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Surfactants MarketA South African Perspective
Executive Summary• Analysis of the South African surfactants market• Key areas of household detergents and cleaning surfactants are analysed• Opportunities in the market exist• Research & development is moderate to low – mostly a case of companies
using tried and tested methods from external markets• Competition in the market it low – room for improvement exists• Key players in the market are addressed• End user usage analysis with environmental regulations and general
legislation addressed• Current surfactants market in SA growing slowly – Loadshedding has
affected manufacturing industry with a knock-on effect• Most surfactants are imported, with downstream products being
manufactured locally
Introduction Market Overview Market Structure Key Findings
Executive Summary• Slowdown in manufacturing sector across the board• Economic growth which is slowing as a result of frequent power outages is
affecting industry growth• Growth will remain steady in the medium term (2015-2019) until energy crisis
is effectively remediated• Specialty end user sector (mining) is decreasing as a result of lower global
commodity prices• Construction industry is experiencing moderate growth (~2% p.a)• Household detergent and cleaning market will experience highest growth as a
result of increasing urbanization and demand for improved hygiene (~4% p.a)
Introduction Market Overview Market Structure Key Findings
2015 2016* 2017* 2018* 2019*
4% 4.1% 4.1% 4.5% 4.8%
Executive Summary
Introduction Market Overview Market Structure Key Findings
Anionic
Cationic
Nonionic
Amphoteric
Market Segment and
Area of Application
Household Detergents
Industrial and Institutional
Personal Care
Specialty
Product Type
Application
Executive Summary• SA surfactants market generated revenues of $188.2 million in 2014• Anionic account for majority of the market share of which household detergents
and cleaning accounted for 60% of the total market• In 2014 personal care products and I&I accounted for 19 and 15%, respectively
Introduction Market Overview Market Structure Key Findings
66%18%
13%
3%
SA Surfactants Market Share (2014)
Household detergents and cleaning productsPersonal careIndustrial & Institu-tionalOther (mining, paints, construction etc)
2015 2016 2017 2018 20190
0.51
1.52
2.53
3.54
4.5
Household detergents and cleaning products
Personal care
Industrial & Institu-tional
Other (mining, paints, construction etc)
Year
% g
row
th p
er y
ear
Annual Surfactants Growth Rate (Predicted)
Aim & Objectives
The aims and objectives of this report are as follows:
• To provide a brief overview of the South African surfactants market with a focus on household detergents and cleaning (key trends, market segmentation, drivers and restraints)
• To estimate the market size (demand) in US dollars for 2014
• To project market growth (%) up to 2019• To provide a competitive overview (current participants,
structure, trends and other relevant information)
Scope & Definitions
• Real GDP growth rate in SA
• Rapid urbanization will lead to increased demand in FMCG sector
• Home and personal care manufacturing sectors expected to increase by 4% p.a
• Significant opportunity in Southern African region
Geographic Scope Product Scope Application
Scope Definitions
2015 2016* 2017* 2018* 2019*2% 2.1% 2.2% 2.5% 2.9%
Scope & Definitions
Anionic Surfactants• Commercially most significant• Household cleaning• Institutional cleaners• Cationic, amphoteric and non-ionic are less prevalent
in the market• SABS compliant• Mature FMCG industry able to absorb supply• Location of manufacturing facility
Geographic Scope Product Scope Application
Scope Definitions
Scope & Definitions
Geographic Scope
Product Scope Application Scope Definitions
National ProgrammeSteering Committee
National Implementing Agency
Coordination Team
Implementing Partner – Frost & Sullivan
Surfactants Producer
Customers – FMCG Manufacturers
Credit Providers
Programme Advisory
Committee
Business Development
Research & Development
After Sales Service
Scope & Definitions
• BBBEE – Broad Based Black Economic Empowerment – An initiative by the South African government in response to criticism against Narrow Based Empowerment instituted in the country during 2003/2004 with the aim of uplifting ethnic groups marginalised by the apartheid regime
• LCA – Life Cycle Assessment – This is an environmental model to evaluate the effect a product has on the environment from cradle to crave (acquisition of raw materials to end of product life)
• SABS – South African Bureau of Standards - leading global provider of standards, management systems, business improvement and regulatory approval information and is responsible for regulating the quality of South African goods and services
Geographic Scope Product Scope Application
Scope Definitions
Industry Best Practices
• Manufacturing processes are clearly defined and controlled• Manufacturing processes are controlled, and any changes to the process are
evaluated• Instructions and procedures are written in clear and unambiguous language• Training – Ongoing and targeted training on issues ranging from allergen control,
cleaning and sanitation procedures, incoming ingredient receipt protocol, and monitoring for employees, management, as well as suppliers
• Audits – Periodic audits and inspections of facility and raw material suppliers either in-house or by third-party firms
• Documentation – Documentation of training activities, raw material handling policies and activities, cleaning and sanitation, receiving records, and use of sign-off logs
• Validation/Evaluation – Evaluation of training effectiveness and establishment of accountability, validation of cleaning through testing
• Processes are compliant with the necessary environmental (LCAs) and labour legislation
Market Analysis
Manufacturing Production
Introduction & Overview
Industry Challenges Supply & Demand Drivers & Restraints
Strengths-moderate growth
rate-barriers to entry -high profitability and revenue
-existing distribution and sales networks
Weaknesses-high loan rates-investments in research and development
-small business units
-competitive market
Opportunities-growing demand
-income level is at a constant increase
-new markets-new products
-new acquisitions-growth rates and
profitability
Threats-government regulations
-increasing costs-increase in labour
costs-financial capacity
2014 2015 2016* 2017* 2018* 2019*
2.4% -2.4% -0.8% 2.1% 3.0% 3.2%
Manufacturing Sales Growth2014 2015 2016* 2017* 2018* 2019*
0.8% -3.1% -1.1% 0.5% 2.0% 2.9%
Producer Price Inflation (PPI)2014 2015 2016* 2017* 2018* 2019*
9.3% 3.4% 3.5% 3.9% 4.8% 4.8%
Market Analysis
• Perennial constraints regarding the security of electricity supply and increased costs incl. water
• Influx of incentivised and cheap imports
• Labour unrest• Fluctuating exchange rates and
weakening Rand• Slowdown in manufacturing sector• Disjointed trade policy and
administration
Introduction & Overview
Industry Challenges Supply & Demand Drivers & Restraints
LabourElectricity
Imports Currency
Policy Frame-work
Growth
Market Analysis
Introduction & Overview
Industry Challenges
Supply & Demand Drivers & Restraints
Competition is moderate with supplier differentiation
Raw materials and other surfactant types are imported. Future market share of anionic surfactants will be replaced by non-ionic surfactants
Two local manufacturers account for 97.5% of total surfactants production
Some consumers are willing to pay higher prices for higher quality products
Major driver for demand: growing consumer income
SA surfactants market generated revenues of $188.2 million in 2014
SupplyDemand
Market Analysis
Introduction & Overview
Industry Challenges Supply & Demand Drivers &
Restraints
Driver/ Restraint
Micro Trends Short term (1-2 years)
Medium term (3-5 years)
Long term (6-10 years)
Driver Consumer market growth is being spurred on by:- Economic growth- Retail expansion- Middle class growth & income- Population growth
Driver Limited availability of ingredients (Raw materials are mostly imported)
Driver Mature end user product manufacturing industry
Restraint Increased contract manufacturing as a result of increasing manufacturing costs
Restraint Environmental and health concerns
Restraint Multifunctional product base (Large divide between rich and poor in society)
ModerateHigh Low
Financial Analysis
Revenue Forecast Market Forecast Supply Chain
AnalysisCompetitor
Activity
2015 2016 2017 2018 2019170
180
190
200
210
220
230
Year
Exp
ecte
d A
nnua
l Rev
enue
[Mill
ion
Ran
ds]
Financial Analysis
• Revenues for 2014 totaled $188.2 million in the household detergents and cleaning market
• Household detergents and cleaning revenues expected to grow at a steady 3-4% over the next 5 years (2015-2019)
• Revenues in the specialties sector surfactants market are expected to decline in 2016 as a result of a global slow down in mining output based on lower commodity prices
Revenue Forecast Market Forecast Supply Chain
AnalysisCompetitor
Activity
2015 2016 2017 2018 20190
0.5
1
1.5
2
2.5
3
3.5
4
4.5
Household detergents and cleaning products
Personal care
Industrial & Institu-tional
Other (mining, paints, construction etc)
Year
% g
row
th p
er y
ear
Projected Annual Surfactants Growth Rate
Financial Analysis
Raw materials acquisition
Revenue Forecast Market Forecast Supply Chain
AnalysisCompetitor
Activity
Supplier
Manufacturer
Distributor
Customer
Consumer
NoteThe inputs into detergents,
cosmetic and pharmaceutical products include a variety of
speciality raw materials, including chemicals,
fragrances, essential oils, thickeners, surfactants,
preservatives, colourants and active ingredients. Many of
these ingredients are imported, which puts South African
manufacturers at a disadvantage.
Financial Analysis
RevenueForecast Market Forecast Supply Chain
AnalysisCompetitor
Activity
Threats of SubstitutesLow
Bargaining Power of Suppliers
Low
Threat of New EntrantsLow
Bargaining Power of Customers
Medium-High
Competition Intensity
MediumIn South Africa, demand meets supply, therefore bargaining power would be low.
Unlikely to occur in the forecasted period. Anionic surfactants are the backbone of many home and personal care products. They are essential to formulations.
Customers are very cost-oriented and negotiate with suppliers for lower prices. In some cases, losing one big FMCG customer could deal a severe blow for a supplier’s livelihood
As South Africa is mostly selfsufficient, the threat would be low
Industry Players
Areas of Concern
• Home care in South Africa is expected to achieve slow but steady value growth during the forecast period (2015-2019)
• Constrained consumer spending impacts consumer spending patterns
• Rising popularity of increasing range of private label products
• Highly competitive retailing industry influences sales of home care
• Supermarkets remain the most popular retail distribution channel for home care
• Steady growth expected to continue in home care over the forecast period
Household & Cleaning Focus
End-User Applications
Environmental Concerns
Why South Africa
2015 2016 2017 2018 20190
0.5
1
1.5
2
2.5
3
3.5
Year
Per
cent
Gro
wth
Areas of Concern
• The inputs into fragrance, cosmetic and pharmaceutical products include a variety of speciality raw materials, including chemicals, fragrances, essential oils, thickeners, surfactants, preservatives, colourants and active ingredients. Many of these ingredients are imported, which puts South African manufacturers at a disadvantage
• A concern expressed by industry participants is the fact that imported ingredients are still subject to an ad valorem ‘luxury’ tax of between 5% and 7% in addition to excise duties
• The South African government spent heavily to improve residents' health care system which has boost demand for surfactants, with hospital infrastructure and health care facilities comprising 20% of the surfactant market share
• End user is not very sensitive to the price of the product, demand will remain stable despite price fluctuations as users are loyal to brands, formulas or surfactant type
• There is growing awareness and interest in renewable-based products by consumers and industrial end users for “Green Products”
• The largest end use market for surfactants is household cleaning detergents
Household & Cleaning Focus
End-User Applications
Environmental Concerns
Why South Africa
Areas of Concern
• Detergent companies are seeking bio-based surfactant feedstock• P&G's sustainability goal of using renewable-based surfactant materials for
its detergent products as soon as possible• One-hundred percent bio-based chemicals are not cheap• VOC legislation is in place in many parts of the world in order to get
industries to change from solvent-based formulations to water-based formulations
• Chemical Oxygen Demand (COD) levels are governed by legislation• The surfactant industry is facing challenging environmental, regulatory and
consumer pressure on the production, exposure, packaging, handling, transporting, use and disposal of its products.
Household & Cleaning Focus
End-User Applications
Environmental Concerns
Why South Africa
Areas of Concern• Africa’s most developed economy with significant manufacturing
capacity able to absorb required demand of surfactants in end-user products
• Strategic point of entry for further expansion on the continent• Three significant port cities as well as sufficient transportation
infrastructure (air, rail and road network), however the rail infrastructure is lacking somewhat
• Steady economic growth
• Need to be aware of the energy crisis SA is currently facing
Household & Cleaning Focus
End-User Applications
Environmental Concerns
Why South Africa
2014 2015 2016* 2017* 2018* 2019*
2.7% 1.3% 2.5% 3.1% 3.6% 4.0%
Conclusions1. Consumer spending remains under pressure2. South African consumers increasingly open to private
label products as they become less brand loyal in general
3. Intense competition between major players remains a hallmark of the competitive landscape in home care as South Africans look for value
4. A steady growth market in South Africa exists5. South Africa remains a strategic gateway to the rest of
the continent6. Most successful companies in South Africa have
developed their business models to compete and be successful in the tough African market
7. Given local constraints and despite the considerable challenges, there is a mood of cautious optimism as companies continue to seek growth opportunities in new areas, both in South Africa and across Africa.
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