Why Private Label are coming to the fore in Eastern Europe’s Baby Diaper market
In the Baby Diaper market, the Eastern Europe manufacturing industry is rapidly expanding. While the Western Europe’s and North America’s Disposable Hygiene markets are stagnant or contracting, Eastern Europe countries are showing some potential. Although far from their saturation point, many countries in the region have reached high penetration rates for disposable hygiene products, especially wipes, Baby Diapers, and femcare pads. Political and economic instability certainly constitute an obstacle, slowing down financial development. In addition, much of the region is still recovering from the economic crisis, which, combined with low birth rates, doesn’t bode well.
However, rising living standards, an improving average disposable income, and the lack of dominant players with deep pockets make the region increasingly attractive. There’s plenty of room for growth for Baby Pants and Baby Open Diapers. Compared to Western Europe, per capita consumption is relatively low, indicating a much greater upside than the Baby Disposable market in Europe, where convenience and premiumization still remain the driving forces. Because of this, industry and manufacturing in Eastern Europe, Russia in particular, are gaining ground, capturing the interest of both international brands and local nonwovens producers.
The Eastern Europe’s Baby Diapers market: a deep dive
According to the United Nations Statistics Division, Eastern Europe includes Belarus, Bulgaria, Czech Republic, Hungary, Poland, Moldova, Romania, Russia, Slovakia, and Ukraine. After the Cold War, the term was used to refer to the ex-Eastern Bloc.
Today, a few historians use the expression in regard to European countries that were beyond the iron curtain but not part of the Soviet Union.
As a region, Eastern Europe is remarkably diverse. If we look at the market penetration of Baby Diapers, it is pretty much like Africa, very heterogeneous, showing a pronounced gap across the region. While in the average Western countries the number of units used per child per year hovers around 1,200, in Eastern Europe it may vary between 500 in Bulgaria, Georgia, Ukraine, and Belarus and 1,000 in Hungary and Poland[1].
In terms of sanitary protection, the situation is a little more consistent. For a mature market, per capita consumption of sanitary products generally exceeds 200 units per year. In this regard, countries like Estonia, Czech Republic, Poland, and Lithuania are well established. On the other hand, when it comes to Bulgaria, Romania, Ukraine and some other Eastern Europe countries, there is room for improvements, and therefore a bigger market opportunity.
Taken as a whole, Eastern Europe has still unmet potential for growth. Euromonitor estimates this opportunity is worth $2 billion, half of which should come from densely populated, less developed markets, such as Russia and Ukraine.
Russia’s peculiar position within the Baby Diaper market
In the context of Eastern Europe's Baby Diaper market, Russia plays a unique role. Undoubtedly, market penetration is very low. Nonetheless, due to rising living standards, the addressable market is expanding year over year. As regards Baby Diapers’ per capita consumption, Russia, with 800 units per child per year, leans towards the upper end of the spectrum. In comparison with more industrialized countries in Western Europe, it shows a 50% upside potential.
The Russian Federation is still recovering from the 2015 downturn, yet, consumers’ confidence in the economy is gaining strength. The average disposable income is rising across the region, setting positive expectations in terms of consumption and widening of the user base. The prospect is that, with a more positive attitude, the demand is coming back in the Disposable Hygiene industry.
Private Label are reaping success in Eastern Europe’s Baby Diapers market
The Eastern Europe's economic turmoil began in mid-2014 when the international exchange market slammed the ruble. This, combined with the 2015 oil crisis[2], put Russia in a tailspin, as the country found it increasingly difficult to repay foreign denominated debts. Predictably, the Russian Federation reacted with a slew of austerity measures[3], such as cuts in public spending, higher taxes, and raise of pension age[4]. As it always happens with recessions, the whole Eastern Europe suffered severe setbacks, dampening growth.
For Eastern European Private Label, this was a godsend. With consumers open to go beyond traditional players and search for more affordable options, Private Label readily seized the opportunity, rapidly capturing market size at the expense of the brands. Indeed, they were perfectly positioned: being smaller, they were nimbler and quicker to react to the fast-changing Eastern European marketplace, offering convenience at premium quality.
This was made possible through wise market positioning by Private Label, that, rather than tackling the crowded low-cost, low-quality segment, invested in building an exclusive, high-end alternative available only on their shelves.
Ultimately, if we look at Euromonitor lifestyle surveys on future shopping priorities, it becomes clear that the rise of Private Label in the Baby Diaper market is not a fad, but a solid trend that is not going away anytime soon.
For more insights about the Eastern Europe’s Baby Disposable Hygiene market, get in touch with us!