The market segments of adult incontinence/ baby hygiene/ feminine hygiene products had CAGRs of 15.7%/12.5%/10.4% over 2014-19. With China’s GDP per capita rising, consumer demand evolved from price and quality to more diverse requirements like comfort, function, quality, convenience and safety. Domestic brands embraced new e-commerce channels and grew quickly. Rating: OUTPERFORM (maintain)
The market segments of adult incontinence/ baby hygiene/ feminine hygiene products had CAGRs of 15.7%/12.5%/10.4% over 2014-19. With China’s GDP per capita rising, consumer demand evolved from price and quality to more diverse requirements like comfort, function, quality, convenience and safety. Domestic brands embraced new e-commerce channels and grew quickly.
Absorbent hygiene products’ volume and price rises; diverse demand needs
According to statistics by the China Paper Association, absorbent sanitary products had a domestic market of RMB116.53bn in 2019, at a CAGR of 11.7% from 2014 to 2019; consumption was 164.61bn pieces, with a CAGR of 4.6% from 2014 to 2019; the per-piece price was stable at RMB0.71 in 2019, up significantly by 23.2% yoy from RMB0.66 in 2016, a CAGR of 6.7% from 2014 to 2019.
The various market segments
The market sizes of feminine hygiene/ baby hygiene/ adult incontinence products were RMB57.22bn/49.88bn/9.44bn, accounting for 49.1%/42.8% /8.1% of the total. In terms of growth, adult incontinence > baby hygiene > feminine hygiene products, with CAGRs of 15.7%/12.5%/10.4% in 2014-19. With China’s GDP per capita at USD8,242.05 in 2019, consumer demand evolved from price and quality to more diverse requirements such as comfort, function, quality, convenience and safety. Domestic brands embraced the new retail e-commerce channels and grew quickly.
Baby hygiene products: with volume and price rising drive growth, more domestic brands are emerging. The market size of China’s baby hygiene products in 2020 was RMB70.34bn, with a CAGR of 18.0% from 2006 to 2020; consumption was 36.97bn pieces, with a CAGR of 15.5% from 2006 to 2020, the main driving force of the industry. The price was RMB1.90/sheet, with a CAGR of 2.2% from 2006 to 2020. The industry concentration fell as foreign brands generally declined, allowing local brands to seize more market share. Based on brands, China’s baby hygiene product market CR3 declined from 52.1% to 31.5% from 2011 to 2020. This was because consumers have changed their perceptions of made-in-China products; some domestic products used the same OEM/ODM factories as the international brands, so there was essentially no difference in quality. Chinese brands Lelch, Dodie and Babycare performed well with high-quality products, building up reputation and popularity.
Chinese feminine hygiene products: the industry has entered a mature period; driven by increasing prices, domestic brands have performed well. The volume and price of China’s feminine hygiene products industry increased from 2006 to 2017, and it turned into a price-driven market in 2018. The Chinese feminine hygiene market size reached RMB890.67bn in 2020, with a CAGR of 7.9% from 2006 to 2020; consumption came to 117.22bn pieces, a CAGR of 4.0%; the price was RMB0.76/piece, a CAGR of 3.7 the main driving factor. In addition, market concentration gradually increased from 2011 to 2020. In terms of brands, CR3 increased from 19.6% to 29.5% and CR5 increased from 24.3% to 36.7% in the period. Su Fei’s market share rose from 4.8% in 2011 to 12.7% in 2020. In addition, domestic brands performed better, with six local names in the industry ten top in 2020: Hengan International, Kingdom Healthcare, Baiya Sanitary, C-Bons Group, Guilin Fugui and Fujian Hengli
Adult incontinence products: in a ramp-up phase. In the price-driven market, the main driver is volume increase, and domestic brands are more competitive in pricing. The market size was RMB5.121bn in 2020, at a CAGR of 21.7% over 2006-20. Consumption was 2.05bn pieces, a CAGR of 18.5% over 2006-20, the main driver. The price was at RMB2.5/piece, with a CAGR of 2.7% over 2006-20. Domestic brands were more price competitive and the more reliable brands grew strongly, with a market share of 9.4% in 2020. This was mainly due to competitive advantages in product quality and price, and a focus on e-commerce channels. In addition, the reliable brands tied up with nursing institutions to integrate internet plus elderly care platforms to increase brand awareness and support performance growth.
Pet health supplies: domestic pet products’ brands on the rise. The US pet supplies and pet medicines market size was USD19.2bn in 2019. The European and Japanese pet supplies markets were EUR8.5bn and JPY170bn in 2018. China’s pet supplies market was RMB23.68bn in 2019. In terms of purchasing channels, unlike developed countries in Europe and the US, which are dominated by supermarkets, Chinese pet owners are more inclined to buy pet supplies, including pet hygiene products, in franchised pet stores and e-commerce channels. A China pet industry white paper in 2019 stated that 58.20% of pet owners typically selected online e-commerce for pet supplies, and would prefer to use Tmall/Taobao/JD, represented by the large e-commerce platforms, mainly on account of quality. The factors include guarantees, a variety of goods sources, large discounts, many promotional activities, speed and convenience. In addition, manufacturers relied on the domestic pet business for rapid channel development and gradually the ODM/OEM model changed to one that was ODM/OEM-based while also taking into account independent pet brand development, with emerging brands such as 「Mad Dog」 (瘋狂的小狗), 「Hua Pet」 (華元寵物) and 「Favorite」 (寵幸).
Risks include: competition risks; sharp fluctuations in raw material prices such as wood pulp; and slower-than-expected macro-economic growth.
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