Unicharm Southeast Asia

THE BACKGROUND

Unicharm has been manufacturing feminine and baby care products in Japan since 1974. The company’s origin can be traced back to Taisei Kako Co., Ltd where it found its niche by selling feminine napkins in 1963. By the late 1990s, Unicharm had successfully expanded its business overseas.

Spurred by rising income levels and populations in Asia, Unicharm has become the leading company for the feminine, baby, and healthcare categories in Asia and No. 3 in the global market thanks to portfolio brands like MamyPoko, Charm, Sofy, and Wave.

Unicharm in Southeast Asia

In 2011, the company bought a majority stake of 51% in US-based pet product and supply maker Hartz from Sumitomo Group to branch out its reach in household categories.

The company’s success caused it to become too comfortable and made it vulnerable to competition. What was Unicharm’s response?

THE CHALLENGES

“Signs of a market change started emerging around 2013,” recalls Unicharm President and CEO Takahisa Takahara. “We should have responded a little sooner.”

Decades of lounging in its throne as Asia’s market leader for inexpensive products lulled Unicharm into a false state of security that eventually caused it to slip behind competitors like Kao and Daio Paper for disposable diapers in key markets like Indonesia and China.

The company’s early entrance to Indonesia when the country’s GDP was still low allowed it to gain market share and its cheap range of products was introduced to first-time consumers in the small remote islands.

As the country’s living standards improve, the citizens can afford to become more selective and choose higher-end diapers. The company’s market share has reportedly dropped to below 60% from the previous 70%.

Unicharm Southeast Asia

Unicharm’s operating profit decreased overtime in Asia. Source: Nikkei

Meanwhile in China, the company has watched its market share fall to 8%, half of what it was three years ago.

“With the growing preference there [China] for high-end products and the rapid spread of ecommerce, high-quality Japanese diapers have become more popular, said Masashi Mori, an analyst at Credit Suisse Securities (Japan).

What’s Unicharm doing about all of this and can it make a comeback?

THE INNOVATION

Last year, Unicharm began to introduce premium line called ‘Natural Moony’, Japan’s first disposable diaper with a surface sheet containing organic cotton, to reserve a seat in the higher-end product category.

In addition to an official launch event in Tokyo, the company also held a Super Brand Day event on one of China’s biggest marketplaces, Tmall.

Unicharm Southeast Asia

Unicharm Chief Executive Officer Takahisa Tahara on Moony launch in Tmall

“We propose new standards for the way you select diapers by putting Natural Moony on the market under the slogan of ‘selecting diapers is selecting materials’,” explained Yoko Kawakami, Assistant Brand Manager at Unicharm’s Global Marketing department.

Unwilling to repeat the same mistake in China by catching onto ecommerce too late, the company has an official presence on e-marketplaces such as Lazada and 11street in Indonesia and other Southeast Asian markets.

Unicharm Southeast AsiaUnicharm’s official store in Lazada Indonesia

The brand was also one of the first available on Amazon Prime after its long-awaited launch in Singapore last month.

Unicharm has taken to publicity stunts to reach the eyes of its consumers by celebrating its iconic mascot’s birthday in Singapore by gifting new mothers with a care-package for newborns at the Thomson Medical Center.

On its 15th anniversary in Thailand, the company’s Mamypoko brand launched Poko Chan Point, the diaper market’s first rewards program that allows consumers to redeem free gifts from collecting points from a code attached to purchased products.

Unicharm Southeast Asia

MamyPoko’s Thailand Facebook post

“We believe that the key success mix includes the right product that best addresses customers’ needs and the right marketing programmes. Based on this belief, we will continue to bring to our customers the right programmes that will enhance their experience with our brand,” said Unicharm Thailand Managing Director Tadashi Nakai.

THE STRATEGY

When the brand first entered India in 2009, it was the first to offer underwear-shaped diapers ahead of giants like Kimberly Clark and P&G. The reward was an 85% jump in sales and 42% in modern trade market share.

“When there’s a low penetration or usage in certain categories, most companies do the obvious — try to develop the market with existing and affordable products,” said Devendra Chawla, Food and FMCG President at Future Group.

“Unicharm tried a different route by launching innovative products, which not just helped expand the market, but also in the process, diverted the entire segment towards their portfolio style, taking leadership while doing market development simultaneously.”

Unicharm believes in employing the same proven technique for the other emerging markets such as the Middle East, and Africa.

“The setting-up and acquiring of business operations in potential countries in the region is part of the key strategy set to grow our diaper and sanitary napkin business in Asia, particularly in emerging markets,” said Takumi Terakawa, Managing Director of Unicharm Thailand.

The company has also looked beyond Southeast Asia’s most popular markets. In 2013, Unicharm acquired Burmese diaper company MyCare that holds over 50% market share in the country.

In a company statement regarding the decision, “our management decision to acquire Mycare has been on the grounds that new markets are being created and overwhelming share is further secured by accelerating the speed of brand penetration through the expansion of product availability.”

THE FUTURE

Unicharm is targeting a consolidated plan of $7.2 billion in 2020 with sales growth at 7% CAGR and plans to tackle Asia first before pushing a global agenda.

Unicharm in Southeast Asia“Our goal is to build a dominant market presence in Asia, the world’s largest market for nonwoven fabric and absorbent material products,” said CEO Unicharm Takahisa Takahara.

“This will be a key step toward achieving our vision of becoming a leading company in the global market.”

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