During the past decade, disposable hygiene products have increased in sophistication three-fold. These products, particularly baby diapers, are thinner, more absorbent and fit better than ever before. Additionally, the advent of design features, such as upstanding leg cuffs and textile-like backsheets have made them more aesthetically pleasing, and a diaper of today bares little resemblance to disposable diaper products 20 from years ago.
While these technological advancements are considerable in themselves, they are even more amazing when you consider how little pricing in the disposable diaper market has increased during this same period of time. This naturally has created a difficult situation for the makers of films, superabsorbents, elastics, adhesives and other diaper components. In order to be successful, these manufacturers have had to raise innovation while lowering their prices—not an easy feat by any standard.
“The challenges in the diaper market are generally associated with price pressures,” said Jim Cree, marketing manager of Tredegar Films, Richmond, VA. “Consumers are demanding more from their diapers but are unwilling to pay higher prices. Many companies have dealt with these pressures through research and development initiatives that lower costs while boosting innovation.”
A good deal of these price pressures can be blamed on the immense consolidation of the diaper market, particularly in the U.S., where only a handful of large competitors still exist, as well as consolidation among mass retail outlets where baby diapers are typically sold. Mr. Cree dubbed this trend the “Wal-Mart-ization” of the business. “When a company like Wal-Mart is only willing to display its brand and two others, there’s not a lot of room for smaller companies,” he said.
While this has eliminated a lot of companies from the diaper market, it has also helped to keep prices down. Companies including Procter & Gamble, Cincinnati, OH, and Kimberly-Clark, Dallas, TX, have been forced to keep their prices competitive against store brands to keep their place on mass retailer shelves.
Another way of surviving in this ultra-competitive market is to keep tabs on market factors by having a strong mix of customers, both global giants and smaller branded and private label suppliers. “Having a good mix of clients enables component suppliers to generate their own market data culled from a variety of sources,” said Robert Van Der Laan, sales manager hygiene of films producer, printer and converter, Delo-Mediane, Lohne/Germany. “If you want to identify with a market, you need to get your knowledge from a variety of customers. This gives you a better overview of the markets you supply and a good indication of what trends are worthwhile.”
A Thinning Market
A few years ago, the hygiene industry was redefined by a series of mergers and acquisitions. More recently, however, this trend toward consolidation has leveled off and now component suppliers are figuring out how to survive in a new business climate.
“You have to be world class,” said David Kearney, global product manager of RadiciSpandex, Fall River, MA. “You can’t be a small supplier who does business on the back of a piece of scrap paper if you want to do business with the big companies, and you cannot survive in the business if you do not do business with the big companies.”
The increased dominance of multinational diaper manufacturers has also put the role of the company ahead of the brand. “This is a commodity market, and in a commodity market, there is no room for brands,” said William Girrier, vice president of marketing and sales, RadiciSpandex. “Brands cost money.”
For instance, unbranded private label manufacturers are improving their products to compete for big sales contracts with giant mass merchandisers such has Wal-Mart and Target. These manufacturers are following branded products by making copycat products that are offered at lower price points.
Consolidation has also led to integration among diaper component suppliers as several points in the supply chain have been eliminated in recent years. One such example is Tredegar Films, which used to solely manufacture elastic films for diapers. But, in 1999, the company forward integrated to produce the entire elastic laminate. “We needed to make the whole elastic feature to stay in business,” Mr. Cree explained.
Additionally, fastener specialist Koester, Altendorf, Germany, has fixed its future strategy on being a flexible and highly innovative system supplier for diaper tape systems, according to director of sales and marketing, Thomas Goeller. “The number of fastener producers being able to offer full range side tapes, landing zones and elastic waist bands has decreased during the past several years, and we see our main advantage as being able to offer the widest range of materials, enabling the diaper producer to reduce its number of suppliers,” he explained.
This trend toward integration is also evident in the component suppliers’ relationships with each other. For a diaper to work effectively, its many components need to work in tandem, creating a situation whereby suppliers need to work closely in sync with other suppliers in the industry. For instance, spandex producers have to work with the elastic adhesive manufacturer as well as the producer of the nonwoven backing on the diaper to ensure that all three products complement each other. If one piece of the equation does not fit, the rest are affected.
“We have to work together because there is so much interaction between the components. The different components actually have to work together to function as a unit,” RadiciSpandex’s Mr. Girrier said. “If we are going to make a change to our product, we actually have to let other suppliers know about it first.”
Another example of this trend toward industry unity can be seen in a recent partnership between Bayer Faser, Dormagen, Germany, and Henkel, Düsseldorf, Germany. The partnership uses Bayer’s “Dorlastan” elastic and Henkel’s “Sanicare” range of adhesives to create a system solution for upstanding leg cuffs and elastic attachments on baby diapers and adult incontinence items.
“This cooperation can help to reduce production costs while offering a high degree of safety and reliability during the production processes,” said Thorston Classen, key account manager, hygiene for Henkel. “Combining the specifically developed Sanicare hotmelts of Henkel with Dorlastan of Bayer with existing production lines can allow manufacturers to cut costs and save time and effort because adapting material from different suppliers is no longer necessary.”
Malte Skirl, marketing manager, Dorlastan technical applications for Bayer, said the partnership saves customers time and effort in developing and adapting materials from different suppliers as well as costs of material savings. “We see this cost-efficient system approach as the next level of a value driver for our customers,” he said. “Our focus is not on generic ‘me-too’ products but on innovative products and concepts that add value to our customers’ products.”
In these times of immense pressure and increased innovation, more component suppliers should form similar partnerships to advance in the diaper market. “If you want to define the essence of the markets in two words, they are quality and cost savings,” Mr. Classen said. “One of the ways to achieve this is through joint development work.”
All The Bells And Whistles
The ever-increasing need for innovation and improved performance and aesthetics has posed several challenges for diaper component suppliers. Where once fit and dryness were the dominant requirements for diapers, now new requirements are emerging, such as breathability, skin care and better tactile properties, that are changing the look and feel of diapers. In fact, some component suppliers predict that technology will evolve to make diapers closely resemble underpants with thinness and textile appeal.
“Consumers are becoming more and more critical, not only of the diaper’s performance, but also its appearance and function as a costly, but necessary, item of apparel,” said Patricia Featherstone, sales and marketing director, for RKW Films Division of Ace, Angleur, Belgium. “Breathability of the diaper used to be a luxury—it is now a ‘given.’ A textile feel is now the norm.”
The changing requirements of disposable diapers have affected every type of component supplier from film producers to elastic manufacturers to adhesives producers. For instance, the trend toward breathability is slowly cannibalizing embossed backsheets as more diaper and san pro manufacturers move toward breathable, textile-like backsheets, according to Delo-Mediane’s Mr. Van Der Laan. “This will force embossed film manufacturers to scale back their capacities and look to target other areas,” he predicted. “In two to three years, no baby diaper will have a standard embossed backsheet.”
Additionally, film technology has evolved with thinner materials, improved additives and more sophisticated value-adding processes, according to Kenneth Swanson, vice president, sales of personal care/medical films for Pliant Corporation, Schaumburg, IL. “The main challenge for film producers in this market is to keep pace with the new technology while maintaining a profitable cost position,” he said.
Elastic producers are facing the challenge of creating elastic films that are more stretchable than ever before while offering breathability. The improved fit of diapers as well as the rise of pull-on youth pants and swim diapers, require elastic films that are three to four times more stretchable than previous generations of elastic films, according to Tredegar’s Mr. Cree.
While the increased amount of elastic is now being seen only in premium diapers, Mr. Cree expects that it will trickle down to standard diapers as more technology is added.
Like elastic, the need for improved stretch has also instigated improvements in foam used in baby diapers, according to Michael Toal, who is responsible for business development at Caligen Foam, Accrington, U.K. “Even at lower densities and thicknesses foam, has shown that it can still offer the same elastic properties as before and achieve the same functional performance.” Currently, foam is found in the waistbands of premium diapers and is being developed for use in leg cuffs.
A main challenge of component suppliers offering side panel materials is considering the sensitive nature of the baby’s skin. “The elastic side panels are obtrusive on skin so their breathability is even more important than in breathable backsheets,” Mr. Cree added. “The side panels actually touch the skin.” Tredegar’s elastic panels are sandwiched between two layers of spunbonded material to give them the look and feel of cotton.
This trend has also extended to fastener producers. For instance, Koester’s “Comfort Plus” tapes are precombined closure tapes featuring soft nonwoven carriers as well as elasticated portions in the tape tab. “The latest developments for new elastic nonwoven hook tabs provide improved physical properties and unique retractive forces to make sure that the diaper stays on the baby’s body, where it belongs, and does not slide down when getting wet and heavy,” Mr. Goeller said.
Koester is also developing a new range of fastening systems to respond to a trend toward new diaper shapes that require soft and stretchable side panel fasteners.
In addition to improving existing diaper components, diapers have been improved by new attributes including lotion systems applied directly to topsheets that help add softness benefits directly onto the baby’s skin. So far, this benefit has only been seen in top-of-the-line diapers, and component suppliers cannot yet judge whether this feature will find its way into more standard-type diapers.
Looking toward the adhesives side of the business, manufacturers have also been affected by more demanding requirements in diaper production. “A critical factor thus becomes the application expertise an adhesive supplier must bring to optimize adhesive use in such severe environments,” said Celeste Mastin, general manager, nonwovens division of Bostik Findley, Wauwatosa, WI. “This can be a differentiating service given today’s challenging use requirements.”
Likewise, adhesive manufacturers are being affected by faster machine runs and textile-like backsheets that can lead to an adjustment or even a complete new formulation, according to Uwe Bayertz, division manager nonwovens, Collano, Sempach-Station, Switzerland.
Searching For Growth
One key benefit to the increased sophistication of diapers is an increase in the amount of some of the raw materials that go into them. In a market that is plagued by high penetration levels in developed areas and economic crises in the less mature, undeveloped and developing regions, manufacturers are depending, to some degree, on innovation and design advancements to increase their components’ role in the market.
One key area seeing a great deal of growth is elastics, where the advent of pull-on style diapers and youth pants as well as a move toward increased fit has increased the material’s role in the market. While demand has been steady in the diaper market, experts expect its role to peak when the material finds its way into the main chassis of the diaper. “As innovation drives elastic prices downward, we will see more proliferation of elastic in the average diaper,” said Tredegar’s Mr. Cree.
“One of the most important aspects of a diaper from a consumer’s perspective is fit,” Bayer’s Mr. Skirl said. “Interestingly enough, for some manufacturers, elastics are still not one of the key raw materials. From a manufacturer’s point of view, this is understandable as the cost contribution of elastics per diaper is relatively small.”
Diaper manufacturers are also incorporating more spandex features in their diapers, but this does not necessarily mean the amount of spandex per diaper is increasing, according to RadiciSpandex’s Mr. Kearney. “As diaper manufacturers become more savvy with their spandex use, they are using finer deniers and lighter materials.”
In addition to increasing in sophistication, the diaper market is also becoming more diversified as consumers demand more variety from their diapers. “What we are focusing on is seeing our product in another way,” remarked Marcy Reichert, sales manager of elastic netting supplier Conwed Plastics, Minneapolis, MN. “We are working on efficiency and process savings while adding more benefits outside of stretch and recovery. This is particularly strong in pull-on style products.”
Besides increasing the role of elastics in the hygiene market, pull-on style diapers have also helped increase the amount of time a youth uses absorbent diapers. This has, to some degree, been caused by social and demographic changes where working parents have less time to handle the abrupt change from a child using a diaper to a child who is toilet trained. In mature regions such as North America and Europe, these transition products have helped to grow the market slightly. Because penetration is at nearly 100% and birth rates are flat or declining, this was an opportunity for a little bit of market growth.
Because this growth is so minimal, the diaper industry is looking outside of the developed regions of North America, Western Europe and Japan for future growth, and component suppliers claim there are many untapped markets for diapers to grow.
“Americans have the mentality that we are the only country with a huge consumer market, and we are wrong,” RadiciSpandex’s Mr. Girrier said. “The more you look at the world, the more you appreciate the scope of local markets.”
Among the markets being eyed for future growth are Asia, the Middle East and Latin America. While these areas are attractive in terms of low penetration percentages and rising birth rates, each presents several challenges in terms of regulations, local competition and economics, reaffirming that all markets, both developed and undeveloped, are important in the hygiene industry.
Already several inroads have been made into Latin America, especially in Brazil, Argentina, Colombia and Mexico, where per capita incomes are rising and people are beginning to view disposable diapers as necessities. Looking purely at market penetration, the Asia Pacific region in total is not as far along in its development, but many component suppliers as well as end product manufacturers have begun to establish strategies there in preparation for future economic recovery, according to Cullen Cooper, group manager of North American sales for the Stockhausen Superabsorbents Division of Degussa, Greensboro, NC. “Ten years from now the success of many companies will hinge on their presence in Asia,” he predicted.
While many companies are looking beyond developed regions for growth, at least one company is still hoping to catch a piece of the mature North American diaper market. Spandex manufacturer, Hyosung, Seoul, Korea, recently entered this market through its subsidiary, Hyosung America, Charlotte, NC. The second largest spandex producer in the world, Hyosung is hoping to provide worldwide access to its premium “Creora” spandex product, according to market manager Greg Hearn. Creora offers optimum modulus and high elongation, which results in improved products for manufacturers. “The availability of our product to the global disposables market will certainly meet with a positive response,” Mr. Hearn said.
Even though the North American diaper market is ripe with problems, including price pressures, consolidation and heightened competition, Hyosung considers it a crucial market for its business. “Even though these issues are real within this market, a substantial amount of spandex is still being used. Our goal is to offer this market a premium product, at competitive pricing. We feel this allows the manufacturer to capitalize through quality of product and raw material savings.” Mr. Hearn added.
A Lot To Absorb
Despite all of the added benefits seen in this era of diaper sophistication, the most important role of a baby diaper has remained the same—to keep the baby dry and comfortable. But, the way diapers achieve this has changed with new technology.
As diapers have become thinner, they have begun to rely on superabsorbent polymers to absorb liquid, thus decreasing the amount of fluff pulp used per diaper. Where once upward of 60 grams of fluff pulp were used in each diaper, modern diapers contain as little as 17-20 grams each. This has changed fluff pulp’s role in the diaper.
“The fiber used to be used to actually absorb and hold the fluid,” said Gray Carter, vice president absorbent wood fiber sales, Buckeye Technologies, Memphis, TN. “Now its role is to hold the superabsorbent and transport the fluid to it.”
For this reason, Buckeye recently developed its “Caressa” fiber, which is designed to work in harmony with high levels of SAPs and maximize the performance of diaper storage cores. “People need a choice as to how they design their diapers,” Mr. Carter added. “This can either improve the SAP performance or allow them to incorporate other features. It gives diaper manufacturers more freedom.”
While the amount of fluff used per diaper has split in third during the past decade, many suppliers feel levels are now at a low because the amounts used currently are necessary to hold the diaper together. Now fluff pulp technology is focused on solving issues associated with leakage and acquisition. The fluff pulp initially absorbs liquid before the SAP begins to function. “The next change in fluff pulp technology that would benefit the consumer would be a radical change in fiber technology,” said Desmond O’Connor, director of fluff pulp sales at fluff pulp producer Rayonier Performance Fibers, Jesup, GA. “You need to engineer a fiber that will make a differentiated product that will add value to the customer’s manufacturing process and portfolio. Our complete and utter focus is on the use of our advanced knowledge of fiber technology to develop and bring to market new options for our consumers.”
To make up for volumes lost through the thinning of diapers, fluff pulp producers, like other component suppliers, are eyeing uncharted territory for future growth. In developing regions, people use less advanced diapers that use more fluff pulp first. Then as the market becomes more sophisticated, thinner and more specialized diapers emerge.
The growth in these regions will help the demand for fluff pulp to grow at a pace of 100,000 tons per year through 2004, according to industry estimates. “Even though the amount of fluff pulp per unit has been reduced through product thinning, unit growth has outpaced that reduction, resulting in continued growth in fluff pulp demand,” explained Marsha Seekins, director of commercial services at Georgia-Pacific, Brunswick, GA.
The radical drop in fluff pulp levels has increased the levels of SAPs used in diapers to such an extent that, until recently, the segment was threatened by shortages in worldwide supply. “In the past, we have faced sharp increases of the amount of superabsorbents used in diapers, but now the amount is stable because it would be useless to add more” said Jean-Baptiste Roques, SAP business manager at Atofina, Paris, France. “Also, fluff pulp prices are going down so suppliers are not interested in increasing the amount of SAPs in their diapers.”
Mr. Roques added that he was unsure whether or not consumer demand would drive diapers thinner. “You still want a fluffy thing on the baby’s diaper so I am not sure if the market is ready for an extremely thin diaper. It might just be a niche market for a couple of years.”
Now that the levels of both fluff pulp and SAPs seem to have stabilized in the market, the next big transformation would be the arrival of the preformed core, a switch some say is inevitable and others say is dubious in the diaper market. “I believe we need to see a tremendous improvement in the economics of producing diapers with airlaid cores before we see the industry convert to this technology,” G-P’s Ms. Seekins said. “Larger airlaid machines and improved delivery have helped but, in such a competitive diaper market, airlaid cores are just not competitive yet.”
Despite uncertainty over whether or not the airlaid preformed core will find its place in the diaper market, fluff pulp and SAP suppliers alike are readying themselves for the change. For example, some fluff producers, including Buckeye, Rayonier and G-P, already produce these types of airlaid materials and SAP producers are all examining their role in the airlaid market.
Because airlaid cores tend to use the same materials as typical baby diaper cores, including SAPs and fluff pulp, the main change to suppliers would be to whom they are selling their products. “We do not really consider airlaid cores to be competition since airlaid is typically 85-90% fluff pulp,” G-P’s Ms. Seekins said. “For fluff producers, if diapers are produced with an airlaid core, it just means that we will ship to the airlaid producer instead of the diaper producer.”
Stockhausen’s Mr. Cooper doesn’t even expect this to change drastically. “If the disposable baby diaper market does convert to airlaid cores, it will not necessarily mean a new customer base for SAP producers,” Mr. Cooper said. “What will probably occur is a three way partnership between the roll good producer, the diaper producer and the raw material supplier. I can’t see any of the points in that triangle willingly giving up their stake.”
While the rapid innovation and constant price pressures have been somewhat taxing to component suppliers in the diaper industry, the increased sophistication has had its benefits. “Innovation is what is keeping diaper production in North America,” Mr. Cree said. “If they were easy to make, diapers would be the next product to be exported from China.”
While this brisk pace of sophistication is sure to level off sometime, suppliers still need to be mindful of what diaper manufacturers have up their sleeves. Just like the arrival of the textile-like backsheet could potentially eliminate the place of embossed films in the diaper industry, a forthcoming new technology could replace any of the components commonly used in the market today. “All that needs to happen to turn the entire industry upside down is one company has to change a component type,” said Delo-Mediane’s Mr. Van Der Laan.
He added that textile backsheets would not have gained such acceptance if fluff pulp prices had not been so low. “When manufacturers have extra money to try things out, that is when new things come along,” he said.
In addition to innovation, growth in the market needs to be gained through education, said Buckeye's Mr. Carter. “The diaper market is heavily dependent on world economies. Our goal then is to market the hygienic advantages of having a disposable diaper on every baby in the world.”