Long before disposable diapers became popular in China, most mothers used cloth rags or dressed their babies in clothes designed with open slits between the leggings to allow the passage of waste. Their decision not to use nappies was not only the cost, but also for a cultural reason: some Chinese believed that disposable nappies caused bow-leggedness and infertility in boys.
A younger generation of parents has overcome such fears. Today China is the world’s biggest diaper market. Daio, a Japanese nappy manufacturer, estimates that the country uses as many as one billion diapers a month, twice the quantity Japanese households consume.
That number will likely grow even bigger. Last year, Chinese parents spent Rmb29 billion ($4.5 billion) on disposable nappies and it is believed that the market will reach Rmb120 billion in 2017, according to figures from US-based MPE. Most of the growth will likely come from rural areas, where the baby care product’s penetration remains low at around 10%, compared with 92% in major metropolitan areas (for comparison, the UK has a penetration of 95%), says CBN.
Not only are Chinese parents buying more nappies than ever, many of them are increasingly willing to spend more. The market share of high-end nappies expanded to 15% in 2013, up from 10% in 2010.
That is good news for foreign diaper makers. That’s because most of the premium diapers are made by foreign firms, accounting for over 80% of the segment. For instance, Huggies, which is owned by Kimberly-Clark, positions itself as a premium brand. Procter & Gamble also recently released a new line called Pampers Premium Care Pants that cost as much as $0.50 apiece – more than three times the cost of some other Pampers varieties, says the Wall Street Journal. These diapers are made in Japan, contain baby lotion and have a wetness indicator.
Demand for premium diapers in China is so strong that some foreign brands now face shortages in their own home market. Take Kao Group, which makes Merries nappies. Japanese shoppers now complain that there is a chronic lack of Merries diapers because parallel importers are snapping up supplies to sell at a mark-up in China, says Asahi Shimbun.
“I am sorry that Japanese shoppers cannot get them, but Chinese customers want them badly,” one importer told the Japan newspaper.
In an interview with CBN, Kao president Michitaka Sawada reveals that sales of Merries diapers last year were double those of 2013. Even though a Merries nappy costs about 10 times as much as Chinese-made products, many consumers say they don’t mind paying more because the Japanese nappy feels softer, holds urine well and minimises diaper rash. “Merries is good for three pees while Chinese products must be changed after each time,” says one mother. “It also lets air through, and babies do not develop a rash.”
Lured by the lucrative potential, over 200 new diaper brands – both foreign and domestic – have emerged in the market since 2013, bringing the total number of diaper brands in China to 1,200. Still, grabbing substantial market share is not going to be easy. That’s because the market remains highly concentrated, with the top 10 brands capturing 80% of sales, says China Enterprise News.
What about local producers? Only one local brand has significant share: Fujian-based Hengan with 9%, compared with 10% for Kimberly-Clark and nearly 29% for P&G, according to data from market research firm Mintel Group. Domestic makers largely focus on the lower-end market in third- and fourth-tier cities. Even though they are starting to catch up with foreign rivals in product development, it is going to be a while before they can narrow the gap in market share.
“Although in recent years local diaper makers have invested significantly in terms of R&D to make the products as absorbent and thin as foreign brands, the latter are still far superior when it comes to distribution, marketing and promotion. And besides, many Chinese consumers are reluctant to buy domestic products because they are wary of the quality. Psychologically, similar to infant formula, they still think foreign brands are more reliable than homegrown labels,” one insider told CBN.
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.