“Disposable Textiles – Future of India”

Mr. Avinash Mayekar, Technopak Advisors Pvt. Ltd.

1. Disposable Textiles

Disposable literally means designed for or capable of being thrown away after being used or used up. Disposable textiles are textiles used in or as apparel for functional applications, designed to be disposed of after use. They are bound by “use and throw” concept. Textiles include fibre, yarn, woven, knitted, braided structures and nonwovens. Of these nonwovens fit most under the disposable category as they can be produced by using compact production lines which give much higher productivity at much lower operating cost. They can be tailor made functionally and economically for the end user. Nonwovens are used in apparels as well as technical applications. To list a few: Absorbent hygiene, Wipes, Medical, Filtration.

2. Existing Indian Market

A very good phase change is being observed in India from the durables to the disposables. The potential for nonwovens usage in India is great and there are many reasons why it will form an important sector. The world giants in consumer products have all modified their strategies to suit Indian conditions prior to achieving any success.

Behind China, India is the second fastest growing economy. According to a survey by Goldman Sachs, India will become the 3rd largest economy by 2035. This is measured in $US. If we use PPP (purchasing power parity) which takes into account local purchasing power, India already has the 3rd largest economy. However, despite having a GDP of US $1.09 trillion (2007), this works out as an average GDP per capita of $964 ($4,182 at PPP - cost of living is relatively cheaper in India). According to a new report by Goldman Sachs, India will grow at 8% until 2020. The new forecast would see India overtake the United States to become the largest economy in the world after China after 2042.

With the younger workforce and growing per-capita income, the middle and upper classes will grow significantly, and spending will increase. Although the use of nonwovens per-capita is extremely low in India at $0.04/capita compared to $2.73/capita in North America, the market is growing rapidly for end uses in feminine care, medical, automotives and packaging applications.

The hygiene market in India has a great potential because of the low penetration and the sheer size of the market. The entry strategies with feminine hygiene products followed by baby diapers, and eventually adult incontinence, will make it possible for women, children and adults to benefit from new, hygienic and

easy-to-use products. The need for single-use surgical products (gowns and drapes) is imminent in Indian hospitals.

3. Growth Drivers

3.1. Population Factor - Nearly 63% of the Indian population of 1.15 billion fall within the 15-to-64 age group. Half the population is under the age of 25, which represents a potential for considerable demographic & economic growth for the decades to come. There is population of nearly 500 million residing in urban and rural areas makes it a potential consumer for many disposable nonwoven products. This section of the population is also well educated and has high enough disposable income to afford nonwoven disposable products. The high birth rate also ensures a recurring huge demand for infant-related nonwoven products.

3.2. Purchasing Power - The purchase power parity (PPP) of the Indian population is nearly $2.7 trillion, which is higher than the total PPP of the South American continent (Brazil, Chile, Argentina, Columbia, Venezuela and others put together). The cost of living in India is much cheaper than in the U.S. or Europe. As the purchasing power increases, there is more income available to spend on consumer products. The average income is $2800 at present and has been rapidly increasing during the last few years. The strong Indian middle class of 350 million has purchasing power and living standards nearly equivalent to the middle class of developed countries. They tend to use the products based on availability and convenience. The children in these families are potential customers for all kinds of baby diapers, baby wipes, etc.

3.3. Growing Economy - The GDP (Gross Domestic Product) of India is $1trillion. The Indian economy encompasses village farming, modern agriculture, a wide range of modern industries and a multitude of support services. Private industries have grown rapidly and privatization by the government has been quite quick in the last few years. The economy has grown at 8% on average in the last few years and is poised to grow at 8-10% in coming years.

3.4. Consumer Confidence Index - Despite a marginal slowdown in growth, India still ranks second after Norway in consumer confidence and their attitude towards recession says a survey by a global information and media consultancy (ACNielsen). The survey says India will see its employment rate rise in inverse proportion to rich nations, thanks to the country's enthusiastic adoption of work-force optimization practices and the outsourcing bug. In recent years, India has established itself as a hub for outsourcing technical and support staff; as belts in the world’s leading economies tighten, we may well see India’s economy – and the confidence of its consumers – soar.

4. Challenges

All said and done, the potential market is faced by the problem of the tendency and attitude of the large population of Indians. The currently low penetration of nonwoven disposable products provides an

untapped market for new entrants to India. However, Indian customers are value-driven, hence only a product with a true value will succeed.

A considerable quantity of bleached cotton wool and woven bandages is still used in the medical market. The market penetration of feminine hygiene is only 15% and sales are mainly in the urban areas. When the price barrier is broken, this market will explode in a big way. Cotton wool and woven gauzes are still popular in the country as nonwoven disposable material is not made locally and imports can be expensive. The health care industry is still using reusable caps, gowns and drapes. A significant portion of this market will remain with woven reusable material until necessary legislation for hygiene standards are introduced by the health authority in the government.

To summarize the issues why the disposables are not used much in India:

• Low Hygiene awareness

• Pricing policies of nonwovens

• Disposable problems

• Availability of cheap washing facilities favoring reusable cotton garments

• No standards for medical disposables; Quality is poor

Area of concern for disposables is how disposable products affect landfills and other types of waste disposal. As is the case in many Western countries, landfills is simply not the solution, but municipal waste can be used for energy provision and therefore benefit the country and the environment.

5. Target Audience

The broad target segments for disposables includes consumer, medical & industrial. In the fast paced life, both parents working, majority families being nuclear; product which are user friendly and time saving will definitely rule the market if they are priced right and available. With the younger population ready for new products, this is an important market for nonwoven disposables. Overall the Fast Moving Consumer Goods (FMCG) sector is growing more than 10% in most categories in India which would reflect in the nonwoven disposable products also.

With the urban population increasing and the increasing trend of working women with higher earnings, the diaper market will grow rapidly in the next few years.

A typical potential estimate for feminine hygiene, based on per capita consumption of 50 units per annum by the eligible population of nearly 300 million users (age group 15 to 40) will give a theoretical total market size of approximately 15 billion pieces. This could result in market sale value of $1.5 billion at 10 cents per piece.

Some 24 million babies are born in India every year. If we typically calculate that 25% of these infants in the period between birth and 24 months use at least 28 diapers a week, the theoretically available market for diapers is 8.7 billion pieces per year. This is a big number for any industry. With rising income levels, the consumption levels of this order are achievable in the near future, if the prices are kept right.

6. Disposable Applications Market

It may be observed that feminine disposable hygiene is the biggest market in India. With the advent of medical insurance and improvement in the healthcare systems across the country, medical disposable markets are poised for rapid growth. The healthcare industry grew 23% in 2003. The penetration of the market by sanitary napkins is hardly 15% of the theoretically available market. With the increased affluence and urbanization of India, this market is expected to grow very fast in the coming years. This fact is reinforced by the entry of many private label manufacturers in the last few years. K-C, P&G and J&J have a strong presence in the market.

Baby wipes is expected to grow rapidly among the urban population, whereas the general moistened wipes will take some more time for the concept to be accepted by the Indian population. Infant diapers are expected to grow at the same rate as FMCG products through high niche market penetration.

The incontinence products will have much slower growth. The low penetration level of diapers in the theoretically available market shows a huge potential in this segment.

Widespread penetration of wet wipes for household uses in the near future is not expected. India is the right place to introduce wet wipes as it could save a lot of water use for cleaning—India has scarce water resources—however, for reasons unknown wipes have not expanded in the country. As a concept, the wet wipes in the beginning can catch up only in restaurants and in travel situations. On the supermarket shelves, some local converters offer the wet wipes. But their consumption has been steadily growing in the urban hygiene conscious population for regular use.

The medical products considered in the study include surgical gowns, packs, caps, masks, shoe covers, nonwovens used in surgical gauze, sponges, disposable pillow cases and sheeting’s are difficult to estimate individually. Doctors exposed to the new types of surgical disposables in the west and coming back to the country to set up specialty hospitals have created demand for nonwoven disposable products. A high growth rate and demand is foreseen in this segment in coming years due to proliferation of private hospitals in the country. The penetration of nonwoven disposable products into the traditional cotton wool and woven bandages will provide a strong demand for these products. The current Indian Market for these products is around Rs. 20 Crores and is expected to reach Rs. 35 Crores by 2010 – a year on year growth of 20% is expected.

There are numerous other disposable applications, such as shopping bags, tablecloths, towelettes, airline head rests, pillow cases, sorbents, sponges, etc., which are made and marketed in a small way. These applications’ volume will grow proportionately to the rising income and is estimated to grow at 8%.

7. Market-Overview No previous study was made and the industry is very fragmented, with many manufacturers operating under different industry headings. The value of nonwovens consumed in India was estimated at $200 million in 2002. It is well known that the per capita consumption of nonwovens will increase as the nation’s per capita income rises. The per capita consumption of nonwovens in India is 0.001 kilograms, which can only rise given the industry’s potential to grow by a thousand times during the next few years. The per capita consumption level is approximately 2.25 kilograms in developed countries. This makes India a nascent market in which the nonwovens industry worldwide can invest.

With the economy poised for a rapid growth of more than 8% during the next five years, nonwovens production and consumption is expected to see rapid growth. No accurate estimate is available on the exact quantity of disposable and durable nonwovens production. However, by discussions with various manufacturers and end users, the total consumption of durable nonwovens is estimated around 60,000 tons and 38,000 for disposable nonwovens. A substantial portion of disposable nonwovens is currently imported for various reasons.

The consumption of nonwovens and the manufacture industry is rising rapidly. This has been caused by increasing imports of disposable products in the country by private marketing companies and also established players such as K-C and P&G.

A large quantity of disposable nonwovens is also imported as tissue and paper. The garment industry also imports substantial quantities of interlinings material, which accounts for nearly $75 million in additional imports. As there is no high quality producer of spunbond and thermal bonded materials, the disposable manufacturers such as K-C, Johnson & Johnson and P&G import substantial quantities of nonwovens. High value and performance filter fabrics made with Nomex, glass, Teflon and other fiber types are also in demand.

The disposable surplus is increasing rapidly and the disposables market in India is expected to grow at 10-15%. The most important consumer disposable markets are hygiene and medical disposable products. J&J, K-C and P&G dominate the hygiene market. Increasingly, small local manufacturers have arrived on the scene competing with large multinational companies. With more than 250 million eligible customers of hygiene products, India will be a huge market when penetration reaches 60%.

One can see that the consumer wipes market is negligible at present. The improvements in this market will come when investment would be made in state of the art technology in India. Premoistened baby wipes

have been recently introduced and have become popular in urban settings. The market is expected to grow 10-15%.

The industrial disposable nonwovens market essentially revolves around packaging and filtration products. And, disposable wipes usage will pick up as resources increase, as labor is very cheap in India. Reusable cotton wipes and rags are still the most popular cleaning tools. Most of the disposable gowns and surgical drapes are still imported as this type of spunbond, meltblown and spunlaced materials are not made in the country.

Among the disposable markets, the diaper market is still in its infancy in India. Diapers are still very expensive as they are mostly imported to or repackaged in the country. Pampers and Huggies are already present in the market, but the pricing is at a level where it cannot stimulate demand.

The average life expectancy in India is only 65 years. This means the population over the age of 65 is not high. The problems of incontinence associated with old age are less of a concern in India so the adult diaper market at present and in the immediate future is not expected to be big. The diapers needed for surgical procedures will be in demand.

8. Conclusion

To build this momentum, change must happen much faster and with a greater degree of business expertise and planning. No doubt, the country has the tools to build a highly industrial nation, but implementation of the state of art technology locally is where we need to focus on. With proper planning, vision in mind and engaging appropriate consultancy firm one can successfully implement projects for disposable nonwovens. Let’s all be a part of India’s this future.

Mr. Avinash Mayekar is an Associate Vice President in Technopak Advisors Pvt. Ltd. with over 22 years of experience in manufacturing, product development, quality control, maintenance, consultancy, marketing & sales of textile machinery, strategy, benchmarking assignments, technical audits, market entry strategy, market surveys, market research, project monitoring, project implementation, marketing tie-ups etc.