Let’s not beat about the bush – it’s tough out there. We can definitively say that we are facing the toughest operating conditions in the last 25 years.
Car care manufacturers ( UK & Ireland ), as well as peers around the globe must all face these difficulties but there are so many factors underlying the situation that no single one can really be blamed:
- Brexit – GB based supplies are unquestionably higher, compared to EU, than they were before the situation changed. Moreover, carriage within the UK is significantly more costly due to the removal of many of the – so critical – HGV drivers.
- Covid – this is multifaceted. Of course we have the knock on from months of factory shutdowns but this leads on to:
- Material shortages
- Containers poorly located across the globe
- Container shipping costs
- Energy price increases
- Ukrainian War – this further impacts energy prices but causes knock on delays to shipping. Moreover, we have directly traceable material shortages as well as less direct (but still intrinsically linked) material cost inflation.
Worst of all, none of these factors are getting better. Much as we hate to say it, there are no lights showing at the end of the tunnel. We would suggest that the average price inflation over the last year – across the board – exceeds 25%, potentially it could be as high as 50%. But, soldier on we all will because it will get better, we just have to be patient. For now, we want to point out a couple of the most difficult products to help our customers to plan accordingly.
Silicones have caused problems several times in recent years but these are critical materials for valeting products. At the moment we are coming off the back of every noteworthy supplier calling Force Majeure in the latter part of 2021. What this means it that supply contracts were no longer able to be fulfilled. The follow up is that free circulation silicone supply went to nil. Were it possible to source silicone oils, they were typically at a premium of more than 5x. For products like tyre shine, using double digit percentages of these silicones, this has a massive impact on pricing. The situation is made even worse by the Ukrainian war. Another critical component in many tyre dressings is carrier solvents, routinely naptha, kerosene or paraffin derivatives. The supply of these is particularly difficult with pricing rising approximately 50% since January 22. Overall, this leads to a scenario where premium tyre dressings truly do command a premium price. If your customer base is not willing to pay a large premium, we thoroughly recommend an exercise in expectation management. It is possible to manufacture products at realistic pricing but it is unrealistic to expect premium performance at the same time. Every supplier of car cleaning products must accept this reality.
This is a group which can cover multiple product types and is key for heavy duty car cleaning products and car wash detailing supplies. For instance, Traffic Film Removers (TFR), Snowfoams and Prewash products are all heavily dependent on surfactant blends and sequestrants. Surfactants are routinely up by 25-50% but sequestrants are heavily impacted by the transportation issues, with a great part of the supply originating in China. For instance, a key sequestrant used is EDTA. The cost of this has doubled since October 2021 and supply is unreliable. This is made worse because products like TFR are very price sensitive. The reality is that – if your TFR price has not gone up – your quality has gone down. Any debate of this point is pointless. This means that suppliers to end users need to make a critical decision – do we sell a product based on quality, or do we sell on price? You cannot do both.
The way forward
Unfortunately there is only one way forward – follow the market. React to your supply chain and don’t find yourself selling at prices which are not sustainable!
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