Can the big sanitary protection brands learn how to ride the Chinese dragon, and do they need to?
The fastest growing market in the world for sanitary protection is China, where at present the most successful player is local manufacturer Hengan International Group Co Ltd. This begs the question – should this be a concern for global brand leaders such as Procter & Gamble, Johnson & Johnson and Kimberly-Clark, or are there still enough opportunities to be had elsewhere?
The size of the Asian prize
The sanitary protection market was worth just over US$22 billion in 2009, achieving growth in value terms of 28% since 2004, with sales of over US$4.8 billion being added over this period. However, just short of 38% of this growth can be accounted for by a single market, namely China.
There is a notable division between those economies where demand for sanitary protection is growing strongly, eg Asia-Pacific (with the exception of Japan) and Latin America, and where there are clear signs of maturity or even stagnation, eg Western Europe, which grew by only 0.8% over 2004-2009 in CAGR terms. The implication, then, is that to continue to succeed, brands will need to take a share of the growing Asian market.
The emerging markets are often bringing consumers into the market for the first time as until now nations like China and India have had very low levels of penetration of sanitary protection. With the key drivers of growth being rising disposable incomes and women demanding more comfortable and convenient solutions, the category is continuing to grow. This growth is particularly being driven by consumers in rural areas who are moving into disposable hygiene products for the first time.
All is not equal in the rush to take a share of this growing market. The leading multinational brands, such as Procter & Gamble’s Whisper, have struggled to maintain share but have not been losing out to private label, as is sometimes the case, but to other brands. In China, for example, Hengan International Group Co Ltd has done well with its Space 7 brand, increasing its share from 0.3% in 2005 to 5.3% in 2009.
This, together with its Anerle brand, has given the company the leading position in the Chinese market, which was held for a long time by Procter & Gamble until 2007. Not only does the company have a good distribution network through supermarkets/hypermarkets in urban areas, it has also championed more traditional channels to reach the rural consumer.
The success to date has been such that the usage of sanitary protection in urban areas is now quite prevalent, with future growth likely to come from the
less developed rural segment. Opportunities for global brands are therefore still more likely to be in the existing urban market, which will increasingly become more sophisticated. In this sense, global brands are well placed to meet increasingly complex needs with product innovations such as ultra-thin pads, antibacterial properties, better absorbency and even packaging innovations.
Following trends in developed Western markets, the shift to more sophisticated products can be made sooner as the technology already exists.
A fashionable period?
The attraction of the Chinese and other fast developing markets is plain to see, particularly as Western markets are generally mature. Nevertheless, markets such as Western Europe and North America remain sizeable – worth US$4.6 billion and US$2.9 billion in 2009, respectively. There are still real growth opportunities in these regions, although in recent times these have come from new products and packaging innovations in particular.
As sanitary protection consumers tend to remain quite loyal to a brand, the targeting of Western consumers is beginning at an increasingly early age. Considerable marketing efforts are focused on channels which target pubescent and even pre-pubescent girls. Leading brands aim to demystify menstruation and make it acceptable to talk about.
On the one hand, manufacturers are making products which are increasingly discrete and thinner, but with the same or improved functionality. On the other hand, in a bid to reach younger consumers, marketing messages are very direct about the issues concerning menstruation.
Packaging developments, such as Kotex’s U brand, no longer fade into the background but make an obvious statement. There is very much a trend to normalise and bring the subject out into the open, as has been done with incontinence. SCA’s French brand Nana has introduced a series of stylish tins, making the product not only portable but also fashionable. Although largely a feature of Western markets, these products could prove successful in the increasingly sophisticated urban markets of developing economies.
Creating new needs
While there are some key economic and demographic trends influencing the performance of sanitary protection products, these are not the only influences. developed countries, the popularity of contraception, which reduces the number of menstruating days, also has a negative impact. In some countries, long-term contraception (eg the Seasonale birth control pill, which reduces the number of periods to just four a year) is affecting sales to an even greater extent.
In some age groups a high number of women are taking the contraceptive pill; in Sweden, for example, as many as half of all women in the 20-25 age group take some form of oral contraceptive. This has an immediate and prolonged impact on the growth potential of sanitary protection. Manufacturers have thus sought to consider the wider topic of feminine hygiene.
As a result, Western markets have seen the development of other products associated with feminine hygiene, with marketing being focused on encouraging daily usage. Creating a need for daily usage has vast potential as the category then becomes less reliant on the menstrual cycle. Key trends in this category include feminine hygiene wipes and in particular pantyliners.
Although growing from a smaller base, feminine hygiene wipes performed better than any other sanitary protection category, growing by just under 12% in CAGR terms over 2004-2009.
The largest market is Western Europe (64% of total), but sales grew the fastest in Latin America (more than a 90% CAGR over 2004-2009), with strong continued growth expected so that by 2014 the region will account for over 10% of the market, up from less than a 5% share in 2009. Essentially then, although the drive for new products may derive from difficulties in Western markets, these innovations can quickly take root in developing markets too.
A similar story can be seen with pantyliners, which have been a huge success in Western Europe. However, growth in Asia-Pacific will see this region overtake Western Europe in terms of sales by 2012.
Although cultural differences sometimes prevent a product’s success (eg tampons in Saudi Arabia) there would appear to be ready demand for the innovations driving Western markets to achieve even more success at the more sophisticated end of the developing markets.
Whatever the challenge, brand is best
Within the tissue and hygiene market generally, private label plays a hugely important role. However, partly because sanitary protection products are more complicated to manufacture, private label has had less of an impact in this category. There is also a definite issue of trust with such products and private label has found this much harder to overcome.
Globally, the share of private label in sanitary protection is only 5.5%, and in developing regions such as Asia-Pacific its share is only 0.1%. It is also less than 1% in Latin America and the Middle East and Africa. Although many Western market developments are attractive, there is an opportunity for brands in these developing markets to ensure that they enjoy the fruits of market growth rather than lose share to private label.