FMCG major Dabur, known for its ayurvedic range of products such as Dabur Honey and Dabur Chyawanprash, has made a foray into the baby diaper market in partnership with e-commerce marketplace Flipkart. The company plans to launch the diaper on the platform during its upcoming sales event. With this launch, the company had extended its range in the baby care products segment. Dabur, said industry analysts, already has a strong presence in the baby oil category and of late has also expanded into categories like baby wash, baby cream, lotion, wipes powder, and soaps.
“The company has made a move for the baby category as it tries to strengthen its offering in the baby care category. Also, they can leverage their brand and the distribution network to build a play in the category,” said Purnendu Kumar, practice leader, consumer and retail, Praxis Global Alliance, a global management consulting and advisory firm.
The market, given the presence of a handful of companies in it and the growing penetration of the product, presents an opportunity to FMCG companies.
An exciting play
According to experts, the market for diapers in India is valued at about Rs 8,000-9,000 crore and has witnessed rapid growth in recent years as consumers beyond metro cities and urban centres adopt the product.
“More and more people are looking at diapers for infant care. Even people in semi-rural have been found using the product,” said Ankur Bisen, senior vice-president, retail and consumer at management consultancy Technopak.
The category, as pegged by market experts, has been growing at 14 percent per annum from the calendar year 2015 to 2019. Though the COVID-19 pandemic derailed its growth, most analysts see this as a minor blip and expect it to be back on track again.
It's also a high-margin category, wherein companies can draw margins as high as 40 percent of the cost of net sales, making a lucrative bet for the FMCG players, which usually draw thin margins in several categories especially the commodity-based ones.
The diaper segment has a presence of players from across categories; however, over 85 percent of it is dominated by P&G through its Pampers brand and Japan-based Unicharm’s MamyPoko. According to industry estimates, Pampers commands 46 percent of the market, followed by MamyPoko at 40 percent, Kimberly Clark lever’s Huggies has a 6 percent share in it, and Noble hygiene a 3 percent share.
The fragmented structure of this market, coupled with rapid adoption amongst consumers, makes the category an enticing bet for companies like Dabur which are trying to build their FMCG play.
The segment, however, has its set of challenges too, points out industry experts. To make a dent in the segment, Dabur first of all will have to break the duopoly of Pampers and MamyPoko. Analysts said this is not going to be an easy task given their expertise in the segment build over the years.
“While the incumbents have a stronghold over the market, it is also a very price-sensitive category and hence companies cannot charge a premium to customers,” said Kumar of Praxis Global Alliance.
According to Bisen, the pricing challenge also makes it difficult for the companies to go to the masses with the product. “For widespread adoption of the product, the price per diaper has to come down. But to achieve economies of scale, the company needs to start manufacturing the products locally,” he added.