Always Changing…
An International Diaper Market Overview

A MARKET OVERVIEW

Perhaps no other business is as subject to change as the business of diapers. After all, diapers were made for changing, and all this change is a challenge to the giant companies that have consistently fought to compete and survive in this highly competitive business. We all know the main players; Procter and Gamble and Kimberley-Clark; monolithic companies well-equipped to take on the big business of babies bottoms.

These two firms control 80% of the global market for diapers.1 P&G’s Pampers is the world’s best selling diaper, with baby product sales estimated at over $20B in 2014. KC’s Huggies are next in line with worldwide revenues estimated near $7B last year. P&G dominates in the U.S., but K-C’s Huggies are increasingly strong in developing markets such as Eastern Europe and China. While these two behemoths battle it out, Asian companies such as Unicharm are steadily making inroads; providing true competition in Asia and setting their sights on U.S. markets and a place among the giants.

Today’s premium diapers are a far cry from the cloth garments of yesteryear. Ongoing advancements in fabrics, absorption capabilities, and special user-friendly features keep competitors scrambling to keep up with each other. Well-known industry consultant Carlos Richer puts it this way. “There is no time to rest … Innovation and cost optimization by the use of higher manufacturing efficiency will be the key for survival in the next years.”2

Changing a diaper is a lot like getting a present from your grandmother – you’re not sure what you’ve got, but you’re pretty sure you’re not going to like it.
— Jeff Foxworthy

Big Marketing Themes

Many key marketing themes have emerged in recent years. Experts we queried mentioned several trends that have affected diaper sales and the ways in which they are sold.

U.S. Birthrates have been an ongoing issue. “In 2008, birthrates began falling dramatically before bottoming out in 2011. However, the numbers largely leveled off in 2012, leading many to believe that a rise was imminent and that birthrates would recover steadily along with the economy. But now, even as the economy shows modest signs of improvement, birthrates have dropped yet again.”3

Multicultural Consumers have caused diaper manufacturers to reconsider their messaging to make it more relevant to a changing U.S. demographic. In recent years, an emerging Hispanic population has driven birthrates in the states, although numbers among this group have actually dipped, as well.

A Proliferation of Online Bloggers and parental advice-givers often leave new parents confused as they sort through profuse amounts of conflicting advice. The question becomes, who do I listen to? Diaper manufacturers need to assess what parents actually want and need and then be the source of expertise these parents clamor for. After all, parents will go to the source before they look elsewhere.

New Purchasing Channels have significantly evolved over the last 15-20 years. Internet outlets such as Amazon.com have parents shifting to online delivery and subscription services as opposed to traditional brick and mortar stores. In the words of some industry insiders, Amazon and their ilk are “Giving brick and mortar people nightmares.” Even Wal-Mart and Target struggle to match the prices that big online retailers can offer.

Increased R&D Investments by Vendors are seen as a developing trend in the diaper market. “The investments are aimed to enhance the bio-degradability of the product and its safety for usage. The designing of diapers as well as the usage of improved and beltless technology are the focus of the R&D investments. Also, investments are made by the vendors for protection of their brands and to prevent infringement of copyright by other low-cost producers.”4

A New Push For Innovation is underway as diaper manufacturers are forced to consistently upgrade their products to keep pace with the competition. Whether umbilical notches or designer prints, companies fight to distinguish and elevate their brands despite the fact that all innovations are soon copied or improved upon by others. Some feel this scrambling to add new bells and whistles is unnecessary, and that such efforts serve only to fragment diaper manufacturer’s original core offerings. What some call innovation, some would call a line extension or simply a different color. Absorbency is innovation, thinner is innovation, new materials, chemistry advancements, gels, or creating a diaper that fits a premature child, this is innovation. Cartoon characters, perhaps, not so much.

Here’s what other voices said …

“There are basic things that moms want diapers to do. They want them to absorb. They want them to not leak. They want them to fit properly. They want them to keep their baby’s skin healthy. The moms who want more than that will buy a diaper specifically because it helps do what they want it to do, but it’s not about new bells or whistles on it. Moms generally go on autopilot where they will stick with a brand unless something happens to make them change. They look at other brands when their diaper stops working.”

“Innovations such as dual-strips for diapers help combat sag and answer a mom’s need. Skin health keeps moms awake at night. Amazing new liners for newborns minimize rashes and solve another problem. Umbilical notches solve yet another problem. Of course, innovations are endless when it comes to leakage. Until we find the perfect diaper, these innovations will continue.”

“There is only so much an innovation can do. It needs to work. Parent’s take for granted that they work. Parents of toddlers are flailing around looking for a source of expertise. The people who make the products are not communicating. They need to provide more than the diapers.”

“Does it work? That is the number one priority. People enter and exit the diaper stage quickly, unlike toothpaste, which they will use for their entire life. Innovation is not as crucial in this limited time window. Companies are innovating to stay ahead of the competition and to look superior on the shelf.”

“Innovations such as Grip-Strips can provide differentiation, but how can they be marketed to make moms feel like good mothers? Rational/emotional tie-ins have to be established. Diapers are significantly different than 20-years ago, but the function is still the same. Some innovation is lasting and makes a difference, but there’s a lot of copying of intellectual property.”

Innovations will invariably keep coming. For instance, “The launch of the Drylock Toujours diaper has started a new trend—diapers without any wood pulp. “Fluffless diapers are the products of the future because they offer superior comfort for the wearer and a more intimate feeling for the caretaker, and they present clearly visible ecological advantages as they eliminate the need to cut down trees just to produce a disposable diaper,” says Drylock CEO Bart Van Malderen.”5

Seeking An Emotional Connection beyond functionality and technical improvements, Procter and Gamble, Kimberley-Clark and emerging players are reaching out to parents and are touching heartstrings with resonant, feelings-based advertising and communications. New opportunities exist for large companies to get closer to their customers in meaningful and, ultimately, profitable ways. Digital channels allow manufacturers to develop one-on-one relationships with consumers. The winners will figure out exactly how to forge these associations.

What provokes emotional responses as much as a new baby and all the inherent feelings one has for that child? Diaper producers know they need to reach consumers on that emotional level. Whatever platform is used to facilitate the message, that message needs to be, “We get it and we know what you are worried about. Let us help you.” New parents need grounding – something more solid than they are getting at the moment. This presents a golden opportunity for companies to meet this need.

In talking to moms and meeting them; understanding their needs and fears, it becomes easier to craft appropriate messages and build lasting customer relationships. To this end, social media has been helpful in allowing for intimate, two-way conversations between manufacturers and their customers and facilitating community-building. Moms are often stressed and feeling alone in the first few months after their child is born. Reaching out on an emotional level can diffuse the sometimes cold nature of the digital space and provide a more analog-type interaction.

Our Experts had More to Say on the Power of Emotions in Advertising …

“All brand marketers want to create an emotional connection between their consumers and their brand. It’s something you have to be careful of because you need to make sure they are connecting with the right thing. You can’t force someone into a relationship. Some companies in the past have tried to push that to a great extent. If consumers feel they are being pushed, they are not too happy. We all want some kind of a connection, but you can turn people off if you do it the wrong way.”

“It’s important to talk to mothers about what they really care about. Often, they are very emotional and just want what is best for their baby. It’s important to describe the benefits of your product. Huggies Second Hug campaign did a great job of portraying Huggies as a type of second hug.”

技術進步 in Communication have forever altered the way companies connect with their customers. In the past, most viewers had only two or three TV channels to watch. Today, the proliferation of satellite and cable channels offers people an almost infinite variety of programs to watch. Conversely, with viewers dispersed among more and more channels, it’s become harder to reach them. Besides television, consumers are now immersed in laptops, tablets, mobile devices and more. With the marketing arena so fragmented, diaper manufacturers are scrambling to ascertain the best ways of reaching the most people effectively and economically. Today’s consumers have more savvy because they are armed with information. The challenge for diaper companies is to create truly authentic platforms for their brands.

The Proliferation of Products that are available today offers diaper customers more choice than ever. But, is that a helpful development? The shelves at Wal-Mart and Target are stocked to the rafters with baby products in infinite variations. Customer confusion is high.

One Person’s Opinion …

“Diapers work better today. The leakage rate has been cut in half. Mothers are using fewer diapers. There is less changing urgency. These are fundamental drivers in our industry.”

The Expanding Role of Social Media

It’s no surprise that social media is playing an increasingly important role for diaper manufacturers. It reaches modern consumers where they live, forges meaningful relationships, and disseminates information in new and pertinent ways. We asked industry insiders for their thoughts on the relevance of social media to the diaper business …

“These days, we’re targeting moms aged 25-35. Social media makes it easier to deliver coupons and incentives. It keeps people in your camp. Social and digital are extremely important to messaging our target audience.”

“Social media allows us to identify specific shoppers of interest and to find the social influencers. These influencers can be incentivized to promote our products. We know that a lot of moms follow Momblogs. Social media offers us a more personable voice to deliver our brand messages with.”

“Moms are quick to complain in a LOUD voice on social media. It forces brands to be relevant and to engage in real-time. Diapers are expensive, so moms are ready to tell you exactly how they feel. Sometimes damage control is necessary. We monitor social media at all times, tracking category and brand to help with our real-time reactions.”

“We are aware of the cultural reverence for celebrity. Bloggers with higher standing are often considered experts simply because of their popularity. However, they are NOT always experts. The Alicia Silverstone vaccination case comes to mind. MD’s and Pediatricians often don’t have time to answer the smaller questions – so, the more subtle stuff is left to others. Social media is evolving daily and is essential to parents. Corporations sometimes don’t know how to respond because it’s happening so fast. It’s also hard to address general issues because everyone thinks their kid is different.”

“Today, all of the brands are shifting to social and mobile. There’s a perception that you can hold a baby in one hand and a mobile device in another. Of course, great content is available for parents and mobile makes it easier for us to target them.”

“Despite the popularity of social media, nothing beats first hand advice from grandparents, nurses, and doctors. Their recommendations are more impactful. It really trumps the online experience. Social media advice just doesn’t have the same credibility. Often, you don’t know the intent.”

Pro or con, social media and mobile communications are not going away and will only be further utilized in the days and years ahead. Inevitably, improvements and increased knowledge about how to use these tools effectively will make them increasingly important to parents and diaper brands alike.

Online Groups for New Moms

MomBlogs and websites dedicated to new mothers and their babies are proliferating and proving to be increasing popular. Of course, diaper manufacturers want a piece of the action. What better way to get moms involved and indoctrinated to a specific brand than listening to moms in mother’s forums and in blogs, and then reacting and interacting in real-time to forge lasting relationships and customer loyalty?

It’s online that mothers talk about what’s important to them. They are willing to share their hopes and aspirations. Diaper companies have only to listen and provide real solutions to everyday parenting problems. They have to bring value to the equation. Of course, they can’t just muscle in. No one likes a gate crasher. Rather, by willingly sharing knowledge and being part of the online community, diaper makers hope to be invited to participate.

MomBlogs can alert parents to specific deals companies are offering and provide many areas for additional outreach. Through donations of products to diaper banks, churches, social services programs, even baby showers, MomBlogs and baby networks broadcast the message that diaper brands are there for their customers and for those in need. Essentially, they care and are a partner for life.

The E-Commerce Affect on Diaper Sales

Today’s diaper market has grown increasingly complicated. With emerging international markets, fierce competition from large players, e-commerce outlets, and budget brands chipping away at the edges of profitability, brands need keen awareness, deep pockets, and savvy navigation to commandeer their place in the market and/or just plain survive. It’s not going to get any easier, either.

Creating brand awareness is imperative; letting consumers know exactly why they should buy a given product and how it will solve problems and improve their lives. Of course, products must be carefully differentiated from those of the competition. Also, it is crucial that it is actually available to purchase. Poor distribution can undermine the best laid advertising. Most importantly, once a product is the hands of a consumer, it should meet and exceed their expectations.

One of the biggest challenges to traditional diaper manufacturers, and to the brick and mortar stores that have been their bread and butter since time immemorial, are the online merchandisers. Contemporary consumers are increasingly enamored with buying online for the sheer ease and convenience of it. In many cases, it’s cheaper, too – and in this case, diapers are delivered right to the buyer’s doorstep.

Amazon.com is the 800 lb. gorilla and the looming behemoth in online sales. Diapers.com cast a pall of fear in the hearts of the industry giants, make no mistake. Consumers find low prices, bulk availability, and cyclical delivery very much to their liking. Target has jumped into this fray, as well and it remains to be seen how P&G and K-C will respond and deal with this very real and looming threat.

To date, online sales and registries are significant. Moms registering online are receiving free baby gifts and they are liking the experience. It’s changing the game, but the full impact of online sales has yet to be accurately assessed. Most sources feel the phenomenon will continue to grow. For one thing, e-commerce seems to lock-in customer loyalty. Online purchasers are incentivized by being offered

discounts to subscribe, thereby signing-on for monthly deliveries. For now, e-commerce and its main proponents are a threat mostly in larger cities where there services are more convenient practically applied. For the future, it remains to be seen if they will be the death knell for the diaper business as we have known it.

For huge companies like Procter and Gamble, online sales integration is well underway, with 30% of sales already taking place online. P&G, the world’s largest advertiser, continues to build awareness and meaningful connections with their consumers through this online experience.

Here are Some Reactions We Heard Concerning E-Commerce in Relationship to Diaper Sales …

“As far as diapers.com, the younger people are, the more they buy online. The 25-35 age group is a huge presence online in the whole baby category, especially when it comes to subscription businesses, the Dollar Shave Club, Never Run Out, and automatic delivery services.”

“Amazon bought diapers.com for $550million. They want to OWN babies, not just diapers. They want to make sure that WalMart doesn’t own them. Of course, this type of business leads to strollers, clothing, and other baby products. K-C and P&G are starting to go consumer direct, but they are treading lightly because of WalMart and other brick and mortars.”

“Brick and mortar will always be an important component of diaper sales because not everybody is the plan ahead, stock up kind of a shopper. I Online does really well for people who plan ahead and stock up, but for those people who get down to the last couple of diapers and have to run to the store, they can’t get away from brick and mortar, because it’s more immediate. You can get it right now.”

“Parents are so busy. The convenience of e-commerce is undeniable. It’s always nice to be able to pick up and hold stuff, but there’s so much offered online and people are busy. Online is compelling.”

Other Media Trends

The word is digital, digital, digital. Procter and Gamble is reportedly going to 70% programmatic buying, where ad purchasing is decided by machines. Television, while still important, is just another component of the overall outreach mechanism. Today, diaper branding, advertising and promotion are conducted on many increasingly critical platforms. People are looking at mobile devices, tablets, cell phones, dual screens. Needless to say, they are completely immersed in social media. It is, indeed, a digital world. The genie is out of the bottle and anyone not fully engaged in this brave new world is sure to be left behind.

These days, product differences can only go so far, so brand equity is truly imperative. Product and brand-focused PR is becoming more and more important. Case in point, Huggies innovative Hugs Delivered campaign that provided plane tickets for relatives of newborns to see new additions to their families. These types of efforts develop positivity in brand association and mark a new way forward for effectively creative diaper marketing.

Taylor-Made for P&G?

“Procter & Gamble has named company insider David Taylor as president and chief executive effective Nov. 1, 2014. The executive, who heads P&G’s global beauty, grooming and health care division, succeeds A.G. Lafley, who will stay on with the Cincinnati company as executive chairman.”6

With the advent of the Taylor-era at P&G, the new CEO will face unique challenges. Coordinating continuing divestments in an effort to scale-back bureaucracy and reconfigure leadership roles, CEO Taylor will have to deftly guide P&G’s still evolving strategy for growth in the 21^st Century. Pampers is companies largest single brand, with sales exceeding $10Billion annually. Taylor will need to focus on P&G’s core categories with the greatest potential opportunities to create value for shareholders. Already, major divestments of Spectrum, Mars, and Duracell have trimmed the company’s roster to a leaner 65 umbrella firms that represent 86% of current revenues and 95% of P&G’s profits. Their previously “long tail” has been shortened as the diaper giant concentrates on core sales.

“Investors should expect sales growth and profit trends to improve now that management’s strategic brand-shedding initiative is a wrap. P&G has cut more than 100 underperforming brands from its portfolio, leaving just 65 leading brands across 10 product categories.”7

P&G Here and Now

2014 looked good for P&G. Reasons for this were myriad. Among them; an emphasis from the company on staying close to consumers to better understand their needs and desires, all for the purpose of developing new products that directly address the needs of customers and their babies. Sensing that parents want diapers which are more like underwear, P&G created a thinner, lighter diaper with smaller packaging to increase sustainability. They also extended the Swaddler line through the toddler stage and offered good Sku offering to retailers.

Despite share point gains in 2014 and a change in leadership, 2015 has been anything but smooth sailing for P&G’s diaper business. “The consumer-goods giant posted earnings results last week that showed a worsening sales slump: growth slowed to a 1% pace for fiscal 2015 — down from 3% last year. P&G, which derives roughly two-thirds of revenue outside the United States, also reported lower-than-expected quarterly sales and profit as the devaluation of major currencies, especially the Russian ruble, versus the dollar ate into profit.”8

P&G’s “Changing” Diaper Strategy

Within the company, there is a realization that core brand equity must not be undermined. P&G knows that they have earned parent’s trust with Pampers, but now there is an ongoing need to drive technology and move the needle forward. The competition is fierce, so P&G is forced to keep providing ever-better and more innovative versions of Pampers and Luvs. In doing so, they will continue to develop and implement strong social messages and strive to achieve better sustainability.

Some worry that the end game where diapers are concerned is private labels where no one in the category is making a profit. Time projections for this possible eventuality range from two to twenty years down the line. Other hurdles exist for P&G, as well. Amazon has been crushing competitors with low prices and easy online availability of their products, while Wal-Mart has begun to introduce shelf-stocking fees for all of their vendors. As a downward pricing trend continues, it may become harder and harder for Procter and Gamble and Kimberley-Clark to stay profitable in the diaper business.

With P&G in the midst of a changing of the guard and of major divestments, might the company see a resultant growth in its diaper business? To do so, they’ll need to produce growth in their top product lines. Meanwhile, “emerging markets have proved a minefield – June sales in Russia dropped 57% year-over-year – and developed markets have proven challenging for all consumer-facing mega-caps.”9

K-C’s Recent Downturn – Losing to Luvs

There’s no hiding the fact that Kimberley-Clark had a bad 2014. Private labels as well as P&G had a lot to do with this. One continuing problem is K-C’s diaper positioning with relationship to Procter and Gamble. With Pampers on top of the mountain and Luvs locking down the lower-cost echelon, K-C’s Huggies are sometimes perceived as being trapped in the middle. This bifurcation from the premium end and the value end hurts Huggies, especially when many feel that Luvs are comparable in value and delivery. Even Pampers has felt the “Luvs Effect,” as the popular product brings down category value and convinces shoppers that there is no meaningful difference between Luvs and more expensive diapers. In effect, everyone’s losing to Luvs – even their own manufacturer.

Of course, Procter and Gamble has always been Goliath to Kimberley-Clark’s David. P&G is big, strong, and extremely vocal. P&G has much more money to work with, hence, their advertising voice is louder than K-C’s. If Kimberley-Clark has a saving grace, it’s that it may operate more efficiently than its competitors. K-C’s “Every Little Step” campaign, directed by ad agency, Saatchi and Saatchi, has been successful, creating a style and brand guideline, and a 12-month calendar event listing with multiple points along the way for shoppers to take advantage of. The campaign has featured an updated approach to photography and might be considered to be more dreamscape-oriented, or, more “Target-like.”

Huggies are affiliated with Walmart, who may have better Huggies products available online than they do in their stores, but they do not always do a good job of making this fact widely known. As they continue to develop apps, it remains to be seen what effect this will have on Huggies sales. Consumers are seeing some of the products such as Huggies Snug and Dry Ultra at Walmart, which launched in March. That’s much more in line with where Luvs is, and Huggies aims to replicate their success.

Huggies – Where to Now?

We Asked our Experts to Weigh-In on the Future of Huggies Here and Abroad …

“In the past, Kimberley-Clark tried to expand their diaper line into toiletries, baby foods, car seats, and more, trying to make it a megabrand. They found it took too much energy from their prime-directive. Now it’s time for them to focus on diapers, wipes, and pull ups. They need to crank up the research,

hire talent, and assess what moms want. The longevity of improvements is very short. KC will always have P&G and private labels breathing down their neck. Product innovation, the use of cost-cutting materials, and logistical practicalities (being close to materials and consumers) will be paramount in trying to lower their cost of manufacturing and in surviving the long haul.”

“The important thing is that as moms change, KC has to change with them. They can’t trail the market in terms of meeting mom’s needs.”

“Kimberley-Clark needs to launch something that can compete with Luvs. Everyone is losing to Luvs. I’m not sure why they won’t do it, if they continue to lose share. Most moms aren’t willing to trade up.”

“There seems to be a new receptiveness in the Huggies camp of wanting to provide expertise and help parents get what they want and need. There’s a lot cooking. Overall, in the parenting space there’s a lot of room for companies to step in and do outreach to parents.”

“Huggies needs to return to its roots. What IS the Huggies brand? They need to use the hug impression to drive that branding, understanding that it’s going to be a more emotional way of motivating mothers. The brand is about a hug and a mother’s connection.”

The Pampers/Luvs Relationship

We know how it is with Pampers and Luvs. Pampers dominates the premium diaper category and Luvs is the successful, more affordable line. Trapped in the middle is K-C’s struggling Huggies brand. One fact we heard repeated by many was that first time moms go with premium brands. They want to do things right and actually suffer from a good deal of anxiety, worried about doing the absolute best thing for their new babies. However, by the time they have their second child, there is a realization and a relaxation which occurs that allows them to feel that Luvs are “good enough” and more affordable than either Pampers of Huggies. Factor this knowledge in with the fact that two-thirds of the births in the U.S. this year will be to mothers who already have a child and things begin to look very good for Luvs.

As one respondent for this research put it, “Most moms will sterilize baby bottles and they’ll sterilize pacifiers and they’ll wash everything ahead of time. If that pacifier hits the floor, it’s going in the diaper bag and a new one comes out. You hit that second one and you put the pacifier in the dirt and you wipe it off in your pants and stick it right back in there. It’s pretty common.” This whole attitude is reflected in Pampers almost Madonna and Child marketing of Pampers compared to their often humorous presentations for Luvs.

Other Constituencies to Consider

Millennials

“Brands are awfully excited about twentysomething consumers right now, and understandably so. Millennial consumers are now a quarter of the U.S. population and wield somewhere between $200 billion and $1.3 trillion in spending power.”10 Beyond that, millennials comprise over 80% of the people that will become new mothers this year. This emerging generation is tech-savvy and has the tools to research products extensively before any decision is made. Many feel millennials are also less likely to be loyal to retailers compared to past generations unless they feel connected to them. It’s up to manufacturers and retailers to make these connections and anticipate the needs and wants of this next wave of diaper consumers.

Other Voices Said:

“It’s important to connect with millennials. Apple does it well. The question is, what can consumers DO with our stuff? The products have to get away from stats and get more down to earth and emotional. LUVS does it well.”

“There has been a shift to dads actually being decision makers in the path to purchase. Huggies is more unisex in their approach. P&G seems to be clinging to a 1950’s model. There should be more openness for dads coming to the table and more openness to LGBT community.”

“Millennials are always online trying to get expertise. There’s so much information. There are voices saying you don’t need diapers because of sustainability issues. They are misinformed about how long children should be in diapers. Big companies need to figure out how to position themselves as the ultimate experts.”

“Millennials may not be that different and it’s true in many product categories. They grew up with different media choices, but when it comes to diapering a child their needs aren’t different. Green (sustainable) diapers would be the one exception. They need their babies to be dry and to sleep through the night.”

Millennials are less brand loyal unless a given brand takes a real interest in their generation. A millennial might love Pampers, but they won’t go to a WalMart to get them. They might go to Target instead. Or, they will drive an extra 15 miles to go to a different retailer to get an incentive.”

Millennials have different attitudes and needs. Many of them that diaper manufacturers wish to reach will be Hispanic mothers, many of whom will be more acculturated than might be imagined. They do a lot more online than previous generations did. Millennials want instant gratification. They also tend to be more collaborative in their decision making process. If a company is “green,” that’s even better. They tend to find a product that works and then stick with it.”

An Emerging Hispanic Population

As the demographic make-up of the U.S. changes, diaper manufacturers are considering the impact of a growing Hispanic population. Over 50-million strong, Hispanics represent a lucrative population sector and big companies are already laying out billions to reach them. “The Hispanic population tends to be more youthful than the population as a whole. According to the Pew Research Hispanic Trends Project … the median age for Hispanics is 27, compared to 37 for the general population.”11 Though birthrates have cooled recently, Hispanics are still having more babies than other demographic groups in the country, making them a very desirable demographic in the diaper industry.

Grandparents

We hear that grandparents spend a lot of time worrying about the parenting decisions their children make on behalf of their grandchildren. They can also be quite influential in helping young parents make those decisions. Despite common misconceptions, today’s grandparents are quite engaged with social media. They want to help, but often they feel helpless. Grandparents are supportive for the most part, but they can be difficult. The advice they give, while helpful, can sometimes be conflicting. As always, the possibility of generational clashes when it comes to babies and even diapers is real. Wise manufacturers might do well to consider these grandparents in their ongoing outreach, as well.

Larger Diapers – Why The Extra Size?

“In mature markets, especially in the U.S., consumers have demanded large size diapers. Procter & Gamble’s Pampers Cruisers diapers are available in a size range up to size 7 for babies up to 41 pounds. For Pampers Swaddlers, the diaper originally designed for newborns and infant babies, Procter & Gamble added sizes 4 and 5 this year to respond to consumers who want to continue using their “softest diaper ever” with the apertured bicomponent spunbonded liner.”12

With obesity on the rise, our first inclination was to think that this was the reason for all the bigger babies, but as our experts pointed out, the real reasons are myriad. Here’s what they said …

“In the U.S. ,kids are in diapers longer. From a cultural standpoint, parents hope to use the transitional stage between diapers and training pants to get children used to certain behaviors before they begin to wear clothes. In Russia, babies are in diapers for an extraordinarily short time. 9-18 months. Parents want their kids to be in a kindergarten or nursery because they are working, but Russian schools won’t accept kids in diapers, so parents are culturally driven to get children out of diapers.”

“Babies are bigger. Unfortunately, they’re getting hit by the obesity epidemic. The other element is that moms are recognizing that transitions like potty training need to happen when babies are ready. According to the University of Michigan’s medical website, boys will be potty trained at an average of 31 months and girls at 29 months. That means that those kids are a pretty good size. There are still a good number of kids who are going well beyond 31 and 29 months before they’re fully potty trained. Moms need to have the bigger diapers. They don’t necessarily use them the same way that a smaller baby would when they are in the toilet training phase. They’re more for continued accidents and for keeping their child dry at night when they might have more of an issue, but they generally go through conservatively less if you look at how many they use. They use the most when baby is the littlest. As that baby gets older and starts to be able to control bowel and urine habits, then they use fewer and fewer diapers.”

“I think it’s because mom’s want to delay potty training.”

“Kids are bigger not just because of obesity. Generationally, they are getting bigger. We’re potty training later, which is better. This has clinically shown to produce a better outcome.”

“Babies are bigger, but the cause may not be obesity. Healthy prenatal care has been a factor in birth weights going up. Babies are staying in diapers longer because, for the transition stage, there has been a growth and infiltration of pull-up products, pull-ups/trainers, etc.”

“Tipping the scales at 13.67 pounds at birth, Maria Lorena Marin became the biggest child ever born through natural childbirth in Spain earlier this month. … A “bigger baby boom” has seemingly swept the globe, with several records being smashed in countries around the world. … Citing a February report from the medical journal the Lancet, NBC News writes that there’s been a “15 percent to 25 percent increase in babies weighing 8 pounds, 13 ounces or more in the past two to three decades in developed countries.”13

Global Marketing Strategy – Pants-Type Diaper

Recent years have seen the growing popularity of pull-up, or, disposable training pants-type diapers around the globe. This type of product saves time and energy for parents whose children are growing and moving around more. Using pull-up diapers is less time-consuming than using traditional diapers. Huggies has taken advantage of this emerging product-line with their effective “I’m a Big Kid Now,” campaign, pressing buttons of practicality and pride that seem to resonate well with parents.

Several indicators point to continued expansion in this market, including an increasing infant population in developing countries which should promote sales, a bigger global population in general, an increased preference for pull-ups and training pants around the world, and opportunities for private labels to take advantage of this shifting trend.

Fortunately for Kimberley-Clark, they have rock solid patents on pull ups that position the company well to enjoy the high profits associated with this type of training pant. Revenue is generally not as large as with diapers, but they do have a higher gross margin. Initially, Procter and Gamble thought pull ups were a niche product, but sales have taken off like a rocket. Many parents are reportedly substituting Size 6 pull ups for diapers, creating additional profits and inspiring other companies to jump into the arena.

Private Labels and Dual-Branding

For the longest time, Procter and Gamble and Kimberley-Clark resisted creating private labels for their premium-quality diaper products. Today, K-C makes Kirkland brand diapers for Costco. This move has opened the floodgates on premium technology being available in store brand diapers. Quality wise, the Kirkland diaper is first-rate and very close to Huggies. Other companies have now entered the marketplace without the protective umbrella of a larger parent company and are finding success.

“The leading private label companies today produce products with excellent performance and consistent quality. … They have demonstrated the capability to promptly follow the innovations introduced by the brand leaders after the market demand for these innovations is clear to retailers. The lower price positions of private label diapers are a significant threat to the leading brands because consumers are motivated to try private label diapers, especially during periods when consumers’ budgets are squeezed.”14

Our industry experts Weigh-In on Private label diapers …

“The First Quality company has a stae-of-the-art plant, good equipment, and a good product in their Cuties line. Kimberley-Clark and Costco have dual-branded with Kirkland. KC said, “OK, we’ll make the diapers under the condition that Costco only has Kirkland and Huggies on the shelves. Kirkland diapers are made on the same machines with the same materials. They might be slightly less absorbent, but they are good quality and have the same feature-sets.”

“Costco’s Kirkland diapers have the same quality as Huggies. Costco requires that they be just as good. The product is even MORE premium for Costco. More absorbent; to give the Costco customer a premium experience.”

“The Kirkland line is very popular at Costco. The price point is lower and the quality is very good. Multiple kids? Give me volume!”

“Private labels are now making “green” diapers that are biodegradable and offer sustainability.”

“Do the private labels hold back anything? I can’t name specifics, but we’re going to innovate and lend that to our branded diapers. Eventually, it all makes it down to the economy or private labels, but not right off the bat.”

According to Euromonitor …

Although nappies/diapers/pants are expected to have positive growth, the growth rate will slow down … due to the decrease in birth rate… 15

Diaper sales are predicted to have 0% growth in the next five years. Birthrates are down, especially among Caucasians. However, among Hispanic, African, and Indian populations, the reverse is true. Even though birthrates and diaper sales are declining in the world’s population centers, there may be growth opportunities for brands that are able to differentiate themselves and apply their technologies to emerging areas of profitability, such as adult incontinence.

In the United States, the Hispanic sector in places like California and Texas offer opportunities for increased sales. Diaper manufacturers are hoping to indoctrinate Hispanic customers to their brands, creating long-standing relationships. In addition to language challenges, companies must also realize that the new Hispanic customers are also millennials, which are the next key demographic group to be addressed and won over. Understanding cultures and younger consumers at home and around the world are essential to nurturing and developing new markets among new people in new places.

Our Experts had Things to Say Concerning Babies, Birthrates, Cultures, and More …

“Birth rates are just stabilizing. Last year was the first year they were up. Manufacturers have been working to improve the quality of diapers pretty significantly and that generally leads to suing maybe one less diaper a day. It kind of counter-balances the growth rate in fertility. That’s seven diapers a week.

“Some cultures equate “disposable” with not caring for a child correctly, when the truth is, cloth diapers or no diapers can slow the development of a child or cause sleep interruptions. Uninterrupted sleep improves the development of children.”

“Birthrates are flat to declining. Consumers are waiting longer to have babies. The economy is forcing women into the workplace. It’s multi-cultural moms that having the babies. We have to reach them. We also have to reach grandmothers too because they influence family decisions. It’s all about getting close to hearts and rituals.”

“Diapers are stuck in a ‘90’s style of marketing. They have been coasting on past techniques and methods for too long.”

“There is some long-term concern because the rebound hasn’t been more dramatic. The economic downturn has affected things. Kimberley-Clark was actually excited about the birthrates. A slight decline is a good indicator for them. As the Hispanic segment continues to grow in the U.S., it will be a strength for Huggies as they dominate Mexico and Latin America.”

Enter … Big Data

We hear the term more and more these days … Big Data; the aggregation of data from innumerable sources, collated and curated to provide businesses with TMI – literally, too much information. What do diaper interests do with all that data? They will use it to identify potential customers, understand their needs and behaviors, and get a bigger, broader, more comprehensive picture of consumers than was ever before available, but for now, many manufacturers and retailers are struggling to understand just how to harness all that data to improve their bottom line. It’s coming. It is the future.

Listen to the Industry Buzz about BIG DATA!

“It’s significant. Access to big data is extraordinary. The question is … “I know I am wasting half my money, I just don’t know which half.” Henry Ford said that.”

“Simply having it is useless unless you know what you’re looking for and how you will use it. We have access to it, but number one is understanding the consumer, getting close to them, knowing they are the boss, listening to them, addressing their needs, and staying focused. If big data can help with this, it’s worth it.”

“Big data is a lot of talk with little implementation and a lot of legal restrictions. The big players afraid of liability regarding data collection. In the next ten years there will be more strategic ways to use the data. Minority Report is becoming real. Do the young accept it? Completely.”

“I think it has a role to play, but I think insights are more important than big data. You can measure just about anything now and have data available for it, but how meaningful is it? What does it actually tell you? I would rather understand my customer than figure out what big data is telling me. Big data might tell me what she is doing, but it doesn’t tell you why. If you don’t understand why, you can’t change the behavior. It’s more of an analytics perspective than an insight perspective.”

“I think there’s a lot of invasion of privacy issues that people are starting to recognize because they get tracked everywhere. I think we’ll have different ways of tracking things. My guess is that 70% of big data is just numbers that don’t have any kind of implication to them.”

“We care about shopping behavior of moms in an 18-24 month window. Big data can help there.”

“There’s a lot of data. I hope we find a smart way to use it. Is it accurate? What questions are we going to ask it? How will we use it? Hopefully we will use it to be responsive. Being able to voice the concerns of parents in terms that they understand and that makes them feel heard, this is what is important. Big data can help, but the real connection is what’s most important.”

“Big data will be important in mapping consumer behavior. We have more than we know what to do with. Marketing is about delivering the right message at the right time to the right user. This will stay old school a little longer. As we learn to manage big data it will be good for programmatic application and continually optimizing media strategies. Big data can help identify new mothers, their demographic and behavioral characteristics, and geo-location. It can indicate a diaper buying population. Big data will continue to be huge. Interpreting and applying it is the challenge.”

“Big data will be helpful, especially concerning diapers because of the finite term; two-years per child to ring up the sales. Any data that can maximize lifetime value has a huge upside.”

Hospitals – The Critical Connection

In speaking with experts for this research, the importance of hospitals in forming parent’s early preferences for diapers was pointed out as being extremely influential. In many cases, the first diaper that is given to mothers in a hospital setting will be the one she prefers from that point on. Of course, it’s a matter of trust in the health professionals that suggested the specific diaper. Moms don’t want to experiment. They tend to find a brand that works and they stick with it, at least as far as “first” children are concerned. For this reason, both Huggies and Pampers have robust hospital programs in many regions.

P&G has dedicated resources for such efforts and puts a lot of focus on hospitals. They have marketing teams specifically dedicated to this pursuit. KC has been doing their best to chip away at P&G’s present-day hold on diaper contracts with hospital groups. This competition is fierce and ongoing.

Procter and Gamble’s Olympic Outreach

P&G tie-in with recent Olympic competitions in Sochi and elsewhere has been exceptionally successful on many levels. It has proven to be a multi-brand marketing platform for many of the company’s brands. Their award-winning Thanks Mom campaign created a significant emotional connection with mothers, helping to generate an estimated $5B sales lift. Jumping in at the last minute in Canada, P&G was unable to integrate Olympic promotion at the retail level as much as they would have liked. With the success they experienced in the Great White North, confidence was much higher heading into Sochi and London.

The overall Olympic experience has served to raise the profile of P&G’s house of brands. Now they are looking forward to involvement in Rio and Korea, looking at each cycle for its own merits and factoring in the changing dynamics of the marketplace. It’s a challenge plugging in specific brands under one corporate umbrella. Some doubted what customers would actually take away from each campaign. Quite obviously, the doubters have been silenced.

The Emergence of Unicharm

“Unicharm tailors its products to developing countries, targeting the middle class in second- and third-tier cities that other multinationals overlook. The company began a serious push into other Asian markets in the early 1990s. In 1995 it started making disposable diapers in China. When Unicharm enters a new market, it sends some Japanese executives to transfer knowledge and its unique management practices to the subsidiary, but it focuses on building local expertise.”16

Unicharm leads all others in Thailand and Indonesia, and is #2 in China. It has grappled with industry giant Procter and Gamble and others to earn its present level of success, and now Unicharm looks to expand further. Next up: partnerships and acquisitions in Saudi Arabia and Vietnam. Japan remains the largest market for Unicharm.

Adult Diapers for an Aging Population

Major manufacturers are anticipating an increasing demand for adult diapers in coming years as the world population ages. This large demographic group is definitely on the radar of Procter and Gamble, hence the Always line extension and their recent interest in developing female incontinence products. Some believe Kimberley-Clark will follow suit in an attempt to capture diaper consumers through their life’s journey, with additional focus being applied to KC’s Depends line.

“Pull-up pants have replaced traditional heavy absorbent diapers in the case of heavy incontinence. Key Market Drivers (include an) increase in aging population (and the )growing prevalence of urinary incontinence.”17

From an aging population that will soon create an unprecedented demand for diapers and other incontinence-based products, to new markets around the world clamoring for affordable diapers and training pants, the demand will be ongoing in the fiercely competitive diaper business. Will the major players retain their hold on this emerging market, or will their influence wane with the advent of private labels, convenient online e-commerce, and the infiltration of powerful Asian companies such as Unicharm? It remains to be seen. One thing is certain. It’s a business that is always … changing.

Links to source materials used in the creation of this document:

http://www.nonwovens-industry.com/issues/2013-01/view_features/the-baby-diaper-market/#sthash.kPizXSaV.dpuf
http://www.forbes.com/sites/neilhowe/2015/01/28/u-s-birthrate-falls-again/
http://www.technavio.com/blog/pampers-or-huggies-innovations-in-diaper-technology-creates-fierce-competition
http://www.nonwovens-industry.com/issues/2013-01/view_features/the-baby-diaper-market/#sthash.kPizXSaV.dpuf
http://www.fool.com/investing/general/2015/08/03/5-things-procter-gamble-corporation-wants-you-to-k.aspx
http://www.reuters.com/article/2015/01/27/us-procter-gamble-results-idUSKBN0L01BW20150127
http://www.adweek.com/news/advertising-branding/what-if-millennials-are-sort-everyone-else-156771
http://www.forbes.com/sites/elainepofeldt/2014/05/31/three-ways-to-increase-sales-to-hispanic-customers/
http://www.nonwovens-industry.com/issues/2014-01-01/view_features/trends-and-developments-in-the-baby-diaper-market/
http://www.nonwovens-industry.com/issues/2013-01/view_features/the-baby-diaper-market/
http://www.euromonitor.com/nappies-diapers-pants-in-georgia/report
https://hbr.org/2012/05/how-to-win-in-emerging-markets-lessons-from-japan