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Consumer

Japan's Unicharm turns to India and Africa after China setback

Toiletries group to ramp up diaper production where it sees demand rising

Unicharm diapers at a store in Vietnam: The company believes demand for diapers will increase when per capita GDP tops $3,000. (Photo by Keiichiro Asahara)

TOKYO -- Japanese personal care group Unicharm will shift the focus of its strategy in developing countries by moving production facilities from China, where competition with local companies is becoming fierce, to India and Africa where it expects steady growth in domestic consumption.

The company will spend much of the 50 billion yen ($473 million) investment budget to ramp up production capacities of baby diapers in India and Africa this year to strengthen its foothold in these regions.

"We want to capture [at least] one-third of market share in emerging countries as soon as possible," Unicharm CEO Takahisa Takahara said at a press conference on Monday, unveiling a plan to promote its diapers in Africa, India and South America as a strategic priority.

Unicharm believes that demand for diapers will begin to increase when per capita gross domestic product tops $3,000. It plans to increase output capacities in promising markets such as India, Ghana and Nigeria where the yardstick rose to about $2,200 in 2019.

In India, Unicharm already commands a market share of around 40% as does Procter & Gamble. The company plans to increase online sales in response to changes in consumer behavior, in parallel with the expansion of local output capacity.

Unicharm also hopes to boost diaper sales in Brazil where it began production at its own plant in 2014.

Such moves represent a major change in the company's past emerging markets strategy of focusing on China, from which it has been retreating in recent years.

The Chinese market for diapers amounted to $8.8 billion in 2019, spelling a threefold increase from a decade earlier, according to British research company Euromonitor International. At present, there are more than 1,000 producers in China as a result of local companies' entry into the market.

Diapers produced by Japanese makers had been in strong demand as they are thought to be of higher quality and more comfortable to wear. But in recent years, local manufacturers have improved their products by increasing water absorbability and other properties.

Unicharm had a 7% share of the Chinese market for diapers in 2019, down from 11% in 2012. The company booked an asset impairment loss of 11.9 billion yen on its factory in China in 2019 after it failed to recover its investments due to weak sales of midpriced diapers under its MamyPoko brand.

The market share of the Merries brand of diapers made by Japanese rival Kao has also contracted since around 2017.

In China, 60% to 70% of diapers are sold online. Japanese manufacturers have lagged behind their competitors such as P&G in this area. They were also late in launching high-end diapers despite growing demand from increasingly wealthy Chinese consumers.

To increase sales in emerging markets, Unicharm will transfer relevant know-how in product development and marketing it has fostered in Southeast Asia. In 2020, for example, it launched diapers that can repel mosquitoes in Malaysia and Singapore where dengue fever is a problem.

Indonesia also represents a successful case of Unicharm's product development matching local needs. The widespread small mom-and-pop grocery shops in the country has made shopping so convenient for local consumers that the company began to sell individually wrapped diapers. The success of the product helped Unicharm gain a 50% market share.

Unicharm's peer Daio Paper is expanding its diaper business in Turkey and other countries. The company acquired local diaper makers in Turkey and Brazil in 2020 to strengthen its presence in emerging markets. From Turkey, it plans to develop markets in the Middle East and Africa.

Daio expects that it will be able to expand sales of sanitary and other products in emerging markets if its brand recognition increases through the sale of diapers.

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