Taking On the Diaper Challenge

Margins are tighter than ever in the baby diaper machinery sector. Meanwhile, manufacturers worldwide are struggling to increase line speeds and flexibility to keep up with demands of customers in hygiene segments. When it comes to competition and cost, stakes remain high for producers, with a tough war still being waged to offer the lowest priced machines to a limited number of customers.

Similar to many commodity sectors within the nonwovens industry, the baby diaper machinery business is described by producers as predominantly saturated in Western Europe and North America with some room for slow growth in less developed regions. Referring to developed regions, Pascal Chabierski, managing director of French machinery supplier C.P.I.D. said, �Machines run faster and sales levels do not increase. As productivity increases and diaper sales remain stable, the tendency of diaper manufacturers is to stop the machines.� In emerging countries, he said, companies are looking to spend minimum money for machinery. �They want machines with maximum efficiency and the possibility of running with low-cost raw materials. This is due to the low level of sales in these countries and the instability of raw material prices. Also, machines from China arrive on the market at incredible prices,� he said.

In response to competition from Chinese producers, certain suppliers are employing an �if you can�t beat �em, join �em� strategy. Machinery specialist Caldiroli Srl, Castellanza, Italy, is one such company. �Today there is strong competition among hygiene machinery suppliers, particularly from Chinese producers with advanced technology,� suggested Dino Caldiroli, the company�s general manager. In an effort to offer competitive prices, Caldiroli has made an agreement with an unnamed Chinese company to produce feminine hygiene and diaper machines that meet international standards. �We supply our technology by completing the machine with accessories in Italy,� explained Mr. Caldiroli. Competition also comes with the availability of a large number of second hand machines with prices that are attractive to potential African and South Asian customers, he added.

�There is always strong demand for baby diaper machines, but many customers have given up the idea of starting this activity because the profit is not as attractive as it is in the feminine hygiene arena. Our customers are small- to medium-sized companies and we do not produce machines with huge production capacity,� said Mr. Caldiroli.

According to Giorgio Biancardi, managing director of Switzerland-based RML Raynworth Marketing Ltd., the shining frontier among expanding markets such as Pakistan, India and Indonesia is China. �However, in this huge nation, next to steadily rising consumption, you have a large number of Chinese machine manufacturers fighting against each other�s base price to catch the clients,� he said. �Low priced, Chinese-built machines have attracted newcomers and those interested in saving money with total disregard for quality and after-sales services.� Mr. Biancardi added that Italian machinery manufacturer Delta, partner to RML, has responded to intense competition by launching a series of reliable converting lines in a price range that is competitive with Asian-built lines. Delta�s Colibri brand sanitary napkin machines offer efficiency, speed and limited maintenance with a basic machine structure, he said.

Offering his view on a competitive European playing field was Guido Conio, marketing director at GDM, Offanengo, Italy, who commented specifically on overcrowding in the medium speed segment. �This high level of competition leads to price battles. In fact, very few companies are really capable of supplying the converter in all the phases of a new project and offering technologies that create value and give a consistent, competitive advantage. These few are the ones, like GDM, that have invested in R&D during the past several difficult years to improve products and offer both pre- and post-sales services, patent monitoring and raw material suppliers� cooperation. These companies have a market-acknowledged advantage and this permits a marginal involvement in the price battle,� he commented.

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Such market conditions have influenced SSP Technology, an Italian producer, to concentrate on high technology sectors and well-developed countries. Similar to its competitors, the company reports steady sales levels compared to past years, with increasing sales in emerging markets. �Competition in our industry has always been strong. In the last two years it has been even stronger,� opined SSP�s CEO Roberto Crippa. �Some companies lost significant marketshare and consequently tried to recover lost jobs by attacking new customers with tremendously reduced prices and ridiculous commercial conditions. It has been, and sometimes still is, a very unfair and unprofitable competition,� he remarked.

Raw material prices are also a serious problem for the baby diaper industry, according to Walter Cestaro, vice president and sales manager of Cellulose Converting Equipments, Moscufo, Italy. For C.C.E., the hygiene machinery market has recovered during 2004 from an earlier major slow down of investments, as the big international players, which are C.C.E.'s main customers, have finally strongly reinvested.

�However,� explained Mr. Cestaro, �the real threat to our business is the SAP crisis. This is hitting the small players as few have protected themselves with long term contracts with SAP suppliers. We know of companies that have been forced to slow down production, stop converting machines or even close down.� Mr. Cestaro added that SAP suppliers should seriously look into the consequences that this will create, and the damage it has already caused to this market. �No one can afford for the small players to die, or for the disposable hygiene market to become known as a market subject to such great crises,� he said.

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Things Can Only Get Better
One company looking forward to a respite from a stagnant market is Paper Converting Machine Company, Green Bay, WI, which predicts growth in upcoming months. �The market continues to grow and current capacity is being consumed,� commented David Kessenich, former senior sales engineer and newly appointed nonwovens global sales and marketing manager for PCMC. �Current sales are flat or down, but we expect, within the next four to six months, for that to change.� The company, which sells Clipper machines to baby, household cleaning and personal care markets, has focused recent efforts on CIP, fluid distribution and hygienic design for ease of cleaning. Mr. Kessenich pointed to reducing cost and changing the value equation as key challenges in the hygiene market.

In an effort to strengthen its position, PCMC recently opened its new Technology Center for the use and development of its nonwovens business and flexographic printing capabilities. The center is equipped with a complete nonwovens lab line capable of unwinding, treating, printing, coating, embossing, rewinding, wetting, folding in the MD and CD direction, cutting, stacking and wrapping. The technology center is available to PCMC customers and strategic partners for development, training, demonstrations and technology seminars.

Italian machinery specialist Fameccanica also has an optimistic outlook despite what the company describes as a contraction of the market by a third compared to 2001. �The disposable hygienic converting/machinery market went through at least three years of trouble and turbulence due to phenomena such as a world economy slowdown, a political crisis, the unfavorable dollar/Euro exchange rate (at least for European suppliers)�all at one time,� said Giampiero De Angelis, commercial director for Fameccanica.

�In the second half of 2004 the trend changed, and today we can say that growth has started again: we have an order portfolio that fully satisfies us in terms of projects, numbers and dimensions of customers.�

Mr. De Angelis added that in the last three years Fameccanica has gained 35 new customers despite this market reduction. This has been achieved across all hygiene segments, with strong demand in the training pants category, pull-up and light incontinence adult categories and all femcare product categories.

Another machinery supplier honing its skills in the hygiene area is Pavia, Italy-based M.D. Viola Machine Srl. �In the future, the diaper market will become more competitive and more sophisticated,� predicted the company�s Davide Viola. �It is necessary to have a lot of experience, a strong reputation and a good product in order to remain in this market.� M.D. Viola offers customized baby and adult machinery for new products with excellent cost/performance relationships.

Potential Growth: Adult Hygiene
Despite market saturation, rebuilt machinery is an area of potential growth for German supplier BHT Bicma Hygiene-Technologie GmbH. In the baby diaper market, the company reports limited growth for new machines due to lack of demand for additional capacity. However, requests for rebuilds are growing due to new product features and the increased pressure to save material and production costs. In the adult diaper area, Bicma is experiencing continued growth for machines and rebuilds due to the need for higher capacities and demand for more sophisticated products.

When it comes to the market, Bicma reports significant competition that has intensified. �This phenomenon can be observed in most saturated markets in the final phase of a product development cycle,� explained Andrea Allar, sales manager for Bicma. �Reasons are limited market growth rates, high price pressure with margins that are not sufficient for long-term survival and R&D investments, and an increased similarity of equipment,� she said.

In terms of challenges for the hygiene sector, Ms. Allar pointed to price pressure in a saturated market with few equipment suppliers and a high concentration on the purchaser side and demand for quick reaction and short leadtimes. �Competence and know-how are crucial to being a good partner for the customer,� she said.

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Another German supplier pointing to increased activity in the incontinence sector is Bikoma AG. The company reports potential for growth in the area of light incontinence. �There is possible growth for innovative products if they are launched from a market leader like Procter & Gamble first,� stated Bernd G�bel, a member of Bikoma�s board of management. �Competition is tight and only the strongest survive. Constant development and close cooperation with customers are key factors for high-tech and top quality machinery.�

For its part, GDM expects growth in adult incontinence, specifically in developed regions such as the EU and U.S., where investments for baby diaper and feminine hygiene lines are stable. �In those areas, innovation makes all the difference and GDM has introduced many new designs for adult and baby products,� said Mr. Conio of GDM.

He went on to say that there is a different situation in developing markets, where baby care is the driving sector and is still growing. For this specific market, machines for high quality products with low-to-medium speeds and affordable prices are required, he said. To answer this request, GDM has introduced Chroma lines that provide high quality and guaranteed technology at the price of a second-hand machine. Mr. Conio added that GDM�s sales are constantly increasing in comparison with preceding years. �At present, GDM has a portfolio of orders already equal to last year�s total turnover and, with INDEX 2005 drawing near, we will further increase the level of investments,� he forecast.

SSP also cited growth in the adult incontinence arena as well as in the training pants category, where the company sees products being used as replacements or alternatives to traditional diapers, rather than �training� products per se. In response to demand from both the baby and adult diaper markets, SSP offers the Combo machine, a converting line with quick changeover that can produce both baby diapers and adult incontinence products. The company reports that 80% of its production during the last two years was in the area of Combo machines.

Through its continued relationship with fellow machinery supplier Bicma, SSP recently sold a new belted adult diaper machine to a large multinational company. SSP is also currently testing a new high speed Combo machine (400 meters per minute) including all current product features. The company has introduced an adult diaper machine for all-in-one diapers with belts or wings, which has already been installed in customers� plants.

Additionally, SSP is designing new equipment that will be available for delivery at the end of 2005. �With our partner Bicma, we recently developed equipment for producing an improved core formation. It has been installed on many machines and products are commercially available in various European markets,� SSP�s Mr. Crippa stated.

The Flexibility Factor
In addition to demand for faster production speeds and higher quality systems, customers in the baby diaper market are also looking for maximum flexibility at minimum costs. Flexible machinery has been the key to success for C.P.I.D., a supplier that specializes in systems that offer a combination of flexibility, efficiency and price. �We make machinery retrofitting for elastic side panels. Our experience with this new feature is beneficial because we are able to give the most effective solution for the producer,� opined the company�s Mr. Chabierski. �The elastic side panel will be the biggest innovation for the future.� He added that there has not been a major innovation since the leg cuff feature on baby diapers with the exception of raw materials such as hook-and-loop devices. In terms of future market development, Mr. Chabierski recommended close cooperation between raw material and machinery suppliers.

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Fameccanica has also responded to the increased use of elasticized materials with a number of new developments. �In the baby care segment, the introduction of elasticized materials and the growing sales of training pants spurred our development of high speed machines capable of producing both baby diapers and training pants, standardizing the processes and allowing the customers to be competitive in both products,� said Mr. De Angelis. �Furthermore, requests for thinner and higher performing baby diaper cores have impacted the technology and brought on our introduction of a superior core formation system. In the adult incontinence segment, demand for products featuring elasticized ears or adjustable waist belts have encouraged our investment in supplying such technology to our customers.�

In recent months Fameccanica has sold some of its most high-tech machines, particularly in the baby and femcare areas, according to Mr. De Angelis. �High speed and reliable machines are requested by the most advanced and evolved players as a must to reach the goal of reducing manufacturing costs,� he said. The company recently sold a new high speed adult incontinence machine; a new compact 4 meter machine for the production of ultra sanitary napkins tri-folded in the easy wrap mode; and a new fluff core formation system for baby diapers capable of producing a 50/50 mix of SAP/fluff while keeping superior values of pad integrity and a homogenous blend up to 800 pieces per minute.
When it comes to new machines, GDM is another supplier attracting attention in the baby diaper market by offering the ultimate in flexibility. As a specialist in the adult incontinence field, the company reports unprecedented success for its AT-300 line, which combines project reliability and finished product quality with innovation and modular system flexibility. �The line answers the need not only for reliable equipment but for a quality product, without any compromise and at a competitive price,� suggested GDM�s Mr. Conio.

Describing the AT-300 line as a new standard for the medium-high machine sector, Mr. Conio said that the growing adult diaper customers�/producers� expectations for speed, quality and competitiveness were the inspiration for the final design of the line. �Absolute tension and product control, excellence in component design and detailed R&D capability allowed GDM to build this masterpiece of technology,� said Mr. Conio. �Any kind of adult diaper known today can be manufactured at the highest performance standards and the lowest cost on this production line.�

In other recent upgrades to its portfolio, GDM�s modular technology MSS (Modular Supply System) introduced a few years ago on high performing machines (up to 450 m/min) has been made accessible to all. Additionally, the medium speed machine (300m/min) has adopted the modular structure. This project radically changes the means of production, transferring many advantages generated by GDM to the customer: lengthening the profit life of the investment, reducing lead-times, reducing spare parts and simplifying maintenance,� said Mr. Conio.

Flexibility has also been an important consideration for Bikoma, which recently introduced the DEDE 400 system for sanitary napkins, panty liners and light incontinence items. Designed to be flexible and efficient, the new line reduces product cost and increases efficiency. �We sell the DEDE 400 to all categories of customers from private labels to big brands,� remarked Mr. G�bel. �Machines must be flexible in terms of raw material quality. That means even low weight material should run with high efficiency.� The DEDE 400 uses wider material rolls, which are less sensitive and can increase running time. Bikoma�s latest development is a double-layer core with SAP inline.

In the area of rebuilds, Bicma has seen increased demand in the area of absorbent cores as well as technology for inline elastic wings, belts and ears for baby diapers. The company is also selling complete systems featuring core technology and technology for inline elastic wings, belts and ears for adult diapers. In addition to elasticated wings, ears and belts, Bicma is also seeing a trend toward phased diaper backsheets with printmarks, inline airlaid and inline production of highly compressed anatomical discrete cores made of a center layer of fluff/SAP and two outer dusting layers of pure fluff. Cores can be flat or feature pattern embossing for enhanced liquid distribution.

Caldiroli's line for the production of training pants

Also with an eye on flexibility, Caldiroli produces versatile machines capable of keeping up with constant changes in raw material technology. �We are now seeing nonwovens made with cotton fibers for avoiding allergies, soft nonwovens to be used for acquisition and distribution layers, nonwovens coupled with plastic layers, perforated nonwovens and similar products for producing breathable backsheets for diapers,� said Mr. Caldiroli.

For the future, Caldiroli expects innovation to be centered on raw materials rather than machinery. �However,� he said, �we have built a new training pants line and we have begun production of a pull-on pant machine for adults. We are also building a machine for a new, up-to-date model of baby diapers, for which we have high expectations.�

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