The Chinese mania for high-priced Japanese-made diapers could change the perception of investing in developing economies. According to AllianceBernstein's observations, this is just one of many trends fostering a new generation of winners in emerging markets. AllianceBernstein closely monitors the changing shopping habits of the growing middle class in emerging markets, such as a strong appetite for high-priced, high-quality goods. Not only does this trend reflect important clues about future patterns of consumer spending, but it also shows that the best investments in emerging-market equities are not necessarily home-grown companies. As long as the best, the rest is negligible In recent years, Chinese parents with deep pockets have insisted on using Merries from Japan 's Kao . Although Kao's Chinese factories make similar products, Chinese parents are willing to pay more for Japanese-made diapers (pictured).
Chinese mothers are willing to pay higher amounts for trusted products A brief background: Procter & Gamble entered the Chinese diaper market in 1998 with its brand Pampers . After several missteps (mainly due to the poor quality of the product at the beginning, coupled with the low acceptance of disposable diapers by Chinese parents), Baojie launched the "Golden Sleep" marketing campaign in 2007 , emphasized the relationship between disposable diapers and the improvement of sleep quality and infant development, and finally opened the Chinese disposable number list diaper market. Several companies followed to enter the Chinese market, including Japan's Unicharm in 2000 and Kimberly Clark, which entered a joint venture with a Korean manufacturer in 2003 . Kao was the last major global manufacturer to enter the Chinese market in 2009 . With the rapid increase in the demand for diapers (see figure), the market share of Kao, which entered the Chinese market relatively late, has also increased, but the market share of Baoji and local manufacturer Hengan International has declined (see figure).
Strong Chinese demand for Miuershu diapers caused profits in Kao's human health care business to nearly triple between 2012 and 2015 . Picture_2 China's demand for diapers is soaring disposable diapers market size (billion US dollars) Picture_3 Kao is the biggest beneficiary of China's diaper war China's diaper market share (%) Emerging trends in the middle class What does this mean for investors who want to understand what's new in emerging markets? The AllianceBernstein team believes there are three main priorities: Premiumization of consumer goods. China's growing middle class has a palpable appetite for premium products, and as a result has injected new energy into the sales of many Western brands, from Steinway pianos and Mattel Barbies to Italian designer lingerie La Perla, all benefits. However, as the diaper wars show, the trend isn't just in the luxury market. Baojie is a pioneer in entering the Chinese disposable diaper market, and continues to target consumers through local production of low-cost diapers. On the contrary, Kao focuses on the top market.