North American Sanitary Protection Market, A Case Study
By Adrian Atterby, Euromonitor International
Published November 10, 2008
Volume growth in the overall sanitary protection market is being restricted by long-term demographic changes, and, in recent years this has resulted in declining volumes, with overall unit sales down by 1% since 2002.
Within individual categories, both volume and value growth opportunities do exist. When looking at the U.S. market specifically in 2007, it is possible to see that tampon sales declined as the number of aging baby boomers requiring them has declined by 3% (this is the preferred format option of older women). On the other hand, the number of napkins sold increased by 1%, which reflects the switch from an older to a younger generation. The number of females entering adolescence is rising quickly, just as older women are leaving the market. These young women have traditionally been hesitant to use tampons at first or their parents may dissuade them from using such invasive products. As a result, they initially prefer napkins of pads.
This situation is slowly changing thanks to the success of P&G’s Tampax Pearl brand. Since its introduction, the brand has skyrocketed into prominence due to its popularity among younger consumers who admire its design, comfort and improved reliability. During 2007 it accounted for more than 19% of units sold and over 22% of value sales in the tampon subsector, according to Euromonitor International. In addition, the introduction of the new variation, Tampax Compak Pearl, enticed additional consumers to move away from the regular Tampax Compak, as it is smaller and fits more conveniently into small purses for women on the go. Basically, this product offers the compressed efficiency of Compak with the “swirl” element of the traditional Pearl product. Both use plastic applicators.
What is interesting about this development is that the manufacturer is attempting to satisfy the demands of the consumer by luring her toward a new product, albeit one that offers the benefits of two old ones. This will ultimately force women away from a brand to which they were previously loyal (which typifies the sector), while at the same time, they technically retain their loyalty by still patronizing a Procter & Gamble product.
In Canada, the situation was basically the same, although volume sales across the entire category (excluding feminine wipes) remained stagnant, mirroring the trend seen in the previous few years. At the individual sector level, some interesting differences can be seen, however. Tampon sales, for instance, were actually up by 1%. As with the U.S. market, this type of format is generally preferred by older, more experienced women who are more at ease with the application process. However, with 80% of products now coming complete with an applicator, it is possible that younger consumers will, as in the U.S., increasingly be prepared to try out this type of format.
Pads See Varying Success
In the pads category there are also subtle differences between the two countries. In Canada there has been a shift away from standard products to more expensive ultra-thin varieties in the past couple of years, with volume sales in the standard category declining by 3%. In the U.S., volumes have increased in all categories, except for ultra-thin products without wings, which have declined by 3% since 2005, according to Euromonitor International. This trend continued in 2007 as towels with wings, both standard and ultra-thin, outperformed their wingless counterparts, posting almost twice the value.
They offer greater flexibility and conform more easily to the body’s contours for a more comfortable fit. As a result, they are preferred by the growing number of women who lead busy and hectic lifestyles. Although much of the value growth was due to price increases, the volume performance of these products revealed their true success. Ultra-thin pads with wings recorded volume growth of 1% in 2007, while ultra-thin pads without wings suffered a decline of nearly 2% in the same year.
In Canada ultra-thin pads with wings saw the strongest growth in the sector with a rise of 1.3% in volume and 1.7% in current value. This growth is in line with the previous five years, which makes this segment the most consistent within the sanitary protection sector. Women find these thinner and absorbent pads adequate for their blood flow and their fashion style. They are easily used with many different forms of underwear, including semi-thong style underwear, which has become more popular among the female population. While proper protection is the main requirement and expectation, consumers are also buying in terms of their wardrobe and how the product will be concealed.
Unit Price Increases
Rising raw material prices affected many parts of the hygiene products industry during 2007, with sanitary protection being no different. In the U.S., although unit prices generally remained the same from March to December 2007, Kimberly-Clark did announce broad price increases across its entire sanitary protection portfolio, effective from early 2008. Shortly thereafter, Procter & Gamble followed suit and stated its intention to raise prices as well.
In Canada, price increases crept into the market throughout the year, growing by 3%, as more companies increased their price structures to compensate for growing material costs, as well as operational ones. Major players in the sanitary protection sector, such as Johnson & Johnson, cited reasons of innovative development as a main reason for the shift in unit price, which the company maintained would remain lower than 6% overall. Product innovation in this sector is a very important concern for all companies, as large amounts of financial and personnel resources go into making improvements and introducing new product lines, as older products erode in price and popularity.
P&G Dominates Both Markets
According to Euromonitor International, P&G dominates both the Canadian and U.S. markets, claiming an almost 50% marketshare of the total North American region, while the second largest player, Johnson & Johnson, commands a mere 16%.
P&G has been able to develop this leading position due to the investments it has made in educational programs in both countries. Women tend to be extremely brand loyal in terms of sanitary protection products, often sticking to the brand they first tried when they were young. Procter & Gamble recognized this in 2005 and began delivering its program “Feeling Good: More About You.” Most of these presentations consisted of a company representative who answered questions and handed out free samples of the Tampax brand of tampons. Since this followed the heavy publicity that the product receives as the largest brand, many young women tried this product and opted to stick with it. This allegiance is likely to last throughout their adolescence and extend into adulthood.
In terms of broader promotion, P&G focused heavily on the African American community during 2007 with its “Black is Beautiful” campaign. The advertising campaign was intended to court favor with African American women, nearly 80% of whom think they are portrayed inappropriately in the media. Procter & Gamble hopes that, by expressing its own similar misgivings over their treatment, African American females will take more notice of Procter & Gamble’s brands, especially those focusing on feminine needs. Once attention is established, the company hopes to hold it for years to come.
A Ticking Timebomb!
Aside from potential issues associated with demographics, sanitary protection brands also face the prospect of losing substantial numbers of customers to the increased availability of incontinence products. It is believed that between 20-30% of women in the U.S. alone purchase sanitary protection products as substitutes for incontinence wear. If these women were to switch to using incontinence products, it could cut the value of the sanitary protection market by between $1.8-2.7 billion in the U.S. alone.
Instead of attempting to prevent consumers switching products, manufacturers should look to launch incontinence products as extensions of existing sanitary protection brands. This is a strategy currently being adopted in Europe, where products such as Always Envive and Nana-plus have been launched to great effect.
Market Conditions Uncertain
As a result of large numbers of baby-boomer women entering menopause and thereby moving out of the sanitary protection market, sanitary protection is expected to decline over the forecast period. Some of the losses in volume and value sales will be offset by the steady entrance of young women into the market, but during the next few years the number of younger women will not nearly match that of older women, especially considering that life expectancy is continually on the rise. It is most likely that price increases will provide the bulk of any relief.
New products will combine the popular features of the major manufacturers’ brands. The aforementioned Tampax Compak Pearl, and its likely continued success, represents the beginning of a new trend that will be further developed by competing manufacturers. This product might seem specialized, but it is basically a combination of two other popular products. Initially, Procter & Gamble may appear to be splintering its marketshare further, but in fact the company is consolidating its products into one that may later phase out the older products. By doing so, the company will lower costs and may not have to raise prices further to keep up with the persistent increases in global pulp prices.
Price competition will likely remain similar to current trends throughout the next five years, as unit prices will continue to see slight increases, especially for innovative products introduced into the market. The higher material costs, which are likely to continue, along with the intensified competitive edge in terms of innovation and marketing between the big players in the sector will mean more of a monopolized style of pricing. The sector will become more fragmented between the top three manufacturers in the sector and the smaller ones, which will attempt to carve out their own respective niches in the market and will focus more on developing specialized products in terms of material use, functionality and even pricing to a certain extent.