The detergents in KSA is highly concentrated and shows characteristics of oligopoly with 3-4 key global players dominating the majority of the market. The said market is valued at approximately US$ 873 Million in 2020.
All the key global players either have their subsidiaries in the Kingdom or they have formed strategic alliances with national scale distributors called the NBO’s (National Brand Owners) to run their operations. The large companies either have production plants in industrial areas of Saudi Arabia itself or they distribute their products in the Kingdom through importing products from their plants in other GCC nations and rest of the world.
There are three kinds of players in the market known as global brands, regional/national brands, and local/private brands. Players having revenue of more than 30 Million US$ are considered Global big players. Currently, there are 4-5 players such as P&G, Henkel, and Unilever which have revenues of more than 90 Million US$. While the players generating 10-30 Million US$ of revenue are considered as medium-sized players, regional/national brands. This market includes 3-4 medium players such as SC Johnson and Classic. As of now, there are 8-10 players in the Local/ private brands category. Majority of them are restricted to particular hypermarkets and nearby regions.
Important Regions for Detergent Industry Saudi Arabia
The six out of 13 administrative regions have more than 84% of the total population of Saudi Arabia, which in large controls most of the detergents market.
We have classified the Detergent market into two types of players – NBO, and GBO. In KSA, the global FMGC players are mandated to partner with a local company in the country to produce or distribute their product.
The above charts depict the market share of national players as well as global players – a few global players such as P&G, and Unilever operate both under their flagship brand as well as through their national partners.
Procter and Gamble is the leading player in the detergent products market with almost 56% of the market share, majority of the revenue coming from the Tide and Ariel. While it also has other products such as Downy and Bonux. P&G also operations through its NBO – P&G and Modern Industries Co and generates almost 40% of the revenue through Modern Industries
Unilever is the second most preferred brand in the country with a market share of about 16%. It has five products in this segment with Omo, Surf and Comfort being the prominent ones and is. It operates through its NBO called BinZagr Lever which contributes about 68% of its revenues
Persil by Henkel AG and Co and has a 9% market share in this segment. It operates through its NBO called Henkel alki SA which generates all the revenues for the group.
R&B and Clorox both have around 3%-4% of market share each. R&B’s has one product named Vanish in this segment and operates through its NBO Arabian Trading Supplies. Clorox Co. has one product in this segment- Clorox, it operates through its NBO Abu Dawood Co.
The remaining 14% of the market is distributed among some very small local players – there are 15 to 18 such local players in the market.
Types of Detergents
- Powder – Powdered detergents contain more water softening ingredients and hence work well in dirt and hard water. These detergents may also contain oxygen bleaches to improve stain removal and whitening performance.
- Liquid – Liquid detergents perform well, especially on oily stains. These products typically have less water softener and more surfactant than powders. In recent times, products have been developed which can work well in many water conditions.
- Bar – Detergent bars are similar to soap bars and designed to clean laundry when washed by hand. The detergent is applied on laundry by rubbing the bar until clean and then washed by water
- Packets/ pods – Packets or pods are a relatively new form that contains detergent enveloped in a water-soluble film. They are mainly used in machine washing where pods can be tossed with laundry, and it dissolves to release its cleaning ingredients. Pods may contain liquid or solid detergent (or even both).
Demand by End-users
Private sector is the major detergent consumer segment, accounting for about 85% of total demand. The public sector purchase is mainly through the wholesalers in large volumes. The buyer mainly looks for the cost of the product while making the purchase decision. In this sector, the household segment accounts for over 72% of the total demand, and rest 28% is by the Corporates, hospitality, and healthcare among others. The household consumption is dominated by powder detergents except for expensive luxury clothing for which liquid detergents is being used.
Hospitality consumers usually prefer liquid detergents which are easy to use and claimed to have superior washing quality. While the healthcare and Corporates focus more on the reliability and strength of the product when making the purchase decision, they usually buy premium brand products as they are perceived to be of better quality.
The detergents market in Saudi Arabia is price sensitive, and a small change in price might lead the consumer to switch the product if the substitute is available at a low-cost. The household segment has mainly two types of customers: the blue-collar workers with no family in the country mostly purchase smaller pack – usually 100 gm pack size and the families living in the country usually buy high value and high-volume packs – preferably 7 kg and 9 kg packs.
In the liquid detergents segment the 2-liter pack is widely used as people mostly use this detergent for premium clothing and occasional use, hence the smaller pack size is preferred.
Bar detergents are slowly losing their attractiveness in the market and consumers are picking powder detergents to replace the usage of bar detergents, these products are usually imported from factories of China.
Drivers of Choice
Cost is the most important selection criteria by the majority of the customers of detergent products. A brand, which offers high discounts and lower pricing is preferred. It is price sensitive and any change in price can significantly change the sales volume.
Product availability is another key factor in determining the success of the product. Detergents are utility products and the customer may not wait long for the availability of the desired brand and can be substituted. These products need frequent stocking up in households and other consumer segments. Availability of these products in different pack sizes improves the saleability.
Being a low-value product, customers constantly look for promotions in detergent products in Saudi Arabia. The promotions which are endorsed by the retailers attain higher visibility of the buyer. It creates an impression of higher bucket value than the price paid, resulting in the delight of the purchaser.
Consumer’s awareness and concern about environmental and personal health is fuelling the demand for natural products. As per the Parthenon survey, over 20% of consumers globally prefer products with packaging that is sustainable. Launch of Tide purclean by Procter & Gamble’s and Unilever’s acquisition of Seventh Generation exemplify growth in this segment.
Brands are entering into partnerships to create new revenue streams through licensing. Detergent companies are partnering with washing machine manufactures to attract loyal customers and increase the touchpoints.
Growing demand for liquid detergents has been high mainly from hospitality and laundry industry. Superior wash quality by liquid detergents such as low risk of detergent stain, no accumulation on woollen fibers have made liquid detergent popular among consumers in Saudi Arabia.
There is also a rise in demand for range of fragrance in products. Consumers associate fragrance with the cleanliness and freshness. Fragrance helps mask smells of chemical ingredients and also personalize the customer experience. It also allows for differentiation with technologies such as encapsulation and additional functional benefits like protecting delicate fabrics.
The Detergents market in Saudi Arabia is growing steadily over the past three years. Growth in the complementary industry such as textiles is expected to drive the detergent demand.
Comparatively, high customer switch rate offers new manufacturers an opportunity to establish its products in the market. Customers mostly look for low-end products and are very likely to switch to other products if they find a price variance with similar quality.
Though growth is steady, there are also some investment risks such as a lack of skilled workforce in the country which might hamper the production of considered products; large share of the market is captured by the leading global brands so the scope for a new entrant is not wide; high initial capital requirement for establishing a manufacturing unit is the major deterrent in the sector and the stringent effluent and environmental regulation and limited scope of raw material sourcing can further overcast the opportunity.
The Detergents market in Saudi Arabia is an attractive proposition for new manufacturers. Market size, demand-supply gap, domestic competition and customer switch rate are the key factors making the market attractive for investment in the country. Despite its competitiveness, the market is fairly attractive for any new player in the industry as the KSA has the highest population in GGC and once the brand value is established the earning can be streamlined.