China has been the growth driver of many industries over the past five years, with writing instruments being no exception. China is expected to overtake the US to become the largest writing instruments market in 2018, with value sales of US$4.2 billion. The US has been the major market for writing instruments, but a weak CAGR of 1% over both the review and forecast period will see it replaced by China in 2018. This is no great surprise as China posted the strongest CAGR of 14% in writing instruments globally over the last five years and is forecast to remain the strongest growth market over the next five. This article will focus on the categories contributing the most to the robust growth of writing instruments in China while a subsequent article will discuss the competitive landscape and take a look at how industry players are performing.
Increasing disposable incomes and higher education spur growth in writing instruments
The number of urban households in China is expected to reach a new high of 281 million in 2018 while the number of rural households will continue to decline. In addition, increasing levels of disposable income have led to the rise of a large middle-class in the country. By 2018, some 19% of Chinese households, that is 87 million, are expected to have an annual disposable income of
above US$25,000. This steady growth in disposable income is having a very significant impact on consumption and education. With higher incomes, parents are able to provide a better education for their children, while an increasing number of young people are choosing to go into further education, and thus may not enter the workforce until their twenties. These factors are being reflected in China’s adult literacy rate, which consistently increased over the review period to reach 95.6% in 2012. In addition, these factors have also contributed to the robust growth of writing instruments in China.
The pen is the mightiest growth driver
Generally, the prices of writing instruments are very affordable to most Chinese consumers. Hence, many, especially schoolchildren, are looking for a wider variety of writing instruments, such as coloured options. This, in turn, is stimulating volume sales of writing instruments overall.
Within writing instruments, the pens category is set to be the best performer in 2013 with value growth of 14.6%, accounting for 56% of overall writing instrument value sales. With the majority of pen consumers being young schoolchildren, it is thus no surprise that pen manufacturers usually target their products at this demographic, with designs often featuring popular cartoon characters.
Within pens, the roller ball is set to register the strongest growth in current value terms of 18.5% in 2013. Compared to ball point pens, roller ball pens are preferred as they provide a smoother and cleaner writing experience, with their ink usually less likely to smudge. Ball point pens are seen as lower-end products than roller ball pens, hence the stronger growth of the latter. Additionally, roller ball pens are replacing fountain pens, particularly among students, as they are much easier and smoother to write with.
Colouring is also set to record strong growth of 16.5% in 2013. Colouring pencils have seen various innovations to help sustain consumer interest, such as colouring pencils that create water colour effects once mixed with water. Crayons, on the other hand, tend to be more popular among pre-school children and those in their first few years of school.
Traditional stationers the leading distribution channel but hypermarkets also gaining ground
Source: Euromonitor International
Stationers/office supply stores are the main distribution outlets for writing instruments in China. The majority of stationers are independent, with no chained operator dominating the channel. Hypermarkets are increasingly becoming important outlets for writing instruments. For instance, pens and pencils are usually sold in multi-packs or bundles and these outlets generally offer a wide product selection. Internet retailing, meanwhile, has also gained value share in 2013. In addition to general internet retailers which sell a range of various product types, there are also internet retailers which specialise in writing instruments. These are usually operated by writing instrument producers such as Deli and generally focus on B2B rather than B2C sales.