“We are seeing store brands really staying ahead of the competition, providing the same or even sometimes better quality products and then coming in with a lower price,” explains Svetlana Uduslivaia, head of tissue and hygiene for Euromonitor.
Babies“R”Us, the largest seller of baby products in the U.S., restaged its diaper line earlier this year. The new products, launched under its namesake brand, offer better absorbency, a flexible stretch waistband as well as new playful designs, all at a significantly lower price point than competing Pampers or Huggies brands. Meanwhile its training pants have been redesigned with wetness indicators, an option first seen in Pull-Ups that alerts parents with a fading design when their little one is wet.
“Babies“R”Us is the destination and reliable resource for baby essentials, and as the industry authority, we continually strive to enhance the benefits of products that matter most to parents and that impact their everyday lives,” says Reg McLay, senior vice president, Babies“R”Us. “The redesigned diapers provide our value-conscious shoppers with a lower-priced alternative that matches the quality of other diapers found on the market.”
Uduslivaia says that Babies“R”Us’ position as a major supplier of baby products gives it an edge in the market because it already has a strong customer base. “When there is a good combination of quality and price, products that need to be bought in bulk can really do well on the market.”
However, retailers no matter how trusted must prove themselves to succeed in the diaper market where there is no room for a mediocre product. In the hygiene market, the quality aspect of private label products is more important than in most other non-food categories. These products must perform as well as their national branded counterparts or customers simply won’t buy them, and in response many major makers of private label diapers and feminine hygiene products have worked hard to offer many of the patented protected features found in national brands.
“With private label, especially with hygiene products, quality matters a lot more than in other household staples like toilet paper or tissues,” Uduslivaia says. “At the end of the day the diaper or adult incontinence product has to work. The price might be good but if they don’t hold what they are supposed to hold or if they are causing problems, then they will not do well in the market.”
Online retailer Amazon.com witnessed the perils of an underperforming hygiene product first hand last year when its foray into the disposable diaper market lasted just seven weeks. In late 2014, to much fanfare, Amazon said it would enter the diaper game with its Elements Soft & Cozy diapers, which were manufactured by Canada’s Irving Personal Care. Not long after this launch, users received an email that Amazon was halting production and sales of the diaper to make some design improvements following early customer feedback. One year later, these diapers are still not listed for sale on the website. Baby wipes, also sold under the Elements brand name, are still on the market.
According to industry observers, Amazon underestimated the entry requirements for the diaper market and had no experience properly positioning the products. Its supplier, meanwhile, Canada’s Irving Personal Care, has little experience in the consumer markets.
“Diapers is a big business,” says Tom Wilson, CEO of The Caregiver Partnership and a former Kimberly-Clark executive. “It’s tricky and if they don’t have people with the background, it is really hard to understand the nuances.”
Neither Amazon nor its supplier has commented on specific issues that led to the decision but prior to the withdrawal, diaper industry consultant Carlos Richer tested the diapers as part of a NAFTA diaper benchmark assessment examining 15 diaper products spanning the premium, value and private label segments.
He said the Amazon product was a good one but did not meet the same standards as premium diaper products. “They tried to sell the product as a premium product, not a private label brand, and this created a certain expectation,” he explains. “The Soft & Cozy product line did not meet that.”The diapers received an average rating of 3.4 stars on Amazon.com, about a point lower than Huggies and Pampers, and were priced similarly to the national brands, not including the $99 annual Prime membership fee needed to gain access to the diapers.
To assess diapers, Richer looks at a tripod of properties to define how well a diaper will perform—liquid absorption, rate of acquisition and rewet. In a centrifugal absorption test, he found that the difference in absorption from one diaper to another was inconsistent, showing that the amount of superabsorbent polymer used per diaper could vary by as much as two grams, or 25%, in either direction—enough for a customer to notice.
Another problem was found in the rate of liquid acquisition in the diaper, which was slow even compared to value diapers. This is caused by two factors, the thickness of the layer, which is about 45 gsm, as well as its position within the diaper. “It takes a long time for the diaper to feel dry,” he says.These issues were not necessarily deal breakers for the diaper. What may have presented more of an obstacle is the amount of hoopla surrounding the launch. “There was a lot of expectation. The diaper maybe could not live up to it,” he adds. “Irving Personal Care is a good company and makes a good product.”
U.K. Leads The Pack
While the Amazon launch had its problems, major European retailers have seen success with their diaper lines in recent years. The U.K., thanks to a sluggish economy and aggressive retailers, has been leading the pack. In the past five years, private labelers have seen their marketshare rise from 23.4% to 32.5% in the country and this should hit the pivotal 50% market within the next eight years, according to Euromonitor estimates.
According to experts, U.K. private label growth has been driven by a stuttering economy and lackluster wage growth which has fostered a more powerful deal culture where shoppers routinely hunt down the cheapest prices for their favorite products. This started in less sophisticated categories like toilet tissue and other paper products and has more recently infiltrated diaper and other absorbent products sales.
In fact, private label products have become a key weapon in the supermarket price wars. As consumers are more likely to flip between stores, retailers are aggressively positioning their brands to keep them coming back. European retailer Aldi has attracted new customers with its Mamia diaper brand, which has been heavily praised and promoted on a popular U.K. mommy blog. This has driven up Aldi’s shares in middle-class households.
U.S. customers can expect to see Aldi stores and its products in their neighborhoods soon. The company announced last year it would open 600-650 stores in the U.S., where it already has 1400 stores, as part of a $3 billion expansion initiative.
Also eyeing up the U.S. market is Lidl, a German retailer that has also been offering a premium diaper product with much success. The retailer, which has already set up a U.S. headquarters and distribution facility this year, should have 100 stores in the U.S. by 2018.
Lidl’s success, at least in diapers, has been supported by innovative no- or low-pulp diaper technology developed by Drylock Technologies. These patented-design diapers are just 3mm thick, compared with an average of 8mm, and contain no glue or fluff at the core. The benefits of this slim, fluffless design mean that Lidl can transport 30% more stock per truck and, without glue and fluff, the diapers contain fewer chemicals and are, subsequently, kinder to the environment.
Drylock founder, Bart Van Malderen has described the diapers being not only thin and comfortable for the baby to wear but also superabsorbent due to the integrated fluid management system. Lidl launched the Drylock diapers under its Toujours range in 2012 and was the first U.K. marketer of the technology.
While Drylock remains is certainly not the largest supplier to the European market, which is largely dominated by Van Malderen’s former company Ontex, it has grown in size and influence since its 2012 establishment. According to the company, its products are now sold in 28 European countries and are seeing particular growth in the Nordic regions as well as in France and Germany. In 2014, Drylock rolled out a second generation of its baby diapers featuring a softer nonwovens based on consumer trends in Japan and Russia that are expanding into Western Europe. As 2015 drew to a close, Drylock was rolling out a line of adult incontinence items that included a fluffless adult pant, a new-to-the market product.
Retailers Eye U.S. Market
Back in the U.S., private label continues to exert its influence in hygiene markets with diapers representing a 20% marketshare, according to consumer tracker A.C. Nielsen. Other hygiene categories are also gaining ground with adult incontinence reporting a 32% share and feminine hygiene private label comprising 23% of category growth.
This success has largely been the work of the major private label diaper manufacturers—First Quality and Domtar—who have been providing innovative products that can compete with national brands not just on price but with features like softness, stretchability, comfort and thinness. “We are really seeing some great products coming from the private labelers,” says industry consultant Pricie Hanna. “They are doing a great job for the retailers and it’s working.”
One recent news item that could shake up the North American market, Hanna explains is the recent acquisition by Ontex, Europe’s largest maker of private label diapers, of Grupo P.I. Mabe (Mabesa), the second ranking Mexican branded diaper producer. Outside of Mexico, Mabesa is a leading contract producer of specialized in green diapers exported to the U.S. market and also has a significantpresence in the Southwestern east U.S. private label market. “This moves brings Ontex to the U.S. private label market potentially enabling them to take on First Quality or Domtar.,” she says.
In the U.S. the private label segment shares are often impacted by the short term on the activities of the major national brands. As these brands launch new innovations—like P&G’s recent three-channel diaper core or Huggies’s new diaper pant upgrade—they motivate major retailers to allocate more shelf space, heavily discount their featured products and employ other strategies to promote new or improved products and boost sales. These activities encourage even deal conscious consumers to opt for national branded products.
After a few months of the new product being on the market, however, brands get less aggressive, store brands regain their place of prominence on store shelves and more consumers opt for their preferred store brand.
“What happens in markets like the U.S., is that store brands make significant advances but then they are challenged by new features and benefits introduced in leading brand products–either through heavy promotion or discounting efforts,” Hanna adds. “When people see new innovations in Pampers or Huggies and the diapers are priced very competitively to motivate trial, they will choose them.”
However, even admidst recent innovations among the national brands, retailers, particularly Target with its blue-and-green polka dot diapers, have been able to hold onto marketshare thanks to a loyal customer base.
Even as the national brands continue to innovate, retailers have been heavily promoting their brands. Like Babies“R”Us’ restage last year, discount retailer Big Lots, based in Columbus, OH, launched its own brand of budget-friendly baby supplies, including diapers and wipes.
The new b*loved premium diapers are available in sizes 3-6 and feature a unique accordion-stretch fastener for a comfortable fit and easy changing, according to the company, while b*loved premium wipes are available in scented, unscented and sensitive options. Also included in the line are toiletries such as baby oil, shampoo, lotion and vitamin A & D ointment. The company says its b*loved line products are comparable to leading national brands.
“Big Lots takes pride in providing our customer a great selection of quality baby care products at a price she loves,” says Richard Chene, executive vice president, chief merchandising officer. “At the core of our assortment are b*loved diapers which are made with pride in the USA and have unique characteristics such as accordion-stretch fasteners, contour shaping and a super absorbent core.”
Wipes Gain Ground
Wipes’ role in the private label market is different than its relatives in the diaper and feminine market. While quality is still important in wipes, there are fewer components involved and the stakes are lower.
“It’s not that quality is not important but the differentiation in terms of qualities and technologies is more minimal between what private label and a branded product can offer,” explains Euromonitor’s Uduslivaia. “It’s easier for a private label wipe to compete.”
In terms of market penetration, personal care wipes represent a large segment of the North American market, about 37.3% of total sales, which is the highest share globally. Other markets with significant private label wipes market include Western Europe with a 27.3% marketshare and Australiasia with just under 20%, according to Euromonitor.
“In wipes, it’s a little more established and there are more products available. If you look at different categories, mainly in developed markets, there is already a significant share coming from wipes,” says Uduslivaia.
John Patton, sales manager of Athea Laboratories, reports that 90% of his company’s wipes sales are within the private label category where offerings include gym wipes, multipurpose hand towels, stainless steel wipes and more. He is seeing less of an emphasis on price and more on product.
“Our customers want subtle differentiation,” he says. “Just something to set themselves apart whether it be more natural ingredients, unique packaging, unique substrates or whatever. They want something that is different.”
In fact, he adds differentiation is easier on the private label front than in the national brands because smaller runs allow for better flexibility. “A lot of people are looking for a subtle twist. Using a stock product and adding your own packaging or other personalized stamp is a great way to do that.”
The U.S.’s largest private labeler of dry wipes, National Wiper Alliance, credits its full spectrum of capabilities to its success. “We can print inline and that has been a big driver,” says CEO Jeff Slosman. “We can perforate, half fold, you name it. We have more capabilities under one roof than anyone else.”
Recently, NWA added floor pad converting to its operations and that is already becoming an important business for the company and continues to expand into new markets for dry wipes, particularly on the private label front, Slosman adds.