Source: New Consumption Think Tank (ID: cychuangye) Author: Mo Xiaoqi
There is a saying in the consumer industry that is almost taken as a rule: "Win women, win the world." In an era where consumer goods change rapidly, if women can go a month without buying new clothes or cosmetics, they will never forget to replenish their most important monthly stock—sanitary napkins.
Seamless and silky, comfortable and cottony, dry mesh... The design and functions of sanitary napkins continue to be refined and evolved, serving 400 million women of menstruating age in the Chinese market. In the field of female care, how can we still attract their attention?
Today, Xiaoqi will deconstruct China's sanitary napkin industry in a long article, trying to let investors and entrepreneurs see the current situation, problems, and future of this industry.
Women's menstruation and sanitary napkins have always been considered a private topic. Although sanitary napkins are almost a necessity for all women aged 14-50, women are shy to share, and men also regard it as a mysterious field.
If you ignore such a large consumer market with rigid demand and strong anti-cyclicality, you will miss a new investment opportunity in consumer goods, especially with the rise of this new wave of consumption upgrade in recent years, which has gradually created many entrepreneurial and investment opportunities.
Let's look at this interesting industry from a business perspective. Next, we will discuss:
- How big is the Chinese sanitary napkin market? What is the current situation and pattern?
- Who are the big players in the 40-billion-yuan market? What are the main business models and competitive landscape? Which brands deserve more attention?
- Where are the future trends and investment opportunities in female care?
****China Sanitary Napkin Market Size and Current Situation
I. Industry Scale and Potential
The modern sanitary napkin we know was introduced to China in the 1980s and became popular in the 1990s. From difficult entry into the Chinese market to a coverage rate of 96.5%, on par with developed countries like the United States, how did this industry, which started 20 years later than Japan, accelerate and achieve a business scale four times that of Japan?
Let's first understand the origin and brief history of sanitary napkins.
The history of sanitary napkins originated from medical bandage materials, first used to stop bleeding for the wounded. Retailers like Johnson & Johnson and Kimberly-Clark smelled business opportunities.
After World War I, this medical fiber cotton was made into clean and soft sanitary napkins and sold in stores. In the early 1970s, adhesive sanitary napkins appeared, meaning they no longer needed belts and pins. The modern sanitary napkin we know took shape, opening a new chapter in women's products.
Despite this, Chinese women did not experience this transition. Until the 1980s, Chinese women still used backward sanitary belts—cotton cloth with sanitary paper or plant ash inside to absorb water, and the cloth was recycled and reused.
In 1982, China introduced its first sanitary napkin production line from Japan's famous nursing supplies machinery manufacturer Zuiko Corporation, and this disposable menstrual product gradually came into view.
For women at that time, this soft, white, high-end product was somewhat incredible. However, due to high prices, the penetration rate was low. It was not until 1990 that annual sales of sanitary napkins reached 2 billion pieces, meaning each eligible woman consumed only 4 pieces a year.
Like most parts of the world, Chinese consumers' demand for sanitary napkins did not grow explosively—it required slow cultivation of consumption habits across generations.
The 1990s was a turbulent incubation period. At that time, Hengan Group had not yet launched the well-known domestic brand "Space 7," but its "Anle" sanitary napkin had already captured 40% of the market share through product reputation and advertising campaigns.
(Straight sanitary napkins in the 1980s)
Foreign brands such as Whisper, Sofy, and Kotex also targeted the Chinese market at this time. With advanced technology and rich marketing experience, they launched fierce attacks and took the other half of the sanitary napkin market. At this time, Guangdong Jingxing's "ABC" brand sanitary napkins bypassed first-tier cities and quietly occupied the small and medium-sized city markets.
From 1990 to 1999, consumption increased from 2 billion pieces to 30 billion pieces, and the penetration rate of sanitary napkins exceeded half.
In the early 21st century, China's sanitary napkin industry entered a new stage of continuous innovation and refinement in function and design.
According to statistics, in 2016, China's sanitary napkin coverage rate reached 96.5%, already on par with developed countries like the United States. According to data from the National Bureau of Statistics, China's future female population aged 14-49 will stabilize at 360 million. So, is there still room for growth in the sanitary napkin industry? Will there be a ceiling?
Let's first look at a set of growth data.
From 2012 to 2016, the world sanitary napkin market had an average annual compound growth rate of 5.9%, with growth mainly coming from emerging markets such as India, Egypt, and Africa, while China's sanitary napkin market grew steadily.
But if we compare with neighboring Japan, we will know that there is still huge potential to tap in this market. Why do we judge this? Xiaoqi summarizes the following reasons:
There is room for increasing the frequency of sanitary napkin use during menstruation. According to surveys, Japanese women change sanitary napkins an average of 6 times a day during menstruation, while in China, few women can achieve this frequency. Even on the heaviest flow days, the average frequency is only 3-4 times.
Menstruation tends to extend to both ends of women's age. According to a 2010 study by the Chinese Medical Association Pediatrics Society, the age of menarche has advanced to 12.3 years, 0.81 years earlier than ten years ago, which will expand the market capacity.
Consumption upgrade makes some women give up cost-effectiveness and pursue better experiences. The rise of light luxury has made users willing to invest more in the sanitary napkin market. In recent years, emerging sanitary napkin brands targeting the mid-to-high-end market have performed well with the support of the Internet and high-end offline supermarkets.
According to the prediction of the China National Household Paper Industry Association's Tissue Paper Professional Committee, by 2020, China's sanitary napkin (including panty liners) market will reach 61.1 billion yuan.
II. Characteristics and Current Situation of the Sanitary Napkin Industry
Before observing an industry, let's first define its scope.
The sanitary napkins we know, like baby diapers, mainly use paper-based raw materials and belong to paper products; according to product characteristics and uses, they are also classified as disposable hygiene products.
Disposable hygiene products refer to broad disposable hygiene products, that is, various daily necessities that are discarded after one use, directly or indirectly contact the human body, and are used for physiological hygiene or health care (antibacterial or bacteriostatic) purposes.
With changes in population structure and rising living standards, the demand for disposable hygiene products continues to grow, and the scale of the sanitary napkin market, which accounts for a large proportion, has also grown steadily.
In 2016, the total market size of disposable hygiene products in China reached 82.94 billion yuan, an increase of 3.6% over 2015. Among them, female sanitary napkins (including panty liners) occupied half of the market, becoming the highest proportion category at 47.6%, surpassing baby diapers and adult incontinence products.
Among these, sanitary napkin products must be analyzed separately.
Disposable hygiene products have certain special characteristics in the production process because they directly contact the human body. If we deconstruct a sanitary napkin, from top to bottom, it consists of:
- Top sheet: The part that directly contacts the skin, mainly made of non-woven fabric or PE perforated film, commonly known as "cotton soft" and "mesh." PE perforated film is cheap and breathable, but due to climate and habits, Chinese and Japanese consumers prefer non-woven fabric sanitary napkins.
- Absorbent core: Used to absorb liquid. Main materials include super absorbent polymer (SAP), wood pulp, fluff pulp, absorbent paper, etc. This part determines the absorbency and performance of the sanitary napkin.
- Back sheet: PE leak-proof film, used to prevent liquid leakage, with hot-melt adhesive on the outside for sticking.
- Wrapper: The outer packaging of a single sanitary napkin, commonly known as a quick-open pack, can be printed with patterns, usually made of cast film or non-woven fabric.
In terms of raw material usage, the top and bottom layers require the most non-woven fabric and leak-proof film; in terms of importance, the middle absorbent core has the highest material requirements, and high-quality SAP and fluff pulp still need to be imported.
Disposable products have high hygiene standards, and the production process needs strict control. The quality control standards of advantageous enterprises in the industry are usually stricter than existing national standards.
From sales and financial indicators, this industry shows the following characteristics:
1. Dependence on offline channels, with rapid growth in online transactions. (Nielsen's "2016 China Hygiene Products Retail Trends Report")
There are two main ways for manufacturers to enter sales terminals:
- Distribution model Manufacturers sign distribution contracts with distributors, sell products to distributors at distribution prices, and distributors sell to sales terminals within the contract period and region, which then sell to end consumers.
The final destination of goods is mainly shopping malls, small and medium-sized supermarkets, convenience stores, daily chemical stores, grocery stores, etc. in the region.
- Direct operation model Manufacturers sign sales contracts with KA customers (mainly hypermarkets, large chain supermarkets, etc.), sell goods to KA in a buyout or consignment manner, and use the advantages of large stores and chain supermarkets with many outlets and strong influence to improve brand coverage.
In the above two models, foreign brands mainly sell their products through KA channels, while local brands usually have certain advantages in sinking sales terminals, with relatively high coverage in small and medium-sized supermarkets and grocery stores in second- and third-tier cities and towns.
It is worth noting that the proportion of e-commerce channel sales for various sanitary napkin brands has increased year by year. The following uses public data from a manufacturer in the top ten market share as an example:
It can be seen that compared with offline channels, e-commerce gross margins are lower, possibly because wholesale sales on e-commerce channels lower prices.
The growth of e-commerce channel sales has also changed consumer habits, prompting women to shift from monthly purchases to one-time bulk stocking.
This change in consumption habits will inevitably further prompt companies to adopt a bulk sales strategy. No wonder after Double 11, women greet each other with "Did you stock up on sanitary napkins today?"
According to public data, the ranking of online and offline sales shares is basically the same. "Sofy," "Whisper," and "ABC" are not only champions in offline sales but also overlords in online sales.
2. High industry concentration
China's sanitary napkin industry is a highly concentrated industry. In 2016, the top ten manufacturers accounted for 82% of sales.
Among the top ten companies, there are six local companies including Fujian Hengan, Guangdong Jingxing, Guilin Jieling, and Chongqing Baiya. Among them, only Fujian Hengan (Hong Kong stock 01044) is listed, and its "Space 7" brand is the best-selling sanitary napkin brand in China.
Although there are not many listed companies, from the market share perspective, domestic sanitary napkins have been able to compete with foreign consumer giants such as Unicharm (Japan), Procter & Gamble (USA), Kimberly-Clark (USA), and Kao (Japan).
3. High entry barriers
High brand and capital barriers.
On the one hand, disposable hygiene products are updated quickly, requiring manufacturers to invest a lot of funds to purchase new production equipment or carry out technical transformation of existing equipment; on the other hand, frequent news of counterfeit sanitary napkins makes consumers more cautious in purchasing, and new entrants find it difficult to establish a reliable and stable quality control system in a short time.
High channel barriers. For new entrants in this industry, distributor resources are relatively scarce. On the one hand, the initial investment cost of developing distributor customers and building trust relationships is high; on the other hand, for new entrants without brand accumulation, channel control ability is relatively poor, which is not conducive to market development.
4. High profit margins
The profit margin of sanitary napkins is generally higher than that of baby diapers and other adult hygiene products, and also higher than general paper products. According to public data, in 2016, the sanitary napkin business of Hengan Group, the leading company, had annual revenue of 6.5 billion yuan, with a gross margin stable at 72.6%.
5. Unclear brand tiers
Currently, sanitary napkins on the market are generally priced at 0.5-0.9 yuan per piece. Even ABC and Sofy, which are positioned in the mid-to-high-end market, have single-piece prices fluctuating between 1.0-2.0 yuan, and price differentiation is not obvious. Consumers pay more attention to product performance and brand reputation when purchasing.
****Overview of Major Players
I. Player Inventory
Since 2010, the industry has entered a consolidation period, with a large number of local small and medium-sized enterprises exiting the market. The remaining players can be divided into three categories.
Category 1: Domestic sanitary napkin brands that started with paper products
Among the local enterprises with high market share, an interesting phenomenon is that almost all sanitary napkin companies also extend into paper products.
Hengan's "Xinxiangyin," Beishute's "Mufeng," and paper brands that do not produce sanitary napkins are also eager to extend in the reverse direction, such as Vinda International's acquisition of SCA in 2016 to enter diaper and sanitary napkin production.
We believe this phenomenon is caused by the following reasons:
- Sharing of upstream raw materials. Currently, the raw materials for sanitary napkin absorbent cores are mostly polymer absorbent resin, wood pulp, fluff pulp, and absorbent paper, which overlap with the upstream of the paper industry, enabling resource sharing.
- Sharing of downstream channels. Both categories are extremely dependent on offline channels, meaning they can share hypermarkets, supermarkets, convenience stores, and other channels. The purchasers are mainly female customers, with a very high overlap rate.
Hengan, as the undisputed leader of domestic sanitary napkins, is a very typical enterprise of this type.
(Hengan's many well-known brands)
Hengan was one of the first enterprises in China to build sanitary napkin production lines. In 1991, Hengan's "Anle" sanitary napkin had a market share of 40.11% in the national women's sanitary napkin market, ranking first in production and sales in the industry.
After investigating the Japanese market, in 1993 Hengan launched the sanitary napkin brand "An'erle," producing more advanced wing-type sanitary napkins; in 2003, to cope with the increasingly segmented market and the strength of foreign brands, Hengan first launched the "Space 7" girl series, targeting the young female market.
Comparing Hengan Group's sanitary napkin and tissue businesses, we find that compared with toilet paper, sanitary napkins are a higher-profit category.
(Comparison of gross margins between sanitary napkin business and other businesses)
Multi-brand, full coverage is another important feature of this type of enterprise.
Guangdong Jingxing has always used ABC to target the mid-to-high-end market, while also launching the younger and more cost-effective "Free" brand; Hengan's "Anle," "An'erle," and "Space 7" brands are positioned in the low-end market, workplace newcomers, and young women, respectively.
It can be said that the reason why domestic sanitary napkin brands have been able to gradually catch up with foreign giants in the fierce competition of the past 10 years is precisely their sensitivity to market segments. Taking the first step is the key to winning, which is the criterion for private entrepreneurs who started from scratch.
Category 2: Multinational FMCG companies with rich categories but single brands
Multinational companies led by Procter & Gamble were once the absolute overlords in the Chinese market. P&G's Whisper once achieved a staggering market share of 53%.
Unlike local enterprises that develop multiple brands, multinational companies mostly focus on the promotion and sales of only one brand, relying on a single brand and launching new products in series.
Multinational companies with large supermarket channels and provincial agents are at a disadvantage in channel sinking, but with economic growth and changes in consumer attitudes, their global marketing vision enables them to better meet consumer needs and lead in concepts.
While all domestic sanitary napkin brands' advertisements still emphasized women's fragility, in 2014, Whisper's liquid sanitary napkin brand always launched a distinctive advertisement. Against a dark background, women were encouraged to abandon stereotypes and be a powerful, confident self.
(Whisper Always advertisement "like a girl")
This advertisement, along with the global campaign "I'm a girl," spread to 150 countries, was played 85 million times, resonated with millions of women worldwide, and won the Grand Prize at the Golden Mouse, Asia's largest creative festival.
It can be said that the winning weapon of such enterprises and giants relies on strong channel distribution and market advertising investment, which is the biggest resource of foreign brands.
But in the sanitary napkin field where product differentiation is not high, service, experience, and value delivery will inevitably become new directions for brand expansion. Ambitious startups have seen this opportunity.
Category 3: New startups that started on the Internet
As mentioned earlier, the price differentiation of existing sanitary napkins is not obvious. With rising income and changing attitudes, there is still a lot of space in the mid-to-high-end market for sanitary napkins.
Currently, investment and financing in this field are not frequent. We have selected several Internet sanitary napkin brands that have received financing and attracted attention in recent years.
Although the unit price is generally 2-3 times higher than traditional sanitary napkin brands, for Internet startup brands that focus on improving service and user experience, online sales save the distribution costs of layers of agents, meaning more energy can be invested in product design and quality control.
Products of such companies generally have the following characteristics:
- Emphasis on outer packaging and design (More design-oriented outer packaging)
Packaging with design and texture not only provides customers with aesthetic enjoyment but also enhances the social attributes of the product. In its early days, Qingshenghuo defined the gift box as "the first box of sanitary napkins bought by men," using packaging upgrades to give the product gift attributes.
Product innovation and upgrade Pure cotton, non-allergenic, no additives, higher absorption rate, and more absorbent polymer materials are all common claims of all brands. In addition, NONOLADY's black napkin, Hunimei's small wing appearance patent, and various brands are competing to upgrade and transform products to strive for higher quality.
Service and experience upgrade Compared with selling sanitary napkins, Internet sanitary napkin brands are more like "warm men." Joke pushes, comic IPs, menstrual reminders, services and products are sold together, which is a transformation of the sales model.
Emphasis on building user communities to enhance interaction Hunimei's expert circle, nonolady's nono tribe, building a female community is more conducive to enhancing user stickiness, which is an area that traditional brands find difficult to penetrate due to lack of feedback.
It is understood that Qingshenghuo's online sales exceeded 30 million in 2016, with a user repurchase rate of 33%; NONOLADY, positioned as light luxury, has an average annual order of 90 million to 100 million; Hunimei, after three rounds of financing, currently has a turnover of 2-3 million, basically achieving break-even.
But emerging brands must also consider whether brand and reputation can continue to endorse products once the online mid-to-high-end market is saturated.
Finally, use a table to compare the current situation of these types of enterprises.
For local enterprises, their accumulated channel advantages and brand reputation over the years are quite mature, and they will also be in an advantageous position when attacking vertical fields in the future.
The real problem facing this wave of Internet enterprises is how to lay out offline channels when the market and distribution channels sink to third- and fourth-tier cities. Otherwise, when the online traffic dividend disappears, they will face a real ceiling. At present, most new consumer brands have encountered relatively big problems in channel sinking.
II. Is the Tampon a Rising Star?
After summarizing the existing players, Xiaoqi would like to specifically mention a new category—tampons.
Unlike sanitary napkins, tampons are an insertable, completely new form of menstrual product. Let's look at a simple diagram.
According to netizens who have used them, tampons are light and unobtrusive, and are actually a very useful product. They can be used while doing handstands or in water. In China, tampon sales of $3.9 million are insignificant compared to the huge sanitary napkin market. Even in Japan, where the market is more mature, only 10% of women choose to use tampons or use them in combination with sanitary napkins.
The main reasons may be as follows:
East Asian women have different sexual attitudes than Western women. Tampons were introduced in the West in 1933, almost developing simultaneously with the sanitary napkin market. Chinese women, who skipped the transition period and entered the sanitary napkin era directly, find it difficult to overcome existing usage habits with insertable products.
Tampons are more expensive per unit and not cost-effective. Non-applicator tampons have a unit price similar to sanitary napkins, while more convenient and hygienic applicator tampons are generally more than 3 times the price of sanitary napkins, with significant price differences.
The hidden risk of toxic shock syndrome (TSS). In fact, with technological progress, modern tampons can reduce this risk to 3 in 100,000, which is an extremely low probability event.
Compared with the Japanese market, Chinese consumers are more receptive to new things, so there is clearly room for growth in tampon sales. In this regard, the founder of the new Internet brand "Miance," which focuses on tampon research and development, believes that tampons will usher in their explosive period within three years.
Not only emerging brands like Miance, Feimi, and Quantampon have smelled the business opportunity of tampons, but FMCG giants that have already established a foothold in the sanitary napkin category are also eager to try.
At the beginning of 2017, P&G's Tampax tampons were officially launched in China. As the number one tampon brand in the US market, this is Tampax's third attempt to enter China (the last time was in 1998 when it landed in Nanjing). Unicharm's well-known brand "Sofy" also launched tampon products.
At the same time, many manufacturers believe that tampons are a very small category and not worth developing and promoting.
Overall, due to cultural and habit differences, the ceiling for the tampon category may also be very low. For tampons to conquer the female hygiene market, it means that marketing still requires huge investment in consumer education.
O.B. tampons, which entered China in the 1990s, actually had a brief period of explosive growth. The confident smiling woman in the tampon advertisement showed consumers a different female life in the new era, causing a backlash among women of that era.
However, after the short explosive period, O.B. tampons fell into an awkward situation of lukewarm sales. In recent years, the gradual rise of feminism may have created a new opportunity for tampons.
****Future Industry Investment Opportunities
1. The mid-to-high-end light luxury market is gradually becoming a new blue ocean. Pleasing oneself has become a new consumption proposition for Chinese women.
On the other hand, with the overall improvement of China's middle-class consumption level, light luxury is becoming the choice of China's new middle class. In this context, a window of opportunity is opening in the blue ocean market for mid-to-high-end sanitary napkin brands. Products that pursue health, no additives, and pure natural elements are increasingly favored by women.
2. New entrepreneurial opportunities are opening up, using sanitary napkins, a rigid demand product for women, as an entry point.
Through community-based user groups, using rigid demand products as an entry point, forming a complete female industry chain and resource sharing, deeply mining the life cycle of female users, and providing women with full life cycle products based on similar products like sanitary napkins.
Therefore, operating female users based on product operations will have great value in the future. The monthly subscription model and self-service purchase model derived from this model will create new retail opportunities.
3. Build a female menstrual service system. Around the rigid entry point product of sanitary napkins, create female menstrual management, combining menstrual management with personalized customization of sanitary napkin products.
This will form a unique C2B product model, which will be a structural entrepreneurial opportunity for current sanitary napkin products, transforming a product from simply selling a product to selling a service.
4. Reconstruct the category extension of new products around the two intermediate categories of women and paper.
Using the opportunity of channel sharing, existing sanitary napkin products can use this explosive product as the core to expand category extensions, thereby entering the entire paper market. And cooperating with more female IPs to enter the content service and new retail market.
5. Opportunities for consumption upgrade in new categories. Around a series of menstrual care products for women, sanitary pads and sanitary pants can become new market opportunities.
Especially new product categories such as tampons are still blank and new markets, and there are new brand opportunities in this category. In the next few years, there will also be many opportunities for mergers and acquisitions around this industry chain.
In short, this large female category has high barriers and a deep moat, making it difficult for new entrants. More opportunities will lie in more vertical blue ocean markets.
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