In the diaper market dominated by big names such as P&G, Unicharm and HUL, Nashik-based Nobel Hygiene has carved a niche. While multinational corporations are heavily focused on the baby diaper market, Nobel took a different approach.
It saw an opportunity in the adult diaper segment which is much smaller compared to the baby diaper segment, but where MNCs have largely stayed away.
That bet seems to have paid off for Nobel.
The company's brand 'Friends' now commands over 50 percent market share in the 500 crore adult diaper segment.
Nobel has been able to grow over five-fold in the last five years maintaining a 35 percent CAGR and closed FY 21 with a revenue of close to Rs 600 crores.
"India is seeing more people suffering from urinary incontinence due to ageing and chronic diseases such as diabetes, requiring use of adult diapers," said Nobel Hygiene’s Founder and Managing Director Kamal Kumar Johari in an interview to Moneycontrol.
Johari says the adult diaper segment is growing at about 25 percent, but there is huge potential to grow, as the penetration remains 2-3 percent.
He says Nobel is the first company in India to launch easier-to-wear pant style diapers in the adult segment. Japanese personal hygiene maker Unicharm introduced pant-style baby diapers under brand Mamy Poko, which became an instant hit with the consumers in India and other Asian countries.
Johari adds that low penetration of the adult-diaper segment could be due to unaffordability and lack of awareness.
"Adult diapers are heavy in size and require higher absorption capacity, the materials used in the diaper also goes up. This increases the cost by 5-6 times over baby diapers, but our margins are more or less the same for both adult and baby diapers," Johari said.
Baby boomer market
To be sure Nobel also competes in the baby diaper segment under brands called Teddy and Snuggy. It claims to have the fourth-largest share after Pampers, Mamy Poko and Huggies in the market.
Nobel says it has around 4 percent, Pampers is the market leader with about 45 percent market share. Mamy Poko, which is giving tough competition, has lost some steam following a fire accident at its factory near Ahmedabad, but still has about 30 percent share.
India's baby-diaper industry is worth Rs 6,000 crore and growing at 25 percent, where the penetration is less than 10 percent. With the birth of 25 million babies each year India accounts for nearly one-fifth of the world's annual child births.
"Indian baby diaper market is not only huge, but is also growing at around 25 percent which is the fastest in the world," Johari said.
On the potential of the market, Johari says China, which has just 10 percent higher population than India, has a diaper market which is 10 times of India's market size.
"There is a clear correlation between per capita income and personal hygiene, the higher the disposable income, growing middle class and nuclear families - the spend on personal hygiene products such as diapers will go up," Johari said.
Capacity expansion
Johari says he bought 13 acres of land in Halol GIDC, Gujarat, and is investing Rs 110 crore in FY22 to set up a new factory.
"In the first phase we will put up three machines manufacturing both the adult and baby diapers, the final plan is to have 12 machines," Johari said. Johari expects the factory to be operational by September.Johari plans to end FY22 with revenues of Rs 800 crore.
The current manufacturing site at Nashik built on 7 acre land has reached full capacity where over 1 billion diapers and underpads annually across both adults and baby categories are produced.
The company also uses about 10 percent of its capacity for contract manufacturing diapers for retail chains who sell it as their white labels.
Nobel’s diaper story has brought PE investors. Last month Quadria Capital, which is healthcare-focused, picked up a significant minority stake in the company. Quadria bought out the stakes of PE investors CLSA Capital Partners and Access India fund and its co-investors who have exited their investment.
Johari said about Rs 50 crore will come into the company and will be used as growth capital for branding and distribution.
Nobel products are available across 200,000 retail outlets in India.