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HUGGIES New Diaper

Launch Case Study


Sep. 2016
Market Opportunity & Challenge
Diaper Market Changing
Chinese
Dynamics Consumers
China diaper market is trading up rapidly driven by
premium segment growth

Market Value Growth Decomposition 2015 Value Growth% by Segment


Retail + Baby-store Total Market by Channel
Volume Driver Price Inflation Premium Segment Growth Contribution

Trade Up/Down Others

Modern Trade 100


%
15.2 -3%
10.0

0.6 Baby-store 95% 21%


-1.5 -5.2

-2.0

2014 2015 e-commerce 88% 67%

Data source: Nielsen RI Panel, BBS Panel, National. Updated to Dec15.


While Merries leads in premium segment, another
Japanese product- GooN.Angel starts to rise from
late 2015

Premium Diaper Segment Value% GooN. Value Importance


w/ L size price index by Sub-brand

Index
Merries 39.8
107 Other GooN. Diapers 60%

Index
HUGGIES T5 100 16.4

GooN. Angel 160


Index
5.3
Angel 36%

Jun. 2014~ May. 2016


yet its hyper pricing within premium diaper
segment opens up a new market niche-- SUPER
PREMIUM
YTD2016 RMB Price/piece - Top 3 Premium Diaper Players
GooN.Angel Merries HUGGIES Platinum
RI BBS
201
186 184 194

166 164 172


160
164 164

GooN.Angels pricing defines a SUPER PREMIUM niche

114
109 111
105

100 100
105 107 106
98
93
90
NB
0 1S M
2 3L XL
4 NB
0 S1 M
2 L3 XL
4
Current HUGGIES product offering in complete
diaper is missing a place in super-premium niche

Nielsen
Complete MMPK
Price HUGGIES Pampers Merries Anerle GooN.
Diaper /Moony
Index

SUPER
PREMIUM
(T6)
230 ?
Premium
170
(T5)

Mainstream
Premium 130
(T4)

Mainstream
(T3)
100
Changing Premium
Chinese Diaper
Market
Consumers Dynamics
China is transforming to consumption economy and
baby category spending importance has kept rising

Consumer Confidence Index Household Baby Product Spending%


Willingness to Spend VS. Total FMCG Spending

48 MAT2014 38%

38 2015
MAT2016 42%

2012

Data source from China Consumer Confidence Survey


While Chinese consumers increasingly desire
premium products and famous brands

Within a range of price I can afford, If I had money, I would buy


1 I always pay for the 2 Famous-branded Products
Most Expensive & Best Product

51% 59%
32% 41%

2011 2015 2011 2015

Fast-moving Consumer Goods All Category


Data source from McKinsey 2016 China Consumer Report
demands for trading-up consumption become
more and more emerging & personalized
Im often the first one I often look for products that
1 Buying the New Arrivals 2 Meet My Taste & Emotional Wellbeing

Total Consumer Total Consumer


46% 53%
VS VS
Trade-up Consumer* Trade-up Consumer*

62% 65%

*high income (monthly household 16,128)/ high education (67.4% undergraduate degree)/ high social status (34.1% manager-tilted)
Data source from 2015 CTR
Post 85s modern mums also believe baby products
they choose are representations of their own
wellness and lifestyle
Premium quality isnt I will gladly spend more
just about the most on my baby to get the
expensive or famous best quality, but I expect
brand, its about the it to look good too. Being
heritage, expertise and the best mum shouldnt
care in creating the mean I have to
product. compromise on style!
Market Situation Summary

HUGGIES brand image is once again challenged by Japanese


brand GooN.Angel even with launch of T5
Challenge
Current product offering cannot meet demands of vastly
trading-up market

Market trading-up increases business opportunity to price


premium and drive profitability
Opportunity
Consumer needs have become more and more premiumized
and personalized
HUGGIES is to launch

the MOST PREMIUM DIAPER in China Market


Launch Plan
Business Vision & Initiatives of the Launch

Become
No.1 Brand Profit Driver
& &
Taken for the Best Value Enhancer

Seize Trading-up Trend & Fulfill Price premium to Drive Category


Unmet Needs to stand firm as a power Profitability
brand

Regain Best Diaper Image through Conceptualizing & Maximizing


delivering winning product against Product Experience to manage
Japanese brands emerging consumer expectation
New product launch is to seize market trading-up
opportunity & upgrade brand image

Seize trade-up trend and fulfill Ultimate skincare empowers by pH


consumer needs for premiumization balance treatment and ultra
Enter and lead super-premium softness despite basic diaper
segment and halo brand as a functionality
whole

Objectives Product Concept


T6 Diamond Diaper
Communication Commercialization
Ladder up premium perception P&L: GP above 40%
visually and emotionally Launch in Apr. 2017
Differentiate from current HUGGIES Exclusive listing to BBS & e-tailers
and competitors
New diaper (entitled as T6) is positioned on top of all
functional promises amongst HUGGIES offerings

T6 Ultimate
Skincare
VS

Softness & Breathability T5


Softness & Fitness T4
Dryness & No Rash T3
Achievement of skincare/wellness as a diaper is on
top of product benefit hierarchy globally

DIAPERING BENEFIT HIERARCHY T6 CONCEPT- ULTIMATE SKIN CARE

Skin-care Natural pH-


balance for
Healthy Baby Skin
BEST
Skin Wellness Softness
Proactive Skin Care Holistic Touching Outside Inside

Superior Softness
Comfortable of Wearing Inside-out
BETTER
Skin Protection | Breathability | Free Movement
1.2D Outer-cover 3D Air
Long-Lasting Protection Thinnest Fiber Embossing Liner
GOOD Leakage Prevention | Long-lasting Dryness Ever Used
Price premium against competitor and drive gross
margin within segment

T6 Pricing Guidelines

HIGH PRICE UP GOOD


Front Margin Against Angel Gross Margin
Motivate voluntary Set up premium Bear against
promotion from perception thru potential mark-ups
retailers pricing premium & price changes
Deliver instant premium take-away in the same
time as the product concept via packaging

1
Packaging Design
Ultimate
Skin Caring &
Pampering

Reference Only

Touches of
Motherhood
Inspiration
Break conventional diaper packaging and visually
captivate consumers thru emotions

L
M
S
NB
XL
Ultimate Skin-caring
empowers by

100% pH Balanced Liner


&
Superior Silky Outer-cover
Build added social values thru emerging fashion
designer corporation of product out-covers

2
Outer-cover Design

Outer-cover Cross-market
Design Corporation

Design Deliverables Emerging Designer


Representable of lifestyle interests

Unique and fashionable aesthetics to


meet post 90s mums
Celebrity endorsement
Exchangeable marketing resources Jewelry Designer Fashion Designer
T6 significantly wins over competitor in consumer
usage test not only by performance also in premium
perception

More Premium

Feels Dryer
VS
More Breathable

Absorbs Better

Fits Better 71 : 29
Better Looking
No difference: 37%
Local insight plus fast innovation development speed
enable new weapon to fight in evolving market

Jun. 2016 Sep. 2016


Market Product Concept
Knowledge Validation
Fast action
to realize
a new product in Feb. 2017 Jan. 2017
CUT Evaluation Product
Development

months
Mar. 2017 Apr. 2017
Production Launch & Marketing