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[Korean Startup Interview] Cheongse ‘Dream of Becoming the KOLMAR KOREA and COSMAX of Industrial Cleaner ODMs’

2024-05-22 8 min read


[Korean Startup Interview] Cheongse ‘Dream of Becoming the KOLMAR KOREA and COSMAX of Industrial Cleaner ODMs’

Reading Time: 8 minutes
  • funding Stage : Pre-Series A
  • Raising Amount : KRW 1.5 B
  • Desired Fundraising Timeframe : 3Q 2024

“We dream of becoming Kolmar in the industrial cleaner ODM field through the detergent manufacturing know-how accumulated through water cleaning services.”

Like the detergents commonly used in households, industrial sectors also require detergents for various purposes. Unlike regular cleaners that can be created by simply mixing standard raw materials, industrial cleaners necessitate specialized and potent formulations tailored to their specific applications. Cheongse, a specialized Original Design Manufacturer (ODM), produces unique detergents for a broad range of industries, customized according to the intended purpose, application, and type of contaminant.

Originally, Cheongse was not established to manufacture detergents. Founded in 2017 with the ambition of becoming an eco-friendly laundry service, the company managed the ‘Youth Laundry’ brand, which offered water cleaning as an alternative to traditional dry cleaning, and the ‘Youth Life’ brand, which produced household goods for direct-to-consumer sales. However, after facing stiff competition from larger, well-funded laundry enterprises, Cheongse decided to pivot to a new business model.

Lee Ki-tae, the CEO of Cheongse, remarked, “During our provision of water cleaning services, we received numerous positive reviews about our detergents. Instead of competing directly with similar laundry businesses, we saw an opportunity to convert these companies into our customers.”

Prior to this shift in strategy, Cheongse faced significant challenges, operating with a core team of just four people, including CEO Lee. By strategically reorganizing and focusing only on essential personnel, the company regained momentum, achieving research and development breakthroughs as well as securing production and sales contracts within just four months. The firm garnered orders from over 550 companies, managing this without a dedicated sales team, and continues to receive inquiries to the extent that current staffing levels are insufficient to meet all the demand.

Having previously founded a successful startup in 2014 while in college, CEO Lee is now committed to pioneering a new market by steering Cheongse’s focus towards the detergent sector. The company aims to become a leader akin to COSMAX and KOLMAR KOREA within the detergent market, supplying custom-formulated detergents based on each industry’s specific raw material needs.

CEO Lee explained, “While household detergents are primarily used to clean dirt, industrial detergents are designed for a variety of applications and methods. It’s challenging to find companies that specialize in these specific products. Moreover, I believe it’s crucial for industrial cleaners to evolve to meet environmental standards. For instance, there’s a growing demand for effective detergents in innovative vehicle cleaning methods that forego traditional brushes for polishing and non-brush cleaning.”

In an effort to attract investment for expanding manpower and enhancing facilities, Lee Ki-tae stated, “To my knowledge, no company comprehensively covers all industrial categories by integrating research with production capabilities. Cheongse possesses its own factory and research facilities and maintains a database of raw materials and formulation expertise, acquired through our water cleaning services and direct detergent manufacturing. Our goal is to address the existing challenges in the market by offering cleaning solutions that not only reduce labor costs but also enhance efficiency for our clients.”

What problem is Cheongse trying to solve?

Companies lack sources to purchase or develop specialized industrial cleaning agents, leading them to rely on general market products or manual labor to address this issue. Normally, when we think of detergents, we envision those bought at supermarkets for laundry, kitchen, and general cleaning. However, industrial detergents are used for more specific and intensive purposes.

For example, consider the issue with barnacles adhering to the bottoms of ships. To maintain cruising efficiency, it’s crucial to keep the ship’s hull smooth. Barnacles can reduce this efficiency by about 25%, necessitating their removal.

Despite the global demand for solutions to remove barnacles, no commercial barnacle removers are available, forcing people to resort to diving or using high-pressure water blasts. This approach results in high labor costs and significant risks.

Furthermore, industrial cleaners play a vital role not just in cleaning, but also in the management, maintenance, and operational efficiency across various industries. These include salmon washing in factories, accessory cleaning, aircraft de-icing, seaweed farming, coil coating in steel mills, and applications in the aerospace sector.

The primary challenge is that these industrial cleaners are not available for purchase on the market, and finding development services is difficult. Moreover, the development process itself is not straightforward. The reasons why development is difficult are as follows.

First, while the raw materials for detergents used in kitchens and laundry are readily available, it is not easy to find raw materials for detergents used in certain industries.

Second, it is necessary to find an appropriate mixing ratio by mixing and combining raw materials, but this takes a lot of time due to the number of cases. Ultimately, time is also a cost, so it is difficult to find a company willing to undertake such development.

How does Cheongse address this issue?

Cheongse leverages its expertise in creating specialized industrial cleaning agents and targets solving problems through its R&D capabilities, tailored to customer needs. For example, let’s discuss our collaboration with a publicly listed company that manufactures car wash equipment. We secured a detergent supply contract with them, responding to their requirements for new product development, improved quality over existing products, and lower costs.

Despite having no previous experience in automotive detergents, Cheongse successfully met these demands by understanding the interactions and functions of various ingredients, backed by thorough analytical research.

What competitive advantages and technical strengths does Cheongse have over its competitors?

Our core strength is developing industrial cleaning agents that meet the specific needs of various industries and establishing a dominant presence in niche markets.

Cheongse distinguishes itself by not just using conventional ingredients; we specialize in applying unique materials across different sectors, continually accumulating data on their properties. This allows us to innovate and integrate our findings, enabling us to formulate specialized industrial detergents more quickly and accurately than our competitors.

Historically, agriculture involved cultivating crops outdoors, but today, it has shifted towards hydroponic systems indoors. As the role of pesticides has evolved from merely eliminating pests to being safe for human contact, our industry similarly requires rapid advancements in technology. Our ability to quickly adapt and develop specialized industrial cleaning solutions is what we consider to be Cheongse’s competitive edge.

What products and services does Cheongse offer, and what is their current status?

Cheongse specializes in developing and supplying industrial cleaning agents tailored to customer requirements through its ODM services, which include comprehensive R&D in industrial detergent technology.

A notable innovation from Cheongse is our “water cleaning” technology. Typically, garments are taken to the laundry for dry cleaning, but due to environmental and health concerns, this practice is regulated in Europe and the USA. In line with Korea’s efforts to reduce carbon emissions, the Ministry of Environment is encouraging a reduction in dry cleaning practices. Cheongse developed water cleaning as an alternative, allowing garments that usually require dry cleaning to be washed with water without any damage.

This eco-friendly method is now available in two Cheongse-operated laundries in Songpa and Jeonju, where approximately 100,000 garments have been successfully cleaned. We have also received the first domestic environmental label certification from the Ministry of Environment. Currently, seven local laundries that typically require dry cleaning safely utilize our water cleaning technology, and we are planning to launch a product this year that will enable households to wash dry cleaning garments at home.

What is the size of Cheongse’s target market, and who are the core target customers?

The global industrial cleaning agents market is expected to grow from KRW 68.395 trillion in 2023 to KRW 205.215 trillion by 2035, with an annual growth rate of 5%. Our target customers are companies across various industries that need specialized cleaning agents, influenced by changes in environmental regulations, technological advancements, and evolving perceptions. We look up to cosmetic ODM companies such as COSMAX and KOLMAR KOREA as our business role models, attributing their growth to mutual development with their ODM clients. Cheongse aims to similarly foster growth and develop specialized industrial cleaning agents through ODM and OEM partnerships.

What competitive advantages does the Cheongse team have?

Cheongse’s strengths lie in our rapid development of specialized cleaning agents and our capability to manage manufacturing processes in-house.

With just four team members, Cheongse successfully completed the development and secured contracts for ODM services with five companies within just four months, amounting to approximately KRW 1.2 billion in contract volume. These four members handle development, field testing, production, administrative tasks, and client relations. Cheongse is continually building a versatile portfolio by developing specialized detergents across multiple fields and through technological integration and modification of these products.

What are Cheongse’s achievements?

In March 2021, Cheongse attracted investment through the development of an unmanned robotic laundry system and our water cleaning technology. The unmanned robotic laundry system, which has been patented domestically and internationally and exported to the USA, allows customers to leave their laundry at a kiosk. The system uses a conveyor to manage the clothes on hangers, and a robot retrieves and delivers the garments once cleaning is complete. Additionally, we developed water cleaning technology that challenges the conventional belief that dry cleaning must use solvents. This innovation has been validated by field and customer tests and received the first environmental certification from the Ministry of Environment in Korea.

Why should we receive investment? Here are three reasons:

First, Capability in Developing Industrial Cleaning Agents: There are very few companies capable of developing various industrial cleaning agents, but Cheongse holds a real and contractually committed portfolio in this field. We also receive consistent product development requests from companies seeking ODM, ensuring our continuous growth without the need for active sales efforts.

Second, Future Growth and International Exports: As demand for customized cleaning agents in various industries grows and awareness of environmental and hygiene issues increases, the field of industrial cleaning agents is becoming increasingly significant. We have the capability to sell our domestically developed industrial cleaning agents in similar international markets and export our technology.

Third, High Profit Margins and Entry Barriers: Specialized industrial cleaning agents, unlike general laundry detergents sold in supermarkets, have no clear market price yet create significant value in work efficiency, yielding high profit margins. Additionally, the use of uncommon raw materials creates high entry barriers.

Investing in Cheongse would be a wise decision for these reasons.

[Korean Startup Interview]

스타트업 투자의 숨은 말 '다코스'
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