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Development Scenario of Household Care Chemicals Industry in Pakistan

Kashif Hussain Mangi, Zubair Ahmed Chandio,


Overview

Soaps:

The Home and Personal Care (HPC)


industry is very diverse in Pakistan with
different products directed at wide-range of
target segments and income groups. The
industry is highly dominated by major
global players like Unilever, Procter &
Gamble, Colgate Palmolive and others. All
major brands of these companies are
available in Pakistan. A break up of HPC
categories is given the Figure 1.

The leading player in soap market in


Pakistan is Unilever. Soap Market in
Pakistan is a comprehensive resource for
market/company shares. Soap industry in
Pakistan produces approximately 75,000
metric tons of toilet soaps. Composition of
soap is generally 80% fats and oil. Major
raw material inputs include Tallow and Palm
oil. The soap market in Pakistan increased at
a compound annual growth rate of 1.4%
between 2004 and 2009. The bar soap
segment led the soap market in Pakistan in
2009, with a share of 97.8%. The leading
player in soap market in Pakistan is
Unilever. Soap Market in Pakistan is a
comprehensive
resource
for
market/company shares.
Laundry:

Figure 1. Break up of consumption of HPC


products category wise
International
consumers

brands

preferred

by

A handful of multinationals dominate value


sales in most categories of home care.
Household name brands in countries around
the world hold a similar status in Pakistan.
These brands represent quality and
availability and maintain a strong image.
Whereas multinationals use their resources
to make a strong impression on consumer
consciousness, for example through
advertising, local brands tend to have more
limited visibility. In view of the current high
rate of inflation and the slowdown in the
economy a considerable proportion of
consumers might be inclined to rethink their
choice of home care product and shift to
cheaper alternatives. Catergoric overiew of
major segments of the home and personal
care industry is the sections below.

Laundry care products continue to dominate


the household care environment accounting
for 65% of the total sales volume. Despite
the low purchasing power of Pakistani
consumers, MNCs dominate sales in the
household care market due to absence of
low cost competitors. The MNCs have the
advantage of higher quality goods, lack of
local competition and heavy advertising and
promotional campaigns. According to the
management, detergent penetration is very
low in Pakistan. About 50% of the
population uses laundry soap for fabric
wash. Similarly, shampoo penetration is one
of the lowest in Asia. Hence, tremendous
untapped potential for new players in the
HPC industry exists in the detergent and
shampoo market.
P&G
Companies
areis
constantly
reformulating its their products to fit the
needs of the local consumer. It In this
regard, pioneered the introduction of small
stock keeping units sachets for various
consumer products have been introduced.,
including Ariel so that the price would not
burden people in the rural areas. Colgate-

Palmolive introduced Brite in 1981 and a


new improved version in 2004 especially
formulated with stain removal and dirt
cleaning action. Surf Excel is the oldest
detergent brand to be present in Pakistan
since 1960.
Laundry Industry Analysis
For many centuries, soap was primarily used
for laundering. However, laundry detergents
have essentially replaced soap because they
perform over a broad range of water
hardness levels. Laundry Detergent and
washing powders have become an important
part of every consumers life. The laundry
care market has evolved over time. These
changes have led to intensified competition
among rival producers and gradual
expansion in consumer choice. The market
currently faces strategic challenges from
changes in consumer needs and preferences
as well as any future rise in outsourcing and
use of multi-purpose launderettes and from
emerging washing technologies.
UK Developed world consumers use
washing machines most frequently each
week, although, Pakistani consumers wash
their clothes more frequently overall with a
combination of machine and hand washing.
Food and cooking are the most common
causes of clothes staining and odor tainting
for most consumers.
For many centuries, soap was primarily used
for laundering. However, laundry detergents
have essentially replaced soap because they
perform over a broad range of water
hardness levels. Laundry Detergent and
washing powders have become an important
part of every consumers life. The market
offers a variety of washing powders, each
brand claiming to wash the cleanest at
unbeatable prices to consumers. Laundry
detergents, however, exert a hidden but
taxing cost on the environment and
consumer health due to their environmentdamaging properties. Phosphates are one of
the main ingredients in most present-day
laundry detergents and are also the primary
culprits in polluting water bodies.

Since very recently Since the last two years,


the market trend in (Pakistan) in the laundry
detergents has taken a good pace, and many
consumers are switching from the bar soaps
to laundry detergents. In terms of
percentage, the increase ratio is about to 2025% per annum. Increased competition in
some categories has led to an increase in the
variety of products which constitute
particular ranges. Overall, competitive
pressure stemming from increased prices
and the effects of the economic recession
fragility led to some companies taking
proactive measures during 2009 in order to
gain value share by expanding into
unexploited categories of home care and
seeking to differentiate their products
among consumers.
Detergents:
Market share plays a prominent role in
business research and standing in the
market. There are many competitors of
detergent in Pakistan. The leading MNCs
introduced their different detergent products
to compete each other. Unilever launched
Surf Excel, which is the oldest detergent
brand to be present in Pakistan since 1960.
P&G introduced cheaper detergent product
including Ariel so that the price would not
burden people in the rural areas. In the
competition Colgate- Palmolive introduced
Brite in 1981 and a new improved version in
2004 especially formulated with stain
removal and dirt cleaning action. Surf
Excel is the oldest detergent brand to be
present in Pakistan since 1960.
Some of the leading brands are given. Take
Surf Excel for example. It was the first in
the Pakistan detergent powder market. Over
the years, Surf Excel has anticipated the
changing washing needs of the Pakistan
homemaker and constantly upgraded itself.
Surf Excel is Pakistan's largest selling
compact detergent powder.
Actual Market Size
Detergent Market is growing by 10-12%.

The current market demand is Market


demand of between 230,000-240,000 tons of
detergents per year.
The local detergent industry is producing
around 175,000 tons.
There is a demand-supply gap of about
55,000 tons.
Laundry Detergent Powder (LDP), as its
market stands at 240,000 tons annual with a
growth almost 10 percent a year.
Market Potential
Detergent Market is growing by 10-12%.
At present cConsumer prefers detergent on
the base of quality, especially the upper
class they are very quality conscious
Pakistani Peoples are moving from rural
areas to urban areas as life style is changing.
Advertising is promoting the detergents by
comparing the functionality of different
detergents and laundry Soaps.
Increase Aawareness of usage benefit of
detergent has increased.
Consumer is giving Ppreference to use
detergent to avoid the bad smell which
comes from washing with soaps (as
advertised by LDPs)
Target Market
Geographic Segmentation
Location
All over Pakistan (rural urban)
Population
180million approx.
Demographic Segmentation
Age
18 and above
Family Size
Small / Nuclear Family
Occupation
Housewives / Mothers
Geographic Segmentation
Location
All over Pakistan (rural urban)
Population
180 million approx.
Demographic Segmentation
Age
18 and above
Family Size
Small / Nuclear Family
Occupation
Housewives / Mothers
Geographic Segmentation
Location
All over Pakistan (rural urban)
Population
180million approx.
Demographic Segmentation
Age
18 and above
Family Size
Small / Nuclear Family
Occupation
Housewives / Mothers

Issues in HPC Sector in Pakistan:

A serious issue faced by the major


MNCthese companies is that the ingress of
smuggled and under invoiced goods has
significantly increased over the years. The
import of low-priced bar soap from
Indonesia was a major concern among
international and local players in recent
years. The low cost of these offerings and
high trade margins make them attractive to
both consumers and retailers. This has
significantly hurt the volumes and margins
of FMCG players in the market.
HPC care chemicals industry is at a growing
stage
in
Pakistan. The
economic
environment is playing a significant role in
the consumption level among consumers.
Major companies faced difficulties in
controlling unit prices in because of
currency devaluation and inflation. Most of
the local and international companies import
raw materials from outside the country and
are affected by rupee depreciation and
persistent energy crisis..
Future Prospects:
An increase in urbanization has fueled
awareness among consumers which has
resulted in favourable value and volume
growth of beauty and personal care
products. Consumers in urban centres
experience a lifestyle which encourages
them to enhance their personality and look
good. The urban consumer enjoys ease in
spending and high disposable income which
urges higher spending on personal care
products.
In Pakistan, a large growth in household
care products can be anticipated in the near
future. The reasons attributed to this,
include, rapid increase in population,
migration of rural consumers to urban areas
in search of employment, rising disposable
incomes, improvements in living standards
and increased awareness of health and
hygiene. In addition, a better distribution
network with the opening of larger urban
hypermarkets will also add to this.

The growing penetration of electronic media


in both rural and urban centres has led to
growth in HPC chemicals. The growth is
directly related to the extent of awareness
and education delivered by brands to their
consumers. Companies have made a heavy
amount of investments in educating
consumers regarding hygiene and personal
development through electronic media.
Increased popularity of supermarkets and
other large-scale retail formats
A number of multinational operators set up
in Pakistan during the review period, with
many new retail outlets opening. This new
trend also seems to be popular among
consumers who increasingly rely on these
distribution channels for stocking up during
periodic big shopping trips. This trend can
be attributed to the greater need for buying
products in bulk at discounted rates due to
the prevailing adverse macroeconomic
conditions. After meeting with success in
Pakistans biggest cities Lahore and
Karachi, the impact of the increasing
presence of these channels is now being felt
in smaller cities such as Rawalpindi,
Islamabad and Faisalabad.
Although the global economy is expected to
recover during the forecast period, there will
still be considerable inflationary pressures
affecting the economy of Pakistan. The
economy of Pakistan has been sluggish.
However, volume will continue to grow at a
goodslow pace due to the nature of

consumer demand for many of the products.


Although volume growth will remain at a
steady middle low level, the slump in oil
prices has decreased energy cost and hence
the jump in unit price will lead to a
considerable rise in value sales. However,
any possible deterioration in economic
conditions or delay in the expected
economic recovery will end up causing
negative volume growth and very minute
unit price increases as more consumers shift
to economy brands from their current choice
of standard brands. Even if the economic
recovery begins soon, high inflation will
still ensure that the magnitude of the
increase will be much smaller and less
significant in real terms compared to
nominal growth.

Recommendations:
Explore regional and national differences
through qualitative market data and compare
growth and penetration data to plan for
future developments. Gain insight into the
consumer preferences and changing
behaviors that will affect the strategic
direction of the laundry care market.
Explore in-depth analysis of new products
launched globally and action points that
highlight existing best practice and new
innovations.