P&G diaper demand surges on turnaround

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Procter & Gamble Co.'s diaper turnaround is gaining momentum, with demand for several products so strong that the company has put retailers on allocation. Two new lines-Pampers Feel `n Learn training pants that give kids a feeling of wetness and a "Cozy Feel" redesign of value-priced Luvs-are helping P&G vie for overall leadership in diaper and training pants for the first time in more than a decade.

Feel `n Learn, which P&G claims already has a double-digit share of the training pants market, particularly has caught K-C off guard. Bob Thibault, president-childcare in May disputed the concept, saying it has been tried before by P&G and tested by K-C without good results. Now, however, analysts and industry executives said they expect K-C to launch its own version of trainers by early next year.

P&G's allocation system has some retail buyers grumbling about fairness-and some told Advertising Age they are concerned others are getting more than they are. "We're selling every case we can ship," said Kirk Perry, VP-North America baby care at P&G.

Still, Feel `n Learn is shaping up as a big success, he said. Training pants is a market "where K-C had a 10-year head start on us," said Mr. Perry, adding that 90% of the Feel `n Learn gains have been incremental to P&G's overall diaper business.

P&G lost overall leadership in diapers and training pants to K-C in the mid 1990's and its position deteriorated throughout the decade to a chasm of more than 14 points in the third-quarter of 2001, according to Information Resources Inc. data. The 2002 Baby Stages of Development relaunch of Pampers helped P&G steadily close the gap.

summer pickup

Though P&G's share gains stalled in early 2004, it regained momentum this summer. For the 52 weeks ended Oct. 3, K-C held only a three-point lead, according to IRI.

A key to P&G's turnaround has been innovation that appealed as much to moms emotionally as it did intellectually, said Deb Henretta, president-global baby care. "Historically, P&G was very good at appealing to minds," she said, but that led to a decade of lost market share in the 1990s. "We're finding it's appealing to hearts that is starting to develop very strong brand loyalty for Pampers."

Baby Stages of Development, launched in 2002, has extended to Toddler Stages of Development, with First Steps pull-on diapers for tots prior to toilet training, combined with Feel `n Learn. Ads from Publicis Groupe's Saatchi & Saatchi, New York, focus on how the diapers aid child development, not on how they soak up leaks.

Pampers' all-outlet dollar share last quarter was more than 29% according to P&G, up three points from a year ago. P&G's share in training pants topped 30% in September, the company said. A K-C spokesman, however, put P&G's recent 12-week training-pants share at 26%, using ACNielsen scanner data that excludes Wal-Mart Stores, dollar and club stores. Still, the training pants share is well above the 20% threshold that Kimberly-Clark executives have said P&G would have trouble reaching.

In a conference call with analysts last month, K-C Chairman-CEO Thomas J. Falk charged P&G's gains were coming on heavy promotion. He said P&G had dropped "several $5 coupons" and distributed a total of $69 worth of coupons on Easy-Ups through the first nine months of 2004, compared to $23 for K-C on Pull-Ups.

But a P&G spokeswoman disputed those figures, saying P&G hasn't dropped any $5 coupons and that its total coupon distribution in freestanding inserts totals $27 in nine months. She declined to comment on how much P&G dropped in direct-mail coupons, but said P&G has steadily decreased the amount of volume sold on promotion while K-C has steadily increased it.

Most surprising has been the resurgence of Luvs, long a low priority in the P&G lineup. Luvs share is up more than a point to over 10% since a July "Cozy Feel" restage that included cloth-like fasteners, larger "landing zones," packaging with a denim look and licensed "Blue's Clues" characters.

"What ails Kimberly today is that they've lost their innovation stride just when P&G found theirs," said Deutsche Bank analyst Andrew Shore.

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