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Discount supermarket chain Aldi has taken an environmental stance in Australia and announced it will ban any laundry detergents containing phosphates from its shelves by 2013.

Phosphates have been widely used in laundry detergents to soften hard water and break down dirt, however, when water used for laundry runs off into streams the phosphates cause the build up of algae in waterways, which is damaging to fish and wildlife.

Australia lags behind the US and Europe

Given Australia’s proactive environmental stance on other issues it is perhaps surprising that the country is lagging behind the world’s developed markets on the issue of phosphates. Phosphates are already banned from laundry detergents in the US and much of Europe, including Belgium, Latvia, Ireland, Italy, Luxembourg, Sweden, the Netherlands and Austria, and The European Commission has proposed they are banned completely by 2013.

While Australian consumers are becoming more aware and knowledgeable of the effects of their choice of home care needs on the environment and, as a result, manufacturers in Australia are more committed to adopting environmentally sound and sustainable processes in producing home care products, to date in laundry care this awareness has resulted only in a trend for concentrated laundry detergents, which are perceived as environmentally friendly because of savings on water and raw materials, with phosphate usage remaining largely under the radar.

What sparked the decision?

The decision by Aldi comes as a result of a campaign by the Do Something! not-for-profit organisation that campaigns on environmental and social issues ¬– the group has been working on the issue of phosphates in laundry detergents since 2010, reasoning that if 308 million Americans are only able to buy phosphate free laundry detergents, so why can’t 22 million Australians do the same?

To date major manufacturers have said that the presence of phosphates in laundry detergents is a smaller problem in Australia because of the vast majority of major cities are on the coast, and the phosphates are dispersed into the sea, rather than into rivers. However, given Australian consumers’ increasing awareness of the impact their choices have on the environment, and the move by Aldi, which has attracted plenty of media attention in the country, this argument is unlikely to wash for long.

Hoping the supermarkets will follow suit

Aldi, which has around 250 stores nationwide in Australia and accounts for 3% of grocery retailers, is the only discounter present in the Australian market. The discounter channel recorded the most robust growth in grocery retailing in 2010, of 15% in current value terms, establishing loyalty amongst some consumers with its fixed low price structure. However, discounters remains a relatively small concern in laundry care retailing, accounting for almost 2% of sales, with supermarkets/hypermarkets accounting for 92% in comparison.

While Aldi will of course be hoping that the move attracts more footfall through its stores, the Do Something! campaigners are hoping that Aldi’s decision will encourage other major retailers – namely supermarkets Coles and Woolworths – to follow suit. The thinking goes that if the major retailers opted not to stock phosphate detergents then it would seem likely that manufacturers would stop producing them for the Australian market.

Better the devil you know?

While the move by Aldi will be welcomed by many as a step in the right direction in terms of the environment, and has generated positive PR for the retailer, it also brings risks for the store. In many of the markets where phosphate bans have now been introduced, the wheels for the ban were put in motion when detergent manufacturers voluntarily agreed to stop using phosphates. However, to begin with consumers perceived phosphate detergents to be more efficient at cleaning than those without, and as a result products that still included phosphates gained share. In the Czech Republic for example, a voluntary approach largely failed when small manufacturers flooded the market with cheaper products containing phosphates, and gained a 10% market share as a result.

With regard to Aldi, unless the retailer effectively conveys the message that detergent performance is not compromised when phosphates are removed, the move could backfire and see consumers opting instead to purchase their detergents where they can buy detergents with phosphates – during the last few years when environmentally friendly products have moved more toward the mainstream it has become increasingly apparent that the average consumer will only go green if they perceive no drawbacks in terms of performance.

This is especially the case in Australia where cold water washing is the norm with the majority of consumers and as such there is the danger that the introduction of phosphate free detergents could serve to change rather than solve and environmental problem. If in reaction to the possible lack of efficacy offered by phosphate free at low temperatures Australian consumers began to change washing habits which would have the greater impact on sustainability? As ever it’s an open ended question although the phosphate debate itself does appear as something of a red herring at least for a country that already washes at low temperatures as agriculture is by far the largest phosphate polluter with detergents in their entirety only estimated to account for around 2% of the total waste output of phosphate materials.

Local players to lose out

The leading Australian laundry detergents are manufactured by Colgate-Palmolive, Unilever and PZ Cussons ¬– accounting for around 80% of the Australian market in total – all also market detergents in countries where phosphates are banned, indicating the lack of phosphate-free detergents in Australia is not down to a lack of know-how on the part of manufacturers. Since the major manufacturers in Australia already have the resources in place to comply with Aldi’s, and any other supermarket’s ban should they decide to follow suit, the cost of reformulation should not have too much of an impact on the market leaders at least.

It would seem likely, however, that any gains for major players will be at the expense of smaller, local manufacturers for whom the required changes in production could be a costly process – in Germany, the Netherlands and Italy, regulation over phosphates caused some smaller companies to cease trading – meaning in the longer term Aldi’s decision could further consolidate the Australian laundry care market.

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