Data / Trend Features
Category Review: Diapers & Training Pants

A Saggy Bottom Line

May 9, 2012
Trans

Private label diaper sales are down, but there are some bright spots.

The diaper and training pants category did not fare well during the late 2000s recession, and although private label offerings gained market share against the national brands, they face stiffer challenges than private label does in other categories.

Overall, sales of disposable baby products fell every year from 2005 to 2010, dropping 8 percent to $3.3 billion from $3.6 billion, and they’re expected to fall another 6 percent to $3.1 billion by 2015, adjusting for inflation.

That’s according to a March 2011 report from Mintel International Group Ltd., Chicago, which attributes the fall-off to two factors: Price sensitivity during the recession and slow recovery, with three-quarters of parents saying they were more alert to sales and bargains in 2010 than the previous year, and a 1.6 percent drop in the U.S. fertility rate between 2008 and 2010.

Euromonitor International notes that the nation’s birth rate per 1,000 people had fallen to 13.5 in 2010 from 14.3 in 2006.

In addition, about three-quarters of mothers who participated in Mintel’s survey said they bought at least some baby products at Walmart, Target, and other mass merchandise outlets, which could continue to exert downward pressure on pricing and the corollary of sales growth and profit margins. And continuing high commodity prices, such as oil, will not help that situation.

Historically high commodity prices have widened the price gap between private label and the national brands, but private label hasn’t won as much advantage as one might expect because of that brand loyalty, says Chris Ferdock, vice president of marketing for Associated Hygienic Products LLC (AHP), Duluth, Ga.

Brands have withstood the higher commodity costs by implementing an industry-wide package down count, he says, adding that “these initiatives helped the big brands absorb the cost of materials because the savings were not passed along to the consumer.”

Private label manufacturers have not been able to pass along these costs because of pressure from retailers, Ferdock says, which “has the potential to force private label manufacturers to cut expenses in other areas, such as promotional funds or R&D, in an effort to absorb the increase in raw material pricing.

“Recently, some retailers have begun to work with private label manufacturers by agreeing to match the national brands’ down count. These retailers understand the long-term implications of partnering with their suppliers in an effort for future investment into technology and innovation to drive the key marketing mix elements.”

LIGHT AT THE END OF THE TUNNEL

The Wall Street Journal reported last fall that the usually recession-resistant category had not weathered the most recent downturn as well as past ones, with diaper sales down 1 percent in the four weeks ending Sept. 4, 2011, from a year earlier. But rash cream sales rose 5 percent during that same period, suggesting that parents might be changing diapers less often to save money.

Mintel sees other bright spots in the category, which Euromonitor measured at $5.38 billion in total market size in 2010, down slightly from $5.42 billion in 2009, but up from $4.87 billion in 2005.

Hispanics represent 16 percent of the U.S. population and have about double the percentage of families with a child under the age of 6 than the general population (23.8 percent vs. 12 percent). Their median income is below average, so mid-market products would fit the bill, Mintel advises.

Although disposable diapers and training pants saw sales fall 2.4 percent to $2.37 billion from 2009 to 2010, baby wipes and moist towelettes rose 3 percent in sales to $523 million, and baby cleansing and care products increased 1.9 percent.

Buying in bulk gained popularity, with 42 percent of respondents saying they did so, which might point toward larger package sizes, Mintel states.

Eco-friendly “natural” disposable diapers could provide some growth, as long as they provide adequate comfort and protection for babies. About 10 percent of parents said they used cloth diapers at least some of the time, and about 26 percent said they looked for products that used natural ingredients, which often have packaging iconography to match, Mintel notes.

For example, Huggies Pure & Natural more than doubled in sales to $23 million between 2009 and 2010.

Euromonitor saw sustainability as an increasing issue in the U.S. even during recession and expected the trend to become stronger as the downturn eased. “A small group of consumers are making a big noise about the relative benefits of reusable diapers,” the company said in an October 2011 blog post.

PRIVATE LABEL

Private label options seem to have become more prevalent during the heart of the recession, accounting for 17.1 percent of total disposable baby product sales in 2009, up 3 percent from 2008, as parents took steps to reduce expenditures, according to Mintel. Kroger led the way with 10 new products in 2010.

Private label’s growth rate exceeded that of branded products in 2009 and 2010, led by retail brands such as Walmart’s Parent’s Choice. Private label rose 2.1 percent from 2009 to 2010 for disposable diapers, while Procter & Gamble fell 0.2 percent and Kimberly-Clark fell 2.0 percent, according to Mintel.

Euromonitor tracked private label growth of 1 percentage point in 2010, to 16 percent market share, as both of the top brands lost share.

This could depress prices somewhat on the branded side, although remaining dominant are twin towers Kimberly-Clark — the maker of Huggies, with 35.4 percent of disposable baby product sales in 2010 — and Procter & Gamble, maker of Pampers, with 33.4 percent of sales in that same year. And Luv’s, the moderate-priced Procter & Gamble brand, saw sales rise 90.4 percent from 2005 to 2010.

Mintel’s research found that more than half of those with children under age 3 (55 percent) said they always or almost always bought the same brand of diapers. Moms over age 35 were somewhat more likely to alternate between brands (30 percent), as were those earning less than $75,000(49 percent).

AHP’s Ferdock says that private label products need to stay on the leading edge of technology because of the ongoing difficulty in convincing mothers that private label diapers fit snugly, hold moisture and keep babies dry as well as branded products.

“It is critical [that] private label manufacturers focus on improving leakage protection and fit within their product design rather than less important, non-performing elements of a baby diaper such as printed graphics or colorization of raw materials,” he says.

That’s not to say merchandising is unimportant, Ferdock says, but it’s challenging to find the budget to compete with national brands.

“There have been a number of retailers that have taken an aggressive position … in the form of in-aisle point of purchase and freestanding display, or end-cap support,” he says. “In every case, this merchandising support has resulted in market share gain.”

AHP’s marketing team has developed what it calls a “first impressions” program to prompt trial and continuous use by first-time mothers, which brings together an in-store element as well as social-media campaigns, Ferdock says.

“We’ve become a trusted source by offering guidance in the social media platform,” he says. “Specifically, we can help identify demographic targets, social media forums, discussion content, consumer advertising and navigation strategies with the goal to compete directly online with the big national brands.”

But private label also will face an ongoing challenge from social media, which has reduced outlet loyalty by offering real-time information on which stores have lowest prices that week, Ferdock says.

 “On the other hand, by developing a unique private label program — including product design, mix, merchandising and consumer marketing — the retailer has the opportunity to deliver a powerful message and ultimately build traffic, consumer loyalty and market share,” he says.  

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