Dow Chemical Co. (DOW) is gaining share in parts of the personal-care ingredient market in Europe, the Middle East and Africa after adding more products to woo clients including Procter & Gamble Co., an executive said.
The company is channeling investment into chemicals for hair-and skin-care products, including sunscreens and moisturizers, Lucrece Foufopoulos-De Ridder, Dow’s head of consumer and industrial solutions for the region, said in an interview.
“We’re holding steady, and in certain selective areas we’re gaining share,” Foufopoulos-De Ridder said, without giving figures.
For Dow, personal- and home-care products are at the forefront of a strategy tweak by Chief Executive Officer Andrew Liveris to tap more profitable markets, such as packaging and electronic materials, emphasizing innovation rather than the volume-led growth of Dow’s past. Liveris is under pressure from activist investor Daniel Loeb’s Third Point LLC.
Europe has become a tougher battleground for personal-care ingredient makers as incumbents BASF SE (BAS) and Croda International Plc (CRDA) compete with chemical manufacturers such as Clariant AG (CLN) that have been attracted to the consumer-driven market, where demand is more resilient to economic slumps than basic chemicals and plastics. Flavors and fragrances makers including Symrise AG and Givaudan SA are also entering the market.
Dow added scale to its consumer division in 2008 with the $18.9-billion takeover of Rohm & Haas Co., which added acrylic chemistry to Dow’s offering spanning glycol esthers, surfactants and amines used widely in cosmetics. Adapting to more consumer-orientated markets has meant installing local managers in markets from Egypt to Ghana to adapt products to local tastes, the executive said.
The change, instigated a couple of years ago, is paying off in a marketplace that’s seeing more intense competition at a time of subdued demand in parts of the region, Foufopoulos-De Ridder said.
While the euro-currency zone is gradually improving, growth in the first quarter hasn’t matched initial expectations, she said.
“We continue to have a challenging macroeconomic environment and the volatility and uncertainty will likely stay with us,” the executive said. “You have to become smarter how you surf that wave.”
Foufopoulos-De Ridder said her operation was 2013’s “star” performer within Dow’s functional materials division, which generated $4.59 billion in sales. The company doesn’t currently break out earnings separately for the personal and home-care operations, though that may change, Foufopoulos-De Ridder said.
Third Point has asked Dow to increase transparency in how the company transfers costs between units and more clearly delineate the petrochemical businesses from specialty units to help investors better assess where value is lost.
Dow managers, including Foufopoulos-De Ridder, got together at the end of June to review market shares and draw up a strategy for 2015. The company is pulling back from markets in decline, such as washing powders that are being replaced by liquid capsule alternatives. In growth areas such as haircare and body washes, Dow is looking to grow at twice the rate as the total market.
Moving downstream from petrochemicals toward the consumer brings challenges. The lifespan of personal-care products on shop shelves is getting shorter, and new entrants have heightened competition, especially in markets like Turkey. Consolidation among personal- and home-care products has increased the power of suppliers to dictate pricing.
“It’s getting a tougher playground that requires clearly smarter people to outplay that and be on top of your game,” Foufopoulos-De Ridder said. Dow is also looking to make bolt-on acquisitions to add technology, though a cooling-off in valuations of targets “would be nice,” she added.
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