Diapers: Trouble in babyland gets response

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Kimberly-Clark Corp. is making the latest move in an increasingly competitive U.S. diaper and training pants market as it begins this week shipping what it bills as a major improvement to Huggies Supreme diapers.

The Huggies Supreme relaunch, coming less than six months after Procter & Gamble Co. relaunched its Pampers Premium lineup as Pampers Baby Stages of Development, marks a step-up in new-product activity after what many retail executives describe as a multiyear lull.

During that lull, private-label brands chipped away at the market, primarily stealing share from P&G. Private label for full-year 2001 held a 17.8% share, up nearly 2 points from 2000, in the $2.85 billion disposable diapers and training pants market topped by Kimberly-Clark at 45.4% and P&G at 33.6%.

Huggies Supreme diapers, which previously stretched only on the sides, get a new wide, elastic waistband all around plus an outer cover that stretches, providing a better fitting diaper. The improved Huggies Supreme, shipping in select sizes this month, will offer a full assortment of sizes by fall, when TV and print ads from WPP Group's Ogilvy & Mather, New York, break.

more like underwear

Meanwhile, Kimberly-Clark this month also broke TV and print ads from Ogilvy for an improvement to Pull-Ups training pants, a version 30% thinner and more like real underwear, says Dudley Lehman, group president-infant and child care at K-C. Pull-Ups faces its first major-brand competition in several years from Pampers, which in February rolled out Easy Ups pull-on diapers as part of its Baby Stages. Mr. Lehman says the new Pull-Ups is preferred by consumers roughly 2-to-1 over the old ones.

"Obviously, with having a new competitor we're going to lose share" in training pants, Mr. Lehman says. But he says Pull-Ups volumes are up so far despite the P&G launch. "I think it's still early and the jury's out" on Easy-Ups' impact, he says.

P&G has tried and failed three times in the past decade to enter the training pants segment Pull-Ups founded in the early 1990s, Mr. Lehman says, and retail buyers say they don't expect Easy Ups to command more than single-digit shares long term. But a P&G spokeswoman says: "We are in the training pants market to stay."

P&G's overall dollar share of diaper sales is down 1.4 points to 40.9% and Huggies' shares are up 1.8 points to 37.9% in the 12 weeks ended May 19, covering the first steps of Baby Stages, according to Information Resources Inc. numbers reported by Alliance Capital Management's Sanford C. Bernstein.

But more than making up for its slippage in diapers, P&G gained in training pants, capturing a 12.1% dollar share in the four weeks ended May 19 as Pull-Ups fell 6.9 points to 68.4%. IRI scanner data doesn't cover Wal-Mart Stores, club or dollar stores, and P&G Chairman-CEO A.G. Lafley has said the company's shares tend to be stronger in the unmeasured channels. "We're very pleased with [Baby Stages] results both here and in Europe," the P&G spokeswoman says, adding that sales and shares of P&G's other diaper brand, value-price Luvs, also have rebounded since last year's price cut. Luvs cut prices 10% in October to get what P&G calls "the value equation" right.

Luvs had been priced on par with Wal-Mart Stores' White Cloud premium private-label brand, though White Cloud, a discontinued P&G bath tissue brand name claimed and later licensed in 1999 by Paper Partners of Boca Raton, Fla., offered a diaper with a clothlike non-woven outer cover that Luvs lacked. Luvs has since added a similar cover.

Kimberly-Clark isn't disclosing ad spending for its launches, but these introductions are likely to get much of the roughly $100 million annually the company has put behind its diaper and training pants businesses in recent years-more than $50 million for Huggies and around $40 million for Pull-Ups, according to Taylor Nelson Sofres' CMR.

"Huggies has been fairly consistent in spending [over the years]," Kimberly-Clark's Mr. Lehman says. "We have seen P&G bounce around more. ... it seems like when they have major product change, they may pick up measured media."

P&G to add to baby stages

Media spending behind Pampers overall has been around $30 million in the past two years, according to CMR, down from annual spending of $50 million-plus in previous years.

P&G is likely to increase its budget this year when it introduces in the third quarter an improvement for Baby Stages, six months after the initial launch, say Mr. Lehman and retail executives. The P&G spokeswoman wouldn't comment on details, saying only that P&G plans continued improvements.

Both P&G and K-C poured more money into bigger payoffs for point-based loyalty programs last year and began including them in TV and newspaper ads.

When reward claims for Pampers Perks came in ahead of expectations this year, angry calls and e-mails from parents prompted P&G to make good on all of them despite a "while supplies last" disclaimer. Huggies also got a stronger-than-expected response to its program.

"We haven't had quite the problem Procter has," Mr. Lehman says. "I think for both of us it's been a learning experience. Going forward, you will certainly continue to see loyalty programs. Whether they will be as high-value per point is something both Procter and we I'm sure have to assess."

While innovation in baby care has long been fast-paced, retail executives had noted a slowing in recent years as private-label sales, not coincidentally, have risen. Retailers offering private-label brands during this period were inspired by White Cloud's success, and rolled out improved premium store brands at prices that remained below Huggies and Pampers' base brands.

But following the current manufacturing overhaul, P&G is poised to step up the new-product pace, Mr. Lafley has told analysts, and K-C's new initiatives show it's not willing to surrender the costly ground it has gained in recent years.

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