first.

Sodium Cocoyl Isethionate, Stearic Acid, Coconut Acid, Sodium Tallowate, Water, Sodium Isethionate, Sodium Stearate, Cocamidopropyl Betaine, Sodium Cocoate or Sodium Palm Ker-nelate, Fragrance, Sodium Chloride, Tetrasodium EDTA, Tetrasodium Etidronate, BHT, Titanium Dioxide (CI 77891)

Sodium cocoyl isethionate is the main ingredient. It is a surfactant, as are five other ingredients in the top ten. Major categories of materials needed to make bar soap are surfactants, humectants, and perfumes. Surfactants change the surface tension of water to aid cleansing, foaming, and emulsifying. Humectants hold in water to increase the moisture content in the top layer of the skin. Perfumes make the product smell nice in the package and during use. Sodium chloride is a viscosity controlling agent that controls product thickness. Titanium Dioxide is a pure white pigment.

Other materials needed to manufacture detergents and soaps sound more familiar: glycerin, vegetable oil, fatty acids, grease, inedible tallow, and chlorine. The primary categories of materials purchased by manufacturers to make detergents and soaps, according to data reported by the U.S. Census Bureau, are from largest to smallest:

• Organic and inorganic chemicals
• Surfacants (surface active agents)
• Soda ash, caustic soda, sodium tripolyphosphate, and potassium
• Perfume oil mixtures and blends

Organic chemicals are generally derived from petroleum. In detergents and soaps, organic chemicals include preservatives and other goods integral to making nontoxic products with a long shelf life. Inorganic chemicals occur mostly as salts, and include sodium sulfate. Sodium sulfate is an inexpensive product used as a filler in dry laundry detergents. The U.S. detergents and soaps industry decreased its use of organic and inorganic chemicals between 1997 and 2002 by half. Chemical purchases were valued at $1.5 billion in 1997 and $752 million in 2002.

Petroleum-based raw materials are not the main materials needed to make soaps and detergents, however, mineral oil, naptha solvents, and petroleum waxes are used in soap and detergent manufacturing. Perhaps anticipating increases in the price of petroleum products, the detergents and soaps industry decreased its purchase of petroleum products 58 percent between 1997 and 2002, from $75 million down to $31 million.

Synthetic surfactants derived from petroleum include olefin sulfonate (a foaming agent), cocamidopropyl betaine, and sodium myreth sulfate (an inexpensive and effective foaming agent). Wetting agents that help products spread, surfactants are integral to making detergents and soaps. The U.S. detergents and soaps industry increased its spending on surfactants by 50 percent in the five year period between 1997 and 2002, from $672 million to $1.2 billion.

Soda ash, also known as sodium carbonate, is a sodium product primarily used to make detergents and soaps. It is a basic chemical found in large natural deposits and mined. Caustic soda, also known as sodium hydroxide, is an alkali used in the manufacture of soap. Sodium tripolyphosphate is used as a builder in soaps and detergents to improve their cleansing ability. The cost of purchasing this class of materials increased 14 percent between 1997 and 2002, from $501 million to $588 million.

Perfumes are used to impart a pleasant aroma in both the product and the packaging. They are often discussed in terms of mixtures and blends because they include enhancers, fixatives, and extenders, to augment the aroma, fix or slow down evaporation rate by reducing volatility, and to increase volume without diluting the aroma. The cost to purchase perfumes increased 20 percent from $239 million in 1997 to $301 million in 2002. This is not surprising, considering the industry-wide strategy of turning to natural essences to expand existing product lines.

DISTRIBUTION CHANNEL

Household detergents and soaps are sold to consumers through supermarkets, drugstores, and mass merchandisers. Detergents and soaps are often described as undiffer-entiated commodities, where one brand is seen to wash or clean as well as any other. As a result, consumers are thought to buy on price, so most manufacturers use value pricing in the form of in-store sales price markdowns to capture consumers' attention. Capturing consumer attention is important because soaps and detergents are primarily sold at stores, where the shelves may hold more than 140 detergent and soap products.

The distribution channel for detergents and soaps is not vertically integrated. There are no Procter & Gamble or Unilever detergent and soap stores designed to sell these product lines. While a manufacturer of paint such as Sherwin Williams has 3,081 stores in North America, Mexico, Puerto Rico, and China, and Ford automobiles are sold at Ford-specific dealers throughout the world, the detergents and soaps industry relies on wholesalers to transport products to local stores. These products are not typically bought online. The exception is newer manufacturers such as The Body Shop, Bath & Body Works, and specialty manufacturers such as Origins and L'Occitane who advertise and sell products online.

Some companies within this industry make and sell the raw products for detergents and soaps. Church & Dwight produces sodium bicarbonate (baking soda) and other specialty inorganic chemicals that it both uses as a basis for its own products and sells to manufacturers of detergents and soaps. Procter & Gamble announced in January 2007 that it intends to buy botanicals in India to support the growing trend of products scented with natural essences.

KEY USERS

The user of detergents and soaps is every human being from newborn infant to the elderly. One factor that distinguishes the user is income. Bar soap and dry laundry detergent are generally bought by people on the lower end of the income scale. As income rises, they switch to liquid toilet soaps and liquid laundry detergents.

ADJACENT MARKETS

Demand for household laundry detergent and household personal care soap can be linked to other activities that occur within the household. Laundry detergent is typically used in a washing machine; the type of machine in the household influences purchasing decisions. Personal care soap is typically used in the bathroom; the type of shower or bath in the household influences purchasing decisions.

Whether the household has a standard top loading or a new front loading washing machine will determine whether they choose dry or liquid laundry detergent. Standard top loading machines can work with either dry or liquid products. Newer front loading machines generally will not accept dry products. If consumers own the latest development in washing machines, such as the new low water/low temperature washing machines that save energy, then they have to buy detergent that is more soluble so it dissolves more easily. Procter & Gamble, with its recent introduction of Tide HE (high efficiency), anticipates that consumers will become more concerned about the need to save energy and therefore demand for such specialized products will increase.

Whether the household has a shower or a bath will determine whether they choose bar or liquid personal care soap. Evidence of this comes from Europe where house are smaller and showers, which take up less room than bathtubs, are more common. In 2003 in Western Europe, the total market size for shower washes/gels was $2.6 billion, while the total market size for bar soap was $1.2 billion, or roughly half. In Europe, the use of shower washes/gels is more common than in the United States. The top bath/shower brands in Western Europe are Dove, Palmolive, and Nivea Bath Care.

On a global scale, bar soaps still outpace liquid soaps by a significant margin. On a price basis, global bar soap sales in 2004 were $9.27 billion and shower washes/gels had total sales of $6 billion. As the liquids are more costly than the solids, this differential is much greater on a volume basis.

RESEARCH & DEVELOPMENT

The materials used in manufacturing detergents and soaps are constantly under research and development. This industry employs more chemists than production line workers. Research and development is driven by the desire to save costs by identifying cheaper substitutes. Historically, detergents and soaps research and development was driven by environmental concerns and the regulatory require-ment to decrease detergent foam residues in surface water bodies. In more established markets, regulatory pressures continue to drive research and development. Emerging regulatory pressures include REACH (Registration, Evaluation and Authorization of Chemicals) scheduled to be implemented in 2007 in the European Union.

CURRENT TRENDS

In many ways soap has returned to its roots as a product with presumed healing properties. The current trend of scented and/or botanical products that ease tension by creating a spa-like environment reflects this desire by the consumer for healing. For instance, Procter & Gamble's Ivory line includes Ivory bar soap and body wash scented with lavender. Lavender is both a botanical and a scent. It is world-renowned for its calming and soothing properties. Lavender is alleged to heal acne, eczema, infections, and skin rash. Lavender can help one relax and unwind, and this is an activity that is no longer limited to the bath. Tide Simple Pleasures is available in three scents: vanilla & lavender, water lily & jasmine and rose & violet, bringing this soothing spa-like environment to the laundry.

Another trend is soaps that clean while simultaneously offering skin care benefits that are almost medicinal in nature. Multipurpose soap products clean, exfoliate, moisturize, and tone skin. Some multipurpose soap products are advertised as alternatives to more expensive medical treatments. This trend uniting soap with its earliest use as a medicine or healing agent is exemplified by Procter & Gamble's expansion of their Olay line. The Olay Moisturizing bar now comes in four formulations: Moisturizing Bar with Silkening Moisturizer for Normal Skin, Moisturizing Bar For Dry Skin with Oatmeal, Moisturizing Bar for Sensitive Skin, and Moisturizing Bar with Shea Butter for Extra Dry Skin.

Some trends appear to contradict each other. Competing trends include the introduction of multipurpose products while at the same time introducing simpler products to meet consumers' desire for all natural, fragrance-free, and dye-free products.

TARGET MARKETS & SEGMENTATION

Because the U.S. laundry detergent market is a mature industry with growth rates of less than 4 percent per year, manufacturers cannot hope to achieve sales growth by increasing their market share as is common in less mature, still growing industries. Instead, manufacturers frequently expand an existing product line by introducing product innovations within a well-respected brand. A strategy now shared by all manufacturers worldwide is to capitalize on an especially successful or well-known brand.

An example of this line expansion strategy is the Arm & Hammer laundry detergent line. Church & Dwight Co., Inc.'s well-known Arm & Hammer logo was first used in the early 1860s exclusively on baking soda packages, a natural product that cleans and deodorizes. The Arm & Hammer line now includes more than ten different detergents including liquids, powders, perfume-free, a dye-free, and products for high-efficiency washers. All liquid laundry detergents are offered in a variety of fragrances.

Another example of this line expansion strategy comes from Henkel. It penetrated the North American market with its 2004 acquisition of Dial. Dial soap is America's number one antibacterial soap, with nearly 1 million bars sold per day according to Henkel's Web site. A key element of Henkel's planned future growth is the development of innovative new Dial products. During the past few years, Dial launched Dial For Men, a line that includes bar soap and body wash; Dial Complete Antibacterial Foaming Hand Wash; Dial 2 in 1 Body Wash & Shave Cream; Dial Daily Care Body Washes; and Liquid Hand Soaps. Expanding a well-known line by targeting the male element is a strategy ripe for exploitation. Thus far, conventional soap and detergent manufacturers have not shown a great deal of interest in the male segment of the population.

Manufacturers have so successfully implemented the brand expansion strategy to capitalize on an especially successful brand, they have expanded right out of the detergents and soaps industry into the toiletries and cosmetics industry. Many of the newest products are appearing as new product classes in toiletries. These new toiletries classes include cleansing and moisturizing creams; facial scrubs and masks; and disposable cleansing cloths. For instance, Olay has a classic cleansing line that is very well-known. Olay recently added numerous specialty products designed to replace bar soap for personal cleansing including: Foaming Face Wash, Dual Action Cleanser and Toner, and the Hydrate and Cleanse line of cleansing products. Olay also introduced a skin regenerating line know as Olay Regenerist, and an anti-aging line called Olay Total Effects. These products are less like traditional bar soaps for personal use and more like toiletries and cosmetics.

RELATED ASSOCIATIONS & ORGANIZATIONS

International Association for Soaps, Detergents and Maintenance, http://www.aise-net.org

The International Union of Pure and Applied Chemistry, http://www.iupac.org/general/handbook/abbrev.html

Soap and Detergent Association, http://www.cleaning101.com

BIBLIOGRAPHY

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see also Antiperspirants & Deodorants, Shampoos & Conditioners