Schlegel and Partners at the EDANA Outlook 2013 in Portugal

Today, we have a total of 1.4 bn households in the world and 75% of those are considered to be of low income. Low income is commonly defined as households with less than EUR 10,000 of available income per year. There are two main groups of low income households, households with less than EUR 2,500 per year and households between EUR 2,500 and EUR 10,000 per household per year.

In China about 50% of all households are considered to be low income, 66% of those in India, 47% of Brazilian households and about 80% of the rest of the world excluding Europe and the US.

Low income consumers open a huge potential market to diaper producers. Today, we have a total population of 350 M babies (0 to 36 months) living on this earth, and a market penetration of disposable baby diapers of around 20%. 80% of the baby diapers are used by the wealthy, affluent people today. If we assume that every low income baby will use a baby diaper this share of consumption will completely reverse and we have more than 83% of the market for baby diapers in the low income sector. This offers a huge growth potential for producers, but the low income consumers are a target group that cannot be easily convinced to use a rather costly disposable product.

The circumstances and requirements of low income consumers differ widely from region to region.

The following requirements and keystones are significant in the market for baby diapers in Brazil:

• High growth rates for disposable baby diapers
• Increasing number of households in the medium to low income group
• Medium low income consumers are status oriented
• Expectations towards products that become affordable are extremely high
• Strategies to introduce cheap low quality disposable baby diapers failed
• Only high quality products at an affordable price are accepted
• The penetration rate of disposable baby diapers increased from below 10% in 1995 to 40 – 50% in 2013.

Another market with a completely different situation regarding keystones and requirements of the market for baby diapers is China.

• The Chinese market for disposable baby diapers is growing fast, but penetration rates of disposable baby diapers are still behind expectations.
• The penetration rate of disposable baby diapers increased from below 1% in 1995 to 30 – 40% in 2013.
• The Kaidangku ("split pants") still have a good standing in China and are the norm in rural areas.
• Potting training is still common practice and widely accepted.

There are four main purchase triggers for the development and of successful products targeting the low income market:

• The product has to be in line with cultural characteristics and habits, therefore it is vital to understand the specific tastes of low income consumers in the various regions of the world.
• The product needs to do its job. Customers refrain from buying products that are only partly suitable or fail in key functions (e.g. leakage at first usage).
• The products needs to represent a certain status, so marketing concepts should avoid the impression that the product is designed especially for low income consumers.
• Product must be available. The distribution must consider the specific shopping patterns of low income consumers, especially regarding the frequency of purchases (packaging, type of shops, make shift stands). When developing marketing strategies for approaching low income consumers, companies should refrain from considering the developing countries in their roadmaps, only. Many households in the US and in Europe can be found that are in this category as well. Furthermore, due to the customization especially in the baby diaper sector, end-users in developed countries are mostly not prepared to accept price increases, even if slight product improvements are given.

This leads to the following key findings for hygiene nonwovens producers:

• The importance of economies of scale is higher than ever.
• The consolidation of the market will carry on strongly.
• Private label products will globally gain more importance.
• Traditional models of transferring concepts from mature countries to emerging markets are more likely to fail than ever.
• No more "think global, act local", now "listen to the locals first".
• Complexity strongly increases the interaction of different technologies and managing the complexity of decision making is key to success.