Home Care Quarterly Briefing Q4 2018

Key Findings

The US (once again) comes to the rescue

The global Passport baseline value CAGR for 2016-2022 has been revised downwards by 0.04 percentage points, which equates to USD260 million. While the US witnessed another upswing, the majority of regions are seeing a downgrade in home care value sales. Without the USD291 million contribution by the US, the global home care industry would have seen a stronger decline in the Q4 2018 revision.

Home care highly commoditised in developed markets

The home care industry, while profiting from low product elasticity, with many product types being essential to consumers’ lives and cleaning routines, suffers from an increased war on price in developed markets, primarily in North America. Manufacturers will have to continue to find ways of expanding the list of products considered essential by consumers if they are to keep value sales up. Average unit prices are on the decline globally, and home care sales in mature markets are mostly supported by an increase in the total population.

Demographic shift in China and increasing trade tensions

The Chinese home care market is set to witness a slowdown in value sales growth, mostly deriving from disadvantageous demographic developments. This also results from the soft landing of its economy. While this can be considered a natural development, sales can also be expected to be negatively impacted by increasing trade tensions and a worsening relationship with the US. At the beginning of December 2018, Huawei’s CFO was arrested by Canadian officials with the US seeking extradition, which will inevitably lead to an aggravation of the conflict.

Potential future scenario

While the likelihood of an all-out trade war between the US and China is increasing, this would only lead to a marginal downgrade of sales in the respective markets. However, tariffs – once implemented – would require US companies operating in the Chinese market to question their pricing strategy, as export costs would increase considerably.