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Feature
All-Season
Cleaners
Packaging major Sealed Air
wants a larger share of the
Soumik Kar institutional cleaning market
after its Diversy buyout.
Aditi Saxena

“Name any big hotel and I can assure you that they are our customers" — Him an sh u Jain , vice-
presiden t, In dian su bcon tin en t, Sealed Air

Every day, more than 100 business meetings are conducted at the year-old Sofitel hotel at
Mumbai’s Bandra-Kurla Complex. These involve conversation, coffee, agreements,
disagreements and, almost every time, spills and stains. “In a hotel, such stains can lead to
losing customers and also, one’s job,” says Sachin Kapse, the laundry manager at the Sofitel.
More than a decade spent inside the laundry rooms of five-star hotels has taught Kapse a
thing or two about stain removal, and how seriously it is taken there.

Dirty bedsheets, used towels and stained table cloths arrive in over 20 lots daily, to be
thrown into 90-kg capacity washing machines designated for different kinds of cloth. Soon

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enough, Diversey’s DF1 laundry dosing machines kick into action, automatically releasing
the required chemical in predefined quantities into each washer, all for a spotless wash.
“Diversey’s products are the best when it comes to industrial cleaning,” says Kapse.  

That’s as good an endorsement as it gets for the world’s second-largest maker of cleaning
products. With almost all leading hotel chains — Taj, Shangri-La, ITC and Hyatt, among
others — as customers, Diversey hardly needs it, though. Its India presence dates back to
1997, when it came in as DiverseyLever soon after being acquired by Unilever, globally.
Later, after another acquisition by Johnson Wax Professionals in 2002, the company came
to be known as Johnson Diversey. Private equity investment firm Clayton Dubilier & Rice
(CDR) picked up 46% in the company in 2009.  

Finally, in June 2011, New Jersey-based packaging solutions company Sealed Air acquired
Diversey for $4.3 billion from CDR. “Because of our traditional Sealed Air business, we
operate at the production side of food, and through our Diversey business, we intervene in
food and beverage plants for sanitisation,” says Jerome Peribere, CEO, Sealed Air,
explaining the synergies gained from the deal. “We are now a farm-to-fork company.” 

The purchase raised many eyebrows back home and Sealed Air’s stock declined 45% within
a year and a half of the acquisition. In India, however, things began to look up. With
Diversey coming into the fold, the importance of the group’s operations in the parent’s
scheme of things finally began to grow. “Earlier, Sealed Air’s protective packaging was a
very tiny business in India,” says Yagmur Sagnak, president (Asia, Middle East, Africa and
Turkey), Sealed Air. 

The buyout catapulted the combined revenues for India to four times that of Sealed Air’s
protective packaging business alone. Of the ₹380 crore revenues clocked in 2012 (₹320
crore the previous year), nearly 80% came from Diversey’s cleaning business. Employee
head count in India is up three-fold from 100 earlier. Globally too, the company reported
$7.6 billion in sales in 2012, down from $8.1 billion in 2011 and up from the $4.4 billion in
2010. 

In India, Diversey’s cleaning chemicals and equipment, especially for laundry, food and
floor care, are used extensively in the hotel industry — the company claims its products are
used by some 350 hotel brands. “Name any big hotel and I can assure you that they are our
customers,” says a confident Himanshu Jain, vice-president for the Indian subcontinent. In
the restaurant segment, Diversey caters to 100 brands of quick-service restaurants,
including global and homegrown chains like McDonald’s, Mad Over Donuts, Haldiram’s
and Nirula’s, several malls, Mother Dairy and educational institutions such as Manipal
University. 

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Now, Sealed Air is becoming ambitious. This year, it expects to cross revenues of ₹400
crore and plans to grow to three times that size by 2015. After the merger of Diversey and
Sealed Air, the packaging company’s India operations now contribute 13-14% of global
revenues; that should increase to 25-30% in four or five years, says Jain. Can Sealed Air
mop up the market the way it wants?  

Customised solutions

But first, just what does Diversey do? Essentially, it is a part of the facilities management
industry. According to estimates by Virtual Info Systems, which organises the annual Clean
India Show, this is a ₹16,000-crore market. Housekeeping services account for nearly a
third of the business and under this, cleaning equipment and chemicals make up ₹1,000
crore. Sealed Air gets about 80% of its revenue from this segment (of which 50% comes
from institutional and laundry (INL) business.  

Hygienically speaking
Considered just another chore,

the cleaning industry is worth

thousands of crores in India

Diversey provides chemical solutions that are used for laundry

and dish-washing, as well as machines that are used to clean
floors; the company also makes dosing equipment for both
segments and soak tanks for kitchens. It gets about 35-40% of
its income from kitchens, followed by housekeeping (15-20%),
machines (20%) and finally, laundry (15%). But surprisingly,
it has a wider portfolio of products for laundry than for
kitchens. Jain explains why. In the hospitality industry, there
is a variety of linen, each of which requires differential
treatment. For instance, food and beverage linen is usually
more soiled than room linen and therefore, requires more
alkaline chemicals. Similarly, towels need to be softer than
bedsheets and require softening chemicals. 

While Sealed Air sources about 50 products of its 200-strong

portfolio from Europe, an important part of its India strategy
is customisation. For instance, Clax, its laundry detergent for
Source: Virtual Info Systems commercial use, has been re-formulated to match the
hardness of water in various regions of India. Diversey’s range

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of floor care machines, too, have been localised to suit Indian weather and construction
conditions. “In the West, floors are generally carpeted, but in India, one will mostly find
tiles or marble flooring in hotels. So, vacuum cleaners alone are not enough,” says Jain.
Accordingly, where Diversey was earlier importing its Taksi machines from Switzerland, it
is now bringing them in from Indonesia, where they have already been adapted to Asian
conditions. The relaunched machines now have new features such as a vacuum-based
system that does away with repeated cleaning and backtracking to pick up excess water.
This, claims Sealed Air, helps save water and chemicals by up to 50% and increases
productivity by 40%. 

Sealed Air has also introduced a machine range, Swingo, a combination of a vacuum and
single disk cleaner. While the single disk cleaner washes and polishes the floor, the vacuum
sucks up the water. Jain believes that this will be of particular use in malls and other
crowded areas. Another product, Suma 3 in 1, has been formulated for cost-conscious
consumers — it is a combination handwash, dishwash and floor cleaner. 

Going forward, more products made

especially for India are likely to be
launched. Already, more money is being
allocated for R&D at Sealed Air’s India
operations — Peribere says it could go up
from roughly 10% to as much as 20-25%
of global spend. “We allocate $140 million
each year to R&D globally. Now, more
funds will be allocated to this market,” he
Tushar Mane
adds.
We allocate $140 million each year to R&D globally. now,

more funds will be allocated to india — Jerome Peribere, Trained to succeed

CEO, Sealed Air The second part of Sealed Air’s India plan
is to ensure its clients know just how to
use its products — that’s the best way to ensure they get results and, therefore, stay on as
customers. Mohana M, managing editor of trade magazine Clean India Journal, points out
that the institutional and industrial market for cleaning chemicals and equipment is very
different from the retail market. “A food processing industry or a pharma production unit
cannot use a general purpose cleaning agent. It requires specific cleaning chemicals and
equipment to attain the stipulated hygiene levels. Hence, even though India is a traditional
market, cleaning chemicals and equipment specific to the institutional and industrial
sectors have a different consumption pattern.”

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Cleaning in full force

Packaging now accounts for only one-fifth of Sealed Air’s business

With new and

advanced machines
and products,
training has become
even more important
in this line of
business. In the past
few years, the
company has
Source: Company established learning
centres in Mumbai
and Bengaluru, where it conducts customised training programmes for employees of client
companies on new products and operating procedures, including floor care, health care,
restroom care and building care. Frequent audits are also done at client sites to ensure the
products are being used appropriately. “We conduct workshops for our staff from time to
time. If these products are not used properly, they could just keep on adding to your
operation costs,” agrees Ranjit Paliath, vice-president, business operations, McDonald’s
India. Convincing customers to use their products the right way, then, is a big hurdle for
Sealed Air.

Challenges ahead

McDonald’s has been a Diversey, and now Sealed Air, customer globally for several decades.
In India, too, the fast food giant has been a customer since its launch. Paliath says that the
cleaning products don’t come cheap, although food security and safety are far bigger
concerns than the price. “The last thing we would want our customers to worry about is any
disease or anything wrong with our food,” he adds. Indeed, that’s the biggest reason Sealed
Air has been able to sign on so many clients from customer-facing retail businesses,
especially those dealing with food. “Since hygiene and food safety are non-negotiable in the
food industry, one looks at optimising cost and productivity,” agrees Seema Atreya, vice-
president, supply chain, Haldiram’s India, a Sealed Air customer for packaging as well as
cleaning solutions.

The challenge now is to convince smaller

hotels, restaurants and offices in India to
switch to professional cleaning solutions.

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Jain estimates the INL market is worth

₹1,500 crore a year, growing at a healthy
8-10% annually. But nearly half of it
operates at the low end of the market and
currently, only 5% of Sealed Air’s
revenues come from this customer group.
It is now looking at expanding its business
to tier 2 and tier 3 cities, which constitute

We conduct workshops for our staff from time to time. If the only 30% of its business in the INL

products are not used properly, they could add to your segment but account for a major chunk of

operation costs — Ranjit Paliath, vice-president, business the revenue from the F&B segment, since

operations, McDonald’s India all the food and beverages plants are
situated in industrial areas outside
metros. Jain wants to change the ratio to 50:50 in the INL segment despite competition in
the form of cheaper alternatives. “Our competition is with the caustic soda and phenyl that
small-scale businesses still use,” Jain complains. 

For instance, at ₹2,000-2,200 per 50 kg, caustic soda comes at less than half the price of
Diversey’s cleaning detergent and chemicals, which cost ₹2,500-2,700 per 25 kg. How then
will its high pricing find favour in smaller cities? “There are price buyers and value buyers.
We have products that might have higher unit cost than the competitor’s product, but, in
the end, our solution is going to make them more productive,” says Peribere. 

That’s a standard pitch for most MNCs coming to India with high-priced offerings. But
apart from the business benefits that come from maintaining high standards of hygiene and
cleanliness for, say, a hotel, professionally formulated cleaning products also score on
cleaning quality and fabric safety. Diversey is banking on this aspect, along with its cleaning
equipment that get the job done better and faster. “If a company has to add 10% to its
operations cost to gain a 25% return on productivity, it won’t think twice before paying up,”
says Jain. 

“It is definitely a huge investment, but it is a one-time investment and people are ready to

pay the price,” says Sajid Ali, general manager, P&L, Radiant Hospitality, which provides
professional housekeeping and cleaning services across seven cities and uses Taski
machines at several sites (including malls) that it manages. “Thanks to their efficient
products and after-sales services such as regular maintenance audits, prompt customer
feedback response and machine repairs, they can demand whatever price they want,” Ali
adds.

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That proposition may not be enough, though, to crack open a diverse and fragmented
Indian market that often values upfront gains over long-term savings. So, while it sells to
large customers directly, Sealed Air uses its network of over 400 distributors across the
country to service small-scale clients. The number will increase, says Jain, as the business
grows. The company currently has four warehouses in Bengaluru, Mumbai, Delhi and
Kolkata, which cater to the nearest tier-2 or tier-3 cities. “But the customer today wants
quicker delivery,” says Jain, and hence, the company is working at improving efficiency at
its existing warehouses as well as opening them in more distant locations, such as
Guwahati. 

It also works closely with laundry centres and building service contractors, who help reach
its products even further down the user chain. “This way, we are just changing our client
mix, but ultimately the product reaches the end customer,” explains Jain. Sealed Air is also
trying out new options such as allowing customers to pay in installments for high-end
products such as the DF1 laundry dosing machine (₹7-8 lakh), and offering smaller SKUs of
its cleaning solutions to encourage trials. 

Where its cleaning solutions usually come in 25 kg packs (5 kg in some cases), it will now
also sell much smaller, 50 and 100 ml versions priced at ₹10-20. This one-day quantity, the
company hopes, will help it reach further down the client chain. It remains to be seen how
successful this strategy will be. Some 4 km down the road from Sofitel, Prakash Shetty runs
Nityanand Restaurant and has not even heard of Diversey, Sealed Air or its products. “We
use Sunny phenyl to wash floors and Wheel for dishes,” he says dismissively. Shetty, who is
a regular attendee of the monthly meetings of the Indian Hotels and Restaurants
Association, says if the company has to mark its presence across the country, “just saying
that its products are better but costly, is not enough.” His solution: “Sealed Air needs to
reconsider prices and work on its marketing strategies to reach us.” 

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INDUSTRIAL CLEANING DIVERSEY SEALED AIR PROTECTIVE PACKAGING

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