How marketing and market forces created a China boom for formula and disposable diapers

Babytree, one of China’s most popular sites for expecting and new mothers, has a dedicated nursing app for the iPhone where worried moms can solicit and give advice. That alone says something, but a quick scan of the latest queries says much more:

“Seeking advice: Enough breast milk or not?”

“Seeking help: Amount of milk drunk by newborn child”

“My quest for milk may finally be over”

…To give only a few examples in which mothers worry whether they should supplement with formula. Meanwhile, at a Shanghai supermarket the disposable diapers aisle is running low again, prompting a restock of Pampers. Between these apparent dual dearths of milk and diapers, it would seem the poster image of the fat, diapered baby is in imminent danger in China. But until recent decades, neither milk powder nor disposable diapers had much of a market on the mainland. Nor did mothers feel particularly put out by a lack of either.

To create demand, Western companies deployed tactics tried if not necessarily true, nor particularly brand-new, to convince parents here that both are sina qua non for raising a healthy child. For both diapers and formula, this was accomplished in part by taking advantage of the common fear among recent generations of mothers in China that their child is at risk of falling behind immediately after it slips from the womb.

Whether the China market will always be quite so kind to global purveyors of milk powder and disposable diapers is a question of politics, marketing, culture and demographics. At the nexus of all these issues sit China’s newest generation of parents.

“Because of globalization and because of changes in culture, this is a period of confusion for Chinese women,” said Kelly Dombroski, a lecturer at the University of Canterbury New Zealand with experience researching both formula and diaper use in China. How the country’s mothers deal with that confusion will move mountains of white powder and paper, and direct corresponding avalanches of the pink RMB100 notes used to pay for them.

Growing demand

Formula is not necessary for most women, provided they are able to stay with their child and nurse uninterrupted. The World Health Organization (WHO) calls colostrum, the yellowish, sticky breast milk produced at the end of pregnancy, the “perfect food” for a newborn, and recommends exclusive breastfeeding for up to six months. However, from the 1980s onward, domestic consumption of milk powder, or formula, in China has seen ravenous growth. During the first year on record, 1986, 135,000 metric tons of dry whole milk powder was consumed in China according to official statistics. That may seem like a lot until compared with last year’s total tonnage of 1.876 million.

Even the infamous 2008 tainted milk powder scandal – when melamine added to Chinese-made milk powder sickened 300,000 people, hospitalized 54,000 babies and killed six infants – resulted only in a temporary dip in domestic consumption. It also caused an enduring surge in demand for foreign formula: In 2013 alone, China imported 619,000 tons of foreign milk powder.

Farmers in China and elsewhere have ridden that demand to the bank: From 2008 to 2013 New Zealand’s annual milk powder exports more than doubled to 1.29 million tons, exceeding even China’s domestic production of 1.2 million tons. The country saw exports to China rise 45% year-on-year in 2013 to US$7.696 billion (NZ$9.9 billion), according to a Financial Times report. Demand for foreign formula is so great that Hong Kong enacted a limit on how much of it could be bought in the territory by mainlanders, though milk powder mules now simply smuggle the white powder north over the border.

The role of foreign enterprise in such a key industry has not gone unnoticed. Last year, China both unveiled subsidies and other support for domestic milk powder producers like Mengniu and Yili, and also fined six foreign companies a total of US$109 million for price fixing. In May of this year the second shoe dropped when it announced additional restrictions requiring foreign milk powder producers to register before being allowed to sell in China.

Baby fat

Officially, China’s government supports breastfeeding in line with WHO recommendations. A 1995 regulation barred companies from offering free formula or samples to pregnant women, their families and hospitals; it also forbade hospitals from promoting infant formula or accepting gifts or help from formula companies. UNICEF’s international initiative in support of exclusively breastfeeding infants for the first six months claimed that as of 1994, China had 6,000 “Baby-Friendly” hospitals. It asserted that exclusive breastfeeding in rural areas rose from 29% in 1992 to 68% two years later, while in urban areas the increase was from 10% to 48%.

A 2004-2005 study of infant feeding practices in Zhejiang province found nowhere near that level of breastfeeding during the first six months, exclusive or otherwise. While non-exclusive breastfeeding rates before discharge from the hospital for urban, suburban and rural mothers were all above 96%, exclusive breastfeeding rates before discharge were only 38%, 63.4% and 61%, respectively. By the sixth month, exclusive breastfeeding rates had fallen to 0.2%, 0.5% and 7.2%, respectively.

Last year, a Reuters investigation laid bare how commonly the 1995 regulation is flouted as companies push formula on new or expecting mothers. The report found violations commonplace, with doctors giving out discount cards for infant formula, hospital staff strapping identity bands branded with formula companies’ names to newborns, and formula representatives distributing samples to mothers recovering from childbirth. Pediatrician Sheng Xiaoyang at the affiliated hospital of Shanghai Jiaotong University Medical School told China Economic Review she had only rarely been approached by formula companies, but said she believed a lack of education among low-level staff also played a part in staffers’ eagerness to push said goods.

“For some primary-level doctors, because they don’t know much about breastfeeding, they may suggest more milk powder,” Sheng said. That fattens up infants and increases their risk of diseases like diabetes, problems familiar in the West and which are currently exploding in China. “The kids in big cities like Beijing and Shanghai, when you compare them to the kids in Europe and America… they’re a bit fatter, a bit bigger,” she said.

Stork stalkers

That suggestion of well-intended ignorance among hospital staff matched up with the experiences of Tang Wangwen, mother of two and breastfeeding class leader at La Leche League in Shanghai. Tang recalled meeting mothers who were advised by nurses to give their children formula in the first three days of life in order to ensure they had enough food, and being told that herself. But she also related pressures more akin to those described in the Reuters report. During her first pregnancy she said she attended breastfeeding lectures that barely mentioned breastfeeding.

“Maybe they would mention only one or two sentences about breastfeeding, ‘breastfeeding is good,’ ‘breastfeeding is best for your baby,’ and then they’d say ‘but if you don’t have enough milk you have to add formula,” Tang said. After the lesson, she said, the doctors would give the expecting mothers formula advertisements.

Another common practice, Tang said, is for formula companies to cold-call new mothers at their phone numbers, using lists purchased from someone at the hospital or a pharmacy. Formula hawkers tell mothers if their baby can’t sleep for more than three hours straight they should supplement with formula; people claiming to be doctors call asking for an address to which they can ship free formula samples.

These schemes recall a phase of invasive marketing that American mothers went through during the country’s baby boom in the 1950s. In an exposé of the US prenatal retail industry’s questionable advertising tactics, the muckraking periodical Collier’s found that drugstores commonly sold lists of expectant or new mothers across the country to prenatal retail giants. The companies then flooded parents’ mailboxes with ads for everything from diapers to cradles to baby clothes. Those little booties meant big business: The magazine estimated the net worth of the industry (adjusted for inflation circa 2014) at around US$6.47 billion.

Over-labored, labored over

However, Lua Wilkinson, a PhD student of nutritional sciences at Cornell University whose research involved years of work in China, suggested that although aggressive advertising played a part in the boom, it wasn’t the whole story. While women in the US adopted formula in part because of marketing that vaunted its scientific veneer, Wilkinson said, “from what I saw it was much more that women were working outside of the home, and they didn’t have the support or the time to breast feed.”

Women made up 43.6% of China’s workforce in 2012, according to World Bank statistics. They have been legally entitled to 98 days of maternity leave since 2011, with 100% of wages for this period paid by their employer and public maternity insurance. However, Wilkinson saw little enforcement of this policy during her time here – comments echoed by Sheng, the local pediatrician. That means exclusive breastfeeding for a full half year is impossible for most mothers, particularly women from a rural background who work as migrant laborers.

Kevin Slaten, program coordinator for China Labor Watch, said it was difficult to say how prevalent denial of maternity leave was on the mainland in lieu of a comprehensive study, but was familiar with the hoops employers often hang high to keep women on the assembly line.

“It’s very common for factories to find a way to not force, but encourage female or pregnant employees to not take maternity leave,” Slaten said. For example, even if it’s a woman’s first child, many factories require evidence that the birth is legal, citing the once child policy. “That’s very difficult because they might have to go back home to get this sort of evidence. They’d have to take off work, and it costs a lot of money,” he said. With mothers at work, many grandparents turn to formula to feed their grandchildren.

Finally, the traditional post-delivery practice of “sitting the month” gives yet another opening for formula. After giving birth, Chinese mothers are expected to spend a full month doing absolutely nothing in order to recover from the ordeal. During this period Chinese medicine forbids many ordinary foods and drinks including any cold liquids, raw fruits and vegetables, all in pursuit of restoring balance to the mother’s body.

The restrictions on physical activity give family members ample opportunity to swoop in and take the mewling babies away for formula rather than trouble the recovering mother for her milk, said Kelly Dombroski, a geography lecturer and PhD candidate at the University of Canterbury, New Zealand. Dombroski, who spent over a year studying infant raising practices in Qinghai province, said that’s the gap where formula (or sugar water) is often introduced.

Open minds, open trousers

Dombroski’s thesis, currently unpublished, focuses largely on the toilet training practices (known in Mandarin as ‘bǎ-niào’) in western China and their potential lessons for the Western world of child rearing. There, as in most other mainland cities, open-crotch pants remain in popular use among the masses as they have for ages. The special pants allow parents and grandparents to train children in China much earlier than their western counterparts, sometimes by as early as six months old.

The practice is Pavlovian: older relatives keep an eye out for behavior from the baby associated with imminent discharge, such as handling of the crotch. Relatives will sweep the baby or toddler up and position its thighs within their own as they squat. Then they will either whistle to or shush the baby, which promptly looses its little bowels all over whatever it’s been positioned over – sometimes a trash can, other times a gutter and, occasionally, a sidewalk.

As more mainland parents bring their babies with them on trips to Hong Kong, the practice has led to blowback from locals who consider it unsanitary and backward. The other disparity with more Westernized cultures is that the practice renders disposable diapers largely unnecessary, provided cloth diapers are on hand for nighttime misshaps and the neighbors don’t mind an occasional land mine. And until recently, most in China didn’t.

When Procter Gamble (PG) first attempted to penetrate the China market late last century, the company quickly learned it simply didn’t exist. Yet in 2011 disposable diaper market penetration in China had reached 39.1% according to a report in Nonwovens Industry magazine. In 2012, PG was sitting pretty at number one with a value share of 46% of the Chinese diaper market, which that year sold RMB31.6 billion.

How PG created, then dominated a previously nonexistent industry is an impressive tale of marketing prowess combined with a consumer base desperate to try anything that might give children a leg-up in the cutthroat, cram-fest competition of Chinese education. After the company botched its previous attempt, which relied on low-grade diapers aimed at low-income households, PG introduced a new nappy that was softer, more absorbent and manufactured locally to cut costs. But an angle was needed, and the company furnished the perfect one: more sleep.

According to a report by CBS Moneywatch, PG researchers conducted two studies between 2005 and 2006 involving 6,800 home visits and over 1,000 babies in eight Chinese cities. The babies wore diapers to bed and, according to PG, fell asleep 30% faster and slept 30 more minutes each night. The master stroke was connecting those extra minutes of sleep to improved cognitive development in advertising. That made Pampers a path toward better brains for China’s babies in the minds of consumers. From there the chain of conclusions leaps onward to better academic achievement, a better university, better career prospects and a better salary that can help take care of Pampers-wearing babies’ parents in their old age.

PG also took full advantage of the then-emerging social media sphere in China. The company launched its “Golden Sleep” campaign in 2007, asking parents to upload photos of sleeping babies and driving home the campaign’s message linking diapers to better sleep. The company took the 200,000 photos and created a 660-square-meter photomontage at a retail store in Shanghai; ads in the campaign even boasted that babies wearing Pampers slept “with 50% less disruption,” according to Moneywatch.

Adaptive adoption

While diapers in China weren’t nonexistent before the Golden Sleep campaign, they were used mostly at night, and made of reusable cloth. Sheng Xiaoyang, the pediatrician, said disposables’ appeal is obvious for anyone willing to pay rather than wash soiled rags every day – an especially common calculus in top-tier cities like Beijing and Shanghai.

“It’s a normal choice for a mom to pick disposable diapers over cloth, because when using cloth you need to wash it, clean it, hang and dry it — it’s very inconvenient,” Sheng said. “Disposables are more convenient, and for many families, they can accept the cost.”

Kelly Dombroski, the PhD candidate who spent a year researching ba-niao in Qinghai, found the practice potentially useful worldwide as an alternative to disposables and cloth diapers, in that it saves water and resources and helps babies become more aware of their own bodies at an earlier age. In addition to ba-niao-ing all three of her own children, she followed as part of her research a group of mothers from New Zealand and Australia who were attempting to do the same, despite the view that diapers were the more modern, civilized option. Mostly this involved babies voiding over toilets and behind bushes instead of on the sidewalk, and covering up infants’ genitals rather than embracing split-crotch pants.

Dombroski also witnessed adaptive adoption taking place with disposables during her time in Qinghai: “People were using them, but they weren’t using them all the time,” she said. “They were just using them one a day, overnight, to get more sleep at night, or they were using them if the baby was sick with like diarrhea.” Even the wealthy parents she observed weren’t using them all the time thanks to a continuing belief in the principals of Chinese medicine. Diapering babies all the time wouldn’t allow heat to escape, and tradition demanded keeping the bottom area cool to avoid colic and skin problems.

That behavior is in line with Moneywatch’s claim that diaper use in China was less than even one per day. The report went on to quote PG’s then-vice chairman of global household care Dimitri Panayotopoulos as telling investors during a 2008 analyst meeting the company had “only just begun to scratch the surface [in China].” The company has also looked beyond the mainland since its success with the Golden Sleep campaign: marketing materials and press releases show that it has since deployed the same strategy elsewhere, including the rest of greater China, as well as Ireland, India, Australia, Vietnam and the UK.

Growing pains

For both formula and diapers, though, the China market will soon change. The country’s baby boom is set to subside thanks to the one-child policy’s decimation of the birth rate. With it, the core demographics for both products will face a shake-up.

Daxue Consulting’s Matthieu David told The Financial Times last year that the formula market is expected to stop growing soon, with a steep drop in the number of Chinese women in their 20s after 2017. Assuming China’s central government succeeds in altering the country’s economic engine from export-heavy manufacturing to a consumer-centric, middle-class-fostering marketplace, the future for both industries may lie upscale in premium goods. But the recent circling of domestic wagons in the formula industry – not to mention others – raises questions about how certain the future is here for international brands. Even Pampers may not be safe from regulators’ wrath.

Whoever ends up selling them, another boom in diapers may yet await. China’s economy, famously graying, may become a hotbed of incontinence as its elderly population skyrockets. Estimates currently peg China’s over-65 cohort reaching 26% of its total population by 2050. As the middle classes have turned to infant diapers for convenience recently, they may also eventually turn to adult diapers for the same reason. That’s particularly true in highly developed cities like Shanghai, where disposable income is high and the birth rate is particularly low. Whether aged urbanites will be willing to risk losing face by wearing them, though, remains to be seen.

Author: Hudson Lockett (@KangHexin)

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