India is considered one of the most important growth markets for many fast-moving consumer goods (FMCG) industries. The hygiene industry is no exception to this. In 2013, the industry stood at Rs27 billion ($466 million), up 18% in current value terms. At four cents per capita, penetration is very limited when compared with Asia Pacific ($7.50) and clearly far less than Western Europe ($34.90) or the U.S. ($42.20). However, the market is expected to grow exponentially and offers great opportunity. In India, sanitary protection and diapers contribute some 90% of industry value growth with incontinence, wipes and cotton wool/buds constituting the rest.
India has witnessed incremental volume growth over the last 10 years, resulting from increased acceptance and usage of personal hygiene products, albeit from a small base. Average incomes continue to be well below threshold levels, preventing many hygiene products from becoming mainstream.
Factors that make the country attractive include its favorable demographics, consistently high birth rates, rising middle-income group, an increasing number of working women, and evolving family structures. However, income inequality and underdeveloped infrastructure in India continue to hinder the market, despite the many positive demographic factors. Given its developing status and vast growth potential, it is unsurprising that many companies are paying close attention to consumer trends in a bid to identify, and stimulate, inherent demand. Stakeholders want to know how to turn their Indian operations into cash cows.
The great Indian divide restricts affordability
Most volume and value growth in hygiene comes from urban consumers. The growing urban middle-class continues to develop patterns of consumption that mirror those of the West. These include working women with rising disposable incomes and educated consumers who understand the need for using hygiene products.
Sixty-seven percent of all households are in rural areas, where most of the population is living below the poverty line ($2 per day). Amongst these consumers, diapers and sanitary protection are yet to achieve anything beyond minimal consumer penetration. Even if most women from such households work, they undertake minor employment or form part of the labor force that includes jobs such as construction/household work with low monthly income. For women and babies from such families, sanitary protection and diapers are far from a necessity, and in many cases, unheard of. The vast majority of this population currently has little or no access to the various products of the hygiene industry. Even if they are aware, at Rs4 per sanitary towel and Rs12 per nappy, it is far too expensive to consider buying these items on a regular basis.
From a regional perspective, 34% of all retail hygiene value sales come from North India. West India ranks second, with South India and East North East India following. The states and regions with higher literacy rates and per capita income, as well as non-resident Indian (NRI) and expatriate population, have stronger demands for sanitary protection. Examples include Kerala, Punjab, Gujarat, Haryana, Tamil Nadu and Karnataka.
Awareness still low in rural areas
Diapers in India are predominantly used when babies venture outside the house or during nighttime so the baby can have uninterrupted sleep. While in the house, parents tend to use cloth diapers. The tropical climate makes it easier for parents or caretakers to wash the cloth diapers, dry them and reuse them as needed. When it comes to diapers, there exist two schools of thought in India. One believes that diapers are taboo, and using diapers on children shows an inability to care for them. Furthermore, it is believed that regular usage of diapers invariably leads to skin allergies and rashes. Conversely, the modern or Western school of thought supports the use of diapers, and accepts that this provides convenience to parents and gives comfort to the baby.
Diaper usage is also largely dependent on modern retail formats, with supermarkets/hypermarkets taking a 25% share of value sales. This is despite the fact that, according to the latest Euromonitor International data, supermarkets/hypermarkets account for just 1% of store-based retailing in the country.
Negative perception still a challenge
Due to low income levels and limited availability of sanitary protection, the market in India is tiny in relation to its vast population of women between the ages 12-54 years. Average per capita spend remains stubbornly low, at just seven cents, and is even lower than sub-Saharan African—Cameroon for example, reporting $1.90 per capita in 2013. India continues to compare poorly with consumption patterns in the wider Asia-Pacific region. In China, for example, women aged between 12-54 spend $23.70 annually on sanitary protection.
In rural society, there remains a widespread belief that menstruation is unclean, which as studies have shown, results in up to a quarter of schoolgirls dropping out of school when their periods start. Moreover, a lack of income means school girls are left to use unsanitary cloths, which leads to high rates of infection and consequently more time taken from school. There is also an element of embarrassment while talking of sanitary protection, as well as buying the products.
Government’s initiatives aim to provide education in hygiene
Both the government and manufacturers have taken some steps in the last few years to increase awareness and affordability of sanitary protection. In 2010, the Indian government approved a menstrual hygiene scheme that aimed to provide sanitary towels to 15 million adolescent girls. The scheme was implemented by the National Rural Health mission (NRHM) that had identified 18 states in India with poor infrastructure and low public health standards. Through this scheme, sanitary towels (NRHM’s own brand – Freedays) were available at subsidized rates, of as little as Rs1 per sanitary towel. The initiative was also aimed to educate these girls on menstrual hygiene and accordant use of sanitary protection, as well as the appropriate disposal methods for the used items. In 2012, Johnson & Johnson partnered with a co-operative in Gujarat, to provide sanitary towels at subsidized price (45% lower than the standard retail sales price) to be used in the menstrual hygiene program. Several state governments and manufacturers worked together to organize free distribution of branded sanitary towels to girls above the age of 12, in a bid to increase awareness.
Manufacturers are in for the long haul
The competitive landscape in the hygiene industry in India mainly consists of multinational companies. International companies have started their operations early on. By increasing consumer awareness, they are slowly working towards capturing market share for their respective brands. The majority of sales are attributable to multinationals.
Within diapers, the top three brands - Pampers, Huggies and Mamy Poko - account for some 80% of total volume and value. Snuggy by Godrej is the only local brand with any significant sales. The product portfolio of diapers available in India from major manufacturers such as Kimberly-Clark, Unilever and Procter & Gamble India are broadly classified as up to 14kg. This roughly translates to 2-2.5 years for the baby. It is a social norm that the child is potty trained by the time he/she reaches 3 years. So most manufacturers have a limited window of opportunity, when compared to countries such as the UK and US, where the product range is available for up to 4-5 years. With the entry of Unicharm (Japan’s leading player) with its brand Mamy Poko in 2010, the available product size increased, up to 35kg. Shortly after this, the disposable pants category started having a sizeable presence in India. Through the introduction of disposable pants, are able to retain consumers in the category for longer. Currently, Unicharm India is ranked third by value, following Procter & Gamble and Kimberly-Clark Lever
Within sanitary protection, close to 90% of value and 80% of volume share is held by Whisper, Stayfree and Kotex. She and Shapers are some of the local brands present in sanitary protection in India. The competitive landscape has remained fairly unchanged over the years. For urban consumers, manufacturers have focused on innovation in the form of slim/ultra slim towels and the comfort provided by these products is highlighted in many television commercials.
In the retail hygiene industry, companies such as Kimberly-Clark Lever, Procter & Gamble and Johnson & Johnson have first mover advantage. Given the fact that these companies started operations in India as early as the 1950s, there is a level of recognition and familiarity associated with their brands. The companies also benefit from an established distribution network, in the otherwise mammoth country. They are privy to consumer intelligence that has been gathered for years for their various consumer products division. By investing in local manufacturing to some extent, these companies are also able to provide competitive pricing and reduce the burden of import taxes on various hygiene products. For instance, Procter & Gamble set up a manufacturing plant in Hyderabad, in the state of Andhra Pradesh. The project was started in 2012 and the company plans to start manufacturing Pampers and Whisper, amongst other FMCG brands, in this facility from 2014. Andhra Pradesh is considered a lucrative start for setting up manufacturing plants given the competitive land price, fixed power allocation and waiver of 100% stamp duty.
So where is the opportunity?
According to Euromonitor International data, the retail hygiene industry is expected to double in value over the next five years, to reach Rs54 billion (US$709 million), in current value terms by 2018.
The country’s birth rate will be favorable for the industry, creating the obvious perquisite of a consumer base for diapers. The birth rate in 2013 was 22% and by 2018, it is still expected to be high (20%). Even with this slight decline, for a populous country like India, the rate roughly translates into 123 million children in the 0-4 age group every year.
Furthermore, the female population in the 12-54 age group is expected to increase from 389 million in 2013 to 412 million by 2018. If each female spends US$2 on sanitary protection by 2018, the category could reach US$824 million. Even if 20% of all consumers in this age group spend US$5 annually, the market could still reach a potential of US$412 million. Euromonitor International’s estimate for sanitary protection in 2018 is Rs27 billion (US$348 million).
For urban India, manufacturers need to focus on getting consumers to increase usage of hygiene products. By providing added functionality and features, they can justify a higher price positioning. Certain trends, such as increasing women in the workforce and nuclear families, will help increase the customer base for such products. Mothers returning to work post-maternity, which is usually three months, and children being cared for by extended family or care takers, is also a burgeoning trend expected to provide growth opportunities in the future.
For rural India, the key is to increase awareness, product availability and affordability. Companies need to cooperate with the Indian government and work towards the main goal of improving standards of living. This will include educating consumers about hygiene standards, as well as providing higher standards of sanitation. The path to realizing return on investments will be slow. Especially for sanitary protection, there are many welfare associations that are involved in the local production of basic sanitary towels, which are distributed to women in underprivileged regions at a price as low as Rs1 per towel. Such organizations believe that the influx of multinational companies in rural India will hamper penetration, as the product pricing is not viable for many women. Manufacturers can also start working in tandem with the welfare associations by providing brands at subsidized rates and investing in improving public health.
Manufacturers need to work on leveraging their established distribution networks to reach the masses in larger numbers in rural India. Distribution of free samples of diapers in hospitals and sanitary protection in secondary schools is another option. Manufacturers can also focus on economy variants to be launched specifically in rural India. Packaging in small quantities may be able to drive price down. Individual packaging, such as sachets in shampoo and laundry detergents that have flooded the independent grocery stores, may also help make the products affordable and far-reaching.
Brand India is definitely going to provide a huge long-term opportunity. This is evident by the recent announcements of Svenska Cellulosa Aktiebolaget (SCA) of its plan to re-enter the hygiene industry in the last quarter of 2013. The company is investing Rs1.45 billion in a manufacturing plant in Pune, India, which is expected to become operational by 2015. Rohit Surfactants, a leading detergents manufacturer, has also indicated its plans to diversify into the retail hygiene industry in India. If the manufacturers are mindful of the urban-rural divide and adopt their strategies accordingly, they can improve their returns and also enhance the living standards of millions of Indians.
About the author
Janaki Padmanabhan is Research Manager at Euromonitor International and can be reached at firstname.lastname@example.org.