Household fabric cleaners are expected to witness the highest growth rate of 11.42% over the forecast period owing to the rise in disposable income and improvements in lifestyle in regions, such as APAC. Other key factors for the market growth include:
Growing awareness about the benefits of fabric cleaning products to maintain the quality of clothes
Efforts by market players to launch less water-dependent fabric cleaning products to cater to the demands of countries, such as India, China, and Indonesia, which have a scarcity of water
The homecare products industry has witnessed more than 70% outsourcing to reduce capital and labor costs. Appointing a contract manufacturer also enables OEMs to access markets that have strict rules and regulations for setting up a factory.
The contract manufacturing market for homecare products is highly fragmented with suppliers present across different regions. Moreover, the low switching costs associated with manufacturing have led buyers to have moderate bargaining power over suppliers. However, training and product testing costs may increase in case a new supplier is appointed.
A considerable number of contract manufacturers present across different geographies reduces the bargaining power of suppliers. Hydraulic acid poses a threat of substitute to the market for homecare cleaning products.
Raw materials cost about 75% of the overall cost of manufacturing. In terms of a liquid concentrate of the cleaner, water accounted for the highest percentage in terms of weight, covering around 40-50% of the solution, followed by surfactants covering 10%. In 2018, surfactant prices declined despite higher crude oil prices, but are expected to become stable over the forecast period.
Apart from the manufacturing cost, quality check audits, product testing, and training are the major components considered in the total cost of ownership when procuring products from home care contract manufacturing suppliers. The approved provider model is the key operating model among OEMs and contract manufacturers in the homecare products market as the suppliers need to meet a predefined set of qualification characteristics and quality standards
Cost-plus pricing is the most common form of pricing followed in the industry. Although this helps the suppliers maximize their profits, it provides the least value-add.
The U.S. has been a key exporter of surface-active agents over the last five years. In 2019, it accounted for 10% of the overall exports globally. From a cost perspective, China and India are the leading countries in APAC.
In the long run, contract manufacturers agree to reduce the manufacturing cost by eliminating or replacing certain components listed on the bill of materials, thus securing alternate sources for particular product materials based on leverage the contract manufacturer has in the global technology supply chain and improving product assembly or test methods
From a sourcing perspective, the majority of suppliers opt for a bundled outsourcing engagement model as it reduces the complexities associated with in-house logistics.
Suppliers widely prefer approved provider operating models to reduce risks and improve the potential for value creation. As such, suppliers are expected to move from offering generic services to proprietary services in the future. The home care contract manufacturing market procurement intelligence report also provides details regarding quick wins, portfolio analysis, key negotiation strategies of key suppliers, and low-cost/best-cost sourcing analysis.
Apart from home care products, the contract manufacturers present in this space also offers manufacturing capabilities for personal care. The personal care contract manufacturing industry is witnessing strong growth due to changes in shopping patterns and formulations. Brands are focusing on partnering with contract manufacturers to avoid high setup costs in the countries where they do not have production facility. The major selection criteria are certifications and ingredients used by the contract manufacturer, brands prefer partnering with manufacturers who use organic ingredients in their production process.
b. The global household cleaning contract manufacturing market size was valued at USD 22.40 billion in 2020 and is expected to reach USD 37.75 billion by 2025.
b. The global household cleaners contract manufacturing market is expected to register a CAGR of 11% from 2020 to 2025. Fabric cleaners are expected to register the fastest growth of 11.42% over the forecast period.
b. Big retailers and wholesalers procure products from contract manufacturers and market them as private label brands to compete with the global brands by offering them at a much lower cost. This is identified as a key growth driver.
b. LCC/BCC sourcing analysis indicates the U.S. as one of the key sourcing destinations for contract manufacturing of homecare products.
b. The supplier market is highly fragmented with suppliers located across geographies. Due to low switching costs associated with manufacturing, the buyers have moderate bargaining power over suppliers.
b. Product testing, training, quality check audits, and logistics are some of the key components considered in the total cost of ownership.
b. Water and surfactant hold over 50% of the weight in a liquid concentrate cleaning product, which is followed by chelating agents and processing aids. However, in terms of pricing, chelating is one of the most expensive components for these products.
b. Approver provider model is the key operating model that is associated with contract manufacturing, wherein the supplier is selected based on the predefined set of qualification characteristics, quality standards, and certifications.
Component wise cost break down for better negotiation for the client, highlights the key cost drivers in the market with future price fluctuation for different materials (e.g.: steel, aluminum, etc.) used in the production process
Offering cost transparency for different products / services procured by the client. A typical report involves 2-3 case scenarios helping clients to select the best suited engagement with the supplier
Determining and forecasting salaries for specific skill set labor to make decision on outsourcing vs in-house.
A typical newsletter study by capturing latest information for specific suppliers related to: M&As, technological innovations, expansion, litigations, bankruptcy etc.
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