Facing failure despite tremendous growth potential in India’s diaper market

December 18, 2018
3 min read

As one of the most populated countries in the world, India has a relatively high birth rate, opening the market up to opportunity for the global diapers industry.

However, the penetration rate of diapers among Indian households remains low, and despite massive investments from global and local companies, the likes of P&G, SCA and Godrej, the profits aren’t there yet. As a result, many of these companies have either curtailed their production or exited the Indian market altogether.

Some of the reasons for failed market penetration include the inability to charge profitable prices, as well as the challenges of primitive local supply chains. From unreliable power grids to poor distribution networks, a lacklustre infrastructure is the main reason why companies are leaving the Indian diaper market.

Local company SCA, for instance, made its exit four years after entering the Indian diaper market. Upon its exit, SCA announced that despite the tremendous growth potential, it needed to focus on its more profitable core markets. Meanwhile, despite positive projections for its business, local manufacturer Godrej exited the market earlier this year, citing the cost of making diapers relative to the rest of its portfolio.

While new Indian consumers are entering the diaper category, it is not at a rate that is fast enough for companies to stay on to reap the benefits. In fact, some of the brands that are closing shop are either abandoning their first-to-market advantage or the valuable knowledge of local consumer needs.

What can companies do?

Many brands that enter emerging markets look to own as much share as early as possible. In markets with both high risk and reward, identifying a niche can provide a low-risk foot in the door.

Investing in a long-term strategy can also help in the long run. While it is easier said than done, brands need to find a balance between delivering margin expectations and entering emerging markets early enough to gain an advantage with consumers and suppliers.

Joint ventures with local or private companies may help global players enter early yet not have to endure the consequences of low margins or massive investment. Such partnerships are often mutually beneficial and can help ensure the survival of global and local brands in the growing emerging market and can help reduce their risk in these markets.

Kimberly-Clark, for example, entered the Indian hygiene market through its joint venture with Hindustan Lever, Unilever’s Indian subsidiary. While Unilever divested its stake in the venture in 2017, it was critical in allowing Kimberly-Clark to move into India, particularly as it had the advantage of understanding the Indian market and its consumers.

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Jamie Rosenberg
Jamie Rosenberg

Jamie Rosenberg is Global Household & Personal Care Analyst at Mintel, exploring trends and new business opportunities in household, beauty and personal care categories.

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