Laundry Care Industry In Argentina

TRENDS

• Consumers are increasingly opting for concentrated fabric softeners, as a consequence of Unilever’s advertising for its Comfort brand, in which Arredo (a clothing store chain) recommends the use of Comfort concentrated for taking care of its products. The launch of a 1L package, to take advantage of the trend towards larger packaging, as a means to save money was also instrumental in making this segment grow, reaching 3% at the end of 2009 according to industry sources.

• Laundry care sales grew by 22% in current value terms in 2009, slightly lower than the review period CAGR of 24%. Using observed inflation (INDEC (national institute for statistics and census) is underestimating the inflation for political reasons) the growth in 2009 would have been 6%, somewhat below the 8% CAGR of the review period. The reason for this slow down is the fact that the market is maturing as concentrated products were already introduced some years ago and the penetration of the category is approaching 100%.

• Standard liquid detergents showed the fastest growth of 50% to ARS88 million. The main reasons for this spectacular growth are the fact that its category leader (Procter & Gamble’s Ariel) has been priced very aggressively against other alternatives, such as powder detergent or concentrated liquid detergent and has been widely advertised stating that it is cheaper on a “per wash” basis, as well as very effective removing flock/stains.

• Unit prices did not follow a pattern in laundry during 2009, as there were products, such as starch/ironing aids, which grew just 8%, as a consequence of an attempt to sustain demand and products, such as bar detergents, which increased 26%, as manufacturers considered that the product had weak future prospects and maximized profits.

• Carpet cleaners continued to suffer a lack of advertising and marketing support from manufacturers, which did not help to overcome the lack of tradition in using such products in the Argentine market and therefore continued, their now endemic decline.

• Liquid laundry detergents is gaining share because of its many advantages in usage, such as needing less/no fabric softener or being less likely to block pipes, as well as the aggressive pricing of Procter & Gamble’s Ariel (priced 5% lower than Skip powder and 10% lower than Ariel powder).

• The fact that detergent manufacturers, such as Unilever and Procter & Gamble advertised that their products are proficient for removing flocks/stains, even 48-hours after they are made, contributed to limit the growth of spot and stain removers.

• Concentrated automatic detergents is growing slightly faster than standard automatic detergents, as consumers consider the former to be more effective than standard versions and also because they are less likely to block pipes, since a smaller amount of detergent is needed.

• Standard fabric softeners dominates, as concentrated fabric softeners entered the market only in 2008. Concentrated fabric softeners, however, is growing fast, as consumers believe that concentrated products are more effective than regular versions.

• Washing machines had a penetration rate of 70% in 2009, slightly above the figure for 2008.This was due to leading durable goods chained stores, such as Frávega and Garbarino maintaining their promotion allowing consumers to pay in 24 instalments without interest, if they pay with an affiliated credit card.

• Most consumers tend to wash with cold water and most are not even aware of what temperature their machine is set on. New washing machines, however, set the wash temperature based on the program chosen, avoiding the user setting it.

• Washing machine manufacturers and consumers alike are pushing towards shorter washing cycles, with the average washing cycle lasting around 30 minutes in new machines, while it used to be 45 minutes in older machines. The reason for this push is the fact that Argentineans have less available time and want to save it, even if the washing machine is automatic, as in most cases.

• Laundrettes are present in Argentina through franchising chains, such as Laverap. At these laundrettes the customer can bring his/her own laundry care product or use the products provided by the store. The products provided are low price standard products, as the stores have to be competitive on price.

• Dry cleaning is available in Argentina, but its impact is insignificant in laundry care, as the price of dry cleaning is very high for most Argentineans, the cleaning and ironing of a shirt costs ARS10, while according to industry sources the cost of doing the same job at home would cost around 10 times less.

COMPETITIVE LANDSCAPE

• Unilever de Argentina SA led laundry care with a 60% share, as a consequence of the strength of its Ala, Skip, Comfort, Vivere and Drive brands, which are heavily supported with advertising and new product development. This support built large brand equity and loyalty, as well as its outstanding distribution network.

• Alicorp Argentina SA saw the biggest increase in share (eight percentage points) in 2009, as a consequence of the acquisition of The Value Brand Co SA.

• Domestic brands and manufacturers held a very minor share of the market, as they could not compete with multinationals, such as Unilever and Procter & Gamble in terms of advertising expenditure and new product development.

• During 2009 a new 1L pack of Comfort concentrado (concentrated liquid fabric softener) was introduced to take advantage of the trend towards consuming larger packages as a means to save money.

• At the beginning of 2009, TV and radio advertising for Unilever’s Drive and Procter & Gamble’s Ariel emphasised that they were more expensive, but yielded more than low price products, as a consequence of the financial crisis. Later on, as the effects of the crisis were milder than expected, Drive’s advertising on TV and magazines emphasised the fact that it can clean stains 48 hours after they happen, stating that it is not necessary to wash clothes during the weekend, so the weekend can be entirely be devoted to playing with the children. Unilever’s Skip was advertised on TV and in magazines stressing the fact that it worked on a variety of fabrics and textures under the motto “Millones de telas, millones de fibras, una solución Skip/millions of fabrics, millions of fibres, one solution, Skip”.

• Doy packs of Skip líquido in 500ml and 1L flexible packs were launched in 2009, as a means to better compete on price with Procter & Gamble’s Ariel. Additionally, the company emphasised the fact that a doy pack consumes 70% less plastic than a plastic bottle, making the product environmentally friendly.

• Premium brands, such as Skip or Ariel compete by advertising extensively and investing in new product development, while low price brands, such as Zorro have much lower advertising budgets and tend to copy only the successful innovations introduced by premium brands.

• The value share of private label remained unchanged as many laundry care categories were eligible for discounts through supermarkets and hypermarkets when the consumer used a certain credit or debit card to pay, thus negating the value-for-money appeal of private label products.

• No companies have yet adopted a “green” approach in Argentinean laundry care. Even advertising for the recently launched doy pack of Skip emphasised the price reduction, not the reduced plastic consumption in the packaging. Procter & Gamble and Asociación Conciencia organised a campaign in 2009 for Ariel, among other brands, to increase the awareness of the environment.

PROSPECTS

• Consumers are expected to increasingly prefer concentrated products, such as liquid fabric fresheners and liquid concentrated detergents, as they consider these products to be more effective than regular versions in terms of taking better care of clothes and are less likely to block pipes.

• Forecast data is being significantly restated vs. 2008 forecasts, down from a 5% to a 2% CAGR, as a consequence of the expected consequences of the global financial crisis on disposable income.

• Laundry care is estimated to grow at a 2% CAGR over the forecast period; well below the CAGR of the review period (considering the observed inflation). The main reason for this slow down is that the category matured significantly, as liquid detergents secured a sizeable share of the market and most product innovations were already introduced.

• The main potential forecast threat to growth is a significant decline in disposable income as a result of the global financial crisis, as consumers can curtail the use of laundry care products, as they did in 2002 when the ARS was devalued 66% against the US$.

• Concentrated liquid detergents sales are expected to show the largest increase over the forecast period, as consumers have a very strong preference towards concentrated products, as they are considered to be more effective.

• Discounting and price competition are not expected over the forecast period, as the main players, Unilever and Procter & Gamble, compete on the basis of new product developments and advertising.

• New product launches, such as Comfort 1L and Skip líquido in doy packs are expected to perform reasonably well over the forecast period, as they are adapted to the trend towards purchasing larger packages and also to lower prices in liquid detergents.

• Premium brand companies, such as Unilever and Procter & Gamble are likely to keep innovating and advertising, while companies manufacturing economy brands, such as Alicorp, are reckoned to keep their advertising budgets low.

Source:   Euromonitor International