China’s nappy brands look to absorb local demand

From toothpaste to ice cream to disposable nappies, modern Chinese life has been transformed by imports. But many of those erstwhile alien products now bear Chinese brand names.

More and more mainlanders are brushing their teeth with Yunnan Baiyao toothpaste, eating Yili ice cream or putting nappies made by Hengan on their babies. Multinationals still have a strong sometimes dominant presence in these markets, but mainland brands are exploiting local knowhow and speed to market.

Disposable nappies are a case in point: many Chinese grannies did not use them to raise the current generation, but today’s urban mainland mums rely on them.

The market in China is highly concentrated, with 10 brands capturing 85 per cent of sales. Only one local brand has significant share: Hengan with 9 per cent, compared with 10 per cent for Kimberly-Clark of the US and nearly 29 per cent for Procter & Gamble.

But the rapid rise in urbanisation and incomes in China is boosting demand for products such as nappies. Euromonitor, the data group, predicts that the world's largest nappy market will nearly triple between 2010 and 2017, from Rmb20bn ($3.3bn) to Rmb57bn ($9.3bn).

Such growth is attracting new entrants, many of them local brands. “It is estimated there will be more than 100 foreign and domestic brands that will enter China in 2014 alone,” says Liu Yang, chief executive of Xiaolu Dingding Diapers, a mainland brand.

Rising costs of materials and labour, changing consumer tastes and increasingly demanding consumers have made market conditions increasingly tough, retail analyst say. Hengan warned in its most recent results that “the short-term outlook remains challenging as a lot of players have entered into this market”.

Hengan says the quality of its nappies equals that of the foreign brands - P&G, Kimberly-Clark and Japanese brand Unicharm together have more than half the market - but many mainland consumers disagree.

Hengan, which expects to sell Rmb2.8bn-Rmb3bn of its Anerle nappies this year, says: “A majority of Chinese mothers believe foreign products are better than domestic ones; therefore, it is necessary to educate consumers to change their minds.”

Persuading Chinese mothers to use disposable nappies has been a slow process, says Xu Ruyi, head of China research at Mintel. "Nappies were introduced to China by P&G during the 1990s and it has taken a long time for consumers to adopt the products."

One breakthrough came with P&G's Pampers "golden sleep" campaign in 2007, focused on convincing mothers that using nappies can help babies sleep better, "which means they can grow faster and get more brain development", says Ms Xu.

However, China is not a captive market for multinationals. “Competition is intense: even for big players if you don’t keep up with the competition you’ll still lose share to others,” says Ms Xu. “Consumers today are offered a much wider range of product choices compared with five or 10 years ago.”

Pull-up-type nappies, nappies for boys versus girls and adult nappies are all relatively new entrants to the market - the latter category is expected to grow strongly in China, the world’s largest senior market.

Domestic brands are "focusing more on R&D and updating their production equipment because the newer the production line, the better quality the nappies will be", says Yan Fei of Beijing's Qinbei Research Centre.

“Intelligent” nappies, which gauge the health of a baby from its urine, and mosquito repellent nappies are under development by Chinese companies.

Research from Mintel shows that famous brand names may actually wield less power in China than elsewhere. In the UK, says Mintel, “45 per cent of parents would go for a product they’ve used before and a low price is among the top three influencing factors”.

But in China, quality is king: freedom from harmful substances, quality, suitability for sensitive skin and absorbency are most important for Chinese consumers, says Ms Xu.

China's birth rate may be low, but spending on only babies is a favourite pastime and Chinese mothers sometimes use up to 20 nappies per day to avoid nappy rash, says Mr Yan.

Big-city mothers have more and more money to spend on nappies and small city mums are just beginning to think of using them.

Like toothpaste and ice cream, nappies are becoming a domestic necessity in China, and everyone from local to multinational brands is eager to get a piece of the action.

Public toilet training falls from fashion

In the west it is called “elimination communication” but in China it is merely called tradition: put the baby over the bowl and watch it urinate or defecate, preferably on cue from a parent.

For centuries, Chinese mothers and grandmothers used this method to “toilet train” infants virtually from birth, Chinese infants were encouraged to eliminate waste on command, often urged on by a gentle “shushing” sound.

This technique, still widely practiced in rural China, largely eliminates the need for nappies. Toddlers wearing “split pants” can be seen on the streets of China’s cities, being held over a gutter or rubbish bin when caught short in public.

Some parents even brave international air travel without benefit of nappies: this Youtube video, narrated by a Malaysian advocate of the practice, explains how it is done.

The practice has a niche following in the west, where it is seen as a way to improve bonding between parent and child, reduce struggles over toilet training and cut nappy rash.

According to the US website www.diaperfreebaby.org, “babies are aware of their elimination needs from birth and communicate about those needs through various vocal and bodily signals”.

“Within the first few months of life, babies have the ability to consciously release their bladders and bowels”, the website says. Some childcare experts say the practice is more parent training than toilet training: the key is teaching the parent to recognise when the child needs to go.

Advocates say “elimination communication” lowers the age at which infants learn to use the toilet independently, and also reduces the environmental impact of disposable nappies. But it is a rare urban parent in China today who chooses to stick to the traditional method.