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Babies are always changing ... so are the diapers.

Our annual overview of the worldwide baby diaper market; it's been an active year in the legal arena and around the globe in this constantly changing segment

1992 was the year of the big show. The elephants were dancing in the center ring catching he limelight - Procter & Gamble with $2.1 billion of advertising and Kimberly-Clark getting a nine-month jump on P&G with its "Ultra Trim" diaper.

But it was the gymnasts in the side rings who were stealing the show. Weyerhaeuser, Pope & Talbot, Drypers, UltraCare, I.C.D. and Associated Hygienic Products seemed to be getting more publicity and market share increases than the big boys.

P&G's share in the U.S. dropped to 39%, K-C, who had dropped to below 30% at the end of 1991, rose slightly, and with an additional 6% from "Pullups," gained 36% of the market and is breathing down the neck of P&G. The private label/all other shares grew to more than 25%.

In June 1992, Veragon announced the acquisition of VMG to form a new company called Dryers and the new company claims sales in the $70-80 million range.

Then in October, Drypers announced still another merger, this time with UltraCare Products. The $50 million in sales of UltraCare will be added to the $80 million of Drypers to make the new combination the third largest branded product diaper maker in the U.S. (see related article on p. 84)

Legal Activity Throughout 1992

It was also a year for legal activity with P&G taking a beating in the patent and anti-trust field.

In March, I.C.D. came out of the "wings" lawsuit a winner against P&G and many others also now make sanitary napkins with wings.

Molnlycke lust patent suits in France and Germany.

The P&G and Finaf merger was set back by the EEC Commissioner in Italy.

J&L sued P&G on the multi-strand leg elastic n New Jersey and P&G sued J&J in Delaware on the sanitary napkin with wings. The two matters will probably be settled with cross-licensing of the patents.

The "cuffs" litigation between P&G and K-C was decided by the Court of Appeals in Washington D.C. after an oral argument on May 5. In August, both the Court of Appeals and the Interference Board in the Patent Office confirmed the Seattle Court's decision on validity.

In early May, P&G and K-C reached an out-of-court settlement of their long-standing anti-trust battle. It started more than eight years ago when K-C charged P&G with anti-trust violations in the marketing of disposable diapers. The two parties were also engaged in several patent lawsuits, which included anti-trust allegations. One of these, in Texas, involved the elastic waistband. Another in South Carolina involved superabsorbent material, and a third in Seattle involved fecal control barriers. P&G lost all three.

Negotiations between the parties followed and the matter was settled out of court, the basic terms of which are unknown to the public. We believe the P&G paid K-C about $12 million for legal fees. The parties also had agreed to drop the patent infringement counts against each other and grant immunity against suit on several patents. This permits both K-C and P&G to pursue litigation against third parties charging infringement of their respective patents.

In October, Kimberly-Clark sued Pope & Talbot and Drypers in Seattle, charging infringement of the cuffs patent.

What's Happening In

Private And Control Label

The winners were the small guys, growing ever bigger.

Weyerhaeuser, with sales of about $380 million, still struggles in divest its newly-named Paragon division. The public offering was removed from the market, then reintroduced in the fall at a much lower asking price. Weyerhaeuser has already sold its "Dri-Pride" adult incontinence activity to Scott and its "Therma-Lam" product to Fiberweb, but it is still making compressed material as an absorbent filler under the name "Prime." The longstanding arrangement where Confab sold Weyerhaeuser diapers was terminated in August.

In the U.S. (with P&G having less than 40% in "Luvs" and "Pampers" combined and K-C having 30% in "Huggies" plus 6% in Pullups), the situation was dramatically reported by the Wall Street Journal on October 20 - "More shoppers buy less big name brands and steer carts to private label products."

Thin Is In In Diapers

In May, Kimberlu-Clark got a big jump on P&G when it announced its Ultra Trim diaper. which it claimed to be 50% thinner with absorbency equal to diapers twice as thick. This product has a new coverstock material that is a thermal bonded rather than spunbonded nonwoven and is extremely soft and flannel-like. It also has curved leg elastics. K-C has ordered four carding machines, two to go to its Paris, TX factory to produce the thermal bonded material.

The material in each of K-C's new Ultra-Trim pads costs 10.5 cents (as contrasted to 9.0 in the previous "Steps") but the pads will sell at the same price. The difference will be made up in smaller bags and boxes, more boxes on pallets and, therefore, more bags per truckload ad less space in warehouses, storerooms and shelves. Early reports indicate that it is extremely absorbent but may suffer from some "side leakage."

The almost panic-like reaction of P&G on June 8 was the announcement of "Pampers Ultra Dry," a new and "revolutionary" diaper, 20% thinner (but not as thin as the new Ultra-thin Huggies) and twice as absorbent as the diapers currently on the market. It is made with a curly cellulose fiber and also has a very soft backsheet. In mid-December it appeared in Eugene, OR, but probably will not be available in many other markets until the summer of 1993.

P&G sale of two pulp mills to Weyerhaeuser is combined with P&G's need for an adequate supply of curly pulp and of high bulk additive. Both of these can be supplied by Weyerhaeuser (which is obviously getting back to its core business of timber and pulp and out of the baby diaper business).

The diapers are very thin, and although other thin absrobent products - such as sanitary napkins and panty shields - have been in the marketplace for some time, these new diapers are a change for anothers and it will be some time before we know how truly effective they are.

The Training Pants Segment

In another field, the Drypers introduction in September of training pants signaled the growing battle for this market. They are made on a machine produced by R&L Engineering Co. Albany, GA.

K-C's $400 million in sales with 10 machines will be growing to $800 million with an additional 10 machines.

Weyerhaeuser's later arrival in November appeared in Chicago at Dominicks under the controlled labels as "Kinderpants," Undeez" and "Wonderpants." They also are in Kentucky and California.

Pope & Talbot and P&G have yet to solve their production problems. P&G training pants showed up in Japan for a few weeks, then P&G blinked and withdrew it from the market without explanation,

In Japan, Unicharm leads the training pant race with "Trepanman," "Moonyman" and "Oyasumi."

Price and Marketing Changes

In mid-year, P&G announced a nationwide "Everyday Low Price" (E.D.L.P) marketing program similar to that which has been the practice in the Wal-mart chain stores. Instead of a discounted price for one week each month, with the prices increasing for the other three so as to maintain profitability, the low price is maintained throughout the entire month with very little, if any, advertising and marketing support from P&G. This program has been extremely unpopular with the marketers.

The battle of Phases and Steps (26 versions of Luvs and Pampers and now 20 versions of Huggies) seems to have settled down somewhat. Most of the stores identified about a half-dozen varieties that were selling well in their local community and most of the smaller chains and regional stores sell only the "Infant l," "Crawler" and "Walker 2" varieties.

A big factor in marketing new diapers is the "Slotting Allowance." Some manufacturers pay anywhere from $100,000 to $2 million to get their products on the store shelves.

Diaper Component

Materials Developments

As mentioned earlier, on the new UltraThin diapers K-C has already switched from spunbonded to thermal bonded coverstock.

P&G has introduced the "Softsorb" cover on its "Always" pantiliners and it is anticipated that P&G will make some changes on its diaper coverstock to compete with the new coverstock from K-C.

All of the manufacturers are looking at the super-thin products, using increased amounts of superabsorbent polymer and decreased amounts of cellulose.

The curly cellulose materials of P&G appear to be covered by two U.S. patents. Sometimes the product is identified as Stiff Twisted Curly Cellulose (STCC) material. It is used primarily to increase the absorbency, but also to prevent collapse when wet.

The peat moss that was introduced by Johnson & Johnson in its sanitary napkin core has not been well received in the market.

Weyerhaeuser continues to manufacture some of the compressed composite material in its facilities at Bowling Green, KY. This material is macerated and used as a component in the cores of some adult incontinence absorbent pads.

Other Changes In A

Changing Industry

The American Tissue Company sold its baby diaper operation to the Braco Company in New Jersey and Whitestone re-entered the baby diaper business, having concentrated on adult incontinence products for the last several years.

Arquest (formerly Chicopee) expanded its operations by acquiring a sanitary napkin facility.

Both P&G and K-C started up new baby diaper production in Mexico and substantially all of the major regional producers have been actively marketing in Mexico their diapers made in the U.S.

Price changes in the U.S. also confused the marketplace. P&G dropped its prices 5% early in the year and then lowered them another 7% six months later. K-C followed suit with a 7% price reduction. These reductions will soon be coupled with what the trade calls "Cheater Packs" - lowering the count in the bags without lowering the price. For instance, dropping from 30 to 28 diapers per bag represents another 6% increase in price.

Not everybody comes into this business and is successful.

Blue Ridge went bankrupt in England. Swaddlers is struggling with absentee ownership. Fater lost massive market share to P&G in Italy. Molnlycke paid too much for Peaudouce and is taking a beating from P&G even in its homeland of Sweden. Tembec has the remains of the Dafoe business to run. Robinsons sold the Chesterfields business to Disposable Soft Goods Ltd. at a loss.

Several French producers went belly-up (or are in deep trouble, like Celatose) and the remains are being revitalized by smaller companies such as Prod'Hygia and Techni-Pro.

It is smaller producers with a firm understanding of the economies of manufacture, a good work ethic, a knowledge of the production complexities and a sharp pencil when it comes to capital expansion, which are the winners.

A Global Overview

Europe. In Europe, Molnlycke is still struggling with the market and its landing strip patents, having lost an appeal in France and an opposition in Germany. It appears that Peaudouce is again being offered for sale, probably because of increasing market pressure from P&G and disappointment by its parent S.C.A.

P&G has sued both Beghin and Ontex in Belgium and Mega in Greece, alleging that the sanitary napkin with wings and plastic cover infringe on P&G's patents.

The diaper activity in Europe still features the massive market share of P&G in most of the European countries. As of mid-1992, P&G enjoyed about 50% of the entire European market (quite similar to that which it enjoys in the U.S.), but in some countries, P&G's share has been as high as 75% or more. Molnlycke continues to be P&G's biggest competitor in those countries where Molnlycke is active. In Italy, for instance, Molnlycke has very little activity and P&G's biggest competitor there is Fater, a member of the Angelini Group.

In Germany, Paul Hartmann of Heidenheim and Schickedanz of Nurnberg create most of P&G's competition.

On June 22, 1992, P&G and Finaf finally announced they were proceeding with the merger of the feminine hygiene and incontinence products business in Italy, Spain and Portugal, following the European Commission's approval to this modified agreement.

Earlier in January, the commission had approved the joint venture plan that included the baby diaper businesses, with the exclusion of the Swaddlers Company in England. However, a number of oppositions had been raised to that modified proposal, and several months later the Commission withdrew its approval, indicating, however, that it probably would agree if the baby diaper businesses were not included in the joint venture. During the several years of waiting for the Commission's approval, P&G's market share in Italy rose to almost 60%, while Fater's share decreased to 40% from the 80% share it had originally enjoyed.

Although P&G seems to have the whip in hand with regard to research and development in Pescara, we have been assured that the Fameccanica division will not be affected by the joint venture and that it will continue to supply high-quality machines to companies other than P&G and Finaf. It has been particularly active in the marketing of its system for the production of perforated plastic film.

Several other companies such as Nuova Red, Abatec, Polygof and Pantex in Italy, A.O.E. in Germany, Guial in France and Everbeauty in Taiwan have been offering their own versions of the three-dimensional apertured plastic film. Tredegar, Stork and 4-P still supply it exclusively to P&G.

Kimberly-Clark's expansion in Humberside in Yorkshire, U.K. will probably be making training pants (as well as diapers) and will get the jump on all manufacturers in Europe just as they have in the U.S. They are testing the Pullups at Nymagen in Holland. Apparently P&G plans four training pants machines for Europe, two in Euskirchen and two in Manchester, but we have yet to see its product in the U.S.

In June, K-C and Schickedanz announced a 50-50 joint venture to form a consumer products company in Europe but the negotiations were called off in October "for economic reasons."

Skippingdale, with its acquisition of Neptune, added two more MoDo machines with upgraded features to make diapers with cuffs.

Pacific Rim. Although most activity in the Pacific Rim with regard to disposable diapers still takes place in Japan, significant activity has been seen in Korea, Taiwan, Hong Kong, Singapore, Thailand and Australia.

In Japan, the battle continues among Unicharm, Kao, P&G and Oji, with Unicharm leading the way with diaper improvements such as "Ultra-moony" with cuffs, as well as the introduction of new training pants.

In September 1991, it brought to the marketplace the Oyasumi nighttime boy and girl training pants, and in February 1992, its daytime boy and girl Moonyman products. The Trepanman product is targeted for children over 30 months of age, and the Oyasumi is targeted for nighttime use.

The Moonyman represents a new marketing approach to provide a diaper that looks like a training pant but is designed with a "wet-feeling" coverstock to get the child toilet-trained much earlier. Therefore, it will not be necessary to use the Trepanman training pant, but Unicharm hopes that increased sales and the higher price of the Moonyman will offset any loss of sales of the Trepanman training pant.

K-C is the leader in Korea with more than 50% and has almost an 8% share in other countries, such as Taiwan. P&g's imports into Taiwan lead with a 45% share of the market, but Unichann and Everbeauty each have about 15%.

A little-known sleeper is Disposable Soft Goods Ltd. (known in the U.S. as Associated Hygienic Products). It has factories in Hong Kong, Los Angeles, Atlanta, Australia and England and dedicated a new facility in Singapore in April. It went public in May and in October its stock jumped 30% when Merrill-lynch recommended it as a "buy.' Its leader, Brandon Wang, is looking at additional acquisitions.

Middle East. In the Middle East and in the countries bordering the Mediterranean, the local production of disposable baby diapers has increased. In Israel the leader is Hogla (40%), followed by Kibbutz Amir (35%).

The Linette Company has 70% of the market in Cyprus where it manufactures and markets the diapers. It also has a production facility in Greece where it has a 25% share and Pampers has 50%.

One of the more aggressive and active companies is the Fine Paper Company of Amman, Jordan, led by Elia Nuqul, who purchased four RC.M.C. diaper machines from bankrupt Blue Ridge in England. Two of these machines are in Jordan, one in Egypt and one is in Dubai.

K-C is increasing its production facilities in Saudia Arabia and has recently sent Wacyf Ghali, one of its international marketing executives, to be headquartered in Riyadh to direct the expansion of K-C's facilities in the Middle East.

Unicharm of Japan is also entering the market in Saudi Arabia.

South America. In South America, the countries where most diaper activity takes place are Argentina (18% penetration), Venezuela (22% penetration), Chile (21% penetration) and Brazil (5% penetration).

What's Ahead

As these developments and improvements continue, it is clear that some of them are technical improvements and some are merely changes driven by a marketplace. In any case, they tend to provide a better product, and if the manufacturers can provide these better products while still reducing the price per diaper, it is a certainty that baby diaper users around the world will benefit.


The author wishes to thank Guy Goldstein of Beghin-say and Elaine Greten of INDA for their assistance with the graphics in this paper.

Francis Bouda is well known to readers of NONWOVENS INDUSTRY for his frequent contributions in the past 10 years on the baby diaper and related absorbent product markets. Mr. Bouda runs his worldwide legal and consulting service specializing in sanitary disposable absorbent products from his offices in Cleveland, WI.
COPYRIGHT 1993 Rodman Publications, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:overview of international baby diaper industry
Author:Bouda, Francis
Publication:Nonwovens Industry
Date:Jan 1, 1993
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