Diapers make up the lion’s share of the retail hygiene sales as South Africa’s disproportionately large youth population and high birth rates, relative to those of developed markets, play a significant role in driving the category performance. Sanitary protection products are the second largest category in absolute value, with sales reaching R1.5 billion ($122 million) in 2015. It is, however, the smallest retail hygiene category in absolute value—adult incontinence—that saw the fastest rate of growth during the past several years, rising by an additional 8% in value in 2015. High prices, further exacerbated by a weakened economy and financial uncertainties—and the stigma associated with incontinence are among the key factors holding the category expansion back, keeping it as the domain of wealthy, high-income, well-educated households. However, rising product awareness and visibility in stores as well as expansion of private label are helping to support category dynamics, with further positive growth expected over the coming years. In per capita terms (population aged 65+) the use of adult incontinence products recorded a 4% CAGR over 2010-2015 and is expected to grow by another 2% in CAGR terms over 2015-2020.
While retail hygiene in South Africa has witnessed growth in value and volume across products categories, on the whole, weakened economic conditions brought value to the fore. Value, economy and value for money have become the key considerations for lower-income households. However, while finding themselves in somewhat more challenging conditions, value-added products still have a good following among those consumers who have fewer budget constraints and continue to look for quality. The number of middle-class households in South Africa recorded a 1.5% CAGR in absolute numbers over 2010-2015, and it is expected to see a 1% CAGR over 2015-2020.
Lackluster Economic Performance and Price Sensitivity of the Lower-Income Consumer
Aside from the structural bottlenecks impeding South Africa’s economic performance, the country continued to struggle economically. Business confidence remains low, and consumer confidence has dwindled. Low levels of consumer confidence continued to negatively impact the demand for durable and non-durable goods. Inflationary pressures gained traction over the course of the year with the steady depreciation of the rand adding further pressure to the economic woes. In an effort to maintain price stability, the Monetary Policy Committee (MPC) raised the repo rate twice in 2015, initially by 25 basis points, followed thereafter by a further 25 basis points, to reach 6.2% per annum.
The complex South African landscape, characterized by high inequality levels and wage differentials, has also led to a disproportionately small number of households that are less price sensitive and that tend to demand goods that provide added value. These households are willing to pay a premium for goods that provide targeted solutions and aid convenience, including higher-priced disposable wipes and adult incontinence products.
Lower-income households, on the other hand, are the most affected by economic pressure, rising costs of living, constrained personal incomes and limited household access to credit. Subsequently, they remain price sensitive and are particularly cautious with spending, making economy, value and value-for-money offerings increasingly attractive.
Poverty has left many households, particularly in underprivileged areas, unable to afford what in developed nations may be perceived as necessities, including an array of retail hygiene products. When it comes to sanitary protection, many underprivileged schoolgirls who cannot afford basic sanitary protection turn to alternative forms of sanitary protection, including newspaper, leaves and pieces of cloth. Lack of adequate sanitary protection and low education levels regarding menstruation cycles also results in higher rates of absenteeism by schoolgirls during menstruation.
In response to recent requests for funding of sanitary towels by underprivileged schoolgirls, initiatives by small businesses and private companies have led to the development and funding of disposable products. Individuals and businesses are encouraged to donate funds and sponsor a variety of reusable sanitary protection packs for schoolgirls.
Reusable alternatives are not only restricted to sanitary protection. Underprivileged households continue to utilize reusable cloth-based diapers for children as well as adults for incontinence purposes.
Value for Money in Focus
South African households have become increasingly savvy when it comes to optimization of their disposable incomes and are seeking value-for-money offers across retail hygiene product categories. The proactive response of manufacturers and retailers to consumer demand for value-for-money goods has manifested itself in many forms, such as more economical pack sizes, promotional packs and price promotions. Examples of such activity included Kotex panty liners Mega Pack 100, Always Ultra Economy Pack, Lil-lets Essentials panty liners 20 plus five free units per pack.
Discounting continued to positively impact the market for diapers. The category witnessed discounting across brands and retail channels throughout 2015. The trend was prevalent not only in brick-and-mortar stores, but also at online retailers.
Many brands of disposable hygiene products also increasingly reflected the value proposition on their packaging by boldly stating the value appeal of products within their portfolios. This was reflected in sanitary protection by players including Clicks, with product packaging indicating “buy bulk & pay less,” Lil-lets with “Super 100 value” and “value 40 pack” and Discreet with “Economy.” Aggressive competition and price promotions also stimulated consumer stockpiling in certain categories, where promotions led to attractive reductions in average unit price points and overall savings. Diapers benefitted from such activity, with consumers responding by purchasing two or three extra packs of discounted products.
In an attempt to appeal to the value-conscious customer and optimize margins, retailers, particularly drugstores and supermarkets like Clicks and Pick ‘n’ Pay, amongst others, continued to expand private label offerings across product categories. The success of private label products has led to the expansion of private label portfolios to also include fantasy brands. Furthermore, retailers continued to optimize shelf space and displayed their private label products prominently alongside the leading brands. In 2015, the value share of private label sales in retail disposable hygiene stood at 6%, up from 4% in 2010.
Amidst Economic Uncertainties, Added Value Maintains Relevance
While many South African consumers are budget conscious, value-added quality products continue to appeal to those in high-income brackets, thereby contributing to the positive value performance of the South African retail hygiene market. As mentioned previously, these include products that aid convenience, provide targeted modern hygiene solutions, and/or include advanced technologies and ingredients.
Demand for value-added products continued to support leading brands like Pampers and Huggies, which consumers identify with trusted quality. Product innovation and marketing further aided, such as the 2015 launch of Huggies Nappy Pants for boys and girls. The pants are said to include an all-round soft and stretchy waistband and feature an underwear-like fit that is designed for freedom of movement. Within sanitary protection products, ultra-thin towels and pantyliners showed significant growth, supported by demand from urban middle- and upper-class women. Similar demographic groups also supported the demand for products like facial cleansing wipes. Last but not least, as mentioned earlier, adult incontinence, while still small, is aided by demand from wealthier, more educated consumers.
Large Unmet Potential and Positive Outlook Ahead
The South African retail hygiene market is projected to see a positive 6% CAGR value at constant 2015 prices over 2015-2020. On the whole, the unmet market potential in disposable hygiene in the country is valued at over U.S. $400 million. The unmet potential in volume terms is estimated to be over 900 million units in diapers, over 1.3 billion units in sanitary protection, and over 70 million units in adult incontinence.
The country’s still high birth rates relative to those of developed markets are likely to continue to benefit the demand for diapers. While South Africa’s large youth population is likely to increase the demand for sanitary protection products, it might also pose a barrier to growth for light incontinence products over the medium term as some women tend to substitute more expensive adult incontinence pads with sanitary protection products to manage incidences of light urinary incontinence.
On the whole, the demand for retail hygiene products is anticipated to be driven mainly by urban households. A mix of value, convenience and sophistication in consumer demand will provide room for growth, segmentation and product innovation within disposable hygiene. However, the country’s weak economic outlook over the medium term and rising costs of living are likely to still put a strain on household disposable incomes, making the demand for value-orientated products increasingly important. Subsequently, manufacturers and retailers are expected to respond with more innovative solutions in product offerings, pricing and promotions.