SLAS: Make vs Buy Decision

Linear alkylbenzene sulfonate (LAS) has always been a curious case for big FMCG players. Considering the present annual consumption volume which stands at whooping 372 Thousand Metric tonnes with estimated annual growth rate of around 3% until 2018, FMCG players in India have always been in dilemma of whether to make it in-house or get it done from the third party. Currently, most of the big FMCG players consider toll as an easy option and get the sulfonation done by the third party sulfonators. Considering sulfonation not being the core business of the FMCG players, they have limited exposure to the ?Make? option and are unaware about the benefits associated with in-house production. This white paper along with the detailed cost analysis for the in-house and toll model compares these two models on various other qualitative factors that radically impact the final decision of the FMCG player. LAS and LAB Market Scenario in India The Indian surfactant market is estimated to be 830 thousand metric tons in 2014 and it is projected to grow at a CAGR of 3?3.5%. LAS contributes to around 45% of the Indian surfactant demand. One single application that determines the viability of the growth and sustainability of LAS production is in the fabric wash/home wash segment. LAB is a primary raw material for the production of LAS. In order to understand LAS market, it is essential to have knowledge about LAB market in India. India has approximately 532 thousand metric tons of LAB capacity. Indian Oil, Tamilnadu Petroproducts, Reliance and Nirma are the only four players in India that hold the LAB market and decide the prices of LAB in the domestic market. Domestic selling prices charged by all the four domestic producers have been significantly higher than the prices at which they export to other countries which has resulted into a significant quantity of LAB imports in India. Majority of LAB imports coming to India are from Qatar, Iran and Saudi Arabia as shown in figure. Considering the growing demand for LAS in India, Imports of LAB in India are expected to increase at a CAGR of around 10% until 2015.