TOKYO — Daio Paper will spend more than 6 billion yen ($53 million) to build a diaper plant and expand existing facilities in China, with the goal of more than doubling production capacity in that country.
The new factory will be built next to the company’s existing site in Nantong in Jiangsu Province. Construction is set to be completed in January, with its start date to be determined later.
In addition to installing up to eight diaper-making machines in the new factory, Daio Paper will set up another machine at its existing site, lifting Chinese output capacity to well over 200 million units a month.
Competition is harsh in China, where almost 2,000 diaper brands have emerged. But “there is a clear divide between premium and mass-market products,” says Daio President Masayoshi Sako. Japanese goods are popular among quality-conscious affluent consumers in coastal cities.
The company holds the sixth-largest diaper market share in China, with roughly 3% last year, according to British research firm Euromonitor International. Daio hopes to catch up to market leader Procter & Gamble, the American conglomerate that controls a quarter of the market, and Kao, which holds 12%, the most among Japanese companies in China.
Daio began extending its sales network to cities in inland regions this year. The company aims to boost Chinese sales of household paper products 70% to 25 billion yen in the current fiscal year ending in March. Daio began making paper diapers in China in 2013. Last year, it started producing premium products, which cost 30-40% more than its other products.
Euromonitor predicts China’s diaper market to reach $11.4 billion by 2020, up 50% from 2016. Meanwhile, Japanese output of children’s diapers fell 6% to 13.9 billion units, according to the Japan Hygiene Products Industry Association.
Daio Paper Corp.