Cleaning preparations and cosmetics - Industry Overview

Cleaning preparations and cosmetics industry shipments reached $42 billion in 1991, of which soaps and detergents (SIC 2841) account for 35 percent; cleaners, polishes, and sanitation products (SIC 2842) 15 percent; surface active primary products (SIC 2843) 8 percent; and cosmetics, toiletries, and fragrances (SIC 2844) 42 percent It is estimated that shipments increased by about 3 percent in 1991, slightly less than the previous year. Some of the growth is the result of an increase in exports, which grew by 13 percent in 1991 and 33 percent in 1990.

Before reading this chapter, please see "How to Get the Most Out of This Book" on page 1. It will clarify questions you may have concerning data collection procedures, factors affecting trade data, forecasting methodology, the use of data, sources and references, and the Standard Industrial Classification system (SIC).

The slightly slower growth rate in 1991 shipments appears to reflect cost-cutting and reduced consumption by hotels, schools, restaurants, hospitals, and other institutions and industries. With the economy expected to recover in 1992, stronger growth is also expected in these end-use sectors, including janitorial, housekeeping, industrial applications, and food processing.

During 1991, the industry as a whole was operating at 82.3 percent of capacity. Total employment reached 123,000 workers while productivity gained 1.5 percent. Productivity is forecast to grow by 1.6 percent in 1992, the result of higher output of super-concentrated soaps and detergents in solid, paste, and capsule form.

Concern about the environment is leading the industry to develop environmentally sensitive products, which are increasingly being sold in recycled packaging material to meet regulatory requirements and satisfy consumer demand.

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The cleaning preparation and cosmetics industries also are focusing new R&D technology on changing consumer habits, lifestyles, and demographics. Consumer acceptance increasingly will be influenced by convenience and price.

SOAPS AND DETERGENTS

Industry shipments increased by 3.2 percent to more than $14 billion in 1991. In constant dollars, growth was 2.7 percent above 1990. Most of the growth is attributed to the laundry detergent market, both in domestic and exports shipments. It is estimated that exports in 1991 increased by 25 percent to $487 million, while imports decreased by 4 percent.

In 1991, total employment increased by 4.6 percent to 36,300. Production workers accounted for 65 percent of the workforce. Greater automation of the production process has helped to improve productivity, which rose an estimated 1.3 percent from 1990 to 1991. Increased automation over the years has given the industry a competitive edge in global markets.

The soap and detergent industry is highly competitive, as evidenced by the wide range and multiplicity of products and high expenditures for advertising. It is also a relatively stable sector of the economy, with a strong international orientation. Significant potential market growth exists in both industrialized and developing countries. There is a close correlation between a country's consumption of soaps and detergents and its standard of living. The industry's frequent introductions of new products reflect improved technology and ever-changing consumer preferences.

Environmental concerns have become an extremely important issue. For example, in recent years the industry has turned to concentrated detergents that are both more powerful and also require less packaging material.

More than a decade of negative publicity also has brought about a decline in the use of phosphates in detergents. It is estimated that 40 percent of the country has banned the use of phosphates in heavy-duty detergents. Among the replacement materials are zeolite, sodium citrate, sodium carbonate, sodium nitrilotriacetate, and other polymers. More R&D and capital spending will be needed to meet both domestic and global competition and proliferating environmental regulations.

INTERNATIONAL COMPETITIVENESS

Markets in the United States, Western Europe, Japan, and East Asia are all estimated to be about the same size. Socio-demographics trends will play a major role in future international development. Population has stopped growing in Europe and Japan, where the average age of consumers is increasing and households are getting smaller. Climate and types of washing machines will also be factors in determining the industry's global marketing efforts.

Events in Eastern Europe and the Soviet Union will present challenges and opportunities, starting with additional exports and leading later to enhanced investment opportunities as these countries move to market economies. Economies in transition may present the biggest opportunity in this decade. With investment dollars limited, U.S. companies face difficult choices. But they will need to move quickly because international competition will be keen. Although overcoming trade and investment obstacles will take time, Eastern Europe appears to offer attractive opportunities for exports - at least until the private sector builds production capacity. Domestic demand, geography, cost of fuel and feedstock, and a ready labor force may make the Eastern European countries an ideal location for world-scale plants with sufficient capacity to eventually export to Western Europe and Asia.

Outlook for 1992

Industry shipments are forecast to increase by 3.7 percent in constant dollars. Productivity is expected to increase about 1.1 percent, and employment about 3 percent.

Long-term Prospects

In real terms, industry shipments are expected to increase from 2.5 to 3 percent per year well into the 1990's, depending on the cost and type of raw materials used to make soap and detergent. Natural soap production is taking hold and prospects are looking brighter. While conventional soap and detergent are based on petrochemicals, natural soap is made from tallow and tropical oils. It appears that growth will continue both in synthetic and natural products. Reformulation including biodegradable raw materials will account for synthetic growth.

POLISHES AND SANITATION GOODS

Shipments of polishes and sanitation goods increased by 2.7 percent in 1991 to $6 billion, and 2.1 percent after adjusting for inflation. The industry had a net positive trade balance in 1991 of $280 million. Exports totalled $455 million and imports $175 million. Total employment was 21,700, up .5 percent over 1990.

The industry produces polishes for furniture, metal, and glass for household, institutional, and industrial use. Also included are industrial disinfectants, drycleaning preparations, household bleaches, floor waxes, and solvents. Institutional and industrial markets account for nearly 65 percent of the industry. This part of the industry is very competitive and relies on such specialized niches as janitorial, industrial, and the food service industries. Major sub-groups include office buildings, restaurants, hospitals, schools, and motels and hotels. Basically two types of cleaners are in the institutional and industrial markets, commodity and specialty. Commodity cleaners are usually sold in high-volume and at lower prices, while specialty cleaners are low-volume, high-priced products that do a specific job.

Outlook for 1992

Industry shipments are forecast to increase by 3.1 percent in constant dollars in 1992, with a productivity gain in excess of 2.8 percent. New products using new technologies will be employed in response to regulatory and environmental concerns.

Long-Term Prospects

The industry will continue to grow by 2.5 to 3 percent per year over the next five years. Growth in performance-oriented specialties will increase at a higher rate, both in the United States and in international markets.

SURFACE ACTIVE AGENTS

Surfactants industry shipments increased by 5.9 percent to $3.3 billion in 1991, or 4.2 percent in constant dollars. Exports increased by 3.2 percent to $480 million, while imports increased to $140 million, producing a positive trade balance of nearly $341 million. The industry has 9,400 employees. Productivity increased by 3.3 percent over 1990.

Companies engaged in this sector produce active preparations that are used as wetting agents, emulsifiers, and primary materials used by soap manufacturers. Any compound that reduces surface tension when dissolved in water or water solution is considered a surface active agent. There are three categories of agents: detergents, wetting agents, and emulsifiers. All have the same basic chemical properties. Raw materials are derived from vegetable oil or animal fat and from petrochemical feedstocks. The raw materials are interchangeable and use is determined by cost of production.

Outlook for 1992

The value of industry shipments is forecast to increase by 5.1 percent in real terms. Exports and imports are expected to increase as global concentration leads to fewer companies. Exports to developing countries will continue to grow, while imports from Western Europe also will post gains.

Long-Term Prospects

The industry will continue to be affected by acquisitions and mergers. Environmental issues and concerns will dominate production, with growth rates of 5 to 5.5 percent per year over the next five years. - Vincent Kamenicky, Office of Chemicals and Allied Products, (202) 377-0128, September 1991.

COSMETICS

Cosmetics are classified in Standard Industrial Classification (SIC) 2844. This consists of five subsets: shaving preparations (SIC 28441); fragrances (SIC 28442); hair preparations (SIC 28443); dentrifices (SIC 28444); and cosmetics (SIC 28445). The establishments within these categories are primarily engaged in manufacturing perfumes (natural and synthetic), cosmetics, bath salts, body powder, colognes, creams, lotions and oils, dentifrices, denture cleaners, deodorants, hair coloring preparations, tonics and scalp conditioners, home permanent kits, manicure preparations, mouthwashes, shampoos, soap-impregnated papers, suntan lotions and oil, talcum powders, toothpastes and powders, premoistened toilettes, and other toilet preparations.

The industry also includes establishments engaged in blending and compounding perfumes, bases, shampoos, and shaving products. Establishments primarily engaged in manufacturing synthetic perfume and flavoring materials are classified in SIC 2869, and those manufacturing essential oils are classified in SIC 2899.

The value of industry shipments is estimated at $16.8 billion in 1991, reflecting 3 percent growth in constant dollars. Net exports represented 6 percent of total shipments.

For the past two years, the industry has undergone major restructuring as the U.S. marketplace became fairly saturated. Many recent acquisitions and mergers have positioned the industry for a global marketplace, including emerging markets in Latin America, Eastern Europe, and around the Pacific Rim. Aother major trend has been the industry's response to regulatory pressures and consumer concerns about product safety. R&D and product development have been increasingly focused on utilizing less animal by-products and chemicals, and more plant materials such as vegetable dyes and proteins to promote mildness and reduce toxicity.

Environmental concerns also have prompted some companies to stop offering their products in boxes and to use recycled materials for their packaging. There has been pressure, as well, to lower the use of volatile organic chemicals and chemical additives in products to reduce toxicity. Many product labels now state whether the contents have been tested on animals in response to heightened consumer sensitivity to this issue.

The industry is highly competitive, with more than 500 companies marketing in excess of 20,000 brands. The leading 10 companies control almost 60 percent of sales. Retail sales of cosmetics, fragrances, and toiletry items can be categorized in the up-scale, mid-level, and low-scale ranges related to distribution channels and prices. Up-scale products are often sold in major department stores or specialty boutiques. Mid-level products are also sold in department stores but usually at lower prices. Low-scale products usually are sold through drug store chains or by catalog.

Although shipments of most of the industry's products will grow only modestly, some market sectors have particularly promising prospects. For example, the markets for such traditional men's products as shaving and hair-care products are being bolstered by new unisex items designed to encourage purchases by men. These products include bath salts, hair shampoos, body washes, and skin-care lotions. The skin lotion market for men is expected to be an especially rapid growing sector.

Men's products also account for an estimated one-fourth of the $3 billion fragrance industry. Increasing numbers of fragrances are geared toward men. Up-scale fragrance shipments have been flat or declining slightly, but overall the industry is projected to increase modestly in the near future.

Skin-care products are forecast to increase about 5 percent per year. The skin-care industry is introducing new products with better sun protection, particularly against ultraviolet rays that are present all year. Specialty sun care products, with current sales of $400 million, have been increasing at an estimated 7 percent per year; this trend is expected to continue.

Lipstick, blush, eyeshadow, and other items that color the face makeup the "color market," which is projected to increase in estimated 10 percent per year. New silicon-based products are increasingly used in color formulations and offer such advantages as color retention and water proofing.

Hair-care product shipments will also increase as hair coloring is increasingly used by an aging population. In shampoos, the trend is toward using natural raw materials and conditioners. Dual-use shampoos are experiencing substantial growth, as the combination of shampoo and conditioners provides another way to target men who don't traditionally use conditioners.

Health-conscious consumers continue to buy products that keep their teeth white and cavity-free and reduce plaque, eliminate tartar, and prevent gum disease. Anti-plaque toothpastes, though they account for only a small portion of the dental products market, have had the strongest growth in the past year.

INTERNATIONAL COMPETITIVENESS

A few multinational firms account for an increasingly large portion of the world market. This trend toward globalization of the industry has reduced the number of cosmetic marketers in the United States and changed the world market. For example, firms are creating international marketing systems to facilitate product penetration in many parts of the world. U.S. companies are also looking toward the Pacific Rim, Latin America, and Eastern Europe to supplement sales in traditional export markets.

Exports in 1991 are expected to reach $1 billion, exceeding imports by $427 million. Canada accounts for 18 percent of U.S. exports, followed by the United Kingdom, Japan, and Mexico. France accounts for 55 percent of U.S. imports, followed by Germany, the United Kingdom, and Japan.

The U.S. industry continues to promote adoption of U.S.- developed product standards internationally, and it is working to lessen counterfeiting of name-brand cosmetic, toiletry, and fragrance products.

Outlook for 1992

Industry shipments are expected to increase 3.1 percent in real terms to $17.3 billion. This growth reflects the introduction of many new products to meet increasing demand for skin products with sun screens, hair-coloring, and dental products, as well as a range of products designed for male consumers.

Long-Term Prospects

It is expected that regulatory requirements will necessitate more substantiation of product claims through clinical and other trials. Consumers will continue to look for products that are more functional. Skin-care products formulated with sunscreens will become increasingly popular.

The industry will continue to enjoy a healthy growth rate for the next five years. Competition will intensify as the marketplace becomes global and new products will be developed in an effort to increase market share. - Moira M. Shea, Office of Chemicals and Allied Products, (202) 377-0128, August 1991.

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Additional References

(Call the Bureau of the Census at (301) 763-4100 for information about how to order Census documents.) 1987 Census of Manufactures, MC87-1-28D, Bureau of the Census, U.S. Department of Commerce, Washington, DC 20233. Value of Product Shipments, Annual Survey of Manufactures, M89(AS-1-28D, Bureau of the Census, U.S. Department of Commerce, Washington, DC20233. 1991 International Buyers' Guide, The Cosmetic, Toiletry, and Fragrance Association, 1101 17th St., NW, Suite 300, Washington, DC 20036. Telephone: (202) 331-1770. International Cosmetic Ingredient Dictionary, The Cosmetic, Toiletry, and Fragrance Association, 1101 17th St., NW, Suite 300, Washington, DC 20036. Telephone: (202) 331-1770. The CTFA Newsletter and CTFA Membership Directory, the Cosmetic, Toiletry, and Fragrance Association, 1101 17th St., NW, Suite 300, Washington, DC 20036. Telephone: (202) 331-1770. Cosmetic Chemicals '91, The Chemical Marketing Reporter, Schnell Publishing Company, Inc., 80 Broad St., New York, NY 10004-2203. July 22, 1991. Telephone: (212) 248-4903.

COPYRIGHT 1992 U.S. Department of Commerce
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