| The hygiene market has had its ups and downs in recent years. Innovations have created products that are thinner, more breathable and absorbent and have more sophisticated closure systems. At the same time, however, these improvements have been met with a series of problems including market maturity, industry consolidation and severe pricing pressures.
For companies supplying components to these markets, these forces have created a difficult business environment where constant innovation is demanded but not rewarded, at least monetarily. Still, many of these suppliers, whether in the films, superabsorbents, adhesives or closure system areas, have been able to keep up their research and development efforts and help advance the market.
Hygiene, particularly the baby diaper segment, is largely dominated by Kimberly-Clark, Dallas, TX, and Procter & Gamble, Cincinnati, OH, but in recent years private label improvements have kept these two giants constantly looking over their shoulders at the competition. According to industry experts, sophistication among private label diapers has contributed to pricing wars in the segment overall. Afraid that even a slight price increase could influence their customers to switch to private label products, national brands have not increased prices in years. In fact, the unit price of a standard disposable diaper has actually dropped from 22 cents in 1990 to about 15 cents today.
These falling prices have come during a time when diapers have increasingly sophisticated and this innovation is continuing. Most recently, much of the diaper industry’s focus has been on two areas—absorbent core technology and stretchability. Kimberly-Clark, for instance, has recently introduced its Huggies Convertibles line in an effort to break P&G’s lead in the diaper market. This premium diaper can be pulled on like a training pant or side-fastened like a traditional diaper. In order to pay for features like increased stretchability and double leg cuff design, K-C has reportedly lowered the weight of its transfer layer. This strategy seems to have worked. Industry observers believe that Huggies has been grabbing some of P&G’s sales in Wal-Mart stores.
“Pricing pressures on all participants in the hygiene market are influencing the direction of innovations,” said Don Young, director of sales for fluff pulp provider Rayonier Performance Fibers, Jesup, GA. “Virtually all components are under intensive price pressures, and converters are reluctant to consider any components that may increase the product cost as they cannot get any more money for improved performance or ease of use. Still, there are some areas where innovation can result in cost/effective improvements for the converter.”
Yet, a market rife with pricing pressures does offer some advantages. Constantly worried about losing marketshare to competitions, component suppliers in the hygiene industry have been working overtime to woo end use manufacturers. Whether these companies are multinational giants or smaller private label or specialty firms, they are extremely valuable to their suppliers.
Throughout the global hygiene market, converters exert considerable price pressure on raw material suppliers. This provides strong motivation for suppliers to continuously improve product design and manufacturing processes,” said Richard Bentley, strategic market manager at International Paper-Akrosil.
Akrosil has remained a leading release liner supplier to the hygiene market as a result of continuous innovation targeted specifically at addressing price pressures and the growing performance demands that accompany increasing line speeds.
The challenge of the hygiene component supplier is to develop one piece of a product that works in harmony with that entire product. The adhesive supplier has to make sure that its product can handle the amount of spandex in a material; the closure manufacturer needs to heed the demands of the topsheet and backsheet and the superabsorbent supplier needs to watch the needs of the product’s fluff pulp. This has created an industry where component suppliers work in tandem, supervised by finished product manufacturers.
“Diaper lines are an assemblage of compatible and interactive components and manufacturers are relying on all of their supplier constituents to provide them with raw materials that are compatible in an ever-changing environment,” explained Bill Girrier, vice president of sales at RadiciSpandex.
One of the best-known partnerships in the hygiene industry is Bayer Faser, Dormagen, Germany and Henkel, Düsseldorf, Germany, which combines Bayer’s Dorlastan elastic thread and Henkel’s Sanicare range of adhesives to create a system solution for upstanding leg cuffs and elastic attachments in baby and adult diapers. This cooperation has allowed both companies to reduce production costs while better understanding how the components work with each other. Still, Henkel’s key account manager Thorsten Classen said he felt that vertical partnerships should not interfere with suppliers’ main goal—to work effectively with their customers, whether they be in the branded or private label side of the business. “We see the benefit of building up know-how around the whole finished product and its materials and trends in materials,” he added. “That, in combination with a company’s own development will lead to success.
“We definitely focus on our cooperation with co-suppliers but also with our customers,” he added. “What really measures success is the final product and that partnership, which is always confidential.”
Partnerships do not only help companies better understand customer needs, they also help suppliers target new terrain. For example, closure specialist Koester, Altendorf, Germany is working with Brazilian closure supplier Parafix to gain knowledge of Latin America customers while providing a jumping-off point from which to move its product into a new region.
Mason, OH-based Clopay used the same strategy in the Brazilian market. The company purchased a Brazilian films supplier two years ago to aid its entry into the region. “There is a big challenge not of only learning local economics but also having the right types of products to compete with local suppliers,” said Bill Norman, marketing manager for hygiene.
Hiring The Big Guns
The importance of wooing large companies as customers, whether on the manufacturing or retail side, in reaching a large number of consumers has had multiple effects on suppliers. The ability to move a large quantity of product with just one or two sales contracts can do wonders for their annual turnovers; however, this consolidation has severely driven down prices, thus negatively impacting earnings.
“Global sourcing has given retailers such as Wal-Mart a lot more negotiating power, which results in lower prices,” explained Julien Born, global marketing manager of Invista (formerly DuPont Textiles & Interiors), Wilmington, DE. “This price pressure trickles down to all suppliers and it results in lower prices throughout the value chain. This partly applies to our category, though the nature of disposable products tends to require local manufacturing. Despite a few very large global players, our customer base has stayed relatively fragmented and regional.”
While hygiene manufacturers are not looking solely at price when making their purchasing decisions, it’s certainly a top priority and forces suppliers to work hard to develop extremely value-oriented, innovative products.
“I’m not sure that price is the number one priority but value is certainly the total leading issue in hygiene today,” explained Bob Marquett, sales manager of adhesives supplier Bostik Findley. “Our customers are looking for innovation that has led to lower costs.”
With this in mind, component suppliers are somehow managing to retain research and development budgets. While manufacturers were hesitant to discuss what these efforts would yield, executives did say that the hygiene market has not yet reached its innovation peak.
For film supplier Clopay a recent innovation has come in the form of a nonwoven strip laminate for diaper topsheets. This allows manufacturers to laminate the nonwoven laminate to the middle of the diaper, rather than the outside, so that the surrounding film can function as a part of the product’s structure. This increases the amount of film, which is less expensive than nonwovens, in the diaper and drives down the total cost of the unit, explained Mr. Norman.
With many hygiene product consumers concerned with fit, stretchability has become a top priority among baby and adult diaper manufacturers. As pricing and elastic thread prices continue to trend downward, the amount of stretchable material being used in each piece has been increasing. This has added players in this part of the business, which was long dominated by Invista with its Lycra brand. “Stretch, fit, comfort and elastic features are still the big thing,” explained RadiciSpandex’s Mr. Girrier. “Everybody is looking to incorporate stretch, even in things not traditionally known for stretch.” For instance, in feminine hygiene products, elastics are providing shape and form.”
Increasing stretchability is not simply a matter of adding more elastic to a product. Companies must weigh manufacturing processes to make sure they are able to handle the increase. Foul ups could lead to increased stops and added downtime, which would significantly drive up the price of the overall product. RadiciSpandex has addressed these issues with a continuous feed process. While this process is more expensive, it does minimize risk in manufacturing.
It is improvements like these that elastic and spandex manufacturers have had to present in the face of increased competition. Globally, the spandex market currently is about 15% over capacity. Since most of this supply was initially produced for fashion-related applications, many companies originally involved in fashion have begun to eye hygiene applications. This has dramatically driven down spandex prices and boosted their attractiveness over latex and other stretch materials.
Arguably the segment’s largest player, Invista, has long set the bar for performance and pricing in elastic applications with its brand of Lycra spandex materials. While many hygiene companies continue to rely on Lycra’s reputation in the market, the reputation alone has not won the company success. One area of particular interest has been line efficiencies. “If we can help a customer reduce money spent on manufacturing, that keeps them from cutting costs elsewhere, notably in component pricing,” explained Mr. Born.
Also boosting elastic’s role in hygiene is the emergence of new training pant lines, disposable adult underwear and other pull-up style absorbent products. These products use stretchable side panels rather than just elastic threads to achieve a total stretch in the product. In fact, it was this trend that prompted nonwovens producer Albis, Rosa Curavecchia, Italy to enter the elastics market. When researching ways to develop a stretchable nonwoven, Albis backward integrated and began making its own elastics to incorporate into the product. Because pricing premiums have hindered the proliferation of stretchable nonwovens in hygiene products, Albis has been selling its elastic threads in the European hygiene market. “To achieve a totally stretchable diaper, it will be necessary to incorporate the stretch into the nonwoven materials,” explained commercial director Pietro Landone. “Right now, costs have prohibited this except for in some specialty applications but it is definitely where the market is going.”
Diapers Close In
In the U.S. disposable diaper market, 100% of branded and about 80% of private label products use mechanical diaper closures, which have gained significantly in popularity since their introduction in the mid 1990s. Additionally, the adult incontinence market, which has been slower to move away from adhesives, has begun to favor mechanical options as users demand more comfort and institutions recognize the cost benefits of refastenable, mechanical closures.
While K-C makes its own loop and sources a hook from two different companies and P&G buys its hook and loop separately and assembles their closure system in-house, smaller companies are looking for a total system that allows their products to feature the same level of stretchability as national brands without having to make a significant equipment change or investment. This has forced suppliers to come up with total system solutions for diaper closures.
According to Nailesh Sangani, market manager for Avery Dennison, North and Central America, private label suppliers are constantly following innovation put forth by the brands, whether it be related to closure systems, comfort or fit. “If you look at the market today, higher tier premium products typically offer better fit and comfort by incorporating soft, highly stretchable materials. I think we will see products in the lower realm of the market continue to add more stretch either through the use of stretchable base materials or through stretchable prelaminated closure products such as those offered by Avery. The former involves higher capital investment whereas the latter will work off existing equipment but typically has higher material cost. This is especially important for producers in developing markets where capital is tight and yet there is a need to make a niche premium product.”
One area where stretch is particularly relevant is in pull-on style diapers and training pants. Where these products are not viable for small infants, they are becoming more popular among parents of toddlers. Executives in the closures area are looking at original ways of targeting this emerging segment.
Closure specialist Koester developed its Comfort technology for nonwoven closure systems first in 1998 and uses it to upgrade products without additional costs. This soft nonwoven-based carrier material increases the comfort of the diaper and is part of Koester’s continuous drive toward increased quality. “Our main target is improving our products without price increases,” Andrea Konrad, marketing manager explained. “To achieve this, we explore all possibilities like more efficient production technologies. Still, if there are true improvements to a product, they can sometimes warrant pricing.”
Koester’s new product line SEM (soft elastic mechanical) represents a new soft, elastic tape generation and is a part of Koester’s Comfort Plus, which is responding to a strong industry demand for more comfortable, user-friendly fastening devices. “Softness is a huge topic of interest for the total system supplier,” Mr. Goller explained.
Not Just Diapers
Although diapers is the largest market for hygiene worldwide, it is not the only segment that demands constant innovation. Feminine hygiene and adult incontinence product have received their share of innovation in recent years, and these markets too have been strained by market maturity and pricing pressures. Still, suppliers are keen on facing the challenges that these markets offer.
In feminine hygiene, these efforts have led to the addition of wings, new packaging styles and increased thinness. Despite this, there has been increased pressure on suppliers to reduce costs. According to Todd Schweigert, Market Manager for Loparex, “Over the last two years, we have been asked to reduce costs nearly 10%. One way cost reduction can be achieved is through lower basis weights and increased efficiencies in production lines. The bigger challenge, however, is to develop innovative, cost effective products that meet the parameters of the hygiene industry.”
“We have worked really hard to develop products for feminine hygiene—not just paper liners but also in packaging concepts,” Mr. Scheigert explained. “This technology has allowed us to offer multiple solutions and the ability to respond to the changing needs of our customers.”
Superabsorbent fiber supplier Lysac Technologies, Boucherville, Quebec, Canada, entered the hygiene market through the feminine hygiene segment but is now exploring other areas for its SNAP safe and natural absorbent polymers. “We developed the product specifically for the absorption of menstrual flow and feminine hygiene has largely been driven by comfort and fit, said Vladmiro Nettle, business development executive for Lysac. “There is much more consciousness over how each component impacts the total performance of the product.”
The fact that Lysac’s products are hypoallergenic has contributed to much of their success in feminine hygiene, where there is more consciousness over how each component impacts the product’s total performance. Executives feel that increased demand for products that are pure and nonabrasive will help its transition into diapers. “It is important in all hygiene markets that you focus on many variables including the company you’re dealing with, the culture of the market and the customer itself,” Mr. Nettle said.
Meanwhile, a key challenge in adult incontinence is increased stretchability in pull-on style disposable underpants. The target user in this category wants to maintain an active lifestyle despite incontinence problems. This has paved the way for stretchable foam materials, which have been added to side panels in light incontinence products. “Foam is good because you don’t need as much (as fluted elastics),” explained David Holt, sales manager for hygiene products at Caligen Foam. “A main plus for foam is that they don’t irritate as much as elastic threads. It’s very soft, making it much more comfortable for the user.”
Finding A Balance
Now that hygiene products have undergone a period of innovation, the next challenge for manufacturers will be to continue improvements without hurting themselves. The term disposable connotes lower costs and some added features could bring diapers closer to the durable segment. The challenge for components is to continue to add features and reduce prices to the consumers to make the item have the same value proposal it has always represented. Still, it is a fact that, in addition to filling a need that has never before been filled, personal care products are gaining marketshare on traditional textile segments.
So, diapers are constantly looking to raise the bar in terms of performance, fit and appearance and are relying on their suppliers to help them achieve this. Therefore, one way to reap success here is to develop a new technology that both large and small players cannot result. Before long, everybody in the market will want to achieve this new innovation. “The way that hygiene market works is a large player has to innovate and then patent that innovation,” Lysac’s Mr. Nettle explained. “This creates a challenge for the rest of the industry to develop that same feature without infringing on the patent.”
And, if a company were able to achieve this, loyal customers would not hesitate to present their problems to their trusted suppliers. “We have customers that have actually designed their diapers together with us right from the beginning because the tape tab has become a very important part of the entire diaper,” Koester’s Mr. Göller said. “A lot of of our individual solutions respond to the different needs of our customers. We do this by working extremely close with the companies.”
Down the road, component suppliers will certainly continue to work hard to woo customers. At this point it’s anybody’s guess what all of these efforts will lead to in the hygiene industry. “The biggest challenge in commodity products is being able to act on a large scale quickly and be able to move quickly as the diaper changes,” explained Clopay’s Mr. Norman. “What you are going to see is diapers with many additional functions. The old ones—fit, absorbency and comfort—will stay the same, but new ones, determined by manufacturers and consumers, will also emerge.”