By Philip Blenkinsop
MALLE, Belgium (Reuters) - Under an eco-friendly, flowering turf roof in an industrial park, the world's largest maker of green cleaning products is trying to figure out how to stay on top of a market that has big growth potential but also increasingly fierce competition.
With big-name detergent and household cleaner manufacturers and retailers moving into the ecological market and consumers growing more savvy, Belgium's Ecover must compete on price and prove it is greener than the rest.
Global spending on green cleaning products is expected to rise to $9.3 billion in 2017 from an estimated $2.7 billion in 2012, according to Global Industry Analysts Inc - albeit still a fraction of the relatively stable $150 billion market for all household cleaning products.
Founded in 1979 by a Belgian who left his job at a soap company to make a phosphate-free washing powder, Ecover became the world's largest ecological cleaning firm last year when it acquired San Francisco-based Method, leapfrogging Burlington, Vermont-based Seventh Generation to the top spot.
It plans to make and market Ecover in the United States and do the same in Europe for Method's distinctive line of colorful liquids in colorless bottles.
"We never really cracked the U.S. market and concluded a takeover was the best way forward," said Ecover chief executive Philip Malmberg. "We wanted a company with the same principles, but one that targeted a slightly different group of consumers."
Ecover has been owned since 1992 by private investment vehicle Skagen, which manages the family assets of Jorgen-Philip Sorensen, the late founder of what is now the multinational security services company G4S.
With last year's takeover, sales doubled to some $200 million. But analysts say Ecover has gained more than scale.
Combining Ecover's scientific savvy with Method's U.S. presence and innovation, such as pump-action laundry detergent, Malmberg sees sales doubling again in the next five years. Method outsourced production, so the combined company plans to build a third green-roofed plant in the U.S. Midwest by 2015.
"Ecover definitely punches above its weight in terms of brand awareness. Method is more design-focused," said Ian Bell, analyst at Euromonitor. "It (the new company) has married innovative design with a green message."
Asia could be the next frontier, although demand has yet to take off, partly due to price. In China, a half-liter bottle of green detergent can cost $15, some 10 times more than in Europe.
MARKET EXPLOSION, FINANCIAL CRASH
The industry has struggled since the start of the financial crisis in 2008, which also marked the arrival of several new players: SC Johnson brought out Nature's Source, Clorox its Green Works range and German Persil maker Henkel its Terra brand.
Dozens of retailers like Tesco and U.S. pharmacy chain Duane Reade have also since launched their own labels.
Nature's Source was discontinued in 2010 under the pressure. Green Works survived but has lost market share, according to research firm Packaged Facts, and plans to cut prices this summer.
"While our research showed that consumers wanted to buy products made with natural ingredients, they largely went back to basics - price and efficacy - when money got tight," said Kelly Semrau, SC Johnson's chief sustainability officer.
While Ecover's sales also suffered, down 5-6 percent per year from 2007 to 2010, it believes it is ahead of the pack with products that really clean at a price aimed at no more than 10 percent above standard equivalents.
"In terms of performance we are at the same level as the traditional brands and for some ... we are better," Malmberg said in an interview at the company's headquarters.
Sales, flat in 2011, shot up 17 percent in 2012 and are now approaching peak 2007 levels.
WHICH GREEN PRODUCT?
One sector-wide problem is that although consumers may care about the environment, they aren't really sure what it means to clean "green" and are overwhelmed by competing claims.
It's partly about what's in the product. The first ecological cleaners did not contain phosphates, now banned in many countries because they promote the growth of algae, which starves fish of oxygen. Many now also shun bleach or ammonia, again largely due to their impact on wildlife.
Green producers are also increasingly stressing the health risks consumers face by wearing clothes or using crockery washed with harsh chemicals, from scents to brighteners.
But these days it's also about the way the producer runs its business.
Ecover argues its customers are buying into an entirely green process. The roofs on its plants in Belgium and northern France allow them to use no heating or air conditioning. Next year, its bottles will contain plastic recovered from the sea.
In recent years, major producers have also focused on cutting their carbon footprint, using less or more recycled packaging and selling cold-wash formulas, a big plus for consumers in an era of high energy bills.
Ecover is among a number of producers that are developing surfactants - the compounds that act as the cleaning agent in most products by lowering the surface tension of a liquid - derived from plants rather than petroleum to sever their relationship with what is considered a polluting industry.
The industry also suffers from a lack of global standards and low consumer awareness of those that do exist.
Directory Ecolabel Index lists more than 60 different eco labels from different organizations around the world.
Certification in the European Union assures consumers that a product has been tested independently and shown to work and to contain few hazardous chemicals. But the label is not well known among consumers and there is no grading system like Europe's energy consumption labeling for light bulbs, cars and other products, from least efficient G to best in class, A+++.
Ecover is among critics that say the EU's eco label, which says cleaners must be "largely bio-degradable", is not strict enough.
Ecover itself has not escaped criticism, however. The Vegan Society withdrew its vegan trademark over Ecover's use of water fleas for testing.
British consumer association Which in 2010 questioned whether "green" products in general were really more environmentally friendly than standard equivalents, as well as whether they actually worked.
Environmentally aware consumers may be best off simply cleaning less, some experts say.
"Really you can clean a whole house with two or three cleaners and you can do a lot with water, lemon, juice, vinegar and salt," said Silvia Maurer, safety and environmental specialist at European consumer body BEUC.
(Paragraph nine of this story has been corrected after Ecover clarified location for U.S. plant not confirmed)
(Editing by Sonya Hepinstall)