The growing popularity of these products has been boosted by the increase in the number of working parents with less time to spend at home and changing attitudes toward child rearing. This has not only led to the postponement of toilet training in many markets, it has boosted sales of disposable pants to include products designed to cater to younger children. In addition to easier baby changes, pull-on style diapers offer improved fit and less chance of leakage than their side-fastened counterparts.
One recent innovation in the training pant category is Tyco Healthcare Retail Group�s Soft-Fit training pant, which is made using a filament core instead of a fibrous core that is typical in baby diapers. Calling it �the first true step out of differentiated core technology,� vice president of research and development Don Sheldon said this new technology was created by marrying technologies developed by companies acquired by Tyco in recent years. Originally applied to a pull-on style training pant, the technology could be used in virtually any absorbent product.
Among the benefits of this product, which is being described as the next step in the evolution of diaper technology, is simpler processing for manufacturers and a better fit for the wearer. The absence of fluff pulp in the diaper also eliminates the need for various diaper line components and creates a more environmentally friendly, lighter weight product.
In development for one year prior to its October 2003 launch, Soft-Fit training pants are already performing at 20% above marketing projections. To protect its investment, Tyco has applied for more than 30 U.S. patents covering the technology and has already received six.
A private label supplier, Tyco tested the product with one of its major retail partners, Wal-Mart, and expects the product to be extremely popular with store brands. As for taking it on the branded front, Mr. Sheldon said Tyco will probably leave marketing efforts to its customers. �I don�t see us going through the expense of forming a marketing department,� he said. �We would rather focus on innovation and product development. The diaper market is a commodity market, and the performance of a product should overshadow marketing efforts.�
Still, the relatively high prices commanded by disposable pants serve to restrict their development in most emerging markets, where low levels of disposable income deterred many consumers from purchasing all but the most essential products. However, there have been pockets of growth in Poland and Bulgaria, according to Euromonitor.
Another subsegment of the baby diaper market, newborn items have also posted healthy growth for manufacturers. With most of the major branded and private label players offering these products, newborn diapers have been boosted by recent product introductions as well as manufacturer selling strategies.
According to Euromonitor, emerging markets, including Russia, saw newborn diapers are registering high growth rates due to increasing awareness of the product and a preference for premium quality products among wealthier parents. Sales in Turkey were aided by higher usage levels of diapers for newborns while in Hungary innovation drove growth in the segment. Despite this, newborn diapers saw value growth fall behind standard diapers in 2003 and sales have, to some degree been impacted by falling birth rates in many developed markets.
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In 2003, one of the biggest pieces of news in the North American market was its decline in value. This segment, which is one of the largest markets for diapers in the world, registered a decline of nearly 2% compared to the previous year as intense competition returned to the industry. This drop in value has, to some degree, been caused by a weakening of brand loyalty. Price increases have been met by different changes in consumer shopping habits such as switching to lower cost channels including mass merchandisers and warehouse clubs and by the purchases of larger packages with lower unit prices. Such moves have helped consumers weather price increases, and, through the use of sales and coupons, consumers have managed to hold average prices down to considerably lower levels. This consumer thrift has also all but cannibalized the �convenience package� of diapers, which contained fewer diapers than packages typically found in warehouse locations.
�The value packs, which are boxes with a large number of diapers offered primarily by warehouse clubs and mass merchants, have shown rapid growth in the last year,� said Reed MacFarland, vice president of sales and marketing of Arquest, a Cranbury, NJ-based diaper manufacturer. �The value pack pricing is very aggressive and provides a great consumer value. The price per diaper for the value pack is lower than the traditional poly bags.�
Price is a key motivation in the U.S. where diapers are largely viewed as an expensive necessity. Because consumers are putting diapers directly in the garbage after use, they are often driven to economize. Unlike North America, the Australasia region saw a 20% increase in its diaper market last year, albeit from a low base. This growth in the world�s smallest diaper market was attributed to a high number of households where both parents work, establishing a need for convenient, disposable products to replace washable items. However, declining birth rates have been a major inhibitor of volume sales with manufacturers relying on premium products to generate value.
Like North America, Western Europe has been characterized by maturity and deep penetration and dollar increases (see Table 2) can largely be attributed to the weak diaper. In fact, dollar increases have been hindered by intensive price competition. Consequently sales of diapers in the U.K., a key market, stagnated, and even registered a decline in Germany, France and Spain. In contrast, value sales gained momentum in the smaller markets of Turkey, Sweden and Ireland. In Turkey, this growth was helped along by higher usage levels of diapers for newborn babies as well as new product developments in all age categories. In Ireland, growth was caused by the movement to super-premium products.
Meanwhile, rising disposable incomes have driven demand for diapers in Eastern Europe, particularly in the region�s largest market, Russia. Rising levels of disposable income in 2003 encouraged consumers to take advantage of the widening range of products available, as many key markets increased their investment in the region.
In many countries of Central and Eastern Europe, penetration levels for disposable baby diapers are as low as 30%, leaving a great deal of room for future market growth. However, pricing in these countries must be significantly lower than in their Western European counterparts. �Expansion of the European Union creates the opportunity for private label suppliers to enter into relations with European retailers,� said Hubert Stepniewicz, managing director of Polish hygiene company Hygienika.� We expect that additional time shall be required for the CEE manufacturers to establish proper perception among EU retailers, however we have no doubt that our quality, flexibility and price advantages will be sufficiently attractive.�
In Latin America, diapers have registered strong growth in most markets, driven by a rise in the number of women in the workforce and a subsequent increased demand for convenient, disposable products. Furthermore, these products benefited from aggressive manufacturer activity, particularly on the part of sector leader K-C, which launched new products featuring added-value properties and improved technology.
While diapers and pants registered growth in some developing markets in the Asia-Pacific region, driven by increasing pressure on parents� time, resulting from more fast-paced consumer lifestyles, these products continued to be viewed as expensive luxuries by many consumers, who continued to favor more economical, cloth alternatives.
The degree to which diapers are considered a necessity varies among regions and varies considerably between developed and emerging markets. For example in developed regions such as Japan, Western Europe or North America, most consumers don�t even consider another option. Nowhere is the dichotomy between developed and undeveloped more marked than in the Asia-Pacific region. In Japan, penetration is high and consumers are leading modern, busy lifestyles that demand convenient, easy-to-use products, which can be disposed of and replaced. However, in Vietnam, Thailand and China, low levels of purchasing power, limited product availability and an overall lack of product awareness continued to underpin many consumers� preferences for traditional rewashable cloth products.
According to Euromonitor, in the next several years emerging regions are expected to witness the strongest forecast period value growth, but the Australasian market is also predicted to expand significantly during the 2003-2008 period, as a result of ongoing innovation and growing demand for premium-positioned products. The major factor limiting growth in Australasia, and more so in Western Europe, is expected to be the combination of high penetration and price discounting. Additionally, diapers� and pants� high penetration levels are leaving manufacturers with little choice other than attracting consumers to premium products.
As a result, high advertising budgets, constant new product innovations and attractive packaging are likely to continue to shape these regional markets. At the same time, however, the intensity of competition is likely to force prices down and manufacturers and retailers may well engage in price discounting in order to improve their overall shares.
Meanwhile the changing lifestyles of young urban consumers are likely to cause dynamic growth in diapers and pants categories. The influence the need for convenience has on purchasing decisions can be attributed to the number of women working in paid employment after marriage and childbirth and rising disposable incomes. Whether this phenomenon is seen in Russia, China, Brazil or other growing nations, surely major diaper manufacturers on both the branded and private label sides will monitor them closely to find the best areas for future growth.
For more information on Euromonitor and its Disposable Paper Products Study, please visit www.euromonitor.com.
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