Despite continued escalating raw material prices and improved fit and performance, pricing levels have remained stable in the disposable baby diaper market in recent years as branded leaders have continued to compete heavily with their store brand equivalents. Add to this heavy promotions such as sales and coupon deals and disposable diapers continue to be a bargain for many consumers.
This situation has caused concern throughout the diaper supply chain, however, as diaper manufacturers and their suppliers have had to tighten their margins and find ways to make their businesses more efficient while raising the bar in terms of performance. To combat this, at least one diaper producer has already announced its intent to raise prices. In October, Kimberly-Clark, the maker of Huggies diapers and Pull-Ups training pants, said it would increase prices of its consumer goods 4-7% during the first quarter of 2008, blaming inflationary pressure and higher raw material and energy costs for the raise.
In the past, heavy competition in the disposable diaper market, particularly between K-C and the other branded leader, Procter & Gamble, has led to a rejection of pricing increases. For its part, P&G has not yet announced any counter to the K-C announcement.
Meanwhile, on the private label front, it is too soon to gauge the change in ownership of Covidien’s retail business, which includes probably the largest private label diaper business in North America. Covidien was purchased by First Quality Enterprises, a backward integrated absorbent hygiene manufacturer and nonwovens producer, in a reported $336 million deal in late December as this article went to press.
Formerly known as Tyco Healthcare, Covidien reportedly makes diapers for Wal-Mart, sold under the White Cloud brand, as well as a number of other retailers, and is one of North America’s largest diaper producers.
“The acquisition of Covidien’s Retail Products business is a compelling opportunity for First Quality,” said Richard Martorella, director of finance and treasury at First Quality. “The addition of retail products creates a more comprehensive absorbent hygiene business, solidifying First Quality’s position in our three core areas. Together, the First Quality Absorbent Hygiene division will provide customers with a full suite of premium products serving the infant care, adult incontinence and feminine hygiene segments.
In May 2006, First Quality, already a large nonwovens and private label feminine hygiene product producer, announced it would enter the private label diaper market, a move at the time interpreted as a response to the major retailers’ demand for more diversity in diaper suppliers.
This demand was also credited as the influence behind Associated Hygienic Products’ decision to build a $13.6 million facility outside of Columbus, OH. This new capacity is expected to add to the already competitive atmosphere in the private label diaper market.
This competition, however, is also expected to benefit the consumer, as it should result in increased innovation in store brand diapers. Currently, leading retailers have focused heavily on increasing stretchability in their diapers—a feature already heavily present in the branded arena—but an assessment of store brand diapers on today’s market shows less sophisticated stretch vehicles when compared to national brands.
“The private label market segment has lost share as P&G and K-C have gained it on the premium end,” said Pricie Hanna, vice president of industry consultancy, John R. Starr, Inc. “Private label diaper producers are dependent on their suppliers for affordable elastic fabric materials for stretchable wings and side panels that can be used without violating the many patent barriers that have been erected in this area.”
For cruisers and toddlers, Huggies Supreme natural fit diapers, launched in 2007, feature a stretchable panel across much of their backsheet, to enhance that diaper’s fit, and Procter & Gamble’s Cruisers line, launched six years ago, continues to upgrade its stretchable side panels. Additionally, P&G this summer added the Bear Hug Stretch feature to its Luvs brand to compete against improvements in the private label market.
Meanwhile, in smaller sized diapers, Huggies in 2007 launched its Supreme Natural Care diaper featuring Cottonweave, a cottony-soft covering for newborns. These improvements compete directly with Pampers Swaddlers, which, like Cruisers, is a part P&G’s premium-positioned Baby Stages of Development line. These diapers offer a soft backsheet as well as a soft, apertured topsheet to better contain the runny bowel movements of breast-fed babies.
According to market data, the improvements on the premium end of the business—like Huggies Supreme’s innovations—have robbed share from not only the private label players but also the same brands’ standard offerings like Huggies regular and Pampers Baby Dry. However, Pampers Baby Dry’s recent introduction of caterpillar stretch side panels as well as new stretchable tabs introduced on the Especially For Baby brand sold at Toys R Us and Babies R Us stores are responding to the consumer demand for stretchability at lower price points.
Diapers Go Green
While still a niche, the market for green, or more environmentally friendly, disposable diapers continues to expand with more options for consumers who want the convenience of disposability while maintaining a level of ecoconsciousness.
In an effort to make these products more available to consumers, major retailers are stocking their store shelves with brands once only available in natural food stores. Target, for example, recently began stocking Nature BabyCare, developed by Swedish mother Marlene Sandberg in 1998. These biodegradable diapers were developed to be both eco-friendly and to have an affordable price point so buyers of leading brands would make the switch to help save nature without spending all their money going green.
Among the product's feature are: an “…absorption layer (which) contains a chlorine-free tree; a unique channel construction which reduces the volume of superabsorbents by 50% and a compostable biological maize film that allows baby’s skin to breath. The company also promises that their diapers are soft, thin, comfortable and dry, and at the same time reduce the proportion of chemicals.
Also betting on the viability of green diapers is natural and organic personal care products company Hain Celestial Group, Inc., which last month completed the acquisition of TenderCare International Inc., a marketer and distributor of chlorine-free and gel-free natural diapers and baby wipes sold under the Tushies and TenderCare brand names.
“TenderCare strengthens our position in the natural and organic sector with the addition of diapers and wipes, while meeting the increasing demand by concerned parents for natural products to care for their babies,” said Irwin Simon, president and CEO of Hain Celestial. “We look forward to integrating TenderCare into our business and to broadening their product offerings under the Earth’s Best name and with additional distribution.”
Other green options in the disposable diaper market include chlorine-free diapers and baby wipes as well as EcoBaby, disposable baby diapers made using polylactic Ingeo fibers, which are created using corn.
In addition to products touting environmentally friendly benefits, the entire diaper industry has worked hard to lessen its footprint on nature in recent decades. According to a sustainability report, put together by EDANA, the international association representing the interests of the nonwovens and related industries, the weight of an average baby diaper has been reduced by more than 40% since 1987 while the impact of diaper manufacturing on global warming and summer smog has been reduced 37-43% during the same time period. Additionally, the weight of packaging has been reduced 41% since the late 1980s.
At the same time, the impact that baby diapers and similar product have had on society has been great in terms of improved quality of life, cleanliness, healthier skin, independence and cost-effective convenience, according to the report.
“EDANA and its member companies endeavor to continue this positive trend and welcome the opportunity for open dialogue with responsible authorities at all levels as well as with consumer and environmental organizations to be part of the solution to today’s sustainable development challenges,” said EDANA general manager Pierre Wiertz.
The training pant market has had the double bonus of not only giving diaper manufacturers a more margin-friendly product to sell but also extending the amount of time a child is using a disposable product.
K-C, the company that pioneered this market in the early 1990s with its Pull-Up training pants and has since remained a market leader, recently expanded its GoodNites absorbent underpants line to target older children experiencing bedwetting problems. GoodNites sleep boxers for boys and sleep shorts for girls offer odor control and discretion to help children five through 12 lessen anxiety and frustration in bedwetting.
“Bedwetting is a condition that many children ages five to 12 experience but will eventually outgrow with patience and time,” said Bob Thibault, president of K-C’s North American personal care products business. “However, this sensitive issues can affect a child’s self-esteem and ability to relax at bedtime.”
According to AC Nielsen data, the GoodNites brand currently holds a 90% share of the U.S. market for absorbent underwear. Meanwhile, the company continues to focus on European growth with the launch of DryNites absorbent boxer-style underwear in July in the U.K. Availability of this line is expected to be expanded within the next year.
The training pants market in general has traditionally been dominated by K-C. Procter & Gamble was able to capture some share of this market with the launch of its Easy-Ups product, a part of its Pampers Baby Stages of Development line, in 2001 but reports have indicated that much of this share has already returned to the K-C product thanks to the introduction of a wetness indicating liner that alerts the child to accidents.
According to data furnished by Information Resources, Inc., Chicago, IL, Huggies’ sales of Pull-Ups training pans declined 5.5% to $171 million during the year ended Nov. 4, 2007 while Pampers Easy-Ups sales dropped 4% to $65 million. Huggies GoodNites pants increased their sales 4% to reach $118 million.
Meanwhile, another niche area making money for some diaper makers is the swim pant market where both Huggies (Little Swimmers) and Pampers (Splashers) both have products that are performing well on the market. And, in the private label arena, Tyco Swim Pants—recently purchased by First Quality Enterprises—use a unique machine direction stretch film. The smooth stretch side panels for the product are designed with a specific stretch and relaxation that provide the necessary fit range and comfort for children. Unlike, other swim pants currently available on the market, Tyco’s product uses a non-pulp filament core without superabsorbent polymers.
Technological improvements—both on the branded and retailer level—are certain to continue to define the disposable baby diaper market as its continues to focus on cost pressures and taking share away from the competition. As new capacity comes onstream in the private label market and this segment realizes the impact of First Quality’s Covidien acquisition, surely innovation will continue to rise but the question remains: “Will the consumers pay for it?”