by ZHU Yongling

At its first earnings briefing since listing, SHEN Yanchang, chairman of Softcare Limited, tore open a pack of diapers and compared it with rival products in front of analysts and investors. The moment was a sharp illustration of how the Hong Kong-listed company built one of Africa's leading diaper and sanitary pad businesses — and of how it now hopes to turn that foothold into a broader consumer goods platform.

Formerly an internal unit of Sunda International, Softcare began operating independently in 2022 and listed in Hong Kong in 2025. The company said it ranked first by sales volume and second by revenue in Africa's baby diaper and sanitary pad market in 2024. Its parent group, Sunda International, has spent more than 20 years building a business presence across Africa.

Its rise has relied in part on mid-market pricing. Softcare's products are typically priced about 15% below leading international brands, but 10% to 15% above smaller local rivals, management said.

That formula has helped it win share in markets where consumers buy in very different ways. In some places, the company is pushing new products to reinforce its position and improve pricing power. In others, where its presence is still smaller, the focus is on breaking into mainstream categories and building volume first.

Softcare operates a "local production, local sales" model across East Africa, West Africa and Central Africa, while newer markets such as Latin America and Central Asia remain small and account for just 4% of revenue. Its route to consumers depends heavily on deep distribution. Diapers, sanitary pads and wet wipes are sold not only in supermarkets by the pack, but also through market stalls where they may be sold individually, reflecting uneven purchasing power and the continued dominance of offline retail.

That model continued to support growth in 2025. Revenue rose 24.9% year on year to US$567 million. Gross margin edged up 0.7 percentage points to 35.9%, while adjusted net profit climbed 24.4% to US$122 million. Net margin held at 21.6%.

The gains came from both volumes and prices. Unit sales were supported by population growth in emerging markets and by rising penetration of hygiene products, while average selling prices across categories rose 4% to 7% as local currencies strengthened against the US dollar in most operating markets in the second half of 2025.

The next stage of expansion will depend on how far Softcare can deepen that distribution network. The company plans what it calls a "one million retail outlets" initiative and currently works with about 3,000 distributors across Africa. Its bet is that offline retail will remain dominant across much of the continent for years, keeping physical distribution a key competitive advantage.

But that model also comes with limits. Deep distribution gives brands less direct control over how products are sold at the retail end. To improve oversight, Softcare plans pilot programs in Ghana and Kenya in 2026 to digitize channel management, though progress will depend heavily on distributor cooperation.

It is also looking beyond organic growth. Softcare has set up an internal M&A team as it explores ways to broaden its product portfolio.

But Africa's consumer opportunity also comes with significant operating risks. Because Softcare prices and settles transactions in local currencies across multiple countries, foreign exchange volatility remains a persistent threat. In 2023, the company recorded US$13.8 million in foreign exchange losses, more than its spending on sales and distribution that year.

Raw material costs are another pressure point. Softcare disclosed in its prospectus that production materials, including procurement costs, taxes and freight, account for more than 80% of total cost of sales. Two of its three major raw materials — SAP and the main inputs used in nonwoven fabric — are derived from petroleum, leaving margins exposed to swings in oil-linked costs.

That is why conflict in the Middle East, and any resulting rise in oil prices, remains a closely watched risk for the company. Softcare said it seeks to limit foreign exchange exposure by prioritizing relatively stable markets and using advance payment and timely currency conversion. It also said long-term partnerships with shipping groups such as Maersk and MSC Mediterranean Shipping Company allow it to secure freight rates at roughly 40% below market levels, while current Middle East tensions do not directly affect its shipping routes into Africa.

Even so, the company expects rising raw material costs to create pressure in the third and fourth quarters and into 2026, even if industry consolidation may ultimately favor larger players.

Competition is also intensifying as more companies target Africa's consumer goods market. Softcare argues that Africa is not a single unified market, making it difficult for any newcomer to build a broad presence across dozens of countries in the near term.

That may be the clearest lesson from its expansion so far. In Africa, consumer brands are not built simply by shipping products overseas. They are built through years of local manufacturing, distribution and on-the-ground execution in markets that remain fragmented, complex and difficult to scale.