Japan’s Kao Corporation, the maker of Merries diapers, was probably the first success story in the Chinese diaper market. After Chinese tourists in Japan were stuffing their suitcases full of premium diapers, Kao launched them in Chinese baby shops. Other Japanese companies like Unicharm and Daio followed suit, replacing Chinese-made diapers with Japanese-made ones, and finding success.
Western companies like P&G and Kimberly-Clark were a little slower to the change but most feel like they have finally cracked the market. In a recent earnings call, P&G said the launch of premium designs had helped it grow sales and marketshare in the country and executives remain optimistic for growth prospects.
But should they?
According to industry observers, there are already some rumblings of marketshare gains from local manufacturers who have the advantages of local manufacturing on their side. Also, the reversal of China’s one-child policy has not led to the baby, and subsequent, diaper boom, expected. In fact, many Chinese couples are intimidated by the thought of more than one child, both economically and emotionally. This is a generation of people who know no siblings, who were raised by a set of parents and two sets of grandparents so the thought of raising multiple children is daunting.
So what is the next great frontier for baby diapers?
Many say that it will be India; that is not a question of it but a matter of when. Unicharm has already invested heavily in the subcontinent and is currently adding its third plant there in an effort to catch market leader P&G and has been steadily gaining marketshare. On the supply side, new nonwovens operations from Toray and Avgol, both strong suppliers to multinational hygiene companies, should indicate that growth is expected in the near term. However, there are many local producers already operating in India, who understand the highly fragmented market, and it is too soon to say what Indian consumers will want—an ultra-premium diaper like the Chinese or a value-priced option like the many that have paved the way in many other developing markets. Surely, everyone doing business in diapers is trying to figure this one out.