Baby Care in China: A Recession-Proof Category
Before traveling to Western countries, I always ask my friends what I can buy for them, and the most requests by expectant and new mothers are, “can you ship baby powder milk (or baby care products) for me?” It seems logical to me considering the recent safety and quality concerns over baby care products here in China. Incidents such as melamine-contaminated milk in 2008 and baby powder containing prohibited amount of asbestos in 2009 have ruined Chinese parents’ faith in domestic baby products.
Still, there is an enormous opportunity for growth in the baby care market as China’s baby boom has been looming for decades. According to Beijing Answer Marketing Consulting, China is currently the world’s second largest consumer market for babies and children goods (after the US). With an annual growth rate of 30% since 2000, this market was worth nearly $16 billion at the end of 2008, and is expected to reach $23 billion at the end of 2010.
According to National Population and Family Planning Commission (NPFPC), some 20,800 babies have been born every day during the past decade, despite an attempt to curb population growth by the Chinese government, which adopted its one-child policy in 1979, which encourages late marriages and late childbearing and limits most urban couples to one child. The one-child policy impacted about 36% of China’s population and the government claims the controversial policy has led to 400 million fewer births.
The recent baby boom can be attributed primarily to economic incentives—newly-wealthy couples find they can afford to pay fines incurred from having more than one child. A survey conducted by the NPFPC found the number of rich people having more than one child is rapidly rising. Another reason for the boom is that there are millions of Chinese in their 20s and 30s who are now allowed two children under the policy because they themselves are single children.
Consequently, China’s baby care industry benefited from the two major factors despite a marked decline in the birth rate, according to Euromonitor. The most significant one is China’s one child policy, which resulted in a distinctive family structure with four grandparents, two parents and one child. This “4+2+1” structure in turn results in grandparents and parents being keen to indulge the only child. Another one is long-term growth in disposable income levels, which enables grandparents and parents to spend more freely on children. According to the China Academy of Social Sciences, Chinese households spend up to 50% of total family income on the child.
No wonder why the baby care segment has prospered during the past year. According to a Euromonitor report, sales have soared—even as the birth rate dropped from 12.4 births per 1,000 in 2005 to just 11.8 births in 2010. The stronger growth was attributed to consumers’ economic concerns easing as the Chinese economy returned to growth.
Baby skin care and toiletries remain the main entry points to China’s baby care market, and jointly dominate sales, accounting for 48% and 38%, respectively, of baby care value sales in 2010, according to Euromonitor. Consumers rarely see a need for baby sun care or baby hair care. Many parents use baby bath products both for cleansing and washing baby hair, while babies are usually kept out of the sun and thus do not require sun care products. Meanwhile, consumers are highly familiar with baby skin care and baby toiletries thanks to strong consumer education campaigns from leading companies such as Johnson & Johnson and P&G.
Sales of baby skin care products rose 16% to about $270 million last year, driven by consumers increasingly switching to baby-specific products, partly because of rising disposable income levels, and parents increasingly recognizing that babies’ delicate and sensitive skin requires gentler products. Sales also received a boost from women who prefer to buy baby care products instead of adult products because baby products are considered to be milder.
Baby hair care and toiletries have also been fuelling strong growth in the baby care market, with each category growing 15% last year to reach $66.4 million and $209 million, respectively, according to Euromonitor.
Johnson & Johnson continues to dominate, with a 55.9% share, according to Euromonitor. The company benefits from its strong brand image in China, which was cultivated over many years via consumer education campaigns and advertising, as well as by working with healthcare providers to offer free samples to new mothers. In 2010, Johnson’s Baby held a 50% value share in baby hair care, 53% share in baby skin care, 65% share in baby sun care and 61% share in baby toiletries. Other top players in the market include Tianjin Yumeijing Group Co. Ltd. (7.5%), Henkel China Co. Ltd. (7.2%), Shuangfei Daily Chemicals Co. Ltd. (6.6%), Pigeon (Shanghai) Co. Ltd. (4.7%) and Shanghai Elsker International Business Co. Ltd. (3.8%), according to Euromonitor.
With 16 million babies born in China in 2009 and the number of births expected to peak in 2015, experts consider this to be the fourth baby boom since 1949. Although smaller than previous baby booms, the China baby market is expected to grow for the next 20 years or so, given the country’s rising economic outlook.
As China’s baby boom has led to a massive development of products related to babies and children, both premium and mass baby care continue to appeal to distinct consumer groups in China. On the one hand, with strong growth in Chinese consumers’ income levels, middle-class parents in urban areas are likely to trade up to premium products. On the other hand, for those in lower tier cities and rural areas where the baby care market is much less developed, better quality and safety are the priorities.
In order to capture this large and fast-growing market, it is important to understand unique Chinese baby care behavior. In China, it is very common for a couple to live with their parents right after marriage or pregnancy, and to seek baby care help from the older generation; therefore, brand owners must consider and influence multiple decision-makers including grandparents.
Ally Dai is senior editor of Happi China. She has more than 10 years of experience in the cosmetic and food industries. Happi China is a leading media for the China household & personal care industry. Published by Ringier Trade Media in strategic editorial partnership with Happi, it helps local manufacturers update their knowledge on formulating, testing and packaging, as well as providing market insight. Website: www.industrysourcing.com