Vision – New Orleans: 20-23 Jan 2010

                   Introduction

Around 300 delegates attended this consumer products conference and table-top exhibition.  For the first time INDA used a 2-tier registration system with white badges for those paying for access to everything and lower cost yellow badges for exhibition and networking only.  The ratio of the two was unpublished but in the exhibition about a third to a half of the attendees had yellow badges.  

The five Visionary award finalists all had table-top displays and all presented their product during the conference.  The winner was chosen by secret ballot held on the last evening and announced the following morning.  About 150 votes were cast.

                   Nonwovens Vision

Paul Latten of Consolidated Fibers and INDA Chairman reviewed the last 10 years in nonwovens and provided some inspirational thoughts for the future:

• Since 1999, worldwide dollar sales of nonwovens had grown by 6.6% p.a., tonnage by 7.9% p.a. and area by 9.0% p.a. according to INDA.  The figures for growth through 2014 were 8.1%, 7.9% and 9.3%.
• Spunmelt tonnage had grown fastest (10.4% p.a.) with Airlaid at 9.9%, Carded at 5.8% and Wetlaid at 4.9%.  Airlaid would be the fastest growing sector to 2014 with 10.9% p.a.
• Wipes had been the fastest growing application in North America, Europe and Asia Pacific (11.2% p.a. since 1999), followed by other industrials and automotive (9-10% p.a.).  Home furnishings had grown least (5.7% p.a.)
• Growth has been driven largely by the emerging market for lightweight hygiene nonwovens and the replacement of heavy weight spunbond machinery.
• Margins are now squeezed in the middle of the supply chain.  Retailers and oil companies enjoy most profit.
• Turnkey production lines have replaced the unique  machinery once used by the top companies.  Spun-melt and spun-laced production methods are now standardized.
• Productivity growth through faster, wider machines has been key, but margins and return on capital have fallen.
• The drive for minimum basis weight and maximum strength continues.
• The workforce is graying: the industry is failing to attract young people.
• Innovation in raw materials and roll goods has declined as the R&D spend has been cut.  “Swiffer” was the last big thing.
• Our industry is now mature, driven by productivity growth not new product growth.

His suggestions for how the nonwovens industry could be improved included:-

• Refresh the vision and focus the strategy.
• Get an independent review of its capabilities
• Develop B2C marketing knowledge and capability
• Classify the business according to the key downstream businesses served.
• Stop doing certain things.  (Get rid of people, products, equipment and even customers which no longer yield “mutually profitable exchanges”.)
• Invest the savings from the “stop doing” list in R&D and marketing.
• Plan to export more, outsource more and import more.
• Strive to be the knowledge leader for a product or market.
• Make energy conservation a strength:  Reduce consumption by 25% by 2020
• Reduce water consumption by 50% by 2020
• Target innovation of a $1bn category every 3-5 years.
• Next generation nonwovens would be used in composites for defence and aerospace, drug delivery systems, and in biological and environmental protection systems .

                   Act Vertical

Alan Pincus and Kimberly Cray of Kurt Salmon Associates reviewed retailing over the last 10 years, a period of retail bankruptcies, little growth, mergers, acquisitions and related store closures.  The situation is bad, and it’s likely to get worse:

• There are still too many retailers with too little differentiation
• Consumers are less tolerant of poor presentation
• On-line buying is growing fast, as is buying second-hand in the recession
• The internet is making consumers smarter and allowing better buying decisions
• The balance of power has now changed in favor of the consumer

There are however some bright spots:  the highly differentiated “act vertical” retailers who have encouraged customer participation in both store and product design have created a more engaging shopping experience and are being rewarded by growth.  These represent about 15% of the sector and are growing at ~20% p.a. despite the recession. While not vertical as such, these companies are successfully orchestrating the value chain to bring unique and compelling products and services to market and building deep bonds of loyalty with consumers who become passionate advocates of the products.  Acting vertically involves taking control of market research, product development, consumer testing, sourcing, keeping stores stocked with the right products, coordinating the brand experience, and marketing. 

Examples of excellence in acting vertically include:

• Apple Stores, Petsmart and Wegmans for the overall brand experience.  The store becomes the brand. 
• Apple Concerts now take the brand experience outside the store. Wegmans are opening pubs and restaurants using their products.   Petsmart’s staff training focuses on engaging customers.
• COACH – New York for their 70,000 market research interviews to identify unmet needs
• Whole Foods Market for their product design and development allowing them to stay ahead of the trends.
• WaWa for consumer testing.  Their Facebook page has 200,000 followers who provide continuous reviews of their products.
• Sainsbury’s and Tesco’s for their sourcing relationships.  More complete information sharing with fewer vendors allows the vendors to control replenishment.
• Macy’s for their assortment, allocation and replenishment of stores by locality.
• Petsmart and Walmart for their marketing:  Petsmart’s email shots are now tailored to your pet.  Walmart is using Twitter to drive the on-line specials.

To date, no one organization is using all these techniques so there is plenty of room for further improvement!

                   The Great US Rebound?

Rory Holmes, President of INDA used the “Perfect Storm” analogy for the events of 2008-9 which included the collapse of the financial services, housing, and automotive industries; the end of cheap energy, and, maybe as a result of the above, a collapse of consumer confidence. 

Cheap energy had become central to the world economy, fuelling it’s growth, and providing an incredible range of new materials.  The coal which powered the Industrial Revolution has been superseded by oil and gas since WW2. Oil has powered the world and its economy since then, especially the “Green Revolution” which has allowed agriculture to feed the exponential population growth.  Now “peak oil” has arrived and consumers have no room in their over-leveraged budgets to cover the extra expenses.  The only winners appear to be the “emerging markets”, and it is now China and not the USA that has an economy strong enough to pull the world out of the recession. 

70% of US GDP has been consumer spending but now the consumer, fearful of unemployment, has reduced spending and started saving.  Credit cards are being rested in favor of debit cards, and paying off the mortgage has become attractive. Job losses were 30% worse than expected and recovery to 2007 employment levels requires 4% GDP growth as against the projected 1.5% for 2010.

For the Future:

• Oil price will rise from $80 to $100/bl by the end of the year, making economic growth much more difficult.
• Real Estate will remain fragile with remodeling and upgrading existing homes taking priority over new-builds.
• Companies will succeed by being trendsetters, hiring loose talent, being creative and innovative, using social networking and delivering customized products.

For Nonwovens in particular:

• Be flexible in choice of polymer to take advantage of price swings
• Move to greener raw materials
• Let “disposable” become “limited use”
• Save energy and water as a matter of principle.

Asked about the effects of the recession on nonwovens, Dr Holmes thought diapers, sanpro, medical and roofing were all fairly recession proof and that market growth of between 3 and 4% had been maintained.  However the US must plan to export more in future.

                   Petrochemical Trends

Karen Jones of CMAI provided an update on oil and gas supply reminding us that only 7% of oil and 5% of gas are used as petrochemical feedstocks.  Despite the recession, higher demand from India and China would keep oil prices roughly level through 2010.  In the medium to long term OPEC would need to maintain high output to meet demand and higher prices would be supported.  Natural gas prices are expected to remain higher than in 2009 despite a healthy supply due to imports of LNG and production of gas from shale.

60% of the 2008 production of 69 million tones of fibers were based on polymers from oil, polyester accounting for three-quarters of these.  2008 was the first year in which the demand for polyester fell.  The p-xylene fraction which provides the terephthalic part of the polymer has an octane value of 105+ and will be used as a petrol additive if the price of polyester falls much further.  Only about 80% of the available polyester capacity is in use, and this could decline further as China and India add new capacity.  With overcapacity and polyester on minimal margins, any oil-price fluctuations will pass quickly through to polyester’s customers.

On a cents/lb basis, PP is expected to remain generally more expensive than PET, but on the more important (for nonwovens) cents/cc basis, PP will remain competitive.

                   Propylene and PP Trends

Bob Dennett of CMAI continued the update with a closer look at propylene and polypropylene production.  The cost structure changed in 2005 as supplies of propylene waste gas from steam cracking of naphtha declined and use of refinery propylene and its “on purpose” production increased.  By 2008 only 63% of the propylene came from naphtha, 30% from refining and 7% was made “on purpose” by either propane dehydrogenation or metathesis.  Two thirds of the propylene was used to make PP, global demand for which fell for the first time in 2008. 

US propylene demand is expected to improve as the housing and automobile markets get back to normal, and supply may tighten as more steam crackers and refineries close in the USA.  The higher prices are likely to last and the US will see its first propane dehydrogenation plant come on stream this year. 

The Middle East and Asia will start new production units, but global propylene price is expected to rise from the current $1000/tonne to about $1250/tonne in 2014.

US Polypropylene demand has declined to the lowest level since 2001 as PP polymer price increased and the economy turned down.  Exports, strong in the first 9 months of 2009, fell away as the US propylene price increased.

Globally, operating rates are declining from 93% in 2007 to a predicted 77% in 2011 before recovering to 85% in 2014.  The resulting 16 million tonne overcapacity is over 3 times that experienced in the last downturn.  Despite this oversupply, PP will remain expensive relative to PE and PET and will have to compete on properties rather than price.  Non-tariff barriers will delay the arrival of cheap imports in the US.

                    Policy Trends

Jessica Franken of INDA thought the changing policy environment in Washington would lead to some opportunities for nonwovens:

• The economic stimulus package would increase the clean energy economy and billions of dollars would be available to improve the energy efficiency of homes and other buildings. “1 million homeowners will buy new energy efficient building products”.
• The sustainable manufacturing initiative was encouraging companies to make sustainable products and supermarket sales of such products increased by 9% in 2009.
• Government moves to prepare for H1N1 and similar pandemics was increasing demand for N95 respirators and diagnostic test kits.

                   Consumer Trends

Carol Berning, recently retired from Procter and Gamble provided insights from national studies and local interviews to illustrate the effects of the recession on consumer habits.  These effects were not just financial; they changed shoppers psychology and affected their lifestyle. Theoretically, psychological impact depended on whether the recession was acute or chronic.  Acute recessions caused temporary behavioral change, but chronic recession such as the current event proved life-changing and altered people’s perception of the normal. 

• Shoppers are normally classified as 10% Scrimpers, 75% Thoughtful and 15% Splurgers.  As a result of this recession, 8% of the Splurgers have become Thoughtful.
•  All shoppers are now choosier and tend to trade down especially for non-personal goods. 
• Trading down depends on the amount saved versus the risks of the change.  (Favorite skin-creams or detergents would not be sacrificed for cheaper alternatives which might cause problems)
• Shoppers are more cautious about new products and less forgiving of quality defects or hype (unmet expectations). 
• Their view of what’s important in life had changed, and they were spending less time shopping for non-essentials and more time on hobbies or with family and friends.
• Visits to Disney, museums and movies were up but sales of products related to these activities were down.
• From the local interviews with 10 shoppers, all employed:

o    9 were worried about the future, had changed buying habits and some thought of delaying retirement.

o    They had not given up buying their favorite brands.

Changes in US household composition, job expectations, increasing prices and disposable income were all affecting consumption patterns:

• 1 in 7 parents now have children returning home after having become independent.
• 21% of 25-34 year-olds are postponing marriage because of the recession.
• 14% of 25-34 year-olds are postponing having children because of the recession
• 30% of 18-34 year-olds still live with their parents
• Only 46% of 16-24 year-olds are working
• Households with 3 generations living together are growing
• 2 family households are growing
• More men than women have lost their jobs, and more men than women are retiring early.

So, men are at home more and almost all men now help with the housework and the shopping even though they don’t like to talk about it.  If asked men admit to:

• “Helping out because it’s only fair”
• They now help with the laundry, sweeping, vacuuming, shopping, washing up and bathroom cleaning.
• They like dusting least because it’s a never ending task made unnecessarily difficult by junk (ornaments).
• The lower the household income, the more the men help with housework.
• Retired men like to nurture. Retired women feel they’ve already done enough.

If male shopping and sharing of household tasks is the new reality how does this affect marketing which targets women buyers and often makes fun of men?

• You wouldn’t reposition detergents for male buyers, but you may add more facts and remove “fluff” from the packaging.
• Men are not good in focus groups: individual interviews would be needed to establish preferences.
• Men need hard facts and such interviews would take time.
• Packaging for men would be simple and would avoid any femininity.

Asked what the next big thing would be, Ms Berning unhesitatingly replied SIMPLICITY.  Life had become too complex and people wanted a change.

                   Cleaning Science

Dr Elizabeth Scott of the Simmons College Center for Hygiene and Health (USA) covered infection control in the home, or “cleaning science”, reminding us that it was an offshoot of “domestic science”, an honorable examination subject which used to be taken by schoolgirls while the boys did woodwork. 

Home hygiene improved dramatically through the 19th and 20th centuries and was widely believed to have contributed to the defeat of the infectious diseases.  Focus of infection control therefore switched to health care institutions.   However urbanization, international travel, the globalization of food supply ( “Delhi Belly at your local supermarket!”), working women (“=dirtier homes!”), and the grouping of the immunocompromised in residential and day-car centers has led to a resurgence of infections.  Dr Scott applauded the growing awareness of the importance of hand hygiene as a precaution against SARS, H1N1, MRSA etc but argued the need for at least as much attention to the cleanliness of the surfaces which hands and foods contact. 

The home is central in the community and receives pathogens from schools, workplaces, leisure centers, retail outlets, restaurants, hospitals and any pets. Within the home the known risks are:

• In bathrooms, where the risk of contamination transfer is (surprisingly) relatively low except during outbreaks of enteric infection.  (fungal growth in showerheads appears to be a new problem area)
• On cleaning materials such as mops and buckets used for cleaning.  Here the risk of contamination transfer is high and constant.
• All hand and food contact surfaces are at risk of cross contamination from floor cleaning. 
• Pets in general but cats are a major source of MRSA in the home.
• Computer keyboards, phones and gymnasium equipment used by many people get inadequate regular cleaning.
• Floors, carpets, rugs and mats, all hard to clean.
• Laundry: the move to cold water washing of clothes is increasing the number of pathogens.

Infection control can involve mechanical cleaning (especially with microfibers), disinfection with chemicals or heat, or a combination e.g chemicals on a microfiber nonwoven.  Chemicals need to be broad spectrum to be effective, and many antimicrobial wipes are ineffective and hence capable of contributing to the development of resistant organisms. Chemical-free microfiber nonwovens capable of physical removal of microbes could be a better long-term solution.

Simmons College has developed a cleanliness test and used it to evaluate the efficacy of conventional and Swiffer mopping.  This study showed the risks of contaminating hands and thereby food surfaces with floor pathogens, but concluded that disposables carefully disposed of were the best floor cleaners.

                   Purex Laundry Sheets

Katherine Yu of The Dial Corporation introduced the first of the Visionary Award candidates observing that consumers had shown a strong preference for all-in-one cleaning systems such as wet-wipes.  The Purex 3 in 1 combination of detergent, softener and antistat in a single dry nonwoven sheet was the natural extension of the trend and since its launch in May 2009 it had won several “best product” awards.  The blue detergent is released in the wash cycle and the softener and antistat survives to be heat activated in the drying cycle.  The product appears to be highloft nonwoven impregnated with detergent from one side and stiffened by the softener on the smoother backside.  The antistat is a stripe on the top edge.   The nonwoven is said to keep the softener intact through washing and carry the dryer-actives into the dryer.  A chart showed 90% of the “softener stripe” surviving the wash cycle and a further 15% being left on the nonwoven after drying.

Clearly this “ultra concentrated” detergent product is very easy to use and has the potential for occupying less shelf space and saving on shipping costs.  It is available in three fragrances in 20 sheet “starter” dispensers and 24 sheet refill packs.  It is also said to:

• Be effective in cold water washing
• Be hypoallergenic
• Be capable of replacing a 50oz bottle of liquid detergent (24 sheet refill pack) thereby saving 27 million lbs of packaging from landfill if every American bought just one pack.
• Reduce CO2 emissions from transportation by 67%.

                   The Ultimate Cloth

Susan Stewart of Advanced Cleaning Technologies LLC introduced a micro-fibre glass cleaner based on hydroentanglement splitting of a spunlaid segment/pie bicomponent of polyamide and polyester.  This award-finalist appeared to be a US launch of a product well-known in the East and typically used for spectacle cleaning.  Here the larger cloths were promoted for a wider range of cleaning and wiping tasks where the streak and lint free finish were desirable.

                   Always Infinity

Linda Cooper of Procter and Gamble described their new holistically-designed foam-cored fem-care pads as dramatically improving the wearing experience and the biggest news in the fem-care category in decades. 

Concentrating on the technical aspects:

• The asymmetric Infinicel™ open-cell foam core has layers with 70 micron and 6 micron pores but is cast as a single sheet.  It is wider at the back.
• The 70 micron top surface is 1mm thick and provides rapid acquisition: the 4mm thick 6 micron layer provides capacity and retention.
• The core is perforated in the target area, light, soft, flexible and resilient and can absorb 10g/gm fluid without any added superabsorbent.  Channels cut-in at the wide end are said to improve fit and add leakage protection.
• The topsheet is a fine stretchy nonwoven, softened and maybe perforated by ring-rolling.
• The wings are larger and softer than on other Always pads.

                   Regenerated Cotton Wipes

Lorraine Crombie of Rockline Industries (UK)  presented the “Little Ones Eco” wet-wipe made for Sainbury’s in the UK.  This 75% cotton 25% Tencel wet wipe is made from reclaimed cotton garneted from T-shirt factory offcuts.  The blend with Tencel increases strength and presumably improves processing through carding and hydroentanglement. The resulting wipes are cheaper than those made from virgin fibre.

                   Fitseal™ Masks

Joseph Leinerberg of Superor Felt and Filtration demonstrated the unique fit, comfort, and permeability of their strapless face masks by wearing one for part of his presentation.   This product, the last of the award-finalists, solves the problem of leakage around the edges of one-size-fits-all masks, for the beardless at least, by a combination of a simple trapezoid shape with adhesive covering the skin-contact areas.  The spunbond-covered meltblown is also electretted to provide 99.9% protection against bacteria and virus particles.  It has met the NIOSH certification requirements and does not need an exhalation valve.

                   3M Nonwovens

David Nelson of 3M provided a thorough overview of the 3M corporation and pointed out that despite profits falling from $4.1bn to $3.5bn (07-08) they still ploughed 6% of revenues back into R&D.  Their success in new product development arises from a boundaryless culture allowing free information exchange between the 45 core technology platforms and the unexpected synergies that become apparent in such exchanges. Individual scientists are famously able to spend 15% of their time on anything that takes their fancy, are allowed, even expected, to make mistakes without criticism.  They can easily get the attention of experts in any part of the organization and are encouraged to bring multiple 3M technologies to bear on each customer’s needs.

The nonwoven technology platform now contributes $4 billion in annual sales, all traceable back to the pre-1960 development of decorative ribbons and tapes, meltblown webs, and abrasive pads. 

3M specialize in commercializing technological innovation into consumer brands.  “Research is the transformation of money into knowledge – Innovation is the transformation of knowledge into money”

                   Connect and Develop

Dr Dale Cooper, Manager, Global Business Development, Procter and Gamble explained Connect and Develop as collaborating for mutual value creation with anyone, anywhere so long as they could accelerate P&G’s innovation and deliver growth.  The initiative arose from the year 2000 crisis when stock declined, top-line declined, innovation had a 35% success rate and the company was regarded as proud and capable but insular. 

A G Lafley, then CEO and Chairman, demanded 50% of P&G’s initiatives to have at least one external partner and C+D was born.  C+D now has 70 leaders in 6 regional hubs and in Global Bioscience, and has recently merged with the External Business Development unit, a center of expertise for business model selection and deal making.

Innovative potential suppliers are encouraged to run their ideas past P&G, and this is done on the website (www.pgconnectdevelop.com) .  Here P&G’s current needs and assets can be browsed and innovative ideas submitted. 

P&G now have about 1000 active C+D contracts. Over 50% of current products and all top initiatives have an externally-sourced component.  P&G assets power $3bn in sales for external companies and their revenue from licensing is equivalent to a billion dollar brand. Last year, 4000 ideas were harvested. 

Examples of C+ D successes include:

• Always Infinity
• Olay Regenerist (with Sederma France)
• Glad JV (with Chlorox)
• Mr Clean Magic Eraser Mop (with Butler Home Products)
• Swiffer dusters (with Unicharm)

                   Sustainability Task Force Update

Rory Holmes, President of INDA described the Sustainability Mission as “to provide tools and resources to membership that enable a holistic, objective and proactive approach to balancing environmental, social and economic opportunities”.  It will be achieved by:

• Providing the tools.  12 separate software systems are being evaluated, among them the OECD Toolkit, BASF’s LCA Software, GaBi, SimaPro, and Sustainable Minds.
• Meetings of Roll Goods producers: Buckeye, Teel, Freudenberg, Ahlstrom, PGI and BASF.
• Meetings of Raw Material suppliers: DAK Americas, T J Beall, NatureWorks, Consolidated Fibers, Cotton Inc. and Martex Fibers.
• Meetings of Converters etc: INDA, RKW, P&G, US Dept of Commerce, Rockline

To date the main needs appear to be help with getting started, training on LCA software, understanding the Government programs, finding funding and navigating the standards.

                   R&D Expenses

Robert Lovegrove of Eastman Chemical Company considered how a balance between the needs of the future and the economic restraints of today could be reached.  Maximizing today’s financial performance was the polar opposite of investing in R&D and the challenge was to develop ways of managing this polarity at a time when great changes were occurring. E.g.:

• Migrations from the land to the cities (China: 250 million people moved in the last 20 years and another 300 million expected)
• Ageing populations (Baby boomers retiring)
• Sustaining a habitable environment
• Water, energy and raw materials shortages.

There remain more questions than answers and more lists of possible management techniques than examples of how any of them might address the problem. E.g.  “How do we manage polarity management? “The answers to your challenges can be found in the foresights you create”