Baby Care market- China

HEADLINES

• Baby care sales grew by almost 7% in current value terms in 2009, to reach RMB2,880mn

• The debate over the safety of products from Johnson & Johnson and Nuk had a negative impact on both companies’ performance and overall market growth

• Unit prices increased continuously due to strong growth of premium brands and increasing costs

• The market leader, Johnson & Johnson, saw its value share fall from 68% in 2008 to 61% in 2009 due to the product safety issues

• Sales are expected to post a CAGR of 12% in constant value terms during the forecast period

TRENDS

• Concerns over the safety of baby products from both Johnson & Johnson and Nuk had a negative impact on both companies’ performance and overall market growth. Although both companies managed to pass the SFDA’s safety test, many parents became more cautious when purchasing baby care products. Additionally, many female consumers, especially students, who previously used baby skin care products from Johnson & Johnson, switched to other brands due to this incident. As a result, Johnson & Johnson, the dominant player in baby care, suffered overall negative growth in sales, undermining overall baby care market growth. This, however, also brings opportunities for other companies in the market. Brands such as Hai Er Mian, Croco Baby, Pigeon, Yumeijing and Elsker all enjoyed strong growth in their market shares.

• Baby skin care remained the most dynamic category in baby care in 2009 with current value growth of over 7%, athough this was considerably slower than in 2008. Thanks to their mildness and non-irritable characteristics, many younger consumers such as students choose baby skin care products instead of adult skin care ones. In addition, thanks to relatively cheaper retail prices, many female consumers buy baby skin care products as body lotion, as baby skin care products are generally more natural and healthier than normal body lotion.

• Premium baby care products have witnessed an upward trend in recent years, taking 10% of total market value sales in 2009. In light of Johnson & Johnson’s product safety incident, consumers tend to be more cautious when purchasing baby care products and pay more attention to the quality and safety of the products, thereby driving growth of premium brands. Take, Pigeon Corp, for example, the company performed well in 2009, increasing its brand share from 2.6% to 3.1%. With a well-established, high-quality brand image, Pigeon Corp now leads the premium baby care segment, followed by Amway (China) Co Ltd. As for another premium brand, Nuk, it registered a poorer performance due to a safety issue with its baby talcum powder.

• The number of baby specialist retailers has grown continuously in China in recent years, although it is still relatively small compared to other retailing channels such as supermarkets/hypermarkets and department stores. Baby specialist retailers are classified within other non-grocery retailers in terms of distribution channels, accounting for 4.3% of total distribution share in 2008 and 5.5% in 2009. The main driver behind growth is consumers believing baby specialist retailers are able to provide them professional advice for tailor-made purchases for their own babies. Additionally, baby specialist retailers offer a wide range of products, providing convenience for consumers. Specialist retailers such as Les Enphants Co Ltd and Ai Ying Shi Co Ltd are expanding rapidly in China.

COMPETITIVE LANDSCAPE

• Johnson & Johnson still leads the baby care sector in China, despite the product safety incident that occurred in March 2009. At the outset of this incident, the company saw its sales fall sharply. Subsequently, the company passed the safety test, organised a number of PR events, and launched heavy promotion in order to recover its losses. In addition, due to strong partnerships with major distributors in China (e.g. Wal-Mart, Carrefour and Trust-mart) Johnson & Johnson managed to make sure its shelf-ranking remained unchanged and orders were not cancelled. Through all these efforts, Johnson & Johnson secured its number one position in the baby care market but with its value share down from 68% in 2008 to 61% in 2009.

• Shanghai Elsker International Business Co Ltdsaw the biggest increase in value sales in 2009, ranking the company fifth among all baby care manufacturers. The company was set up in Shanghai in 2006 by Danish Elsker International A/S and its products have been available on the market since 2007. Elsker offers brands for baby sun care, skin care, hair care, toiletries and skin care products for mothers. The company managed to establish a high-quality brand image by claiming that all its materials abide by the standards of Astma-Allergi Forbundet. In addition, Shanghai Elsker International Business Co Ltdhas built a successful distribution network by collaborating with supermarkets/hypermarkets such as Carrefour, Wal-Mart, Lotus, Tesco and Auchan. It also worked with a few leading Internet retailers and baby specialist retailers such as Muying Zhijia, Ai Ying Shi Co Ltd and Redbaby Co Ltd to increase brand awareness and market penetration levels. Furthermore, the company has set up 32 sales offices and representative offices in China, as it seeks further expansion in China.

• International baby care brands still dominated the Chinese baby care market in 2009, but domestic brands have seen positive growth in their market share. In contrast with the poor performance of Johnson & Johnson and Nuk, other international brands such as Hai Er Mian, Pigeon and Elsker registered strong growth in 2009 due to their high-quality brand images, with market shares 7.4%, 3.1% and 2.9%, respectively. As for domestic companies, overall they recorded better performance in 2009. For example, Yumeijing, a brand with a long history, continued its rapid growth due to high consumer loyalty, with a value share of 8.8% in 2009, ranking the brand second among all other competitors. Other local companies such as Guangzhou Lixin Cosmetics Co Ltd and Shuangfei Daily Chemicals Co Ltd also enjoyed good performance, witnessing consistent growth in their market share in the last two years.

• Despite the global recession, premium brands maintained an upward trend in 2009 as Chinese parents paid more and more attention to product safety and quality since the Johnson & Johnson incident. Take, Pigeon, a premium Japanese brand, for example, by targeting the “new rich” consumer segment in China (according to the company definition, a group with a monthly household income of more than RMB5,000, who use many high-quality, convenient products), the company recorded impressive growth in 2009. Not content with the current growth, Pigeon Corp also seeks further expansion in other regions besides eastern China by developing more “Pigeon corners” not only in department stores and baby specialist shops, but also in drugstores/parapharmacies. As for private label brands, Nac Nac, a brand by Les Enphants Co Ltd, a leading baby specialist retailer in China, is one of the few brands to have performed well in recent years. Due to dedicated service, a well-established brand image and wide coverage in more than 20 cities in China, Nac Nac has enjoyed constant growth since 2008. On the other hand, other private label brands tend to have poor market visibility in China due to low brand awareness and negative consumer perceptions.

PROSPECTS

• Baby care sales are expected to post a 12% CAGR in constant value terms during the forecast period. This trend will be driven mainly by the country’s strong GDP growth and relatively higher disposable incomes.

• Baby skin care is predicted to record the strongest growth during the forecast period, with a CAGR of over 12% during the forecast period. Chinese parents pay particular attention to the condition of their babies’ skin, which makes baby skin care products daily necessities. In addition, due to the non-irritable and natural aspects of baby skin care products and their relatively cheaper prices, many female consumers, especially students, will continue to buy baby skin care products as their body lotion, thereby driving future growth.

• Baby sun care products are also expected to show an upward growth trend in the future. Thanks to the constant improvement in living standards in China, baby sun care products are likely to receive more attention from parents. In addition, according to industry sources, baby care manufacturers are gradually increasing their marketing investment in sun care products to better inform parents about the importance of sun care products.

• During the forecast period, mass brands will continue to dominate the Chinese baby care market, while premium brands are expected to see steady growth. Parents are paying more and more attention to product safety and quality rather than price alone, thus driving the growth of premium brands.

• Baby specialist retailers are expected to register steady growth in the future. With comprehensive product portfolios and professional service for tailor-made purchases, baby specialist retailers are accepted by more and more consumers. In addition, many international and local companies such as Pigeon Corp and Suzhou De Bao Trade Co Ltd are paying more and more attention to this distribution channel.

CATEGORY DATA

Table 1 Sales of Baby Care by Subsector: Value 2004-2009

RMB million	2004	2005	2006	2007	2008	2009
Baby Hair Care	216.3	233.9	256.6	288.2	324.8	343.2
Baby Skin Care	811.0	891.1	978.8	1,118.8	1,284.5	1,380.1
Baby Sun Care	35.5	38.3	41.6	46.3	52.0	54.6
Baby Toiletries	657.0	722.5	803.6	909.5	1,039.1	1,101.9
Medicated Baby Care	-	-	-	-	-	-
Nappy (Diaper) Rash Treatments	-	-	-	-	-	-
Baby Care	1,719.8	1,885.7	2,080.7	2,362.8	2,700.4	2,879.8

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

Table 2 Sales of Baby Care by Subsector: % Value Growth 2004-2009

% current value growth	2008/09	2004-09 CAGR	2004/09 TOTAL
Baby Hair Care	5.6	9.7	58.7
Baby Skin Care	7.4	11.2	70.2
Baby Sun Care	5.1	9.0	53.8
Baby Toiletries	6.0	10.9	67.7
Medicated Baby Care	-	-	-
Nappy (Diaper) Rash Treatments	-	-	-
Baby Care	6.6	10.9	67.4

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

Table 3 Baby Care Premium Vs Mass % Analysis 2004-2009

% retail value rsp	2004	2005	2006	2007	2008	2009
Premium	6.5	6.8	7.0	7.2	9.5	10.0
Mass	93.5	93.2	93.0	92.8	90.5	90.0
Total	100.0	100.0	100.0	100.0	100.0	100.0

Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor International estimates

Table 4 Baby Care Company Shares 2005-2009

% retail value rsp	2005	2006	2007	2008	2009
Johnson & Johnson China Ltd	62.8	63.2	64.7	68.3	61.0
Tianjin Yumeijing Group Co Ltd	7.3	7.4	7.7	7.8	8.8
Henkel (China) Co Ltd	8.5	8.5	6.7	6.0	7.4
Pigeon Corp	1.8	2.1	2.3	2.6	3.1
Shanghai Elsker International Business Co Ltd	-	-	1.0	1.2	2.9
Amway (China) Co Ltd	-	-	-	2.2	2.2
Les Enphants Co Ltd (Mainland China)	1.0	1.0	1.8	1.9	2.2
Suzhou De Bao Trade Co Ltd	1.9	2.0	2.1	2.2	2.1
Shanghai Chaozhong Cosmetics Co Ltd	2.1	1.9	1.9	1.7	1.6
Guangzhou Lixin Cosmetics Co Ltd	1.3	1.3	1.2	1.3	1.5
Shuangfei Daily Chemicals Co Ltd	0.6	0.8	0.9	0.9	1.1
Shanghai Baiqueling Daily Use Chemical Products Co Ltd	4.0	4.0	3.2	-	-
Procter & Gamble (Guangzhou) Ltd	0.7	-	-	-	-
Others	8.0	7.8	6.5	3.8	6.1
Total	100.0	100.0	100.0	100.0	100.0

Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Table 5 Baby Care Brand Shares by GBN 2006-2009

% retail value rsp	Company	2006	2007	2008	2009
Johnson's Baby	Johnson & Johnson China Ltd	63.2	64.7	68.3	61.0
Yumeijing	Tianjin Yumeijing Group Co Ltd	7.4	7.7	7.8	8.8
Hai Er Mian	Henkel (China) Co Ltd	8.5	6.7	6.0	7.4
Pigeon	Pigeon Corp	2.1	2.3	2.6	3.1
Elsker	Shanghai Elsker International Business Co Ltd	-	1.0	1.2	2.9
G&H	Amway (China) Co Ltd	-	-	2.2	2.2
Nac Nac	Les Enphants Co Ltd (Mainland China)	1.0	1.8	1.9	2.2
NUK	Suzhou De Bao Trade Co Ltd	2.0	2.1	2.2	2.1
Xiao Ding Dang	Shanghai Chaozhong Cosmetics Co Ltd	1.9	1.9	1.7	1.6
Croco Baby	Guangzhou Lixin Cosmetics Co Ltd	1.3	1.2	1.3	1.5
Frog Prince	Shuangfei Daily Chemicals Co Ltd	0.8	0.9	0.9	1.1
Xiaobailin	Shanghai Baiqueling Daily Use Chemical Products Co Ltd	2.1	1.7	-	-
Disney	Shanghai Baiqueling Daily Use Chemical Products Co Ltd	1.9	1.5	-	-
Safeguard	Procter & Gamble (Guangzhou) Ltd	-	-	-	-
Others	Others	7.8	6.5	3.8	6.1
Total	Total	100.0	100.0	100.0	100.0

Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Table 6 Baby Care Premium Brand Shares by GBN 2006-2009

% retail value rsp	Company	2006	2007	2008	2009
Pigeon	Pigeon Corp	29.4	31.7	27.1	31.3
G&H	Amway (China) Co Ltd	-	-	23.4	21.9
NUK	Suzhou De Bao Trade Co Ltd	28.6	29.6	23.1	20.6
Mary Kay	Hangzhou Mary Kay Cosmetics Co	1.2	0.7	-	-
Others	Others	40.8	38.0	26.4	26.3
Total	Total	100.0	100.0	100.0	100.0

Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Table 7 Baby Skin Care Brand Shares by GBN 2006-2009

% retail value rsp	Company	2006	2007	2008	2009
Johnson's Baby	Johnson & Johnson China Ltd	63.0	65.0	67.9	60.4
Yumeijing	Tianjin Yumeijing Group Co Ltd	11.0	11.5	12.0	13.4
Hai Er Mian	Henkel (China) Co Ltd	7.9	5.9	5.3	6.5
Pigeon	Pigeon Corp	2.3	2.7	3.0	3.6
Elsker	Shanghai Elsker International Business Co Ltd	-	0.9	1.0	2.9
Nac Nac	Les Enphants Co Ltd (Mainland China)	2.2	2.3	2.4	2.8
G&H	Amway (China) Co Ltd	-	-	2.7	2.7
NUK	Suzhou De Bao Trade Co Ltd	2.2	2.3	2.3	2.1
Xiao Ding Dang	Shanghai Chaozhong Cosmetics Co Ltd	2.0	2.0	1.8	1.7
Xiaobailin	Shanghai Baiqueling Daily Use Chemical Products Co Ltd	2.2	2.0	-	-
Disney	Shanghai Baiqueling Daily Use Chemical Products Co Ltd	1.5	1.4	-	-
Others	Others	5.6	3.9	1.5	3.9
Total	Total	100.0	100.0	100.0	100.0

Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Table 8 Baby Sun Care Brand Shares by GBN 2006-2009

% retail value rsp	Company	2006	2007	2008	2009
Johnson's Baby	Johnson & Johnson China Ltd	69.0	71.3	75.0	69.9
Hai Er Mian	Henkel (China) Co Ltd	10.0	8.3	7.9	9.8
Elsker	Shanghai Elsker International Business Co Ltd	-	1.9	2.4	4.4
Mary Kay	Hangzhou Mary Kay Cosmetics Co	4.2	2.6	-	-
Others	Others	16.8	15.8	14.7	15.9
Total	Total	100.0	100.0	100.0	100.0

Source: Trade associations, trade press, company research, trade interviews, Euromonitor International estimates

Table 9 Forecast Sales of Baby Care by Subsector: Value 2009-2014

RMB million	2009	2010	2011	2012	2013	2014
Baby Hair Care	343.2	374.3	416.1	467.7	528.5	598.9
Baby Skin Care	1,380.1	1,526.0	1,704.3	1,917.6	2,169.4	2,463.5
Baby Sun Care	54.6	58.7	63.6	69.4	76.4	84.7
Baby Toiletries	1,101.9	1,205.2	1,331.6	1,482.3	1,659.1	1,864.1
Medicated Baby Care	-	-	-	-	-	-
Nappy (Diaper) Rash Treatments	-	-	-	-	-	-
Baby Care	2,879.8	3,164.2	3,515.7	3,936.9	4,433.4	5,011.2

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

Table 10 Forecast Sales of Baby Care by Subsector: % Value Growth 2009-2014

% constant value growth	2009-14 CAGR	2009/14 TOTAL
Baby Hair Care	11.8	74.5
Baby Skin Care	12.3	78.5
Baby Sun Care	9.2	55.2
Baby Toiletries	11.1	69.2
Medicated Baby Care	-	-
Nappy (Diaper) Rash Treatments	-	-
Baby Care	11.7	74.0

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

Table 11 Forecast Baby Care Premium Vs Mass % Analysis 2009-2014

% retail value rsp	2009	2010	2011	2012	2013	2014
Premium	10.0	10.1	10.2	10.3	10.4	10.5
Mass	90.0	89.9	89.8	89.7	89.6	89.5
Total	100.0	100.0	100.0	100.0	100.0	100.0

Source: Official statistics, trade associations, trade press, company research, store checks, trade interviews, Euromonitor International estimates