Pampering parents help Kimberley-Clark

Thirty-year-old Zhou Ling's 10-month-old daughter is an only child.

Like many young and affluent parents in the country, Zhou and her husband, who runs a five-star hotel in Zhejiang province, want to give their child the best of everything and when it comes to diapers they shell out for foreign-brand Huggies.

"Huggies is the most expensive diaper brand, probably 20 percent higher than the average price in the market but its materials and designs are the best for little babies," said Zhou.

But she may switch to a cheaper brand when her daughter grows older, she added.

Huggies' Texas-based parent company Kimberley-Clark is growing strongly in China thanks to the increasing purchasing power of well-off young couples such as Zhou and her husband.

Kimberly-Clark posted 52 percent year-on-year sales growth in China in 2008, the most robust increase in 10 years. The rising number of high-end customers is the principle driver behind the firm's top-line growth last year said Shao Qingfeng, CEO of Kimberly-Clark China.

The company (perhaps best known as the maker of Kleenex tissues) came to China in 1994 and has seen bumper sales during the golden pig year craze in 2007, and the Olympic year in 2008, which were both considered auspicious years to be born and triggered a minor baby boom.

"People say children born in the Year of the Pig will be luckier and healthier and I, like many others, rushed to have my first baby in 2007," said Luo Binying, a 33-year-old saleswoman from Hangzhou, Zhejiang province.

The number of new babies born in 2007 was about 17.4 million, 7.4 million higher than the average over the past several years, according to the Xinhua News Agency.

Kimberley-Clark's personal care division grew 40 percent that year, according to its full-year report.

The company ranked sixth in China's nappies/diapers/pants market in 2007, with a 4.8 percent share, far behind market leader Procter & Gamble (P&G), which carved out a 43.5 percent share, figures from research firm Euromonitor International show.

"For children's products, there will always be a healthy premium market and over time, we expect the share of this premium segment to grow further. Child's safety, health and comfort are naturally of utmost importance to the parents, and a large proportion of them will buy nothing but the best," said Ashok Sethi, a regional director with consulting firm TNS's Asia-Pacific, Latin America, Middle East and Africa division.

Kimberley-Clark also plans to extend its reach to second and third- tier cities, and made inroads into Jinan and Hefei.

"With economic development and the reach of Internet, the differences between different tiers of cities, though still significant, are becoming less pronounced," said Sethi, adding that the consumption behavior of upper-end consumers in all three tiers of cities will resemble each other more.

The company set a 40 percent sale growth target for 2009.

But analysts say stiff competition from P&G, which has a similar product line of diapers, could thwart such ambitious expansion goals.

"The rivalry will get fiercer in 2009," said Kimberley-Clark CEO Shao.

(China Daily 03/23/2009 page9)