Last month, Kimberly-Clark announced it would halt diaper production in Western and Central Europe, areas where the maker of Huggies diapers has struggled since entering the market in the 1990s.
This announcement was not met with surprise by industry watchdogs and many think it will mean good things for the company and the European diaper market as a whole. For Kimberly-Clark it frees up money and resources to focus on other areas like Latin America or Russia, where the company has already seen some success; meanwhile within the European diaper market, the exit frees up market share for both established and emerging companies on both branded and private label fronts.
“The impact on the diaper markets that they are exiting will be positive for private label diaper producers,” says industry consultant Pricie Hanna. “The strength of retailer brands in these countries combined with the lack of category growth is the reason why K-C was not able to achieve attractive profitability. K-C entered these markets too late when they were highly penetrated and had little growth prospects.”
While the news is seen as positive for the diaper market, what about the European nonwovens industry? Sources report already that overcapacity is becoming a problem within the European spunmelt market, with players like Fibertex, Union, Texbond, PGI and Fitesa and Pegas. Last week Czech Republic-based Pegas announced it expected volumes to remain constant between 2012 and 2013 in spite of the K-C announcement, but will this be the case for all of these manufacturers who are struggling to capture market share in an already challenging marketplace?
Some would say the size of the diaper market is the same regardless of the participants so the amount of nonwovens feeding this market will not change with K-C’s announcement. But, new players could have different supply agreements in place, which could result in a major shift in supply and demand within the European market. It will be interesting to see which companies are impacted.
Karen Bitz McIntyre