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The European diaper business.

The European Diaper Business

The whole of the private label diaper business in Europe is having very difficult times due to many factors. One of the main causes is the ridiculously low price levels demanded by the retail chains for their private label products.

Retailers demand that their private label suppliers offer diapers with very high levels of performance and product features similar to the brand leaders. This would be fine if they were prepared to pay the proper price for this, but in reality they are oblivious to the cost of achieving the demands they lay down. The high production costs are inevitable if the private label suppliers are to offer the products demanded. Suppliers have no choice but to invest in the latest machinery including retrofits and significant research and development efforts. Inevitably, line speeds are slower when compared with those achievable running straight forward diapers without all the add-on features. There is, additionally, the high cost of specialty materials necessary to achieve the features demanded.

Converters we have spoken with in recent weeks and months feel that retail buyers are sqeezing them in a mutually destructive manner - the other private label suppliers as well as Celatose may go to the wall, thereby reducing retailers' choices. The reduction in capacity could lead to a seller's market with those remaining diaper converters able to demand very high prices from any retailer who wants to secure supplies in a climate of shorage.

Up Against The Wall

There are an increasing number of private label diaper companies in France, the U.K. and Germany that are really up against the wall in terms of being able to run profitably in this climate. Closures are occurring and are inevitable. In the U.K., for example, we only know of one private label supplier that managed to make a small profit in 1989. Clearly, the problem is general as opposed to the result of poor management. As an example, Adrian Bregar, of Bregar Gibson Ltd., a progressive and capable private label supplier, said recently: "I am fed up with being in an industry where the word 'profit' is an obscenity."

Meanwhile, in the European branded sector there is quite a lot of use of pricing to buy market share. There are a lot of discounts and money back offers around so that actual retail selling prices seem in many cases to be so close to manufacturing cost that suppliers cannot be making much, if any, money. This factor is another one which has made life extremely difficult for the private label suppliers because it gives retailers a false impression of true manufacturing and distribution costs.

Procter & Gamble has a clearly evident expansion program for "Ultra Pampers" in Europe. Pampers is available now in every country in Europe and is making strong gains in Scandinavian countries, the U.K. and elsewhere. The product is very well liked by a good portion of the consumers that buy brands. P&G's market share differs from country to country according to many factors, including the strength of the national competition.

In order to expand and increase its importance in certain markets, P&G has added to its traditional program of adding lines at centralized production facilities. At the beginning of 1990 it purchased a share in Arbora, a leading and progressive independent Spanish company that was owned by Tambrands until last year. Arbora's "Dodotis" range of products had a share last year of around 40% of the Spanish market. The determination of P&G to remain number one in Europe is very clear.

In a market where environmental factors are now added to quality, price, service and distribution factors in deciding who leads and who follows, P&G is giving full attention to this issue and addressing what it considers to be real and important issues around reducing civic waste. This includes addressing questions of recycling, packaging and even plastic. P&G is, like Peaudouce, already offering product that has so-called "biodegradable" backing, but it remains keen to see other ways that perceived environmental deficits of diapers (and detergents and other products) can be improved upon.

The Model T

In February, Peaudouce (Molnlycke) rolled out its first "Ultra T Form" boy and girl product in the U.K. Unlike traditional diapers that are symmetrical if a line is drawn along the center separating front and back, the T Form is not - it is bigger and wider at the back with the bar of the "T" at the front.

The shape created is similar to that taken when a pair of briefs is worn and this is the basis of Molnlycke's design concept. It is said to follow the shape of the baby "just like a pair of pants." The advantage claimed for this design is improved comfort and fit; this same design may show up throughout European markets shortly. The new Peaudouce diaper is an updated four-fold and compact (thin) version of the classic Molnlycke "Libero T Form."

This style of product has been available for several years in the countries served by Molnlycke in Scandinavia and other North European countries. The "T" shape is set to replace Peaudouce's contoured elasticated "Babykini" product throughout Europe and is the key feature of Molnlycke's strategy to win a substantial place in the European branded diaper business.

Its success depends on market acceptance of this unique design. The outcome may be largely determined by its absorptive performance when compared to "Pampers" or leading national brands. Good advertising is bound to have an instant benefit in establishing the product, but sudden gains in market share can be taken for granted when a good and expensive advertising campaign is used to introduce a new diaper product with new features.

However, such gains can be shortlived - the final outcome depends largely on the performance of the new product and particularly the importance of all the absorbency-related performance factors. Naturally, good hygiene, good appearance, acceptable price levels and good distribution must be assumed in any product that is featured in today's European branded diaper sector.

The retail selling price of the new product is fairly high at around 19.3p (30 cents) for the "maxi plus" product (22-44 pounds). For comparison, high quality superabsorbent private label products sell at about 15p in the U.K.

There are several design developments incorporated in the new European Peaudouce Ultra T Shape product, namely, the addition of gender specific features. The distinguishing features are pink packaging for the girl product and blue for the boy; pink or blue birds printed on the target tape and pink and blue differentiated elastic. The latter is achieved by the use of the well known Molnlycke feature which I know of in no other product - the wrapping of colored thread around white rubber elastic strands. There is another very individual Molnlycke feature used in this product to create a "cup" shape to hold the wetness. This consists of two parallel lines of elastic that run around three sides of the T shaped product.

Clare Haddad is an independent consultant in Godalming, England, specializing in research for suppliers in the nonwovens, disposables and paper industries. She is a frequent contributor to Nonwovens Industry on the European disposables business and a well-known speaker at international nonwovens industry gatherings.
COPYRIGHT 1990 Rodman Publications, Inc.
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Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:disposable dispers
Author:Haddad, Clare
Publication:Nonwovens Industry
Date:Apr 1, 1990
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