Analyst Insight by Tamara Bartels - Home Care, Tissue and Hygiene Analyst
As in most other FMCG categories, income is a crucial factor for development in retail hygiene. But, income requirements for disposable sanitary protection and nappies/diapers are relatively low, standing at US$1,500 and US$3,000, respectively, according to Euromonitor International’s estimates. Therefore, hygiene products are some of the first fast moving consumer goods to become ‘mainstream’ staples in developing markets because of the importance of personal hygiene and the lack of substitution.
However, the relatively low income requirements for these hygiene products also mean that while volume growth accelerates quickly in early development stages, market saturation tends to set in at relatively low income levels compared to other FMCG categories. Additionally, hygiene products suffer from the law of ‘diminishing returns’, meaning that for every unit of income increase, ‘marginal’ consumption decreases.
In other words, it only takes a per capita income of US$6,000 before half of all babies wear disposable nappies/diapers regularly, but it requires four times that income for full penetration. Therefore, it can be predicted that future growth, in relative terms, is always lower than past growth rates. Manufacturers should be mindful of not being blinded by previous rapid volume growth rates, which can often be found in many emerging markets, but analyse penetration rates and focus on innovation and value growth to generate sustainable business growth.