A Stack Of Issues

By Karen McIntyre, Editor | January 19, 2009

The disposable diaper market continues to be dominated by two multinational companies-Kimberly-Clark and Procter & Gamble-however, these two giants continue to feel pressure from competing store brands as cash-strapped consumers are favoring private label products.

A combination of a global economic crisis with stagnant innovation from the brand leaders has put some serious pressure on the disposable diaper market in recent months. While Procter & Gamble and Kimberly-Clark continue to dominate with respective shares of 36% and 20.5%, respectively, they have been working overtime to retain their loyal customer base with sales promotions, couponing and other marketing efforts.

    “The major brands are very concerned about maintaining share when the consumer’s pocketbooks are squeezed,” said Pricie Hannah of nonwovens industry consultancy John Starr, Inc.

    In the past decades, Procter & Gamble and Kimberly-Clark have basically controlled the disposable diaper market, fighting each other on price increases and other marketing efforts. During the past 18 months, however, rising raw material prices and retailers’ resistance to price increases have limited innovation among these major brands, giving private label competitors the chance to bring their products up to speed. Innovations at the store brand level have included wide, stretchable wings and softer topsheets and backsheets.

Growth Continues

While growth in disposable diapers has tempered thanks to market saturation and declining birth rates, a higher average toilet training age has allowed growth to continue in developed countries. “The average age of toilet training children is going up in many developed countries,” Magdalena Kondej, research manager for Euromonitor International,  said. “Many parents are reluctant to push their children earlier than around three years of age. Two years was the optimal age in the past and continues to be the norm for much of the world. However, the popularity of products with enhanced features such as greater absorbency has allowed parents to delay this developmental necessity.”

    Meanwhile, in less developed world regions, growth continues to be promising. In Eastern Europe diaper sales grew 195% from 2002 to 2007 with expectations for further growth continuing. Currently, per capita spending is just $5 in diapers, less than half of comparable spending in Western Europe.

    “In Russia, increasing disposable incomes combined with an already low birth rate enables parents to spend more per child,” Ms. Kondej said. “As increasing numbers of parents rely on professional childcare, children will be required to wear nappies.”

    Back in the U.S., the diaper market saw a significant shake-up last year when First Quality Enterprises, a maker of spunmelt nonwovens as well as private label disposable goods, announced it would buy Covidien’s private label diaper business. First Quality reportedly moved quickly to consolidate its assets—and trim the fat off its manufacturing costs—but so far no major product design change has been noted. Covidien was a major supplier to Wal-Mart’s private label diaper business, reportedly making the diapers sold under the White Cloud brand at Wal-Mart and these contracts have not been disrupted with the First Quality purchases.

    Meanwhile, private labeler Associated Hygienic Products has a new plant up and running at full capacity in Delaware, OH and is adding another site in Waco, TX, reportedly in response to retailers’ demand for more options in the private label diaper market.

    “I still believe that some areas of the world even under this economic crisis are still doing well,” said diaper industry consultant Carlos Richer. “Most of the countries of North Africa are experiencing growth—Libya, Algeria, other places—and Brazil is still a good option even though there is a short-term reduction in sales. Also, markets that were non-existent are starting to grow, like Nigeria for example, or Botswana or South Africa.”
A New Idea

While no major upgrade has been made to its major diaper brands—Pampers or Luvs—Procter & Gamble is test marketing disposable diapers with replaceable slip-in inserts. Avail­able online only at www.pamperschangengo.com, Pampers Change ‘N Go is a diaper pant with a replaceable slip-in ultra-absorbent pad that is replaced through the back of the diaper. The pad can hold as much fluid as a full-sized diaper and makes diaper changes easier than ever, according to Procter & Gamble.

       While not yet available in stores, Pampers Change ‘N Go diapers are being lauded by mothers on the brand’s website for their ease of use, convenience and eco-friendly benefits however some critics feel that the price—$10.99 for 16 size 4 pants plus $2.99 for a 16-pack of the slip-in refills sold separately—is not justified by the level of convenience they offer, particularly in today’s economic climate. Nevertheless, P&G is reportedly examining a full-scale roll-out of the product.

    Industry watchdogs predict that Change ‘N Go will ultimately fill a niche, or perhaps even a sub-niche, within the disposable diaper market, attracting travelers or other parents seeking convenience. Another key niche area gaining ground is in eco-friendly products. One such offering, like Change ‘N Go, offers the convenience of disposability with a flushable absorbent pad housed inside launderable pants. These plastic-free, flushable refills keep babies dry and happy so they’re less likely to get diaper rash and keep trash out of landfills.

   Other environmentally offerings include Seventh Generation and Nature Baby diapers, which don’t use chlorine or perfumes to limit their impact on the environment. These products have been gaining some ground, winning prized retailer shelf space, but they continue to comprise only a minuscule percentage of sales as consumers tend to not put their money where their mouths are when it comes to eco-friendliness.

         Speaking of environmental friendliness, the disposable diaper market received  laurels in November with the release of a U.K.-government-sponsored study claiming that reusable diapers are more damaging to the environment than their disposable counterparts. The U.K. Department of Environment, Food and Rural Affairs (DEFRA) found that using washable diapers—or nappies as they call them there—is only more ecoconscious if parents hang them out to dry all year round and make sure the water in their washing machines does not exceed 60°C. Furthermore, two-and-a-half years of disposable diaper usage would bear and impact of 550 kg; washing and drying diapers for the same time period would be 993 kg. The results of this study were so surprising to the government agency that officials were hesitant to release them.

    And, the environmental impact of disposable diapers has decreased as diapers have become thinner and easier to transport. Pampers has reduced the unit weight by 40% and its packaging by 80%. Huggies has teamed up with the Carbon Trust to institute the carbon labeling of its products. “While sustainability is increasing in importance in wipes, its significance to consumers will be tested over the next five years,” Euromonitor’s Ms. Kondej said. “If green solutions are available at a similar price point to conventional products than most consumers will purchase the environment-friendly offerings, however they are unlikely to make the green choice if such products are considerably more expensive.”

An Older Consumer

Faced with the challenge of growing sales in areas with declining birth rates and high penetration levels, major diaper manufacturers have sought to extend the amount of time children use their products. This strategy was first implemented in the early 1990s with the launch of disposable training pants, like Huggies Pull-Ups, which aid children in training, and are used by parents as security well after their children begin using the toilet.

    In the past 12 months, both Kimberly-Clark and Procter & Gamble have created line extensions targeting the 5-7 million children above age five who wet the bed. Pampers UnderJams offer all-night protection but are designed to fit more like underwear to help give children the privacy they deserve. Among the features of UnderJams are Nightlock, an absorbent core that helps lock away fluids to help prevent leaks, a low weight design to allow the product to fit more like underwear, a cloth-like feel and varied designs.

    “Bedwetting is a common problem that shouldn’t stop kids from essentially being kids and partaking in their favorite activities, like sleepovers and overnight summer camps,” said Kirk Perry, North American vice president and general manager for Pampers and a father of four. “We created UnderJams with the belief that all kids have a right to privacy. The product is designed with the same quality parents expect from Pampers and is discreet, so kids will have the confidence to experience a routine, active life.”

    Meanwhile, Kimberly-Clark, which was already targeting older children with its GoodNights disposable underpants, has launched boxer-style disposable underwear and sleep shorts for girls that feature odor control for added discretion. These attributes help lessen the anxiety and frustration felt by parents and children coping with the issue of bedwetting.

    “Bedwetting is a condition that many children ages 5 to 12 experience, but will eventually outgrow with patience and time. However, this sensitive issue can affect a child’s self-esteem and ability to relax at bedtime,” said Bob Thibault, president of Kimberly-Clark’s North American Personal Care products. “The new GoodNites Sleep Boxers and Sleep Shorts offer trusted nighttime protection and look more like everyday underwear, helping children feel more comfortable as they deal with bedwetting.”

    Since inventing the absorbent underpants category in 1994 with the GoodNites brand, K-C has continued to grow the category through innovations. In 2004, the company introduced the first and only gender-specific absorbent underpants that feature more underwear-like graphics and styles and custom protection for boys and girls. Within the first year of being introduced to market, these innovations helped produce double-digit gains in the category.

    Beyond the disposable underpants category and some niche areas, innovation has slowed in the disposable diaper market as manufactures have grappled with rapidly escalating raw material prices, a market reluctant to accept pricing increases and high levels of saturation. The goods news, however, is that conditions can not do much else but improve as raw material prices ease and customers recover from the economic uncertainty that has hit the globe these past couple of months.

    “The crisis is a strong one and it will certainly have effects on the disposable diaper market,” Mr. Richer said. “Even though raw material prices are going down, companies are still facing very difficult conditions because these de­creases have not really had their effect, at least not so far.”                               

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