Diaper Market in India

Birth rates have declined in the developed world and that has become unfavorable for the diaper manufacturers to expand their businesses. Internationally, birth rates in the developed nations have declined by 20% during the last 30 years and are now only half the global average.

The global market for diapers was worth $22.2 billion, a 2.9% increase Year on Year. But the major markets of Western Europe, the U.S. and Japan reported decline. As a result, companies like Procter & Gamble and Kimberly Clark are banking more on innovation to their rescue. This has been a major contributor of success for P&G in the past few years.

There is newly developed focus on developing country markets, which derives 40% of global diaper revenue. Markets such as Russia and China are providing brands with excellent opportunities for longer term growth.

It is also remarkable to see the trend in the developed markets towards greener products as shown in the chart below

Diaper Market in Developing Country

There is huge growth potential for diaper products in emerging markets such as China, Brazil and India, as these markets are still quite underdeveloped and in the nascent stage. While it has taken advanced Western economies some time to realize the environmental price of their development this is not the case for today’s emerging nations. In this case even the global recession will enable China to have more time to better make arrangements for considering more sustainable and greener options for its growth.

Middle-class is at the forefront of environmental awareness as the environmental consequences of rapid industrialization and urbanization in countries such as China and India are becoming increasingly apparent

Also in countries such as India, the Philippines and Malaysia, levels of consumer awareness regarding hygiene products are very still very low.

Indian Diaper Market

In 2009, manufacturers have been now more focused on more categories such as disposable diapers. With the increasing buying power of Indian consumers, companies are looking for options which are more convenient and safe to use for the children. Increase in awareness about hygiene is a big factor for thus development.

Some of the major development last year is as follows:

Procter & Gamble Hygiene & Health Care Ltd introduced Pampers Magic Nickers

Kimberly-Clark Lever Ltd introduced Huggies New Born, a product specifically targeting the mothers of new born babies.

With increasing awareness regarding the advantages of using the use of disposable diapers over cloth substitutes, Indian parents are now spending more on purchasing such products which in turn led to an increase in sales value for the manufacturers. Convenience has been one of the driving factors in this change. Even in tier 2 towns and cities, parents are willing to spend money on disposable diapers to use when the baby is taken out of the home, for added convenience.

Also as babies get older, some young mothers look to go back to work. This encouraged the use of diapers, as they are more convenient, and they do not need to spend time washing cloth nappies. Also, as babies become more active, and nappies are a more comfortable and hygienic alternative to cloth nappies. However currently the majority of the sales is restricted to customers in urban India. So the penetration rate of disposable diapers has been increasing, as more young parents are finding it convenient to switch from cloth nappies to disposable nappies.

Sales of disposable pants remained negligible in India in 2009. Procter & Gamble Hygiene & Health Care Ltd introduced Pampers Magic Nickers and Uni-Charm Corp entered India with its brand of Mamy Poko Pants. Disposable pants have seen an increase in activity from the leading brands, but sales have still not become significant.

The main factors that inhibit the growth of this category are as follows:

Cultural factors: Diapers are a relatively new concept in India. Indian parents use Diaper only for the sake of convenience during travel.

Price: When launched, diapers were priced at around Rs. 15 per piece which is high priced. The average prices in last few years have dropped to Rs 10 per piece but its still very costly for everyday usage.

Other Trends: Potty training in India is at around two to two and a half years average. With that taking place at such a young age, the use of diapers is even lower for Indian babies.

Also with the easy availability of cheap domestic help in India, it is convenient for Indian mothers to wash and reuse cloth nappies.

Some of the important facts and figures are shown as follows:

Marketing Objective

The penetration of disposable diapers has been increasing, as parents are finding it suitable to switch from cloth nappies to disposable nappies. With the market offering a variety of products across several price ranges, use of disposable diapers is expected to grow.

Today young mothers are more sensitive about hygiene and health. They will readily utilize disposable nappies from an earlier age. Also, many young working mothers will want to habituate their children to wearing disposable diapers, and thus will start using them early.

The forecast of retail sales of Diapers shows strong growth figures, in two digits. And with more consumers shifting from traditional cloth nappies to disposable diapers, the category is expected to burgeon in the coming years.

Godrej Consumer Products Limited’s main brand under Tissues and Hygiene category, Snuggy Dry has witnessed several changes in ownership in the Indian market. The joint venture between Godrej Consumer Products limited and SCA Hygiene Products which manufactured and distributed Snuggy Dry discontinued. This led to SCA Hygiene’s exit from India.

The brand Snuggy Dry, which was the third largest disposable diapers brand in 2009, is now being marketed and distributed by Godrej Consumer Products Ltd. Over the years, the diaper market in India has been dominated by existing players Kimberley Clark and Procter and Gamble as can been seen in the graph below.

Godrej is moving strong in FMCG sector currently standing second to HUL and being fiercely competitive to HUL. Although Hindustan Unilever enjoys market leadership in several segments in India, it is slowly losing its ground to Godrej, which has relatively competitively priced products. Moreover, profit margins of Godrej products are significantly higher than those of HUL’s.

Based on this background, the marketing objective is to capitalize on the above mentioned conditions and increase the market share of Snuggy Dry diapers from the current 8% level to 10% in short term and substantially continue gaining higher market share.

5C’s Situation Analysis

Godrej Company

Godrej Consumer Products (GCPL) is deals in manufacturing, marketing, and distributing fast moving consumer goods. The company offers various products such as soaps, toiletries, cosmetics, hair care, household care, fabric care and baby care products. It also markets products under Cinthol, Fairglow, Godrej No 1, Nupur and Ezee brand names. The company primarily operates in India and some overseas market. It is headquartered in Mumbai, India.

The company recorded revenues of INR13,929.7 million ($303.9 million) in the financial year ended March 2009 (FY2009), an increase of 26.3% over FY2008. The company’s operating profit was INR1,881.6 million ($41.1 million) in FY2009, a decrease of 4.8% compared to FY2008. Its net profit was INR1,732.5 million ($37.8 million) in FY2009, an increase of 8.8% over FY2008. (Source :EuroMoniter)

In Diaper segment, Godrej Products Ltd offers Snuggy Dry. This has around 10% market share accounting for the third position in Indian Diaper market. Godrej Consumer Products Ltd regained share in 2009, as the joint venture between Godrej Sara Lee and SCA Hygiene (Godrej SCA Hygiene Ltd) was discontinued. The brand Snuggy Dry is now being marketed and distributed by Godrej Consumer Products Ltd exclusively.

The company has five factories in India, at Baddi, Guwahati, Katha, Malanpur and Sikkim. Apart from Snuggy Dry, all the other products of GCPL are produced in-country. Snuggy Dry was part of the Godrej SCA Hygiene Ltd joint venture, which was imported into India, and after the discontinuation of the joint venture, the brand was distributed by GCPL.

Competition

Huggies (by Kimberly-Clark) is the leader in the Indian market with a value share if 60 % share.Pampers from Procter and Gamble Hygiene and Health Care Ltd. is at number 2 spot followed by Snuggy from Godrej Consumer products Ltd. Wipro Ltd and BellePremier Happy HygieneCare Pvt. Ltd. also have their own brands competing for the market share.

Huggies and Pampers controlled 84% of the market in 2009 according to a Euro monitor International report. These brands have invested heavily in advertising and hence have a dominating market share.

Kimberly Clark launched a new product called Huggies New Born in 2009, which was diaper targeted towards new mothers. The product has been a moderate success as penetration of disposable diapers remains low in India, with mothers often using cloth nappies for young boys.

New brand Mamy Poko Pants has been using extensive television advertising, with its advertisements highlighting the comfort of the products and the ease with which they can be put on a child. In a market in which the leading players advertise a great deal through television, these advertisements will help it to increase its brand presence.

It can be said that the products compete against each other based on the price. Teddy and Wipro are considered as economy brands. Pampers, Huggies and Snuggy have price points in all three price segments. Disposable pants have a more premium price point within diapersPantaloon Retail India Ltd entered this category with the launch of its brand Caremate in 2009. Other private labels have not yet emerged in India.

Diapers/Pants Retail Company Shares 2005-2009

 

Customers

With the increasing income levels in India, parents are spending more on purchasing disposable diapers instead of reusing cloth nappies at home. In addition, awareness is increasing through the media about the different brands and the benefits of using disposable diapers over cloth versions, manufacturers saw an increase in value sales. Even in smaller towns and cities, parents are willing to spend money on disposable diapers to use when the baby is taken out of the home, for added convenience.

This has made India’s nascent baby care market transforming into world’s fastest growing baby market. A vast population of population in age group 0-4 years is a boon to the market. Aggressive marketing strategies and consumer acceptance of branded premium baby care products (especially in baby food and skin care segments) will enable the industry to register a CAGR of more than 11% during 2010-2013.

The major market players have used television based advertising to their full advantage and have raised the awareness of Baby care. With the increased awareness and increasing purchasing power, customers are fast shifting from cloth nappies to baby diapers. The Decision makers in this market are parents with mother being the dominant decision maker.

The market has used extensive retail channels with super markets, traditional grocery stores etc. This use of extensive channels has also resulted in the increasing demand.

The rapid development of modern retail infrastructure is luring consumers for convenient shopping experience and transforming into high retail spending. Baby care companies are optimally utilizing this trend and executing strong product positioning strategies to maximize their market returns

According to recent research, the Indian baby care market has grown substantially over the past few years and caught the attention of international players. However, there is still a relatively large and untapped market in the rural sector. This market is anticipated to witness concrete market developments which will also give impetus to the baby care market.

Collaborators

Most diaper brands in India are imported and so is the case with Snuggy. The production for Snuggy is carried out by a Chinese manufacturer.

BroadVision, Inc. announced that Godrej Group of India has successfully implemented two new sales portals for its business and consumer channels.

The new portals, built using BroadVision’s multi-channel sales portal and content solution, have streamlined and enhanced customer service for two Godrej Group subsidiaries-Godrej Industries Limited (GIL), which provides industrial supplies to businesses, and Godrej Consumer Products Limited, a manufacturer of consumer products

According to the company’s analyst and investor meet report, rural distribution is essential for a sound growth. In 2009, reach in rural areas has increased by 40-50% in terms of small towns and villages. Rural now measures about quarter of GCPL’s sales. It accounts for 45% of the growth. Going forward it is expected to be a continuous growth driver.

Context

Social/Cultural:

In general, in India the diaper is met with resistance. And diapers are perceived as status symbols.

One of the major concerns of diapers is rash it causes. Indians are not tolerant of rash and insist that the baby move around bare bottomed.

Technology:

Companies are heavily investing for bringing about innovations in this field. They are offering new products to boost consumer confidence and increase their market shares. Huggies Dry Diaper currently available in India is particularly designed for new users in new markets. The product employs high technology super absorbent materials (SAM) to deliver super dryness to the user which results in dry and healthy skin. SAM can absorb up to 100 times its weight. Also high leg cut design is one more innovation for hot climate from Kimberly- Clarke.

It is a capital intensive industry and is associated with high costs. This is one of the major reasons why Godrej diapers are not manufactured in India but imported from China.

SWOT Analysis

(S)trengths:

• Godrej brand name is an asset, well known to Indian consumer
• Leveraging on the distribution channel by using Operation Big C.
• Cost benefit obtained by product import from china

(W)eaknesses:

• Lack of marketing focus coupled with moderate success of Snuggy Happy Baby contest.
• Unavailability of R&D facilities

(O)pportunities:

• Strong Market Growth expected at 16%
• Growing disposable income of Indian parents ( both parents working)
• Increasing hygiene and health awareness of preferring diapers over clothes.

(T)hreats:

• Presence of many competitors in the market
• Newer indigenous brand targeting the economic segment of the market

Marketing Strategies

The below graph shows the number of new born babies born per inhabitants, though the number of new-born babies are decreasing but still the market is huge. Diaper is competing with the traditional way of using Clothes which has the advantages of reuse, inexpensive and to a certain extent healthier for the babies. Healthier in the sense, diapers used to cause rashes while clothes didn’t. Diapers have the advantage of convenience and cleanliness.

In order to increase the market share for Godrej diapers we intend to implement a progressive marketing strategy. In terms of marketing we intend that our name and products are marketed on an extensive basis to ensure that customers are aware of our existence. In price, we intend to offer reasonable and competitive prices in comparison to other competitors and we need to be able to sustain that.

Segmentation Profiles

Dividing a market in to distinct groups of buyers with different needs, characteristics, or behaviour who might require separate product or marketing mixes.

We can segment the market for the diaper market based on the disposable income of the parents. Regular use of disposable diapers remains more restricted to parents in urban India. Based on the stage of the new-born baby , the number of diaper to be used per month can be found Godrej should launch the diaper in three segments Premature when the baby is less than 6 months , New born when the baby is less than 2 year and Mini pack when the baby is 2-4 year.

We can segment the market based on the Tier-1, Tier-2 cities. The disposable income of the parents has been increasing not just in Metro cities but also in tier-1 and tier-2 cities as well.

But we find that number of working mother is less in these cities when compared to metropolitan cities. So the diaper usage will be less when compared to metropolitan cities. So we need to use a push marketing strategy for this segment of population without altering the pricing mix.

 

Target Segment

Demographic Distribution

AGE GROUPS

PERSONS

MALES

FEMALES

6 years and Below

163,819,614

84,999,203

78,820,411

RURAL-URBAN POPULATION DISTRIBUTION

POPULATION

PERCENTAGE

RURAL

742,490,639

72.2

URBAN

286,119,689

27.8

Percentage of Children below 6yrs to total rural/urban population

RURAL

URBAN

Number of children(0-6 yrs)

117,950,122

45869491

Percentage of Population

15.8

16

The target market will obviously be mothers to be and current mothers. Indians are not used to this product. This category is concentrated on urban market. The Indian mother is a cost-conscious woman and would like to recycle most of the products used for her household. The same applies to the products used for her baby too.

Moreover, large population base in 0-4 years and parents increasing preference to spend more on baby products will drive the market to new horizons in near future.

Apart from penetrating deep into urban market, rural market will also provide growth opportunities to companies.

Indian demographic distribution shows that 72 percent of the population live in rural areas while the rest 28 percent live in urban or semi-urban areas. Out of the total population mix both in rural and urban areas approximately 15 -16% population is below 6 years which form the potential market share for the diaper market. With the average purchasing power of the Indian population increasing and the with increased hygiene awareness the rural market is the market of the future.

When the purchasing power parity reaches threshold, India will be the largest customer of diapers within the next 15 years which and is expected to explode in next 3 to 5 years. It has been found that with the present birth rate 24 million babies are born in India every year. If we typically calculate 25% of these infants in the period birth and 24 months use at least 28 diapers a week, theoretically the available market is 8.7 billion pieces per year. It is estimated that the diaper market would grow at a rate of around 5-10%.

This proposed market segmentation will help building strong position in specialized diaper market segments. It will allows Godrej to focus on target customer specific needs. It will help them to understand the customer need and make improvement in marketing mix for each segment. It will help Godrej to compete with Huggies and Pamper brand diapers.

The TV and print media can reach the diaper buyers. These two media forms the potential to create the brand awareness among the buyers through various advertisements and promotional campaigns.

Positioning

The Godrej diaper should be positioned as a value-for-money brand, one that

Reasonably priced

Softness

Ease of use

Comfortable, good fit

Manufactured with bacteria resistant technology, with clean and highly absorbent cotton lap

Environment friendly

No irritation to the skin

Quicker Absorption

Super Absorbent core keeping the baby dry for long hours

It should be positioned as a product which is a “Small package of joy”

Marketing Mix

Product

Design

• Disposable diaper is made of an absorbent pad sandwiched between two sheets of fabric. The diapers are made by a multi-step process, viz.
• The absorbent pad is made and attached to a permeable top sheet and impermeable bottom sheet
• The other accessories are then sealed together by application of heat or ultrasonic vibrations. 

Features

The function of the pad is to absorb and retain body fluids, and the non-woven fabric gives the diaper a comfortable shape and prevents leakage. The main features of diapers would include:

• Absorb body fluid.
• Retain body fluid inside the absorbent core.
• Isolate wetness from the baby’s skin.
• Isolate other excretion from baby’s environment (clothes, bed, etc).

Varieties

The following major varieties of diapers and tissue hygiene products are predominantly present in the Indian market

• Regular diapers
• New born nappies
• Disposable pants
• Adult diapers
• Junior diapers

Godrej primarily focuses on regular diapers, junior diapers and new born nappies. The company markets a narrow portfolio of products within retail tissue and hygiene. It has only two brands, Snuggy Dry and Protekt, but there are some variations in terms of fragrances under the Protekt brand umbrella.

Most of the diaper brands continue to be imported, including Snuggy. Godrej is currently outsourcing its diapers from a Chinese company and will continue to do so until the volumes pick up.

Price

Godrej has positioned its brands Snuggy Dry and Protekt in the standard price segment in the market. A regular Godrej diaper pack of 6 costs Rs. 50. Currently, the Snuggy brand of diapers has a retail price of Rs 85 for a pack of 10. Smaller pack sizes have also been introduced and there are more product innovations being considered within the diaper category in the area of nappy pads – much along the same lines of its competitor Huggies from Kimberly Clark, which has also introduced nappy pads. However, the current prices are a result of 2% price hike in March 2010, by Godrej.

In the retail tissue and hygiene market in India, Godrej diapers held just above 2% value share and were ranked 6 in 2009. Within diapers/pants, the company held a share of 8%, and was in third position after Procter & Gamble Hygiene & Health Care Ltd and Kimberly-Clark Lever Ltd.

Promotion

Being the first brand of diapers in the country, Snuggy enjoys high-brand loyalty as one of the three leading players in the Indian baby diaper market. Godrej benefits from the brand loyalty which Snuggy commands in the consumers’ mind.

The following table shows the ranking of nappies and hygiene products in the sales of Godrej in 2009.

 

Advertising

• Diaper ads typically are earnest, fawning over babies and remaining steadfastly euphemistic about function, typically pouring blue liquid into diapers to demonstrate absorbency.
• The major two brands focus on heavy marketing and advertisement in mass media and television. This has led them to capture around 90% of the market share.
• A commercial titled SNUGGY HAPPY BABY CONTEST was done by Madison Media advertising agency for GODREJ diapers. The campaign was moderately successful and helped Godrej to keep its 10% market share.

Place

The company has national coverage through wide marketing and distribution channels. Supermarkets and malls, especially BIG BAZAR and Reliance Fresh have considerable self coverage of Godrej Diapers, though majority of the hygiene shelf space is still taken up by the two major players.

Channels

OTC Sales: Godrej intends to push various OTC (over-the-counter) products and brands and the primary inclusion in this category is Snuggy diapers. It feels that coupled with a consumer pull strategy through the marketing campaign SNUGGY HAPPY BABY CONTEST, this aggressive dealer push strategy will help it to gain sales.

Operation BIG C: Godrej looks at revamping distribution network and re-staging of brands. As a part of Operation BIG C, it intends to use the Chemist network in the country as a retail outlet for Snuggy diapers. The chemist margin for Godrej Diaper sales has consequently been kept higher. Following the success of Operation B, which involved the saloons of the country for Godrej Beauty product outlets, Godrej hopes to achieve as high as 20% market share through Operation BIG C.

Financial Projections

The baby diaper market in India is fairly underdeveloped and is approximately Rs 4479.8 million.

Source: Official statistics, Euromonitor International estimates, trade associations, trade press, company research etc.

The overall growth of the market is projected to be around 15% per annum.

 

Source: Official statistics, Euromonitor International estimates, trade associations, trade press, company research etc.

The current share of Godrej diapers under the brand name of Snuggy diaper is approx 8% of the overall share. That means the market share of Snuggy diaper is approximately Rs 371 million.

Source: Official statistics, Euromonitor International estimates, trade associations, trade press, company research etc.

Diapers/Pants Retail Company Shares 2005-2009 

 

Financial projections of Snuggy diaper

 

Selling 7.5 million units of diaper at Rs 6 each will achieve the marketing objective of godrej Snuggy diaper. To achieve targeted revenue, Godrej diaper needs to generate revenue of INR 126 million (as given in above table, point 15). With the potential price and sale of the diapers in a quarter Godrej can expect to generate revenue of Rs 135 million (point 9 mentioned in given table above).

As per the financial projections annual revenue of Snuggy diaper is Rs 371 million in 2009 which will grow to approx Rs 504 million in 2010 which comes to around 35 % growth in revenue.

Budget Analysis and Implementation

In view with the financial projections, please find the below budget analysis

Particulars

Cost

Comments

Gross Profit

1.2 INR per diaper

Profit from sale of one diaper

Quarterly sales targets

23 Million

Quarterly sales expected

Quarterly profit

27 Million INR

Overall profit

Budget Allocation

Advertisement

10 million INR

Budget allocation from advertisement and awareness spreading

Collaborators margin

7 Million INR

Retailers need to be given additional margins to promote Snuggy Diaper

Implementation

As the sales volume starts increasing, Godrej can open up the manufacturing unit at one of its already existing factory unit locations. Below is the approximate cost of building up the net manufacturing unit.

Particulars

Cost (INR in crore)

Comments

Land Required(1200 sq mt)

0.6

Rs 5000 per sq/mt

Building

0.5

Rs 5000 per sq/mt

Total Plant and Machinery for diapers

3.5

Industry average

Installation of Electricity

0.015

130 KVA transformer

Other preliminary expenses

0.05

Total Expenditure

5

approximately

The brand Snuggy is distributed by GCPL and currently not manufactured locally. The company is well positioned in diapers/pants in India, which is seeing an increase due to more Indian parents using diapers for their babies. Experts believe that since Snuggy is imported into India after the discontinuation of the joint venture with SCA Hygiene Ltd, there is a strong case to save costs by manufacturing the product locally.

Available in pack sizes of 2s, 5s and 10s, for all age groups including new born, standard and junior, the brand can be affordably priced alongside mainstream brands, and supported by aggressive advertising.

GCPL requires not just building distribution and trade relations in the fragmented retail landscape, but also investment in terms of advertising and promotions. The revenue model will be on the lines of ‘Operation Big B’, with chemist shops being offered higher margins.