Talking specifically about baby diapers, Ever Green produces both the traditional S-type and T-type diapers, with a variety of features to meet demands from different consumer classes including low, middle and premium tier markets. Ever Green also produces the standard low entry products but also premium products with two absorbing cores, adjustable waistband, double leg cuffs, breathable cloth-like back sheets, etc. and sells its diapers under the brands Natural Baby, Huppy and licensed Backyardigans.
Nonwovens Industry talked with Hong recently about trends in Brazil’s baby diaper market as well as Ever Green’s role in it.
Nonwovens Industry (NWI): What are the key trends in Brazil’s baby diaper market?
Amauri Hong, director, Ever Green: About four years ago, the Brazilian market saw an explosion in the total amount of diapers being produced and sold, increasing significantly penetration levels, especially in the Northeast region of Brazil where the lower tier consumer class started having disposable income to try baby diapers.
Before this time babies in these region either used to go naked or wear cloth diapers. Growth derived from very basic, low entry, low profit margin baby diapers. We are talking about diapers with non-printed standard poly back sheets, top sheets with 10 gsm weight basis and extremely low SAP/fluff concentrations.
Today this scenario has changed a little bit. Brazilian consumers in general are now looking for diapers with improved absorbency and features. The Brazilian market is still very far from the qualities we would normally see in North America, Europe or Asia, or even compared to some of our regional players in Chile or Colombia. However, with the improvement of social and economic conditions among Brazilian consumers, there is a growing demand for better diapers, although at a very slow pace, with better absorbency and better features such as printed laminated cloth like back sheets, higher gramature top sheets with 12-16 gsm and mechanical (velcro) side tapes.
NWI: Designer diapers in limited edition is a growing trend. What are your thoughts on this strategy and does Ever Green offer any such products?
Hong: Some manufactures are trying this by offering diapers that look like jeans or a different design scheme for particular seasons. In my opinion there are more effective trade marketing initiatives to enhance consumer spenditure than limited edition campaigns. Here at Ever Green we have never done this before. What I know is what I hear from the market at the point of sale. Limited editions are troublesome, require extra inventory space because they have to hold this extra sku and the normal ones too, and because they are more expensive, consumers in the end did not see the advantage of spending more for the diaper just because it was a limited edition.
NWI: Are private labelers operating in the Brazilian diaper market and competing with the big brands?
Hong: For some unknown reason, private label companies never developed in Brazil as in the U.S. There have been a lot of discussions, with several alternative answers to why this is the case, but there is one general consensus. The obvious private label customers’ (i.e. the bigger retailers) diapers could not really compete with the leading brands on at the point of sale. Here “competition” is not related to the quality of the diapers. Most manufacturers here in Brazil could actually produce very similar quality diapers like the leading brands, however, they could not “compete” on the price levels.
The entire private label strategy, in theory, is based on the fact that we could deliver the same quality/feature diapers like the leading brands, but at a much more attractive price level. Because there are a lot of manufactures here in Brazil, competing for the exact same shelf space, prices of baby diapers are very deflated—even for the leading brands—leaving very little margin for the private label companies to sell same quality, “cheaper price” diapers for the major private label customers. In the end, there was not really a price advantage in the private label brands over the leading brands because of the very tough price competition, and therefore, no real benefits for the end consumer to buy a private label brand.
NWI: In terms of geography, what are the global trends as well as regional trends that are shifting and shaping the market? Where is growth being driven and how is your company responding?
Hong: In terms of global trends, I think we will continue to observe innovative products originating from the Asian region. We can see very sophisticated products with improved material design and machine runnability on the Asian diapers.
Here in Brazil, as I mentioned earlier, we are still very far behind from the common diapers you see in other parts of the globe, because of the price pressures. Slowly we are moving up. I believe that today there is very little room for low entry diapers as the economical and financial feasibility of such products become harder to meet. Growth will come from the ability to deliver improved diapers with enhanced features at the right price that will fit in the end consumer’s budget. This is what Ever Green is working on at the moment.
NWI: Where is the baby diaper market headed in terms of technology trends?
Hong: At the manufacturing level, every single converter is working on technologies that will enhance process productivity, higher efficiencies and lower waste.
NWI: What are your thoughts on the state of pulp-less diapers and the more frequent incorporation of superabsorbent polymer?
Hong: Here in Brazil there is still a cultural barrier towards very thin diapers. Brazilian consumers tend to mistakenly relate quality of the diaper with its thickness.
NWI: What are the latest product innovations your company has launched in the baby diaper market?
Hong: We have launched several new products recently, all related to improving the features of the baby diapers including diapers with two absorbing cores, with printed cloth-like material, t-shape, etc.
NWI: What are the current market requirements and how is your company meeting them?
Hong: There is an even more demanding necessity towards manufacturers being able to solidify what I call “corporate presence.” This means that manufacturers can no longer specialize in just one single category, for example, low entry baby diapers. Companies need to be able to offer a complete line of products for different consumer categories in different regions of Brazil. Fortunately we have consistently been able to achieve this for the last 26 years. Very few companies can meet our extensive product line not only in baby diapers but in the entire disposable segment with adult diapers, sanitary napkins and wet wipes.
NWI: How closely do you gauge end-user wants?
Hong: We take advantage of our external partner that prepares focus groups in different regions of the country every semester to understand customer demands and needs. The results vary considerably from region to region.
NWI: Please discuss the importance of sustainability issues and or regulatory issues and how these are impacting the market.
Hong: Unfortunately there is little regulation in the Brazilian market. There is a major and strict governing body that regulates all the Brazilian companies’ safety and quality requirements (similar to FDA in the U.S.), called ANVISA. However, there is little or no efforts made towards defining a minimum spec for diapers. Price pressures are a very relevant part of the Brazilian diaper market and you will have different quality diapers at different price points that can mislead or confuse the consumer. For example one consumer might believe he is purchasing a better priced diaper over a more expensive one, but this cheaper diaper has much less absorbency. This makes it very hard for the consumer to decide. There is an urgent need, at least here in Brazil, to differentiate and label the diapers at different quality levels/requirements. This way consumers can then compare prices for the same level of quality diapers.
NWI: Are costs on the rise and are they able to be passed along to consumers?
Hong: Costs are definitely on the rise not only because of the raw materials that are dependent on the prices of PE and PP resins, but also if you consider the exchange rates fluctuations. Because of price competition, an increasing number of manufacturers present in Brazil are fighting for the same market share, prices have not been passed along to customers. Actually we have seen the opposite. Some of the local players are in fact reducing prices.