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In China, Does 1+1 Equal a P&G Win?

December 4, 2013

New rules on childbirth could provide a boost.

And baby makes three...make that four. On Nov. 15, 2013 the Chinese government announced, after the Third Plenum policy meetings in Beijing, that it would allow married couples to have two children if at least one spouse is an only child. With that ruling, experts assume that millions of couples in China meet the criteria to have a second child because of the old one-child-per-family-rule. With the new laws in place, will diaper makers such as Procter & Gamble and Kimberly-Clark benefit? Beyond that, how can baby care marketers such as J&J make a move in the country?

According to estimates, P&G is the No. 1 player in the Chinese diaper market with a 46% share. The company added a point in 2012 and continues to expand its presence via an agressive marketing campaign, according to analysts.

Meanwhile, Kimberly-Clark's decision to sell off its diaper business in Western Europe during the third quarter of 2012, underscored its commitment to growth in large and expanding markets rather than focus on defending market share in saturated markets such as Europe. China and other BRIC (Brazil, Russia, India and China) nations have vast populations and rising levels of disposable income that provide huge potential for Kimberly-Clark’s paper-based hygiene products such as diapers and tissues.

A baby boom isn't the only reason why China is attractive to FMCG companies. Last year, the urban population in China exceeded the country’s rural population for the first time in the country’s history. As a result, this rising urbanization is giving rise to an expanding middle class – a segment that is a key driver of the nation’s total consumption. According to McKinsey, Chinese consumption will account for $8.4 trillion, nearly 25% of the world’s total consumption by 2025. As a result, the real opportunity for household and personal products makers will be in catering to the needs of the growing middle class, say industry experts.
 

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