Industry Profiles: Soaps, Detergents, Cosmetics, and Toiletries

Overview

Makers of cleaning products, cosmetics, and toiletries participated in a combined U.S. market worth more than $55 billion in the early 2000s. By segment, cosmetics and personal toiletries, which include such items as cologne, perfume, shampoo, and shaving preparations, accounted for about 49 percent of industry sales. Soaps and detergents, including bar soap and laundry detergent, was the second-largest segment, contributing around 27 percent of annual revenues. The remaining 24 percent of sales was dispersed among many household and industrial cleaning products. Some of these include household kitchen and bathroom cleaners, dusting and polishing compounds, and surfactants.

Most companies in the industry specialize within one or several lines of toiletries, cosmetics, or cleaning goods, and while some are diversified, few have products in all segments.

History of the Industry

The various specialties within the industry evolved at different rates and in different periods, but many of the industry's most basic products have historical antecedents dating back thousands of years.

Soaps, Detergents, and Surfactants Different accounts place soap's invention between 2500 B.C. and 300 B.C. The word "soap" may have been derived from Mt. Sapo, near Rome, a place where burnt offerings were made to the gods. People discovered that the fat and ash residue from the offerings had cleaning properties.

By definition, soap is a cleansing product created through the chemical process of combining a fat or natural oil with an alkali (such as wood ashes or lye) under controlled conditions. Soap-producing factories developed in France and Italy, where olive oil was plentiful and used as the main ingredient, throughout the sixteenth, seventeenth, and eighteenth centuries. In the nineteenth century, palm oil began to replace olive oil in formulations. By the turn of the twentieth century, many people still made soap by boiling fats and lye to produce solid cakes.

In the United States, the soapmaking industry marks 1837 as an important year. In that year, William Procter and James Gamble established a candle and soapmaking business. Their company, Procter & Gamble, went on to become one of the foremost soap and detergent makers in the country. Procter and Gamble's famous Ivory soap bar was first introduced in 1882. Lever Brothers, another major soap and detergent company, offered Lifebuoy and Sunlight soap bars in 1895.

Procter & Gamble introduced Oxydol, a flaked laundry soap, in 1924. Oxydol was followed in 1933 by Dreft, the nation's first synthetic household detergent. Instead of soap, Dreft's formula was based on alcohol sulfates. Alcohol sulfates were the first type of surfactants to make a significant impact in the formulation of cleaning products.

The term "surfactant" comes from shortening the phrase "surface active agent." A surfactant is a type of chemical capable of changing the surface properties of a liquid. As a result of their chemical nature, surfactants help water wet the surface to be cleaned more quickly and thoroughly than use of water alone. When water and mechanical action combine to remove soils from a surface, surfactants also help keep the soil suspended in the liquid so that it does not redeposit on the item being cleaned. Surfactants are basic ingredients in most products intended for use in washing clothes and dishes.

The first synthetic detergents based on sodium dodecylbenzene sulfonate were developed in 1939. They were followed by detergents based on alkylbenzene sulfonate (ABS), which provided better cleaning and more suds than traditional soaps at lower prices. ABS grew in popularity and its use expanded with the introduction of front-loading drum washing machines.

Cosmetics and Toiletries The use of cosmetics, fragrances, and personal care products can be traced to prehistoric times. The Neanderthals, who lived approximately from 250,000 years to 35,000 years ago, painted their faces with reds, browns, and yellows derived from clay, mud, and arsenic. Bones were used to curl hair. Makeup, tattoos, and adornments conveyed necessary social information. The ancients also used fragrances. Some believed that a flower's aroma contained the presence of a deity, while others burned incense during religious rites. Different fragrances often had symbolic meanings and ceremonial oils were used for anointing.

During the reign of the Pharaohs, Egyptian aristocrats wore cones of solidified perfume that would melt under warm temperatures to mask odors. A mineral called hematite was applied as rouge, and faces were painted with white lead. Black kohl encircled eyes. Egyptians curled their hair with sticks or straightened their hair with iron bands and weights. Aloe vera was known as an anti-irritant.

Greek women also painted their faces white and put red circles on their cheeks. Galen, an ancient Greek physician, invented cold cream. The Romans used oil-based perfumes on their bodies, in their baths and fountains, and applied them to their weapons. In the ninth century, Arabs developed alcohol-based perfumes. Crusaders of the thirteenth century brought fragrances back to Europe from Asia.

The perfumes developed during the sixteenth century were powders or gelatinous pastes. They could be applied to scented fans or carried in jewelry with fragrance compartments. The ability to create new fragrances by blending ingredients was developed during the seventeenth century in France. A person who developed new perfume scents by blending ingredients was called a "nose." Some of the compounding establishments developed in France during the eighteenth and nineteenth centuries were still operating at the close of the twentieth century. America's first cologne water, Caswell-Massey's Number Six, was a blend of 27 ingredients and was said to have been a favorite of George Washington.

Natural perfumes were made from a variety of ingredients containing aroma. These included: essential oils, which were found in flowers, roots, fruits, rinds, or barks depending on the type of plant; resinoids, which were gums or resins that were purified with a solvent; and absolutes, which were aromas extracted with solvents existing in viscous liquid form. Natural perfumes were expensive, primarily because of the labor involved in gathering ingredients. For example, Smithsonian magazine reported that a pound of jasmine flowers contained approximately 5,000 blooms, and one pound of the flowers yielded only 1/800th of a pound of jasmine absolute.

Chemical formulations developed during the nineteenth century began to replace expensive natural ingredients and make perfumes more widely available. Early synthetic fragrances included vanilla and violet. In the United States, Francis Despard Dodge developed citronellol and citronellal with various floral scents.

The nineteenth century also brought changes in facial makeup. Ceruse, a cosmetic that had been widely used in Europe since the time of the second century, was replaced by a powder made from zinc oxide. Ceruse, made from white lead, was discovered to be toxic. It was blamed for causing physical problems such as facial tremors, muscle paralysis, and even death.

Antiperspirants and deodorants were developed during the 1890s. Aluminum chloride, the original active ingredient, frequently caused skin irritation and damage to clothes. These difficulties were overcome during the 1940s when aluminum chlorohydrate was developed. Although additives were subsequently produced to improve antiperspirant activity, aluminum chlorohydrate remained the primary ingredient in antiperspirants for the remainder of the twentieth century.

Cosmetics played a role during World War II. Leg makeup was developed in response to shortages of stockings. In Germany, women sacrificed lipstick, but U.S. officials judged it vital and necessary. Following the war, biological ingredients began to receive attention. Human placental products were first used in cosmetics during the 1940s. Cosmetic makers claimed that they stimulated tissue growth and removed wrinkles. The FDA ruled that such claims were medical in nature, and as a result classified these products as drugs and declared them ineffective. Placental products later reappeared in cosmetics but were listed only as a source of protein. Other biological ingredients (derived primarily from cows) included amniotic liquid, collagen (a protein substance), and cerebrosides (fatty substances with carbohydrates produced at the deepest layer of skin).

Fashion trends continued to bring new innovations. Artificial skin tanning aids were developed during the late 1950s. False eyelashes became popular during the 1960s. The 1960s also saw the introduction of "natural" products based on botanical ingredients such as carrot juice and watermelon extract. During the 1970s, the growing environmental movement brought challenges to the cosmetic and fragrance industry. The use of some popular ingredients was banned following the enactment of endangered species protection legislation. Some examples of banned ingredients included musk (from Himalayan deer, Ethiopian civet, and certain types of beaver) and ambergris (taken from sperm whales).

Concerns about contaminated makeup emerged during the late 1980s. An FDA report in 1989 found that over five percent of samples collected from counters in department stores were contaminated with molds, fungi, and pathogenic organisms. Such contamination was supposed to be controlled by preservatives in the cosmetics. Preservatives, however, proved ineffective against the microorganisms responsible for causing product contamination when they lacked stability or when a particular product was kept longer than the shelf life of its preservative system.

Significant Events Affecting the Industry

One of the most recent significant events for the soap and detergent market was the value-pricing trend. The early 1990s saw a move in this market away from premium pricing for name brands as customers became more value conscious. Although exceptions existed, many soaps and detergents were seen as undifferentiated commodity items. In 1992, reduced value pricing was being used by approximately 40 percent of detergent manufacturers. Typically, a value-priced product cost $1 or more less than a premium-priced product. By the early 2000s, leading discount stores like Wal-Mart were selling an increasing amount of their own store-branded soap and detergent products, offering consumers additional opportunities to save money.

A similar trend brought the increased popularity of "value added," multi-purpose products. These included items such as detergent with bleach or fabric softener and three-in-one personal cleansing bars. Moisturizing, deodorant, and anti-bacterial-multi-benefit synthetic detergent (also called syndet) bars and soap/syndet combination bars became popular following the introduction of Lever 2000 in 1990. Analysts expected multi-benefit bars to capture 10 to 20 percent of the soap market by the mid-1990s.

In addition to value, consumers in the early 2000s were pressed for time. As the pace of work and home life became more stressful and hectic, soap and toiletries that emphasized relaxation, but which could still be used quickly, constituted a strong category within the industry. Among these products were aromatherapy products like scented body washes, as well as other liquid and gel soaps. These were replacing bar soaps, which were declining in popularity.

For the perfume, cosmetic, and toiletry segment recent challenges including regulatory changes, product safety concerns, calls for scientific data to document product claims, increasing environmentalism, and pressure from the growing animal rights movement heavily affected the industry. Congress began investigating possible revisions to the traditional "drug" and "cosmetic" definitions established under the Food, Drug and Cosmetic Act. A report titled Classification and Regulation of Cosmetics and Drugs: A Legal Overview and Alternatives for Legislative Change included provisions for a third category of "cosmeceuticals" to include products like sunscreens that fell in the gap between traditional drugs and cosmetics. Some industry analysts welcomed legislative changes to clarify product distinctions but doubted whether manufacturers would accept proposals that would require safety and efficacy testing to substantiate label claims.

Key Competitors

The world's largest consumer products company, Procter & Gamble has more than 250 well-known brands, including Pantene, Cover Girl, Max Factor, Camay, Ivory, Olay, Old Spice, Head & Shoulders, Pert Plus, Zest, Cascade, Cheer, Dash, Dawn, Dreft, Safeguard, Mr. Clean, and Tide. These product lines give Procter & Gamble significant shares of the bar soap, shampoo, cosmetic, and laundry detergent markets, although it also markets toiletries and many products outside the scope of this industry, with such staple food brands as Pringles, Folgers, and Puritan Oil. In 2001, Procter & Gamble's Fabric and Home Care unit, which includes dish soaps and laundry detergents, generated almost 30 percent of the company's $39.2 billion in revenues. The company's Beauty Care division, which includes cosmetics, shampoos, and bath soaps, brought in about 18 percent of revenues.

Colgate-Palmolive is another major player in the industry. Its $9.4 billion business as of 2001 is built upon such brands as Ajax, Murphy Oil Soap, Mennen, Speed Stick, and Irish Spring, in addition to the two leading brands that form its name: Colgate is a top toothpaste brand and Palmolive is a major line of dish detergents. The New York-based company is dependent on foreign markets for a striking 70 percent of its sales. About 25 percent of sales come from North America, 26 percent come from Latin America, 20 percent from Europe, and 16 percent from Asia/Africa.

Unilever is the industry's largest company by annual sales, which totaled $46.7 billion in 2001, although more than half of its revenue comes from food products. The company has two headquarters: Unilever PLC is headquartered in London, United Kingdom and Unilever NV is based in Rotterdam, The Netherlands. The conglomerate also has U.S.-based holdings and is an important contender in the U.S. market. Although most of its revenue comes from Europe (39 percent), 27 percent of the firm's earnings come from North America, where it possesses a sizable percent of detergent market, behind Procter & Gamble. In addition to its soap and detergent business, Unilever is also a major producer of edible oils, dairy products, and prepared foods. Among Unilever's brands are Dove, Lever 2000, Lux, Snuggle, ThermaSilk, and Pond's.

Other key participants in the industry include L'Oréal S.A., with $12.2 billion in 2001 sales; Reckitt Benckiser plc, with $4.8 billion; S.C. Johnson & Son, with approximately $4.5 billion; The Clorox Company, with $3.9 billion; The Dial Corporation, with $1.7 billion; Revlon Inc., with $1.3 billion; and Church & Dwight Co. Inc., with $1.1 billion.

Industry Projections

The industry's performance varies widely by product segment, but overall U.S. industry growth was stagnant at the dawn of the twenty–first century. Shipment values within the industry barely increased from 1997 to 2000, from $55.1 billion to $55.8 billion. Within the soaps and detergents segment, values declined from $17.8 billion in 1997 to $15.1 billion in 2000. Meanwhile, the value of cosmetics and personal toiletries shipments increased from $24.2 billion to $27.1 billion during the same time period. Because the U.S. market was saturated, companies were seeking growth through international markets.

Global Presence

Many of the industry's top companies derive a significant share of their revenue from international sales, and a number of the world's largest cleaning product and toiletry firms—including Unilever and L'Oréal—are based outside the United States. These companies have come to face relatively tight, slow-growing markets in saturated markets like that of the United States. To fuel sales growth, they've looked instead to emerging markets in such places as eastern Europe, Asia, and Latin America, where product penetration and national brand names tend to be weaker.

According to Global Cosmetic Industry, the Americas claimed the greatest percentage of the $22.8 billion world market for personal hygiene products in 2000 ($7.7 billion), followed by Asia/Pacific ($7.4 billion), and Western Europe ($6.5 billion). The Americas also comprised the greatest share of the $19.7 billion worldwide cosmetics market in 2000 ($7.7 billion), followed by Western Europe ($6.1 billion), and Asia/Pacific ($5.5 billion). Data from Euromonitor, listed in Chemical Market Reporter, ranked the world's leading cosmetic companies in the early 2000s. Leading the list was L'Oréal, with almost 17 percent of the market; Estee Lauder Cos. Inc., with nearly 11 percent of the market; Procter & Gamble Co., with about nine percent of the market; and Revlon, with seven percent.

Employment in the Industry

Overall, the industry employs some 120,000 personnel in the United States, more than half of whom work for toiletry and cosmetic manufacturers. The annual industry payroll exceeds $4.5 billion, and the average annual salary exceeds $36,000 per worker. Modest growth was expected during the first decade of the 2000s, with employment levels expected to grow about six percent between 2000 and 2010.

Sources for Further Study

annual survey of manufactures. washington, dc: u.s. department of commerce, economics and statistics administration, u.s. census bureau, 2001.

"chemicals and allied products." u.s. industry and trade outlook. new york: mcgraw-hill and u.s. department of commerce, 1998.

gerry, roberta. "cleaning up the body and spirit: soap market is bubbling with new body washes gaining significant market share." chemical market reporter, 22 january 1996.

sauer, pamela. "a makeover of global proportions." chemical market reporter, 3 december 2001.

"occupational employment statistics." bureau of labor statistics, u.s. department of labor, 23 april 2002. available at http://www.bls.gov.

"state of the industry 2001." global cosmetic industry, june 2001.