In 2015, consumers continued to seek thinner, softer and leak-free diapers for their babies, and manufacturers have been up to the task. Thanks to innovations from makers of nonwovens, diaper manufacturers have been able to reduce the overall weight of the product by using thinner diaper components and have been able to create a soft to the touch feel with silkier topsheets and backsheets. Moreover, the better use of elastics has allowed for a snugger fit to prevent leaks, while new core technology has allowed for better liquid distribution.

The last year has shown that these innovations are key when it comes to growth, even in the highly saturated markets of North America and Europe. In fact, after sluggish sales in North America in the fourth quarter of 2014, Huggies maker Kimberly-Clark announced it would refocus its strategy to better compete with its top rival Procter & Gamble, the maker of Pampers and Luvs. A year ago, K-C chairman and CEO Thomas Falk said the company would be “making investments in innovation, marketing and relative value to key competition” to improve the company’s performance in 2015.

Fast-forward to the third quarter of 2015, and K-C reported an increase in Huggies diaper volumes—rising in the low double-digits—compared to a low double-digit decline in 2014. “Our second quarter re-launch of new Snug & Dry mainline diapers is on track, and I’m encouraged that our Huggies volumes are improving,” Falk said during the company’s third quarter conference call in October.

K-C also saw success in emerging markets. In Eastern Europe, organic sales for baby diapers were up around 45%; in China, organic sales for baby diapers were up 15%, with volume growth remaining strong; and in Brazil, organic sales for diapers rose 5% despite the challenging economic environment.

Last year P&G also focused its attention towards innovation in the U.S. with upgrades to its Pampers Cruisers and Swaddlers lines. Both were enhanced with Extra Absorb Channels that are meant to help babies stay drier. The upgraded diapers have three absorbent channels in the core of the diaper that distribute wetness evenly and help prevent diaper sag. While the design of Pampers Cruisers has changed, the materials remained the same. On the other hand, diapers in the Swaddlers line now feature a softer outer cover.

“The Extra Absorb Channels within new Pampers Cruisers solve one of the most-long-standing problems that we’ve seen in our research with babies and their caregivers through many years: wet diaper sag,” says Heather Valento, associate director-communications, P&G Baby & Feminine Care. “Ordinary diapers have an unstructured core; when wetness accumulates in the middle, it weighs the diaper down and causes it to bulk, which leads to sagging. Distributing the absorbent material evenly within channels is a breakthrough in how diapers are made, how they work to distribute wetness evenly, and how they fit to reduce sag.”

During P&G’s first quarter fiscal 2016 conference call in October, CFO Jon Moeller said strong innovation, consumer communication, trial programs and a strong online presence had led to solid growth in P&G’s Baby Care segment in the U.S. P&G’s diaper value share was up over 1.5 points in fiscal year 2015, and up a half of a point in the first quarter fiscal 2016. The company expects the latest premium Pampers upgrades to help it sustain this strong momentum.

In other markets, Moeller noted that Baby Care results were weaker outside the U.S. To tackle this, P&G “accelerated premium innovations” for its taped and pull-on diapers, to better compete at the top end of the market, he said. “We’re strengthening our selling resources and programs for baby stores, and we’re improving our point-of-market entry programs to deliver higher awareness and trial of Pampers among new moms.”

Burlington, VT-based eco-conscious brand Seventh Generation also made some upgrades to its baby diapers. Modifications were made to the inside of its Free & Clear diapers where it touches a baby’s skin. According to Daron Byerly, brand manager, Innovation at Seventh Generation, the company has improved how the diaper absorbs and locks moisture away from the skin, so the baby stays drier. Seventh Generation has also upped the absorbent capacity of Free & Clear diapers. “We combined premium absorbency with a snug, comfy fit around the legs and adjustable, re-sealable tabs for a flexible but secure diaper,” he says.

Like other diapers on store shelves marketing softer materials, Seventh Generation launched its own line of softer diapers in 2014. New Touch of Cloth diapers feature an unbleached cotton backsheet.

“The unbleached cotton has an incredibly soft touch,” Byerly says. “These are the first and only diapers made with cotton fibers that are as natural and unprocessed as you would find in the field - cleaned without chemical processes.”

While backsheets are usually made with petrochemical plastics, he says the Touch of Cloth line’s backsheet is made with all plant-derived materials.
In Europe, Swedish hygiene and forest products company SCA has made advances in the premium diaper category. In October, the company launched Libero Touch, featuring a new, very soft and ductile material that provides a better fit and movement around waist, hips and legs, preventing leakage and keeping the baby dry for a long period of time. SCA says the diaper’s topsheet is exceptionally soft, and the outside is composed of a material with a cotton feel that also breathes.

“During the first years of its life, a baby spends almost 24 hours a day in diapers, which means comfort and material quality are absolutely critical,” says Maria Holmberg, global technical innovation manager at Libero’s innovation center. “All the materials and features have been carefully selected to provide total comfort and care for the baby.”
Diaper industry consultant Pricie Hanna, managing partner of Price Hanna Consultants, says this trend of über softness for premium diapers has gone to a higher level in the last one to two years. “I think there is a fair amount of evidence that consumers are really recognizing aesthetics—softness, cushioning, etc.,” she says.

Action in Private Label
In early November, Ontex, a Belgian maker of branded and retailer brand hygienic disposable products, agreed to acquire 100% of the shares of Grupo P.I. Mabe (also known as Mabesa), a leading Mexican maker of disposable hygiene products. Based in Puebla, Mabesa’s annual sales are about €400 million ($434 million). Of these, about 60% are conducted in Mexico, the fifth largest personal care market in the world. The remainder is exported, mainly to the Americas region, where Mabesa has a strong foothold in the southeast U.S. market. Ontex’s entry into these new markets, as well as the establishment of a new Americas division will extend the group’s growth moving forward, Ontex executives say.

In Mexico, Mabesa offers a full product portfolio that includes baby diapers, feminine hygiene items and adult incontinence products and it has become the second largest player across all of its personal care categories with a No. 2 position in baby care. Mabesa’s baby diaper brands include Chicolastic and BBtips, and the company also offers a number of retailer brands.

“I was waiting for Ontex to enter the Brazilian market with the purchase of Hypermarcas,” says industry consultant Carlos Richer. “Instead it decided to purchase Mabesa. In my opinion, it was a better strategic decision. Mabesa has been growing locally and internationally; their own brands in Mexico have been taking market share, especially after the disappearance of Pampers in Mexico last year.”

Hanna ponders whether this acquisition will create another strong private label competitor north of the border. “Mabesa produces under contract, many of the environmentally-friendly diaper brands sold by U.S. marketers—they’ve made a specialty of supplying that segment of the market. She suggests that Ontex eventually may become a major private label supplier in North America now that the company has gained a hygiene plant in Mexico that could be cost competitive for the store brands of retailers located in the U.S. southwest.
Meanwhile, Drylock, another Belgian diaper manufacturer—inventor of the fluffless diaper—continues to focus on innovation in the private label sector. The company has been producing diapers for just over three years, offering a lower-priced low fluff style in addition to the super-thin fluffless premium diaper, both under the Magics name.

In 2015, Drylock’s second generation fluffless diaper debuted with modifications made to the core as well as in the raw materials used for faster absorbency. In the next month or so, Drylock will be rolling out its third generation fluffless diaper that Drylock founder and CEO Bart Van Malderen calls a “textile fit.” The backsheet and topsheet will be softer, and the core will once again be improved, he says. Drylock is also the first to launch a color-integrated diaper concept comprising a color printed topsheet.

“What we see and what we actively put into private label is thinner and softer,” Van Malderen explains. “That’s the direction it’s going. The biggest thing for us was to come up with the fluffless diaper—we keep innovating with even thinner and softer materials that are being used now.”

Magics are currently available in all European countries, and the diapers have also started being shipped to China. Early this year, Van Malderen reveals that Magics will start selling in the U.S. via internet sales.

In the U.S., Dallas, GA-based Bemax Inc., which began exporting and distributing private label disposable baby diapers in 2012, announced in September it would be launching a line of private label disposable diapers and wipes. Promoted under the Mother’s Hugs brand name, the diapers and wipes will be sold and distributed through existing Bemax distribution channels of wholesalers and retailers in Europe and emerging African markets, as well as to buyers online through the Bemax e-commerce website. The first phase of the launch will begin in the first quarter of this year.

“The emerging markets, especially in Africa, are not adequately tapped,” says Bemax’s CEO Taiwo Aimasiko. “We see the potentials these markets offer as more and more people are now using the product. New birth increases and overall decreases in the use of cloth diapers offers more opportunities. Bemax is well positioned to capitalize and bring value in terms of lower prices. Currently there are few disposable diapers manufacturers in Africa. Most disposable diapers are imported.”

Aimasiko adds that private label offers more options for disposable diaper consumers as well as reduced prices. With the popularity in the emerging African markets growing, especially in outside major cities areas, the company expects this trend to continue in the foreseeable future.

Diapers Emerge Elsewhere
Low penetration rates, high birth rates, and growing disposable incomes in many emerging markets have opened up opportunities for diaper manufacturers.

Mumbai-based Nobel Hygiene Ltd. (NHL), which started off making disposable adult diapers in 2000, is gaining traction in India with its Teddyy brand of baby diapers. Kamal Johari, founder and managing director of NHL, claims Teddyy is the largest Indian baby diaper brand.

In India alone, diapers and diaper pants saw retail sales growth of 38% in volume terms in 2014, according to market tracker Euromonitor.

Last February, Nobel gained a $10 million investment from a private equity investor—Aria Investment Partners. At the time of the investment, Miranda Tang, managing director of the Aria funds, said: “Changing lifestyles, evolving social habits and favorable demographics structure, coupled with low diaper penetration, has resulted in diapers being one of the fastest growing FMCG categories in India. The Aria team’s aim is to assist NHL to scale its operation, enhance its brand and prepare it to capture the exponential growth potential in this space.”

Although India’s baby diaper market is growing and is expected to continue on this path, Johari says it’s currently at a slower pace than expected.

Meanwhile, in March, SCA opened its first production facility in India—a SEK 150 million ($17.6 million) investment. Located in Pune in the central Indian state of Maharastra, the plant produces baby diapers under the Libero brand and Tork tissue for the Indian market.

At the time of the inauguration, SCA president and CEO Magnus Groth said, “The low penetration of hygiene products and the large population in India provide the potential for future growth. The plant in Pune will enable us to further leverage the growth potential in India. The investment is in line with our strategy of strengthening SCA’s presence in emerging markets.”

Ahead of the facility opening in Pune, SCA put forth major promotional activities in the country. Groth said SCA’s team in India launched its biggest information and educational campaign in 2014—reaching 2300 doctors, 5000 hospitals and clinics, and 1.2 million mothers and babies in the world’s second most populous country.

Elsewhere in Asia, SCA announced in October a “strengthened cooperation” with Vinda International Holdings Ltd. by integrating its business in Southeast Asia, Taiwan and South Korea into Vinda. SCA is the majority shareholder in Vinda, one of China’s largest hygiene companies.

As part of the agreement, Vinda gained the exclusive license to market and sell SCA’s Libero baby diaper brand, in addition to other SCA brands including Tena (incontinence products), Tork (Away-from-Home tissue), Tempo (consumer tissue), and Libresse (feminine care), in South East Asia, Taiwan and South Korea. As part of the deal, Vinda will hold the rights to these product brands in these Asian markets. Additionally, Vinda will acquire the brands Drypers, Dr.P, Sealer, Prokids, EQ Dry and Control Plus in these markets. SCA says it will continue to provide innovation and technical support for the business.

“Asia is an important growth market for SCA with a large population and low penetration of hygiene products. This transaction strengthens the collaboration between SCA and Vinda and enables us to further leverage on our strengths to build a leading Asian hygiene business,” Groth says.

Subscribe and Save
While disposable diapers themselves offer substantial convenience for today’s parent, adding e-commerce and subscriber services to the mix has been a game changer for moms and dads short on time.

One of the most notable successes in this area has been Amazon Mom, a program through Amazon Prime that offers parents a 20% discount on diapers when ordered through its subscription service. Upon signing up, Amazon automatically ships out diapers of a customer’s choosing when they need them—once per month, once every two months, and so on. Target also joined the subscribe and save bandwagon by offering a 5% discount to customers who subscribe to automatic diaper deliveries.

“Subscription models are trending and they will keep growing faster,” says Richer. “Not only do they keep track of each individual consumer by suggesting order count and changes in sizes, they also have mastered the art of how to keep consumers happy and well motivated. Club members are their best promoters. They also take advantage of their feedback and provide a strong communication channel between the brand and the consumer.”

Regarding these services, Hanna adds, “It’s a growing, worldwide phenomenon fueled by convenient, free shipment delivery and by the fact that it’s an easy way to ensure that you’re getting good value because it’s so easy to compare pricing online.”

One industry-related issue, she notes, is that these diaper online subscriptions are causing problems for those monitoring market shares, if the retail share audits only track purchases made at the actual retail store and do not include the retail store’s online sales. “The diaper manufacturers, when they sell diapers to Walmart, Target and other major retailers with strong website sales, may not know how many are being delivered from the online orders and how many are going for people purchasing diapers in the store itself. So the audit data can be misleading as it may underestimate the market size and may not accurately reflect diaper share positions in all distribution channels. That issue raises questions on what really is the total market growth and what are the market shares of brands and the private label market segment.”