"Recession ho yaa inflation, shaadi to honi hai."
(Be it recession or be it inflation, people will get married)
- A lesson in Economics from the movie “Band Baaja Baaraat!”
In India, this is equally true for bacche to hone hi hai (people will have kids no matter what). In fact, every year we have the highest number of births in the world! While some would worry about the ever-growing population, to an entrepreneur, this sounds like a great business opportunity!
No wonder so many new baby brands such as FirstCry, Mamaearth and R for Rabbit have been launched in the last few years.
And now Dabur is launching diapers as well!
But why diapers? Is the business really that appealing?
Not if you ask HUL and Godrej. The two FMCG giants disposed of their diaper businesses and fled from the scene (more on this later).
Then? What’s going on?
Read on to find out!
Growing Demand for Diapers
Approx. 35% of the Indian population was residing in urban areas in 2020. It is projected that this number will go up to 40.76% by 2030.
And what does urbanisation do? It brings with itself a changed lifestyle: A chance for the diaper companies to lure new parents with the promise of a hygienic way of life.
Also, as more women are now working after giving birth, they are choosing diapers over traditional cloth nappies (that need to be changed again and again). To them, diapers are easy and hassle-free.
Add to that the rising middle class. It is projected that nearly 55% of the Indian population will join the ranks of the middle class by 2025. If the purchasing power of people goes up, they are more likely to upgrade to a better lifestyle.
So, obviously, the demand for diapers has grown, and the Indian diaper market size reached almost $1.06 billion in 2020. And it is expected to continue to grow at a 14% rate (double in 5 years).
No wonder Dabur wants a piece of this pie.
But, why did HUL and Godrej exit this lucrative business?
Well, so far only two major players have really benefitted from this diaper demand boom: Pampers (by Procter & Gamble) and Mamy Poko Pants (Unicharm). Together, they control 80% of the diaper market share. How did they manage to get this duopoly?
Simple, by choosing to innovate.
In the earlier days, when you and I were toddlers, diapers were quite complicated and messy to deal with. But Mamy Poko Pants decided to end this messy affair once and for all. It introduced pant-style diapers, which made diaper changes so much more convenient.
One company that was quick to sense the changing winds in the diapers market was Pampers. It recognised how great the idea was and soon launched a similar style of diapers. So much so that in its FY 2015-16 annual report, HUL, which had a 50% stake in Huggies, said it faced a tough competitive environment on pricing and trade spends in this segment.
And so it divested its stake in the Huggies brand in 2017. This was soon followed by Godrej’s exit from the space in 2018.
So, if other Indian FMCG brands have decided that the diaper space is too messy for them, can Dabur succeed?
Challenges for Dabur
As per a Business Standard article, diaper manufacturing requires extensive and constant research, which can be an expensive affair. Moreover, there’s not a lot of pricing power. When HUL and Godrej exited the market, diaper prices had almost halved: from Rs 15-18 apiece to Rs 7-9 within a span of 20 years.
Making profits in the industry is a mammoth task.
But, Dabur believes it can leverage its brand recall in the rural segment.
Chances of Success
Dabur may be new to the diaper business but the brand is already a household name in India. It has been around for more than 100 years and many people associate Dabur with good health, thanks to its Chyawanprash. And if we buy Patanjali Noodles with so much faith, what’s stopping us from buying Dabur diapers?
Also, parents have now become more concerned about their kids' safety. They check every ingredient of a product before using it on their children. And many of them now favour natural and eco-friendly products. In fact, this is what has ended the supremacy of brands like Johnson & Johnson, and paved the way for D2C brands like MamaEarth. So, Dabur's age-old Ayurveda reputation may make it a more desirable pick for parents. Furthermore, it is a homegrown brand, unlike its competitors.
From the looks of it, Dabur's entry into the diaper market could very well challenge the supremacy of Pampers and Mamy Poko Pants. Sounds like a plan, no?
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