K-C planned an 18% reduction in package counts and 13% reduction in list prices for diapers and training pants to take effect this month. But while the count reduction remains, the company told retailers last week price reductions will now be more proportional, amounting to a roughly 1% increase in diaper prices and "slight decrease" on Pull-Ups.
Though K-C's Huggies is the leading brand in the $4 billion-plus diaper category and Pull-Ups leads the $1 billion training-pants category, both are under pressure from Procter & Gamble Co., which launched its Baby Stages of Development improvements to its Pampers premium line earlier this year. P&G had also announced plans to reduce package counts next year but wasn't fully following the price hike, Dudley Lehman, K-C's group president-infant and childcare, told Advertising Age.
An ad campaign behind Pull-Ups and Huggies from WPP Group's Ogilvy & Mather Worldwide, New York, should break early next year. But while first-half ad spending may be heavy behind the launches, Mr. Lehman doesn't expect much increase in overall ad spending for the full year. K-C's total diaper outlay has run about $100 million annually behind the products in recent years.
K-C had planned to deal back most of the price increase initially in the form of higher trade promotion, he said. "If there was going to be any more [money] spent back into the category, it won't be, because it's not there," he said.
K-C's rollback of its price hike is a sign that price competition in household and personal products may not ease anytime soon. The second quarter marked the industry's most intense price and promotion combat in years, said Jim Gingrich, analyst with Alliance Capital Management's Sanford C. Bernstein.
K-C sought the price hike to offset the higher cost of a host of improvements to its lineup, including a new version of Pull-Ups that go on like regular underwear but can be reopened and closed with Velcro tabs on the side.
K-C earlier this year launched an improvement to Huggies Supreme that allows the entire diaper to stretch, and began last month rolling out a better-fitting version of its base Huggies Ultratrim line.
A P&G spokeswoman confirmed the company plans a package-count reduction similar to K-C's but with no net change in per-diaper price.