The Covid-19 crisis and its impact on the Disposable Hygiene industry
COVID-19: where we are now
Despite global containment measures, COVID-19 has grown into a full-blown pandemic. At the time of writing, over 7.4 million people worldwide are suffering from SARS-CoV-2. The death toll exceeds 800,000. Of the over 23.424 million cases registered since December 1, 2019, more than 15 million have recovered[1].
One of the most impactful factors is indeed the age composition of the population. Although COVID-19 affects people of all ages, the elderly are much more at risk, especially those with chronic medical conditions. About 90% of people in the hospital with COVID-19 had at least one underlying health condition[2].
COVID-19 strikes men harder than women[3]. Data coming from China and Italy lead to this conclusion, albeit it’s been debated whether this might be due to the gender disparity. Both genetical and behavioural factors could be at play here.
In order to protect public health, several countries have decided to step up their safety measures through country-wide lockdowns, enforcing work-from-home and stay-at-home orders as a mass quarantine measure, and allowing only essential businesses to remain open. This strategy, also known as “flattening the curve”, has mitigated the spread, keeping the health care system from working at overcapacity. As a consequence, multinational tech giants have thrived, while most businesses have suffered, especially those relevant to travels, leisure and fun. Enterprises in consumer goods as well as disposable hygiene have gained during the lockdown, but now they're slowly coming back to pre-pandemic levels.
COVID-19: the impact on the global economy
The impact of COVID-19 on the global economy is profound. By Deloitte's estimates[4], it will bring massive disruption to production, supply chain, and market all over the world, also undermining financial markets and firms. It could take three years for the US economy to recover from COVID-19[5]. China might be in better shape, as it has successfully flattened the curve and has started lifting restrictions. The Eurozone, on the other hand, is among the worst hit regions in the world and will likely contract 7.2% in 2020, with significant downside risk. India’s real GDP will grow by just 2.0% in 2020. The Japanese economy is going to contract by 5.5% in 2020 and is expected to recover by 2.8% in 2021[6]. As regards Latin America and the Caribbean, the International Monetary Fund (IMF) expects a contraction of 9.3% in 2020, projecting a partial recovery in the region of 3.7% in 2021[7]. In June, Brazil posted a record budget deficit of 37.6 billion USD[8].
The first effect of the pandemic is more people seeking work. Unemployment rates have increased worldwide. According to the IMF, the proportion of people out of work has hit up to 10.4% in the US[9]. Figures go up to 29% in Italy and 41% in France. The IMF expects global GDP to shrink by 4.9% in 2020[10].
To keep the economy afloat, all central banks around the world have gone through a printing spree, acquiring assets at unprecedented levels and distributing stimulus packages worth trillions of dollars.
All things considered, the so-called Great Lockdown looks in many ways alike to previous economic meltdowns. Yet, however similar, it is by all means one of a kind - a Black Swan event through and through.
COVID-19: the impact on the Disposable Hygiene industry value chain
Raw materials availability
The corona crisis has generated a boom in the face mask market. With the World Health Organization advising anyone to wear them in public places[11], the demand for raw materials that are necessary to produce them has skyrocketed. As a consequence, the price of meltdown fabrics, most of which coming from China, has ballooned[12], while availability remains limited.
As the novel coronavirus spread through North America and Europe, nonwoven demand in selective markets increased significantly. At the end of 2019, the industry was already working at full capacity. Right now, new investments have been announced in order to match the untapped demand. In fact, Europe and the US have suddenly room for growth, as China can no longer take care of the world’s supply of meltblown material.
As a matter of fact, prior to COVID-19 China dominated the face mask sector with a 85% market share[13] thanks to its manufacturing cost advantage and access to lower prices for raw materials. In 2018, China was the largest exporter of meltblown nonwovens in the world. The US was the largest importer. At the moment, China has restricted or prohibited exports of meltblown, SMS/SB and spunlaced nonwovens to supply in-country needs for converted hygiene, wipe and medical products. This has determined a global shortage of meltblown and spunbond nonwovens and, simultaneously, an expansion of the production capacity of meltblown everywhere.
Reshaped consumer habits
A shakeup this big had substantial implications on the population. For starters, it triggered a sudden change in consumer habits. As soon as COVID-19 started spreading in Europe, panic buying became a thing. Driven by fears of potential shortages, consumers began stockpiling. As a consequence, the concern about a supply chain paralysis turned into a self-fulfilling prophecy - a tragedy of the common that aggravated the crisis in logistics while leading to record sales for manufacturers of disposable hygiene products. Compulsive hoarding, though, was not the only repercussion.
Another exceptional side-effect of the lockdown economy has been the explosive growth of online channels. According to market research Rakuten Intelligence, e-commerce in the US is up 30% year-on-year from the beginning of March through mid-April 2020, a level which was not forecast until 3 years from now. Both established brands and private label manufacturers are registering spikes of up to 50% from online sales.
Stockpiling and e-commerce have been the key drivers in the Disposable Hygiene industry, allowing to its main players to gain considerable revenues and profits in Q1 2020[14].
The pandemic impact is not having the same reach everywhere.
In normal times, one in three U.S. families struggle to purchase diapers. As the economic impact of the COVID-19 crisis deepens, many more families have reduced the share of spending for baby diapers and are turning to local diaper banks for help.
Diaper banks, community organizations present all over the country that distribute free diapers to struggling families, said they are experiencing record demand, up 50% to 300% compared with the number of families they regularly served each month.
GDM: providing shelter against any storm
With the stress companies are being put under by the COVID-19 pandemic, there is a global call to rethink and rebuild business strategies from the ground up. A far-reaching overhaul is taking place, reshaping the global economy head to toe. Society as a whole, from startups to public institutions and multinational enterprises, is forced to redefine its processes. The future has never been so digital.
That is also why GDM provides shelter against any storm. Since the advent of the Internet of Things, GDM has in fact undergone a deep reorganization of its digital strategy: from hardware manufacturing to IoT as a service. Its multifaceted offer includes smart services and products, connected machines, edge analytics services, an innovative service platform, plus a state-of-the-art digital toolkit. Because of this, and also thanks to its network, its decades-long experience in the field, and, most importantly, its founding principle named “Business Made Easy”, GDM is a reliable partner for any customers and business in the Disposable Hygiene industry.
In conclusion, COVID-19 is taking a toll on the global society and economy. Consumer habits are changing, leading to explosive growth in online channels. The Disposable Hygiene market is shifting, with nonwoven textiles surging in demand. Finding a partner to rely on has never been so important. GDM, thanks to its vision of Business Made Easy as well as its digital solutions, is the ideal match for any kind of player searching for a partner in this industry.
Looking for a digital partner in the Disposable Hygiene industry that you can trust? Discover how we can help you unlock your full potential. Get in touch!