Rising Confidence in Cleaning

[box type=”shadow” ]India is set to be the world’s third largest economy with projected GDP at US$10,133 billion by 2030, and so is the cleaning industry with a pan-India potential of $150 billion. With Clean India Mission, river cleaning and smart cities projects, policy reforms and rising awareness happening altogether, cleaning today is one of the most fertile businesses of India. Suprita Anupam brings an account on the cleaning business potential in India.[/box]

AS RIGHTLY pointed out by Kiran Mazumdar Shaw during her interaction with Clean India Journal, “We have to be in a firefighting mode”; the Government at the helm has set the tone from “should” factor of cleaning to the “must” mode, irrespective of the nature of organisations – private, public or PPP.

India is a country where 60.2% population has no access to safe and private toilets, tier II and III cities have little access to mechanised cleaning; tier I cities like Delhi and Mumbai are counted as the most polluted cities in the world; logically, a number of things are to be done just to make the country and its cities functional.

The socio-economic situation opens a huge door for the business of cleaning that was so far limited to B2B.

Emerging Markets

Clean India Mission

As per the Press Information Bureau, 3.18 million toilets have been built between April 2014 and January 2015, which is 25.4% of the target for 2014-15. The government program aims to construct 120 million toilets in rural India by October 2019, at a projected cost of US$29 billion. Based on the marginal postulates of market equilibrium that an investment of $1 creates a $3 potential market, the US$29 billion investment will create a $87 billion market for cleaning products and services over a period of 2014- 2019. Of this, Swachh Bharat Mission envisages an investment of US$9.3 billion of which US$2.2 billion will be provided by the Central Government. The rest is expected to be raised by the states, urban local bodies, and from private players. While the World Bank is committed to provide $1.5 billion, the Global Sanitation Fund has amplified its support to the Swachh Bharat Mission and Namami Gange projects.

Clean Ganga

Like Clean India, Clean Ganga project has turned in to be a nationwide campaign that involves 118 ULBs across the five Ganga Basin States of Uttarakhand, Uttar Pradesh, Bihar, West Bengal and Jharkhand. While the existing sewage treatment plants along the Ganga Basin have a capacity of only 1,027 million, the States generate 3,636 million litres of sewage per day that goes directly into the river. As far as the business potential and investments are concerned, “The Clean Ganga project will cost around $12 billion,” said Union Minister for Road Transport, Highways and Shipping Nitin Gadkari at Ganga Manthan, national dialogue. “The government may provide around 30% of this sum through viability-gap funding and the rest will come through a PPP model.”

[box type=”shadow” ]It is hard to calculate the figures of cleaning market potential of a country with over a billion population; a country which is unclean, unhealthy and unhygienic to live in, yet is the number one investmentdestination in the world. The business of cleaning is still unrecognised at large.[/box]

The National Ganga River Basin Authority (NGRBA) has so far sanctioned 83 projects in 49 towns of the Ganga States costing Rs59.19 billion under NGRBA Program, including Externally Aided Projects (EAP) component with the assistance of Japan International Agency (JICA) and the World Bank of Rs43.87 billion. According to the National Mission for Clean Ganga, these include projects of Rs22.56 billion in Uttar Pradesh, of Rs17.02 billion in Bihar, of Rs993.6 million in Jharkhand, of Rs13.53 billion in West Bengal and of Rs2.51 billion in Uttarakhand for laying of sewage networks, treatment plants, development of river fronts, etc. The sanctioned projects also include three CPCB projects worth Rs1.98 billion on Pollution Inventorization, Assessment and Surveillance (PIAS) on river Ganga Strengthening of Environmental Regulator (SER)-CPCB and a project on setting up the Ganga Knowledge Centre (GKC) in NMCG (Rs48.54 million) and educating schools.

“Under the World Bank aided project Automatic Water Quality Monitoring has been setup under the NGRBA Project for the river Ganga at an estimated cost of Rs994.5 million approximatelly market. The network will consist of 113 stations at critical locations along the main stem of the river.”

While the entire plan has been prepared by a consortium of seven IITs, the government is open to adopt new approved technologies. In a recently concluded conference, various technologies that could revive the sustainability of Clean Ganga Mission were presented and shown to all the officials, as almost Rs290 billion had been spent already till 2013, with no consequence at ground.

The Clean Ganga project, with focus on wastewater treatment, water treatment, ghats cleaning and toilets provision being planned, creates a huge market of $36 billion.

Home Cleaning

The market for home cleaning products can be divided into three major categories – the organized high end cleaning equipment & service providers, FMCG suppliers of mid-level cleaning aids and the local traditional suppliers of home cleaning products. “Home cleaning segment is growing with our estimates pegging at over Rs80 billion or more. We believe, this fragmented market will see organised players getting in and potential consolidation of leading players,” says Manu Dhawan, Co- Founder & CEO, Spaceworx Services Pvt. Ltd. If we add the cleaning products market too, the market potential is huge.

Existing Markets

Looking at the global markets, Indian Economy has held the ground strongly. The inflation rate at 3.9% stands comparatively better against 15.6% of Russia, 9.9% of Brazil, 7.7% of Turkey and 7.1% of Indonesia. Also, the current account deficit to GDP ratio stands at a contracted 1.2% in India compared with 2.1% for Indonesia, 6.1% for Turkey. The growing FDI and FII inflows help boost the economy further and hence, the cleaning Industry.

 

Food Processing

Projected to grow at the rate of 104%, touching US$482 billion by 2020, the Indian food and grocery market is the world’s sixth largest, accounting 14% of manufacturing (GDP), 13% of India’s exports and 6% of total industrial investment. “Indian food service industry is expected to reach US$78 billion by 2018.The Indian gourmet food market is currently valued at US$1.3 billion and is growing at a CAGR of 20%. It is expected to cross US$2.8 billion by 2015.

[box type=”shadow” ]The inflation rate of India at 3.9% stands comparatively better against 15.6% in Russia, 9.9% in Brazil, 7.7% in Turkey and 7.1% in Indonesia.[/box]

The online food ordering business in India is in its nascent stage, but witnessing exponential growth. The organised food business in India is worth US$48 billion, of which food delivery is valued at US$15 billion,” according to the India Brand Equity Foundation.

This transmits to their cleaning & maintenance needs too. Installation of CIP (Clean-In-Place), anti-foaming devices and COP systems account for a minimum of 0.25-1.5% of the entire expenditure. Therefore, the food processing industry alone generates a minimum of $450 million worth market prospect for cleaning & maintenance segments.

Healthcare

According to recent FICCI-KPMG report, India’s healthcare sector is expected to be $280 billion in size by 2020, growing at a compound annual growth rate of 16%. The Industry growth is favoured by rising income level, greater health awareness, increased precedence of lifestyle diseases and improved access to insurance.

In comparison to World Health Organisation’s (WHO) stipulated minimum doctor to patient ratio of 1:1,000, India has only 0.7 doctors per 1,000 patients. Currently, 0.9 million more doctors are required to meet the global average of 14.1 doctor per 10,000 people. Moreover, in comparison to WHO’s stipulated minimum ratio of 2.5:1000, India has only 1.7 nurses per 1,000 patients. An additional 2.4 million nurses are required to meet the growing demand. The healthcare manpower demand has outpaced its supply, creating a huge gap in quality healthcare services that needs to be filled.

According to the Healthcare Expenditure Survey, healthy healthcare unit direly needs the latest mechanised solutions for housekeeping. It normally spends 3% of the entire expenditure to fulfil the housekeeping operations. This accounts for a $1billion cleaning & maintenance market potential in healthcare segment.

Hospitality

The Indian hospitality industry is the third-largest sub-segment of the services sector comprising of trade, repair services, hotels and restaurants contributing nearly US$187.9 billion or 12.5% to the GDP in 2014-15. The industry has been growing fast at 11.7% CAGR over the period 2011-12 to 2014-15.

As per ICRA report, the domestic hotel industry is estimated to touch $1.8 billion by 2016 end from $1 billion presently. When it comes to cleaning & maintenance or say housekeeping in hotels, it is no more a utility based expense, but becomes a matter to showcase. Kristopha Hohn, Corporate Support Expert at Hospitality Staffing Solutions avers, “It depends on the hotel, but it tends to be a good percentage for most. I have worked in a few different hotels with divergent needs, and found this to be true. With the luxury hotel, housekeeping expenses were about 14-18% of the budget because of the types of products one would use to clean and the frequency of laundry, but it was primarily staffing. Turnover on the rooms didn’t happen quite as often because guests would stay for roughly three to five days per room, and we had some conscientious guests who would re-use their towels and wash rags.” Adding both the existing and upcoming projects, Housekeeping / Cleaning & Maintenance at hotels and restaurants marks a $1.5 billion potential over the next five years.

Pharmaceutical

Accounting for 2.4% of the global pharmaceutical industry in value-terms and 10% in volume terms, Indian pharmaceutical sector is estimated to grow at a CAGR of 15.92% to US$55 billion by 2020 from US$20 billion in 2015.

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C&M of a premise precisely depends on the property’s design, amenities provided, open space provided for landscaping and so on.

For real estate properties, C&M is around Rs3/ft monthly. This can be further divided as:

• Keeping the properties clean – landscaping, garbage removal etc: 20% (Rs0.60)
• Property Repairs – broken windows, removing graffiti, replacing light bulbs, any light maintenance: 5% (Rs0.15)
• Interior Upgrades – replace carpeting, interior painting and interior cleaning: Nil
• Safety – regular checks on the property, making sure property is always accessible for showing potential buyers: 20% (Rs0.60)
• Security – board-ups, door and window replacements, lock changes: 25% (Rs0.75)
• Parking maintenance & cleaning /( Housekeeping of the entire property): 30% (Rs0.90)

– Mohamed Ali, MD, South India Shelters Pvt Ltd

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With 71% market share, generic drugs form the largest segment of the Indian pharmaceutical sector that is expected to be the third-largest global generic Active Pharmaceutical Ingredient (API) merchant market by the year-end. Generic drugs account for 20% of global exports in terms of volume, making the country the largest provider of generic medicines globally and expected to expand even further in coming years. Pharmaceuticals Exports Promotion Council expects pharmaceutical exports to reach US$25 billion in 2015.

However, for the past two three years, Indian companies have been consistently criticised and some of their plants have been banned by EU owing to their poor GMPs. Recently, the US Food and Drug Administration issued a warning letter to Sun Pharma highlighting serious concerns of sterility assurance in medicines, possibility of microbial contamination and ceiling leaks, as part of the manufacturing lapses at its Halol facility.

[box type=”shadow” ]According to the Passport database access, India had ₹174 billion washing and cleaning industry in 2012, more than doubling in value since 2007. Nearly 767,000 washing and cleaning companies in India in 2012.[/box]

Hence Cleaning & Maintenance, an essential and inevitable part of GMP at pharmaceutical can’t be side-lined. Ashok G. Deshpande, Manager-Corporate Communications & Administration- Glaxo SmithKline says, “In my opinion a pharmaceutical company of Rs1 billion revenue spends approx. 2% on housekeeping.

Other Sectors

It is hard to present the potential-figures of all the sectors in a single article. Each one has its own story to tell. Indian Railways with a revenue of over $24 billion is a big consumer for cleaning & maintenance in itself. The domestic textile and apparel industry is estimated to reach US$141 billion by 2021 from US$67 billion in 2014. Among others, banking industry that consists of 26 public sector banks, 25 private sector banks, 43 foreign banks, 56 regional rural banks, 1,589 urban cooperative banks and 93,550 rural cooperative banks; IT & ITeS, world’s largest sourcing destination, accounting for approximately 55% of the US$146 billion market and Defence & Aerospace getting a huge FDI inflows are the other prime consuming target sectors for cleaning & maintenances.

Cleaning Market Potential

Taking all the figures into account, the emerging markets, existing and new investments being made, the cleaning & maintenances market potential stands tall at $150 billion, harnessing which the cleaning industry can actually contribute to 0.5% of country’s GDP.

Industry Snapshots

When it comes to the cleaning segment, it is comparatively difficult to consolidate the figures. It has neither been sketched nor been framed as an Industry. The areas are washing & cleaning / linen cleaning; building cleaning services; other contract cleaning; cleaning equipment, tools and consumables; critical cleaning; home cleaning; roads & street, rivers, lakes and other water resources and heritage area cleaning. For e.g, while outsourcing, cleaning services comes under soft services which has to be separated from the hard one. At the operations level, “the cleaning & maintenance is a part of O&M Expenses, the norms set by CERC, regulatory commission, for power stations as Tariff Regulations,” comments Vivek Kumar, Manager- NHPC Ltd.

[box type=”shadow” ]Banking Industry that consists of 26 public sector banks, 25 private sector banks, 43 foreign banks, 56 regional rural banks, 1,589 urban cooperative banks and 93,550 rural cooperative banks, IT & ITeS, world’s largest sourcing destination, accounting for approximately 55% of the US$146 billion market and Defence & Aerospace, getting a huge FDI inflows are the other prime consuming target sectors for C&M.[/box]

According to the Passport database access, India had Rs174 billion washing and cleaning industry in 2012, more than doubling in value since 2007. Nearly 767,000 washing and cleaning companies in India in 2012. Industry lacks automation, is very labour-intensive throughout 2007-2012. Industry turnover set to see 19% CAGR over 2013-2018, to reach $7.4 billion at end of forecast period.

The Indian building cleaning services market has grown by 78% over 2007-2012, reaching Rs63.8 billion in the latter year. While value of building cleaning services provided to Indians abroad climbed by 127% over 2007-2012 to Rs7.6 billion, the value of local building cleaning services segment has increased by 74% over the same period to Rs57.3 billion in 2012. Industry turnover is expected to increase by 123% over forecast period, reaching Rs127.7 billion in 2018.

Late entrant to the Indian cleaning market is services. Contract cleaning has recorded an impressive CAGR of 18% in the period 2011-2014, whilst total sales reached USD3.1 billion in 2014. The services are now being outsourced in a variety of institutional channels, including private hospitals, private education (higher education), factories (especially in the power, energy, steel and cement sectors), public administration, banks, multinational corporations (especially in IT and the telecommunications industry), retail, manufacturing and lodging, among st others.

With inputs from IBEF,

PIB Moody’s Analytics and KPMG