Detergent brands have been relying on consumer loyalty and large ad spends, says Mintec’s Robert Miles. But cost increases are threatening their dominance
They say cleanliness is next to godliness. Well, houseproud Brits had better get praying.
The cost of many of the commodity ingredients used to produce washing detergents has soared over the past year and fears are mounting that the hikes will soon start filtering through to retail prices.
Detergents are derived from relatively few global commodities, but these have pretty much all increased sharply in price. Coconut oil, palm kernel oil and caustic soda have more than doubled in price in the past 12 months.
The recent spike in oil prices is also weighing on detergent manufacturers road transport costs have surged 41% year-on-year, with crude oil (used in the manufacture of synthetic detergents) up 40% and bottle-grade plastic up 30%.
With so many of the key underlying commodities experiencing price inflation, manufacturers will be increasingly concerned that they will have to pass those costs down the supply chain to retail customers, and ultimately, consumers.
And, as the UK is the largest consumer of detergents in Western Europe, UK shoppers could be hit particularly hard.
Although the Western European share of the global detergents market has declined from about 40% to less than 35% over the past 10 years, it is still the largest market in the world. That means manufacturers who do pass costs on to consumers in the EU and the UK will need to be careful, as there is no lack of alternative product on the market.
In the past, commodity spikes in the detergents category have, to a degree, been mitigated by the fact that many detergents are used diluted large price rises were therefore significantly ‘watered down’.
But not any more. The recent trend to reduce packaging and produce more concentrated products means that any cost increase is now likely to be much more pronounced and potentially noticeable to the consumer.
Brands ought to be particularly concerned as other trends threaten to compound the problem. In the US, there has already been a big push to trade down from branded products to own-label economy products, for instance, with Walmart leading the way.
A high advertising spend and significant brand loyalty has, to date, kept brands at the forefront in the UK and the rest of the EU but with costs rising, how long will this last?