INDIAN BABY CARE INDUSTRY

India is one of the most attractive retail destinations in the world. The baby care products industry is still
in its nascent stages and represents a high potential and untapped market for baby care products. This
market has grown substantially over the past few years and has attracted a lot of attention from both
local players as well as international players.

The Indian baby care market, comprising both branded and unbranded segments, is estimated to be Rs
2,000 crores. The following chart illustrates the segments and product categories in the baby care
sector.

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The market is projected to grow at a CAGR of 11.5% till 2013. The segment-wise expected CAGR are:

SEGMENT CAGR (%)

Baby food 8
Skin care 12

Toiletries and diapers 14

Hair care 5
Growth Drivers

This healthy growth rate can be attributed to

1. Vast consumer base

2. Increasing household income
3. Increasing working women population
4. Fundamental shift in consumer habits, with growing acceptance of branded baby care products
5. Low penetration in rural India which is still to be explored to a large extent
6. Low spending on babies by families compared to global standards

Challenges

The major challenges that this segment is facing are

1. Competition from cheap substitutes.

2. Cultural aspects and acceptance.
3. Regulation on Indian food promotion.
4. Dominance of the unorganized segment.

Rural Scenario

The baby care products market is concentrated in the urban area. Rural India contributed to only 16%
sales of the industry in 2009. Poor distribution network in rural areas is cited as the primary reason for
this gap. In recent times, increasing income level and improving rural distribution networks by FMCG
players have made baby care products like bath soaps and massage oils available.EPC already has
established channel so entering into the rural market can become a good opportunity and an avenue to
establish itself.

Recent trends in industry

The major players in this market are Johnson and Johnson, Pampers, Huggies, Wipro and Himalaya.

Johnson and Johnson India is the largest player controlling 85% of the market. Other major international
brands such as Avent, Nuby and Tenderils, in a bid to snatch market share from J&J, have decided to
introduce specialized premium products thereby broadening the baby care market. To counter more
intense competition resulting from increased number of players, investment in product innovation and
development is the order of the day in the sector. Modern retail infrastructure in urban India is being
leveraged by baby care companies to execute strong product positioning strategies and hence maximize
their returns. A key to success in the sector is to take a call on brand rationalization and reorganize and
jettison brands every five or six years.
Some of the new trends and growing products that could be introduced into the Indian market are

Organic Baby Food: Although expensive than its non-organic counterpart, organic food is witnessing
strong demand in urban India. Increased awareness about the product is the major factor driving
demand. A few well known brands in this category are Beech Nut, Earth’s Best, H.J. Heinz, Nestle and
Gerbr.

Organic Clothes: The same awareness is also driving demand for baby clothing made from organically
grown fibers like wool, cotton, hemp, soy and bamboo that have been grown without the use of
pesticides.

Diapers: Companies have generated awareness which is expected to shift demand from traditional cloth
nappies to disposable diapers. This product category is expected to generate revenue of Rs. 200 crore by
2013.
CONSUMER ANALYSIS

We conducted individual interviews with mothers who had children between the ages of a few months
and five years. We found that most of the buying behaviours across consumers of a specific income
group are very similar.

Habits and Practices

Around 50 % of the respondents answered that they buy their baby care products in usually large
quantities and make their purchases about once a month or more. They tend to use most of the
products usually before or immediately after giving a bath to the baby.

Usage

Most consumers purchase baby care products once a month. The consumers tend to purchase large-
sized packs for the diapers and medium-sized for other baby care products. Almost all consumers use
the common baby care products, like baby soap, baby shampoo, baby oil, baby powder and diapers.
Most of the consumers also use some form of baby lotion or cream.

Attitudes towards current products

The most pressing need for baby care products is the perception that the chemicals in the normal
personal health care products would be harmful on the skin and that the baby care products give extra
care to the baby. They perceive the products to be chemical free and mild on the skin.

Importance of Price, Brand and

Availability

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Price Brand Availability

When purchasing baby products, most consumers feel that the brand and quality are most important.
Consumers are not as open to trying out a new brand as they do not want to risk any product on their
children. As a result, they tend not to switch brands either. Over 80 % of the consumers said they would
mostly or always use the same brand. The next most important factor is availability, while price is
relatively unimportant.

Consumers use the same brand

always
No
14%
Not necessarily
5%

Mostly
18%
Yes
64%

Over 90% of the consumers trust Johnson & Johnson the most. Johnson & Johnson have an excellent
distribution network, making their products readily available and at a very affordable price. Hence, price
and availability do not seem very important to these consumers. Over 60% of the consumers prefer
Pampers for diapers.

Need Gap Analysis

Almost three-fourth of the consumers feel that hygiene is the most important attribute in a baby-care
product, followed by softness of the skin, and finally by less irritation. However, many of the consumers
feel that there is no product that would prevent diaper-rash from occurring. There appears to be a need
for such anti-diaper-rash products. The consumers also feel that there is no preservative-free food
product available in the market for babies.
Customer Study

Baby care products are served in market by four types of retail channels:

1. Kirana Stores, normally bigger in size, like HUL’s Super Value Stores
2. Modern Trade
a. Key Accounts, which include Big Bazaar, More, etc.
b. Self-service outlets, like Subhiksha, In & Out, etc.
3. Medical Stores

Out of these channels, traditional kirana stores contribute the minimum, whereas modern trade and
medical stores contribute maximum to sales.

Retailer
Brand Preference

Through interaction with the retailers and our own observation, we found that these retail outlets stock
only 3 to 4 well known brands.

Baby Soap

In baby soap category, every outlet stocks Johnson & Johnson Baby soap. Apart from this, some of them
keep Wipro Baby Soft soap, some keep Himalaya Moisturizing Baby soap etc. Most of them keep only
two brands at a time, out of which one is Johnson & Johnson Baby soap definitely.

Baby Powder

In this category, every retailer stocks Johnson & Johnson Baby powder. Some of them also stock
Himalaya Baby Powder. We have heard that Wipro Baby Soft powder is also available in the market, but
we haven’t found any. Most of the outlets only keep one brand, and that is compulsorily J&J Baby
Powder. A few keep two brands, but more than two is difficult to find.

Baby Oil

This is the category where Dabur rules the market. Dabur Lal Tail has the major chunk of the category,
but J&J Baby oil is gaining market rapidly. Most of the retail outlets stock four or more brands of baby
oil. The traditional kirana stores keep regional brands also. But the modern trade and self-service outlets
only stock national brands. Medical stores keep 2-3 brands, of which Dabur Lal Tail and J&J Baby Oil are
must.

Diapers

In this category, competition is steeper. Most of the retail outlets stock 3-4 brands of diapers with
Pampers and Huggies having definite presence. The third brand is Wipro Baby Soft. Some of them keep
J&J Baby Diapers. Medical stores normally keep 2 - 3 brands: Pampers, Huggies and any other national
brand. Modern trade usually stocks 4-5 brands, which include their own private labels.

Shampoo

This product is not very popular amongst the consumers, but it is growing at a rate 17% per year.
Normally traditional kirana and medical shops keep 1-2 brands. Almost every outlet keeps J&J Baby
shampoo. Some of them also keep Himalaya Gentle Baby shampoo. Medical stores keep 2-3 brands.
Almost every medical store stocks J&J Baby shampoo. Himalaya Gentle Baby shampoo’s availability is
also considerably good in the market. But Marico’s Parachute Starz Gentle shampoo’s presence is
limited only to modern trade. One can find it at some kirana stores also.

Baby Lotion

The performance of this product in the market is similar to baby shampoo. The demand is not huge, but
it is growing very rapidly. Modern trade outlets and medical stores normally keep 2 brands. J&J Baby
Lotion and Himalaya Baby Lotion are the most popular in this product category. Kirana stores normally
keep J&J Baby Lotion.

Baby Cream

This is again not a very popular product category in terms of sales. But market research suggests that,
due to mothers’ extra concern for their children, this category is expected to grow in future. Mothers
are seeking specialist products for their children. Thus, they may want to buy a specialist face cream for
their children. Most of the kirana outlets keep 1-2 baby creams. Mostly they stock only J&J Baby cream,
but some of them also stock Himalaya Baby Cream. Modern Trade outlets and medical stores also keep
2 - 3 brands of baby creams.

Pack wise Preference

Medium size packs are more popular in baby care products. Normally customers don’t prefer to buy
large size packs, because of the expiry of the products. For a category like soap, 70 grams soap is more
popular. In oil category, 100 ml is preferred. Powder is preferred in 100 gram packs, but 200 gram packs’
sale is reasonably good for J&J Baby powder. 100 ml shampoo and 100ml lotion are preferred.

Contrary to this, in the diaper category considerably larger packs are more popular. A pack of 12 and 28
are preferred by the consumers. This is because of longer expiry period of the diapers.

Company service level

Normally traditional kirana stores and medical stores are serviced on weekly basis. Every week a
company representative visits the outlet and takes order, which is delivered next day. Modern trade
stores are normally served twice a week. But if there is any sudden demand for the product, companies
serve it. Mostly these stores generate Purchase Order (PO). As per this PO, Company delivers the
ordered stock. Stores normally generate POs once a week. But normally company’s sales people visit
stores twice a week. PO is delivered next working day.

Quality Control

As baby care segment is a very sensitive market, extra care is taken by the companies in maintaining
quality. Most of the companies replace every expired and old product. The retailers themselves check
the expiry of the product at regular intervals. They verify it even at the time of selling. At the modern
trade outlets, people are assigned to maintain quality of these products. For the damaged products,
company norms are followed. If the damage happens because of retailer’s mistake, the product will not
be replaced.

Promotion

Promotion activities at retail outlets are in the form of display and display contests. At traditional kirana
stores a display window (shelf space) is booked for 1 or 2 months (can be even longer). In this window
company’s products are arranged as per their display norms. Sometimes company also introduces
display contests. In these contests, few of the top display outlets are awarded.

Almost every company follows similar display patterns at medical outlets but they are excluded in
display contests.

Most of the promotion activities are done at modern trade outlets. Sometimes companies place their
branded gondola in store for better visibility. At time they even place their sales representatives at the
stores to educate the consumers. Also companies enter into TIT (Terms of Trade) agreements with the
modern trade stores. As per these TITs, stores give the agreed shelf space to the company’s products.
Sometimes companies also sponsor some of the stores sales people to promote their products.

Apart from these promotion activities, modern trade stores get good discounts and exclusive consumer
offers. These include bundle offers, on pack discounts, etc.

Wholesaler

Wholesalers play an important role in the distribution network. They not only help in distributing the
company’s products to the various retail outlets which are not served by the company stockist, but also
buy the company’s products in bulk. They normally serve retail outlets, like small kirana stores. But
some medical stores also purchase baby care products from them. Of late, medical wholesalers have
also started stocking baby care products, as the demand for these products is growing at medical stores.
Modern trade outlets are served directly by the company’s stockist.

Brand Preference

Wholesalers are not loyal to a brand and their only motive is better margins. On an average, a
wholesaler stocks 3-4 brands. They negotiate for bulk discounts and purchase from those
companies/stockists who give them better discounts. They purchase 1 or 2 brands in bulk (very large
quantity) and another 1-2 brands in smaller quantities. They prefer well established brands, but if a
marginally good brand gives them good discount, they may even shift their loyalties.

Pack wise Preference

As wholesalers sell to considerably smaller outlets, they stock smaller and medium packs. For example,
they stock J&J powder of 70 grams, diapers of 6 or 12 units per pack.

Company service level

Wholesalers are generally served twice a week. Some companies serve wholesalers on weekly basis too.
The company dedicates a salesman for wholesale. He visits the various wholesalers’ outlets and book
orders and receives prior payments. Booked orders are delivered on the next working day.

Quality Control

Quality norms are similar to retail quality norms. Expired and damaged stocks at the wholesalers are
replaced with fresh stocks by the company.

Promotion

Only trade promotion is implemented at wholesale stores. These are in terms of quantity discounts only.
Most of the companies don’t consider these outlets for display.

Stockist

Stockist is the company’s distributor in a particular geographical area. For Tier II cities, like Indore,
normally 2 stockists are assigned whereas for tier III cities 1-2 stockists are assigned.

They are company dedicated stockists, so there have no brand preferences. They are associated with a
particular brand.

These stockists are served in accordance to the company norms and distance from Carry & Forward
(C&F).

The stockists have to maintain quality standard at their godowns. These standards are set and enforced
by the company.

There are no promotional offers either at the stockist office or stockist godowns as they can’t sell over
the counter. They are responsible for distribution of company’s stocks in the assigned market.