cleaning industry – a strategic analysis of asia pacific markets

Prepared & Presented by: Ranajay DasguptaEnvironmental & Building Technologies PracticeFrost & Sullivan, Kuala Lumpur

CLEANING SOLUTIONS EXPO December 2-4, 2009 | Suntec Singapore

Cleaning Industry – A Strategic Analysis of Asia

Pacific Markets

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Agenda

• North American Cleaning Services market

• Asia Pacific Facilities Management and Cleaning Services Markets

- Regional Overview

- Australia

- Indonesia

- Vietnam

• Green Cleaning – Trends and Opportunities

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Setting the Context

Single Service Providers

Single Service Providers Integrated FM Service

Providers

Integrated FM Service Providers Third Party

Management

Third Party Management

Perceived Value to the Client

Degree of Outsourcing

Risk Sharing & Mutual Gain

Lifetime Value to Client

Value of Contract

Number of Contracts

Perceived value of FM Services to clientsPerceived value of FM Services to clients

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Cleaning IndustryNorth AmericaIntroduction

All facilities need to be cleaned in order to meet health code requirements and create a favorable impression on visitors, making cleaning services very important to facility owners

Lack of available internal resources

Increasing demand for automated

‘back office’ janitorial

management

Increasing trend to outsource

Focus on core operations

The intensifying need to reduce

cost in a slowing economy

The cleaning service industry is highly competitive, with a large number of regional and niche competitors and facility management companies

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Cleaning IndustryNorth AmericaCleaning services revenues poised to grow at 10%

Cleaning Services Market: Revenue Forecast (North America), 2005 - 2015Cleaning Services Market: Revenue Forecast (North America), 2005 - 2015

$6,298.1 million (2008)

$13,797.7 million (2015)

CAGR (2009-2015) = 10.3%

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Cleaning IndustryNorth America Competitive market with few well known large participants

Number of Companies in the Market There are 5 to10 well-known national and multinational companies as well as a large number of small, privately owned companies competing in the North American janitorial services market

Tiers of Competition This market is very competitive with the top three participants accounting for 45.1 percent of the market share. The rest of the market share is accounted for by a number of service providers.

Competitive Factors •Providing cost savings•Strong customer relationships•Geographic reach•Cost structure•Service quality•Experience•Reputation

Cleaning Services Market: Competitive Structure (North America)Cleaning Services Market: Competitive Structure (North America)

Cleaning Services Market: Market Share Analysis by Revenues (North America), 2008Cleaning Services Market: Market Share Analysis by Revenues (North America), 2008

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Cleaning IndustryAsia Pacific MarketsMarket Maturity Snapshot

Market MaturityHighLow

Vietnam

Singapore

Australia

Indonesia

Malaysia

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Facilities Management and Cleaning ServicesAustraliaCompetitive Landscape

$7.68 billion market in 2008, growing at a compounded annual growth rate of 7.0 percent from 2008 to 2011

FM Services Market: Competitive Structure (Australia)FM Services Market: Competitive Structure (Australia)

CB Richard Ellis, Colliers International, DTZ, Jones Lang LaSalle, Knight Frank

CB Richard Ellis, Colliers International, DTZ, Jones Lang LaSalle, Knight Frank

Brookfield Multiplex Services, Downer EDI Limited, ISS Facility Services, Johnson Controls, Programmed Group Limited, Sodexo, Resolve FM, Spotless Group Limited, Transfield Services Limited

Brookfield Multiplex Services, Downer EDI Limited, ISS Facility Services, Johnson Controls, Programmed Group Limited, Sodexo, Resolve FM, Spotless Group Limited, Transfield Services Limited

Tier III

Tier II

Tier I

Domestic single service providers Domestic single service providers

• Highly competitive and diverse market with strong international and domestic companies

• Constant push for technological innovations

• Aggressive pricing

• Strong B2B marketing and branding strategies

• Highly competitive and diverse market with strong international and domestic companies

• Constant push for technological innovations

• Aggressive pricing

• Strong B2B marketing and branding strategies

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Facilities Management and Cleaning Services AustraliaKey Trends Observed

An increase in acquisitions and joint venture/alliance programs

The push towards sustainable managementand green buildings will drive the market forgreen cleaning

Tempo Services Limited, Australia

(Cleaning and Security)

Arrix, Australia(Contract Cleaning)

Tungsten Group, Australia

• Drive to transform government offices into green buildings

• Green building rating tools has been introduced for new sectors such as education

• “Green” regulations and educational programs to build awareness

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Facilities Management and Cleaning Services Indonesia Introduction

Janitorial service is the most commonly outsourced operation among all facilities maintenance services

The market is dominated by large international as well as small to medium local players

There is an increasing trend to out-task cleaning operations by building owners and facility managers

Cleaning companies are increasing their investment on technology

Increase in demand is observed from commercial offices, hospitals and hotels

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Facilities Management and Cleaning Services Indonesia Market Challenges and Drivers

1 – 2 years1 – 2 years

Opposition againstoutsourcing

Preference to manage facilities in-house

Price sensitive customers

Challenges

3 – 4 years3 – 4 years 5 – 7 years5 – 7 years

Abundance of local players and cheap foreign players

Lack of good quality players to subcontract


Presence of multinationals

Building construction activity in cities

Focus on managing only the core activities

Drivers


Increased focus on energy efficiency and resource conservation

Inspection of buildings

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Cleaning IndustryIndonesia Competitive Landscape - Large Number of Diverse Industry Participants

PT. Pro Tec Indonesia

Cleaning chemicals, products and hygiene solutions

Cleaning Service Providers & Facility Management Companies

Tier III

Tier II

Tier ITop tier facility management service providers that select best possible cleaning vendors for their clients and manage the vendors

Top tier facility management service providers that select best possible cleaning vendors for their clients and manage the vendors

Building management service providers that provide their own manpower for cleaning or subcontract to cleaning service providers

Building management service providers that provide their own manpower for cleaning or subcontract to cleaning service providers

Cleaning service providers that provide manpower for cleaning

Cleaning service providers that provide manpower for cleaning

Bukit Mayana PT, Daya Cipta Wira Mandiri PT, Environmental Indokarya PT, Gagana Megah Utama PT

Bukit Mayana PT, Daya Cipta Wira Mandiri PT, Environmental Indokarya PT, Gagana Megah Utama PT

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Facilities Management and Cleaning Services Indonesia End-user Analysis – Commercial office sector offers opportunities

Significant office space will be added in Jakarta in 2009- 2011 from the on-going projects

By 2011, 766,368 sq. m of office space will be added in Jakarta Central Business District (CBD)

214,874 sq. m of office space will be added in Jakarta outside CBD in the period 2009-2011

• Existing multinationals are expected to increase their operations in Indonesia and new multinationals will set up offices

• Newer buildings are expected to be more technologically advanced

• Level of professionalism in managing facilities is expected to increase

• Tenants will expect good quality of service

• Existing multinationals are expected to increase their operations in Indonesia and new multinationals will set up offices

• Newer buildings are expected to be more technologically advanced



Good opportunities for facility management companies and cleaningservice providers

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• Companies in oil & gas and mining sectors, are increasingly outsourcing their facilities to facility management service providers

• Rising concern about pollution and energy conservation is likely to further spur the demand for facility management services focusing on energy and waste management

• Companies in oil & gas and mining sectors, are increasingly outsourcing their facilities to facility management service providers

• Rising concern about pollution and energy conservation is likely to further spur the demand for facility management services focusing on energy and waste management

Facilities Management and Cleaning Services Indonesia End-user Analysis – Other sectors that offer opportunities

Industrial Retail

• New retail spaces are being added in both Jakarta and greater Jakarta. However, absorption rate will be slow in greater Jakarta area

• Rental growth is expected to be less than 5% in 2009. Developers are offering various deal sweeteners to attract tenants

• The sector offers opportunities to cleaning and security service providers

• New retail spaces are being added in both Jakarta and greater Jakarta. However, absorption rate will be slow in greater Jakarta area

• Rental growth is expected to be less than 5% in 2009. Developers are offering various deal sweeteners to attract tenants


Healthcare

• The hotel market posted a positive growth in Jakarta, Surabaya and Bali. The market recovered in 2nd quarter of 2009 after a drop in occupancy in most hotels in the first quarter

• Similar to the healthcare sector, hotels offer potential opportunities to cleaning chemicals and products manufacturers as stringent cleaning standards are enforced

• The hotel market posted a positive growth in Jakarta, Surabaya and Bali. The market recovered in 2nd quarter of 2009 after a drop in occupancy in most hotels in the first quarter

• Similar to the healthcare sector, hotels offer potential opportunities to cleaning chemicals and products manufacturers as stringent cleaning standards are enforced

Hotels

• Increasing trend to outsource cleaning operations is observed

• Opportunities for cleaning chemicals and products manufacturers will grow as stringent regulations are enforced on chemicals used for cleaning

• Increasing trend to outsource cleaning operations is observed

• Opportunities for cleaning chemicals and products manufacturers will grow as stringent regulations are enforced on chemicals used for cleaning

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Facilities Management and Cleaning Services Indonesia Key trends observed

Increasing pressure on the cleaning companies to reduce price

Cleaning companies increasing the portfolio of their offerings

Influx of Chinese companies in chemicals and equipments market

Consumers still prefer cheap chemicals to keep housekeeping costs low

Hospitals and Hotels are more geared towards adopting “Green Cleaning” compared to other sectors

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Facilities Management and Cleaning Services Indonesia Porter’s Analysis

• Competition from large international players

• Abundant cheap local players

• Competition from large international players

• Abundant cheap local players

• Pressure to cut price due to difficult economic environment• Easy to switch providers


• Low bargaining power of of suppliers of cleaning chemicals


• • High construction activity and economic growth raising interest• Market potential attracting foreign players

• • High construction activity and economic growth raising interest• Market potential attracting foreign players

• Preference to keep cleaning in-house• Preference to keep cleaning in-house

BARGANING POWER OF CUSTOMERS - HIGH

BARGANING POWER OF CUSTOMERS - HIGHCOMPETITION - HIGH

COMPETITION - HIGHBARGAINING POWER OF SUPPLIERS - LOW

BARGAINING POWER OF SUPPLIERS - LOW

THREAT OF SUBTITUTES - MEDIUMTHREAT OF SUBTITUTES - MEDIUM

THREAT OF NEW ENTRANT - MEDIUMTHREAT OF NEW ENTRANT - MEDIUM

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Cleaning IndustryVietnamIntroduction

The market for cleaning or other facility services is at a very early stage of development

Large domestic players lead in market share as international players struggle to increase their footprints

The demand to outsource cleaning and other facility services will be driven by multinationals

Increase in demand is expected from commercial offices and industrial sector

The trend to outsource cleaning to professional service providers is low

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Cleaning IndustryVietnam Market Challenges and Drivers


Opposition againstoutsourcing

Preference to manage facilities in-house

Price sensitive customers

Challenges


Lack of professionalism and transparency in conducting business


Presence of multinationals

Building construction activity in cities

Focus on managing only the core activities

Drivers


Rise in environmental concerns due to increase in pollution

Abundance of small local players

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Cleaning IndustryVietnamLocal Players Dominate the Market

Total market (2008) = $11.2 million

Note: All figures are rounded; the base year is 2008. Source: Frost & SullivanNote: All figures are rounded; the base year is 2008. Source: Frost & Sullivan

Pan Pacific Corp., $ 6.7 million, 60%

Pan Pacific Corp., $ 6.7 million, 60%

HB Cleaning, $ 2.0 million, 18%

HB Cleaning, $ 2.0 million, 18%

Unicare, $ 0.9 million, 8%

Unicare, $ 0.9 million, 8%

Others include Aden Services, Greenrose Services Co. Ltd, P. Dussman Vietnam Co. Ltd. ,

Hoan My

Others include Aden Services, Greenrose Services Co. Ltd, P. Dussman Vietnam Co. Ltd. ,

Hoan My

Others,$ 1.6 million, 14%

Others,$ 1.6 million, 14%

Cleaning Services Market: Company Market Share by Revenues (Vietnam), 2008

HB Cleaning

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Cleaning IndustryVietnamEnd-user Analysis – Commercial office sector offers opportunities

Commercial office space is expected to increase in Hanoi and HCMC in 2009-2011

In 2009, 197,760 sq. m of Grade A and Grade B office space will be added in Hanoi

Grade A office space in HCMC is expected to increase by thrice in 2009-2011 and reach 500,000 sq m

• Government regulations are likely to encourage further FDI in this sector

• Existing multinationals are expected to increase their operations in Vietnam and new multinationals will set up offices



• Government regulations are likely to encourage further FDI in this sector

• Existing multinationals are expected to increase their operations in Vietnam and new multinationals will set up offices



Good opportunities for facility management companies and cleaningservice providers

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Cleaning IndustryVietnamEnd-user Analysis – Other sectors that offer opportunities

Industrial Retail

• Urbanization, strong economic growth, and rise in disposable income of the expanding middle class are expected to drive the growth of modern retail in Vietnam

• Future addition of retail space (in sq. m) in Hanoi is expected to be 41,625 (2009), 41,496 (2010), and 330,251 (2011)


• Urbanization, strong economic growth, and rise in disposable income of the expanding middle class are expected to drive the growth of modern retail in Vietnam

• Future addition of retail space (in sq. m) in Hanoi is expected to be 41,625 (2009), 41,496 (2010), and 330,251 (2011)


Others

• Market for cleaning service providers will grow in healthcare sectors as more and more hospitals start outsourcing cleaning operations

• Market for cleaning service providers will grow in healthcare sectors as more and more hospitals start outsourcing cleaning operations

• Ranked as the fifth attractive manufacturing investment destination among the emerging markets by PWC in 2008 ,Vietnam’s industrial sector is one of the key components driving the economy

• Pollution is a major cause of concern, and it is expected that trend to outsource industrial cleaning will grow in the future

• Ranked as the fifth attractive manufacturing investment destination among the emerging markets by PWC in 2008 ,Vietnam’s industrial sector is one of the key components driving the economy

• Pollution is a major cause of concern, and it is expected that trend to outsource industrial cleaning will grow in the future

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Cleaning IndustryVietnamPorter’s Analysis

• Competition from large local players• Open tender process often not followed while choosing vendors• Abundant local players

• Competition from large local players• Open tender process often not followed while choosing vendors• Abundant local players





• • High construction activity and economic growth raising interest• Property management providers present in Vietnam eying facility management market

• • High construction activity and economic growth raising interest• Property management providers present in Vietnam eying facility management market

• High preference to keep cleaning in-house• High preference to keep cleaning in-house

BARGANING POWER OF CUSTOMERS - HIGH

BARGANING POWER OF CUSTOMERS - HIGHCOMPETITION - HIGH

COMPETITION - HIGHBARGAINING POWER OF SUPPLIERS - LOW

BARGAINING POWER OF SUPPLIERS - LOW

THREAT OF SUBTITUTES - HIGHTHREAT OF SUBTITUTES - HIGH

THREAT OF NEW ENTRANT - MEDIUMTHREAT OF NEW ENTRANT - MEDIUM

23

GREEN CLEANING – TRENDS & OPPORTUNTIES

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Green CleaningWhat it is all about

Green Products are those that reduce impacts on health and the environment when compared to similar products used for the same purpose. E.O. 13101

Green Cleaning includes all products, trainings, procedures and initiatives designed to protect health of occupants without harming the environment

Green Cleaning is more than switching into a “green” cleaning product for a traditional product

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Green CleaningGreen Cleaning entails a change of behavior and not just a change of cleaning products

TRADITIONAL CLEANING GREEN CLEANING

COST

SINGLE SERVICE

PEOPLE

INTEGRATED SERVICES

HEALTHAPPEARANCE

VENDOR-CUSTOMER JOINT EFFORT

LITTLE CUSTOMER INVOLVEMENT

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Green Cleaning“Green Cleaning” covers products beyond cleaning chemicals

General p

urpose cleaners

Glass Cleaners

Carpet S

potters

Bathro

om Cleaners

Cleaning chemicals are certified by independent and voluntary organizations that identify cleaning solutions that are environmentally preferable than other products that perform similar functions

ThailandKoreaJapan Taiwan China CanadaUS Singapore

Toilet tissue with high recycled paper content

Chlorine-free paper

Touch-free dispensers

Effective filtration

Low power consumption

Carpet industry

approved

Carpet extractors, Micro-fiber clothes and mops, Mats, Recycling bins……..

Australia

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Green CleaningGreen label schemes are specifically designed for cleaning solutions

Hong KongAll Purpose Cleaner (GL-003-005)

• Biodegradability• Exclusion of certain chemicals, limits on certain chemicals and volatile organic compounds • Color pigments• Packaging requirements

Floor Cleaner (GLS-013)Singapore

Laundry Liquid Detergent (GLS-011)

Hygiene Paper (GLS-002)

Dishwashing Detergents (GLS-012)

Australia

The Australian Ecolabel program for

cleaning solution

Domestic (Household) Cleaning

Window Cleaning

Commercial Cleaning

Industrial Cleaning

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Green CleaningCleaning Industry can help buildings earn green building certification

LEED NC – LEED for New ConstructionLEED EB – LEED for Existing BuildingsLEED CI - Commercial Interiors

Cleaning industry can contribute 13+ credits for the Green Building certification

Sustainable Sites Materials & Resources Indoor Environmental Quality

Exterior cleaning etc. Eco-friendly cleaning materials etc. Entry mats, pest management, janitorial equipment

Australia Singapore Hong Kong New Zealand South Korea

Japan Malaysia

Gre

en B

uil

din

g

Cer

tifi

cati

on

To

ols

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Green Buildings Market: Analysis by Country (Asia Pacific), 2009

Ma

rke

t p

art

icip

ati

on

a

nd

sta

ke

ho

lde

rs i

nv

olv

em

en

t

Low

- Leading Green Building

markets in Asia Pacific region are

South Korea, Australia and

Singapore, due to both government

support and market stakeholders’

commitment and efforts. Hong

Kong has achieved similar

positioning with slightly less

number of government initiatives.

- Japan and New Zealand

have made progresses too, but in

terms of market stakeholders’

involvement and government

support they are behind from

leading markets mentioned above

- The market is at the initial

stage of development. Rating

systems and certification tools

have been recently introduced.Government regulations, incentives and GB associations’ initiatives to promote GB

Medium High

Hig

hM

ed

ium

L

ow

Singapore

Australia

Hong Kong

Japan

South Korea

New Zealan

dMalaysi

aIndonesi

a

Source: Frost & Sullivan

Green CleaningGreen Buildings market poised to grow in Asia Pacific and offer opportunities in Green Cleaning market

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Green CleaningRelative attractiveness of various sectors for the green cleaning market

LOW HIGH

Residential Healthcare

Hotel

Public Buildings

Educational

Commercial Buildings

Adoption Level of Green Cleaning across Various Sectors in Asia Pacific Markets

Government buildings should comply to

Green standards

Drive to turn existing buildings into green

Drive to turn existing buildings into green

Residential sector has maximum

number of green buildings

Government buildings will be transformed into

green buildings

Commercial sector has the largest number of

green buildings

Key End-user Trends in Green Buildings in Asia Pacific Markets

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Green CleaningStrategic recommendation for industry participants

Join Relevant

Associations

Participate in spreading awareness

Educate customers

Bundle service offerings

ConductPilot

Programs

Identify potential clients

• Healthcare facilities• Public facilities• Environmental organizations• Corporate Headquarters

• Green Building Councils• Green Hotel and Healthcare Associations

• End-user workshops• Seminars and conferences• White papers

• Conduct a test program and analyze the results

• Bundle various cleaning services to achieve a wider reach within an organization• Offer consulting and advisory services

• Educate customers about higher ROI of green products• Make customers aware that

green cleaning is a holistic approach and not just buying green products

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