SCA says ready to fight P&G in incontinence care market

By Anna Ringstrom STOCKHOLM (Reuters) - Sweden's SCA, the world's biggest maker of incontinence pads, is accelerating product upgrades and boosting promotions to counter the re-entry of U.S. personal care giant Procter & Gambler into the market, its CEO told Reuters. However, Jan Johansson brushed off some analysts' advice that he should respond with a change in strategy, such as extending one of SCA's feminine care brands into incontinence. "We’ve known about this for quite some time, longer than the market. Our concern was that they’d come out with an entirely new product range that we don’t have," he said in an interview. "But there was no innovation that we didn't know about." SCA accounts for about a quarter of the global market for adult diapers, with its top-selling Tena brand making more than 10 billion crowns ($1.4 billion) of sales a year, out of a group total of 89 billion crowns last year. The firm's shares have fallen around 16 percent since P&G hinted in June -- and then confirmed in August -- that it would return to the incontinence care market after a 15 year absence. P&G has begun rolling out in Europe, where SCA has the bulk of business, and the United States. Handelsbanken analyst Karri Rinta, who has an accumulate rating on SCA's shares, has warned SCA could lose 30 percent of its operating profit from incontinence products in 2016 due to P&G's extension of its well-established feminine care brand Always into the market. However, Johansson said analysts were underestimating the strength of the Tena brand and that SCA would be able to defend its position with product upgrades and innovations. He said it had brought forward upgrades, such as a higher-and-faster absorption pad for people who suffer incontinence during a sudden sneeze. It has also reallocated resources from advertising toward promotions in order to match P&G's offers. Aging populations and the fact incontinence is also widespread among younger adults, most of which don't use incontinence pads, means it is a market with huge potential, Johansson added. SCA estimates that less than 40 percent of sufferers in Europe use incontinence pads or pants, with fewer than 5 percent of incontinent men using the products. SCA, which started out as a forestry company in 1929 and makes the largest share of its revenues from tissues, sells most of its incontinence products directly to the healthcare industry, with less than 30 percent of revenues from retailers. P&G, which made net sales of $83 billion in its latest financial year, is focusing on the retail market for now. Johansson dismissed the idea of investing heavily in one of SCA's feminine care brands and, once it was bigger, extending it into incontinence products for the retail market. "Tena is much stronger (than SCA's feminine care brands) so it would be daft to change brand," he said. Johansson also said he had no plans to shift focus more to emerging markets at the expense of Europe. "Europe, too, is a fantastic growth market as long as we find a good way to increase penetration. (P&G's entry) means more competition, but also helps drive penetration," he said. Independently of P&G's return, SCA is investing online, where it sees a big potential market due to the embarrassment felt by some incontinence sufferers when buying products in store. The firm has its own online stores in several markets. (Editing by Mark Potter)