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Asia300

China's Hengan to sell tampons in home market

Country's biggest sanitary napkin maker to challenge tradition and foreign brands

HONG KONG -- China's largest sanitary napkin manufacturer, Hengan International Group, will sell its own tampon products in the Chinese market to break into this relatively undeveloped sector and challenge foreign brands' dominance.

Hengan bets that more Chinese women will shift to tampons from traditional menstrual pads, as their education levels and overseas exposure rise. The relatively niche product could also create a new growth engine for the group.

"We have been preparing to launch tampon products since last year," group CEO Hui Lin Chit said in a press conference in Hong Kong on Thursday. Achieving higher growth for its menstrual pad sales had become difficult, as the group already had a market share of more than 20% in China, he said.

Hui did not give a timetable for the launch, but said the group will roll out more products in line with its new positioning as a "feminine care products provider."

While tampons are widely used in Western countries, only 2% of women in China have used them, according to a 2015 survey by Cotton Incorporated covering 1,000 users from Shanghai to small local towns. "Don't know how to use them" and "never heard of them" are cited as the top two barriers that prevent women in China from using tampons, followed by the responses "bad for health" and "strange," according to the survey.

The extent of unfamiliarity with tampons in China was illustrated by the confusion two years ago when swimmer Fu Yuanhui openly talked about how she was on her period during a race in the Rio Olympics. Questions flooded social media, as some Chinese internet users wondered how Fu could swim while menstruating. Lack of education on women's health also contributes to misconceptions in China, with some believing that tampons can break the hymen and are bad for health.

However, China has undeniable market potential as the home to 377 million potential female consumers aged 15 to 50, accounting for roughly one-fifth of the world's potential feminine hygiene market. Tampons are now available only in high-end shops in big cities, such as Beijing and Shanghai. The market is largely dominated by foreign brands. It was not until 2016 that China saw its first domestic tampon brand, Danbishuang.

With women in China becoming more educated and having more overseas exposure, the market has begun to grow rapidly.

One of Hengan's big rivals, Procter & Gamble of the U.S., promoted a China-specific branded tampon during Alibaba Group Holding's Singles Day shopping festival last November, and its sales during the day increased 39% over 2016, according to USA Today.

If tampons do sell in China, Hengan can expect less pressure on its profit margin, which has been dragged down by rising pulp prices that show no sign of dropping in the near future, according to Hui.

Hengan's profit rose 5.5% in 2017 to 3.79 billion yuan ($600 million). But its profit margin dropped to 46.9% from 48.8%, with all three segments -- tissue paper, sanitary napkins and disposable diapers -- showing declines.

Hengan's shares closed down 2.9% at 74.50 Hong Kong dollars on Thursday after the latest results were announced during lunch break, while Hong Kong's benchmark Hang Seng index ended down 1.1% at 31,071.05.

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