Eugene Gerden, Contributing Editor07.09.12
Several factors have made the Russian market for nonwoven hygiene products and baby diapers an attractive investment for leading producers. These include a significant increase in local production capacities and projected sales, the steady increase in birth rates in Russia and the improvement of economic security among local consumers.
The birth rate in Russia has risen by 15% during the last three years while the consumption of feminine care products has increased by 30%, creating conditions for simultaneous growth of the local diaper and nonwoven sanitary product markets.
The Russian market of nonwoven sanitary products has always lagged behind the EU and the U.S. in terms of consumption, primarily in the segment of diapers and feminine care products, due to the fact that development only started after the collapse of the USSR.
Hygiene products became widely available in Russia in the mid-1990s. Since 1998, the Russian market of disposable nonwoven hygiene products has showed impressive growth. From, 1998-2003, sales in all categories of nonwoven hygiene products in Russia more than doubled in terms of value, mainly driven by the diapers and feminine care segments. Growth has slowed in recent years, however.
In 2011, the Russian nonwoven hygiene product market was estimated at $1.5 billion in value, with the diapers segment accounting for 50% of the market overall.
Active market development in the 1990s has created conditions for expansion to Russia among the world’s leading producers, including U.S. giants such as Kimberly-Clark (K-C) and Procter & Gamble (P&G), which have established plants in Russia.
In the case of K-C, the company’s current share in the Russian hygiene and diaper market is estimated at 25%, and the company is considering the possibility of further expanding its Russian production capacities, which are located in Stupino (Moscow region).
K-C completed the first stage of the Stupino investment in June 2010. This investment was estimated around $170 million and the plant is capable of making 300 million diapers per year. The company is currently producing its Kleenex and Huggies brands in Russia and hopes the increase in local production will help expand its Russian range significantly in the near future.
There is a possibility the company will pay more attention to the increase of production in premium products during the next several years. According to Helen Degtyareva, marketing director of the department of child hygiene products of Kimberly-Clark Russia, local consumers have become more demanding of product quality in recent years and are ready to pay more for it.
“Previously uncommon for Russia, super-premium diapers and diaper-pants currently form the most promising segments of the market, where Kimberly-Clark is represented by its Huggies Little Walkers diapers and innovative Huggies Pull-Ups products,” Degtyareva says.
K-C has significant hopes for Russia and considers the market one of the most promising in the world for future developments, along with China and Latin America.
For example, during the past 10 years, K-C sales in the Russian market have grown by 20 times. Currently, Russia accounts for 5% of the company’s global sales structure. Annual sales growth of the company in Russia is estimated at 13-15%.
According to Degtyareva, growth rates could be even more impressive if not for forest fires and other natural disasters that have been observed in Russia in recent years.
Market Dominance
In the meantime, two other major foreign players, P&G and the Swedish Svenska Cellulosa Aktiebolaget (SCA), which—combined with K-C—control 70% of the local market, are also considering accelerating expansion in Russia.
According to Jan Johansson, president and CEO of SCA, the company now ranks third in Russia, but intends to take second place in the next few years, looking to increase its market share up to 30%. Russian analysts consider these plans legitimate, taking into account that sales of the company’s Libero diapers in Russia over the past few years have increased by more than 30%.
Timothy Sokolenko, CEO of SCA Russia and the Commonwealth of Independent States (CIS), shares a similar view, saying the Russian market of feminine hygiene products could double in size during the next several years, while the market for baby diapers could triple and reach the European level of per capita consumption. Prospects are also bright for the segment of incontinence care products.
“The consumption of nonwoven hygiene products in Russia lags behind the European average by more than four times,” says Sokolenko. “This provides SCA and other leaders of the market good opportunities for growth and increased profitability.”
Alongside its chief competitors, SCA has its own production facilities in Russia. The company currently operates a factory in Russia that specializes in the production of its Libero diapers and Tena incontinence care products, which were launched in June 2010. The facility is located in the city of Venev (Tula region).
The volume of investments in the establishment of the factory amounted to $100 million. The plant can produce 600 diapers per minute, according to the company.
Analysts of the Russian Ministry of Economic Development believe the establishment of its own production in Russia is economically advantageous for Western producers, reducing transportation and logistics costs.
P&G is considering further expansion into the Russian market by increasing its production capacities, mainly in the diapers segment. In recent years, the company has already invested more than $150 million in the gradual expansion of its local capacities, in particular at its Novomoskovsk plant (Moscow region), which specializes in the production of its well-known Pampers brand.
According to sources close to Procter & Gamble Russia, the increase in production capacity is necessary to ensure ever-growing sales. In addition, in recent years, exports of Pampers produced in Russia to foreign (mainly neighboring) markets have increased significantly. Currently, about 25% of P&G’s total production at Novomoskovsk is exported to the CIS countries, which include Ukraine, Belarus, Kazakhstan and the Baltic states.
P&G acknowledges that regular investment is an acute need for Russia, aiming at the increase of its local market share in the segments of children and feminine hygiene products in particular, where the company remains a leader with market share in the range of 35-40%.
Russian analysts believe the increase of production announced by the world’s leading diaper and hygiene product manufacturers operating in Russia is fully justified and provides an opportunity to save significantly on production costs and to increase market share.
Currently, the Russian market for nonwoven hygiene products is characterized by high investment attractiveness. Currently, according to Nielsen, more than 80% of all retail sales of diapers and other hygienic nonwoven products in Russia come from hyper and supermarkets, as well as specialty children’s stores and pharmacies. The largest sales volumes are observed in the largest cities of the country, especially Moscow and St. Petersburg.
Future Prospects
According to forecasts from Russian analysts, the local market of diapers and other nonwoven hygiene products will continue to grow rapidly in coming years, mainly due to historically low consumption of these products. Despite the fact that in recent years all of the leading Western producers have launched their product ranges in Russia, the volume of per capita consumption of these products is still far behind that seen in Western countries.
Currently, future prospects are reflected by the fact that only half of Russian women aged 12 to 54 years use hygienic products and only 28% of Russian parents buy diapers. At the same time, the consumption of incontinence care products is even lower.
In the future, Western corporations will continue to dominate in the Russian market, according to analysts of the Russian Ministry of Economic Development. The share of foreign manufacturers will be overwhelming, not only in the premium, but also the low-price segments of the market. At the same time, production from local producers still won’t be competitive.
Eugene Gerden is an international freelance writer who covers the global nonwovens and textile industries. He has written for numerous industry publications and can be reached at gerden.eug@googlemail.com.
The birth rate in Russia has risen by 15% during the last three years while the consumption of feminine care products has increased by 30%, creating conditions for simultaneous growth of the local diaper and nonwoven sanitary product markets.
The Russian market of nonwoven sanitary products has always lagged behind the EU and the U.S. in terms of consumption, primarily in the segment of diapers and feminine care products, due to the fact that development only started after the collapse of the USSR.
Hygiene products became widely available in Russia in the mid-1990s. Since 1998, the Russian market of disposable nonwoven hygiene products has showed impressive growth. From, 1998-2003, sales in all categories of nonwoven hygiene products in Russia more than doubled in terms of value, mainly driven by the diapers and feminine care segments. Growth has slowed in recent years, however.
In 2011, the Russian nonwoven hygiene product market was estimated at $1.5 billion in value, with the diapers segment accounting for 50% of the market overall.
Active market development in the 1990s has created conditions for expansion to Russia among the world’s leading producers, including U.S. giants such as Kimberly-Clark (K-C) and Procter & Gamble (P&G), which have established plants in Russia.
In the case of K-C, the company’s current share in the Russian hygiene and diaper market is estimated at 25%, and the company is considering the possibility of further expanding its Russian production capacities, which are located in Stupino (Moscow region).
K-C completed the first stage of the Stupino investment in June 2010. This investment was estimated around $170 million and the plant is capable of making 300 million diapers per year. The company is currently producing its Kleenex and Huggies brands in Russia and hopes the increase in local production will help expand its Russian range significantly in the near future.
There is a possibility the company will pay more attention to the increase of production in premium products during the next several years. According to Helen Degtyareva, marketing director of the department of child hygiene products of Kimberly-Clark Russia, local consumers have become more demanding of product quality in recent years and are ready to pay more for it.
“Previously uncommon for Russia, super-premium diapers and diaper-pants currently form the most promising segments of the market, where Kimberly-Clark is represented by its Huggies Little Walkers diapers and innovative Huggies Pull-Ups products,” Degtyareva says.
K-C has significant hopes for Russia and considers the market one of the most promising in the world for future developments, along with China and Latin America.
For example, during the past 10 years, K-C sales in the Russian market have grown by 20 times. Currently, Russia accounts for 5% of the company’s global sales structure. Annual sales growth of the company in Russia is estimated at 13-15%.
According to Degtyareva, growth rates could be even more impressive if not for forest fires and other natural disasters that have been observed in Russia in recent years.
Market Dominance
In the meantime, two other major foreign players, P&G and the Swedish Svenska Cellulosa Aktiebolaget (SCA), which—combined with K-C—control 70% of the local market, are also considering accelerating expansion in Russia.
According to Jan Johansson, president and CEO of SCA, the company now ranks third in Russia, but intends to take second place in the next few years, looking to increase its market share up to 30%. Russian analysts consider these plans legitimate, taking into account that sales of the company’s Libero diapers in Russia over the past few years have increased by more than 30%.
Timothy Sokolenko, CEO of SCA Russia and the Commonwealth of Independent States (CIS), shares a similar view, saying the Russian market of feminine hygiene products could double in size during the next several years, while the market for baby diapers could triple and reach the European level of per capita consumption. Prospects are also bright for the segment of incontinence care products.
“The consumption of nonwoven hygiene products in Russia lags behind the European average by more than four times,” says Sokolenko. “This provides SCA and other leaders of the market good opportunities for growth and increased profitability.”
Alongside its chief competitors, SCA has its own production facilities in Russia. The company currently operates a factory in Russia that specializes in the production of its Libero diapers and Tena incontinence care products, which were launched in June 2010. The facility is located in the city of Venev (Tula region).
The volume of investments in the establishment of the factory amounted to $100 million. The plant can produce 600 diapers per minute, according to the company.
Analysts of the Russian Ministry of Economic Development believe the establishment of its own production in Russia is economically advantageous for Western producers, reducing transportation and logistics costs.
P&G is considering further expansion into the Russian market by increasing its production capacities, mainly in the diapers segment. In recent years, the company has already invested more than $150 million in the gradual expansion of its local capacities, in particular at its Novomoskovsk plant (Moscow region), which specializes in the production of its well-known Pampers brand.
According to sources close to Procter & Gamble Russia, the increase in production capacity is necessary to ensure ever-growing sales. In addition, in recent years, exports of Pampers produced in Russia to foreign (mainly neighboring) markets have increased significantly. Currently, about 25% of P&G’s total production at Novomoskovsk is exported to the CIS countries, which include Ukraine, Belarus, Kazakhstan and the Baltic states.
P&G acknowledges that regular investment is an acute need for Russia, aiming at the increase of its local market share in the segments of children and feminine hygiene products in particular, where the company remains a leader with market share in the range of 35-40%.
Russian analysts believe the increase of production announced by the world’s leading diaper and hygiene product manufacturers operating in Russia is fully justified and provides an opportunity to save significantly on production costs and to increase market share.
Currently, the Russian market for nonwoven hygiene products is characterized by high investment attractiveness. Currently, according to Nielsen, more than 80% of all retail sales of diapers and other hygienic nonwoven products in Russia come from hyper and supermarkets, as well as specialty children’s stores and pharmacies. The largest sales volumes are observed in the largest cities of the country, especially Moscow and St. Petersburg.
Future Prospects
According to forecasts from Russian analysts, the local market of diapers and other nonwoven hygiene products will continue to grow rapidly in coming years, mainly due to historically low consumption of these products. Despite the fact that in recent years all of the leading Western producers have launched their product ranges in Russia, the volume of per capita consumption of these products is still far behind that seen in Western countries.
Currently, future prospects are reflected by the fact that only half of Russian women aged 12 to 54 years use hygienic products and only 28% of Russian parents buy diapers. At the same time, the consumption of incontinence care products is even lower.
In the future, Western corporations will continue to dominate in the Russian market, according to analysts of the Russian Ministry of Economic Development. The share of foreign manufacturers will be overwhelming, not only in the premium, but also the low-price segments of the market. At the same time, production from local producers still won’t be competitive.
Eugene Gerden is an international freelance writer who covers the global nonwovens and textile industries. He has written for numerous industry publications and can be reached at gerden.eug@googlemail.com.