While you’ve probably never heard of it, you’ve almost certainly had one of its famous product brands in your home.
The company is a manufacturer and supplier of personal and home care products, as well as a raft of other household goods.
That company is Pental Ltd (ASX:PTL). Managing director Charlie McLeish spoke with Proactive about the company’s fresh launch into e-commerce, newly honed focus on sustainability and recent acquisitions.
In this article:
- COVID-19’s impact on the home cleaning product market
- Key market shifts
- The future of sustainable products
- Pental’s e-commerce launch
- What’s next for Pental?
COVID-19 and household cleaning products
COVID-19 drastically changed the way we live in a very short period of time. Routines and habits we once took for granted were intrinsically altered or entirely ended, and humanity was abruptly laser-focused on disinfection and hygiene as we attempted to protect ourselves from an unfamiliar emerging threat.
Based on analysis by Fortune Business Insights, the global household cleaning product market experienced rapid growth of 18.2% in 2020, caused in part by an intense positive demand shock.
Big names like SC Johnson & Sons, Unilever and The Procter & Gamble Company stepped into the void, struggling against the tide of a global shipping squeeze and COVID-induced labour shortages as they endeavoured to meet demand.
One Australian company fared considerably well, leveraging a local procurement strategy to source its base ingredients and packaging locally, and circumventing most of the shipping supply crunch altogether.
Pental was incorporated in 1984. The company has spent the last 40 years building a vertically integrated local supply chain and acquiring beloved Australian brands like White King bleach, Jiffy firelighters and Huggies nappies, attempting to embody the 'Australian Made and Owned' slogan in all of its manufacturing.
Given that the household cleaning market is projected to grow from US$235.76 billion in 2021 to US$320.82 billion in 2028 at a compounding annual growth rate (CAGR) of 4.5%, the future looks bright for Pental and companies like it.
Key market shifts
The rapid growth of the market ramped up overall production and strongly encouraged innovation, as the hygiene-conscious population of consumers expanded drastically and increasingly demanded more transparency in the manufacturing and marketing of household cleaning products.
Fortune Business Insights identified three key trends that emerged during the pandemic:
- Full disclosure of ingredients on labels;
- Increasing demand for natural products to boost market growth; and
- Lack of customer retention and product differentiation.
Providing detailed information of ingredients on labels has become standard practice within the industry, both encouraging, and fuelled by, consumer desire for authenticity and transparency.
Consumers are demanding more information about the components and supply chains of products they consume than ever before.
Pental says it’s committed to providing that transparency, believing it’s imperative to keep up with these shifts in market trends or be left behind. True to its word, Pental’s products all have safety data sheets, including ingredients and potential hazards, readily available on its website.
“We’re receiving a lot more enquiries and being challenged a lot more about products which are more earth-friendly, more sustainable. Which is fantastic, I’m so happy about it,” Pental managing director Charlie McLeish said in an interview with Proactive.
“People are now asking questions like ‘what is your future in product development, what innovations are you looking at?’ I’m glad these questions are coming forward because it gives us more confidence to invest in that area, which is what we are doing right now.”
The future of sustainable products
Despite a shift toward stronger cleaning products last year, prompted by the pandemic, the overall trend within the home cleaning market has been toward natural, sustainable and eco-friendly products.
The global green cleaning products market accounted for US$3.9 billion in 2019 and is estimated to be US$11.6 billion by 2029, anticipated to register a CAGR of 11.8%, more than twice the growth rate of the greater household cleaning market.
Snooper data indicates that 25% of dish liquid buyers consider eco friendliness as a top criterion when purchasing a dish product and more than 90% of shoppers are willing to try eco-friendly alternatives.
“If we don’t hop on the bus, we’ll be left at the bus stop,” McLeish explained, “Our target is to ensure that at least 50% of our products are fully recyclable products by the end of 2025. We’ll be setting more and more goals from there.”
Pental began sustainable research and development three years ago, formulating non-chemical cleaning products with sustainable packaging. The company is increasingly looking to natural cleaning products as a more sustainable and worry-free alternative to chemical cleaners.
“With a team of confident and experienced chemists on board, the development of new green and eco-friendly products is an ongoing process for us,” McLeish continued.
That process has already produced natural soaps, bleach-free cleaners, biodegradable fabric softeners and stain removers and plant-derived hand sanitisers. Pental tests none of its products on animals and is actively working to reduce non-sustainable packaging for all of its offerings.
The company currently has fully compostable packaging for its firelighter products firmly in its sights and says that lab results are highly promising for eco-friendly, biodegradable packaging in the near future.
Pental’s e-commerce launch
E-commerce exploded under the Pandemic. Confined to their homes, consumers had no choice but to order goods and necessities online, forcibly introduced to the convenience of click-and-collect or home delivery.
The trend has stuck and continues to be a driving force in the market even now that restrictions in Australia have mostly lifted and shopping from home is no longer necessary.
“If you look at the Nielsen data, even now with the country opening back up, online growth rates haven’t slowed. Online growth rates are still around 40-odd per cent,” McLeish said.
“Online business was growing to a point that made us envious. That was definitely one of the driving forces behind us looking to buy an online business to start with, which was the Hampers with Bite business, but also setting up our own online website.”
On September 1, 2021, Pental announced that it had completed its acquisition of Hampers with Bite Pty Ltd (HWB), a leading Australian e-commerce hamper and gifting business.
HWB has grown from an approximately $10 million revenue business in FY19 to an approximately $24 million revenue business in FY21 with expected earnings before interest and tax (EBIT) of $5.1 million.
Pental also launched its own e-commerce website and marketing, capitalising on the acquisition of luxury soap brand Bondi, the release of two new Jiffy firelighter products and multiple other new offerings:
“Consumers, as we know, are buying more from the online space via their phones, laptops and iPads and we saw this as an opportunity that we had to be a part of,” McLeish explained.
“It also allows Pental to create an omnichannel approach to our strategy by creating different touch points with our consumers.
“We have the big box supermarkets selling our products, third-party suppliers, and now our very own shopping website. We see e-commerce as a huge opportunity, and this will play a bigger part of our growth strategy as we extend the online range.”
Pental’s efforts in the green product and e-commerce market certainly appear to be paying off.
The company’s underlying profit after tax increased 11.7% from last year, despite a drop in demand for household cleaning products following the 2020 frenzy, and its statutory profit for the financial year rose 6.9% to A$5.4 million.
Altogether, the company entered the 2022 financial year with A$12.7 million in net cash and effectively zero debt.
So, what’s next for Pental?
With consistent core business growth and new product and market offerings, Pental is very excited about its future.
The company is well positioned to reap rewards for its strong brand recognition, reinforced by its ability to leverage new markets and direct reach to consumers through its newly acquired e-commerce channels.
Pental is now exploring and investigating distribution opportunities in other markets, focused on its five strategic priorities:
- Driving sales growth through key brands;
- Developing new products and channels;
- Expand export markets;
- New projects and acquisitions; and
- Continuous manufacturing improvements.