K-C, P&G Up Stakes in Diaper-Category Battle

Roll Out Product Improvements, Tempt Consumers to Trade Up to Premium Brands

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CINCINNATI (AdAge.com) -- Locked in a neck-and-neck for category leadership, Kimberly-Clark Corp. and Procter & Gamble Co. are introducing a wave of disposable-diaper product improvements just as it seems they've exhausted all possible ways of making the product friendlier.
Kimberly-Clark has improved its superpremium Huggies line and is rolling out a new ad campaign to help maintain its sales edge against rival Procter and Gamble.
Kimberly-Clark has improved its superpremium Huggies line and is rolling out a new ad campaign to help maintain its sales edge against rival Procter and Gamble.

"Going back to the early 1990s, you say what more could you do to a diaper, right?" said Robert Thibault, president-childcare at K-C. "And each year -- and I'll give P&G credit as well -- we have continually found ways to make the product perform better and to make it more appealing."

K-C's new innovation: improvements to Huggies Supreme, including a cottony Gentle Care lineup with better umbilical-cord cutouts for newborns and an hourglass-shaped, thinner, more-flexible Natural Fit lineup for older babies and toddlers. Improved printing technology gives the diapers a more underwear-like look similar to recent generations of training pants.

Ad rollout
Though K-C isn't providing spending details on the "multimillion-dollar" ad rollout that starts next month, the company termed it the biggest introduction since Huggies initiated the superpremium segment with the Supreme line in 1994.

The stakes couldn't be higher as the battle seesaws for leadership in the $5 billion diaper and training-pants category. K-C edged P&G by a 43% to 42% margin in the four weeks ended July 16, according to Information Resources Inc. data reported by Morgan Stanley, the fourth straight four-week period it has held a narrow lead after P&G led for much of the prior year. The data don't include Wal-Mart, club or dollar stores.

The improvements this time, as they usually have in the past, are coming without price increases. Consumers watch diaper prices closely, as do retailers, which generally sell diapers as a loss leader, despite the $60-$70 monthly cost to parents.

No price hikes
P&G and K-C both tried to raise prices last year to recoup rising raw-material costs, but both rolled back those price hikes this year, blaming private-label manufacturers that refused to follow suit.

Mr. Thibault is hoping the newly improved Supreme is good enough to get consumers to trade up from the base Huggies UltraTrim or, better still, from Pampers. Supreme sells at a 14%-20% per-diaper premium on the base Huggies brand.

Trading consumers up has become the primary growth vehicle in a U.S. market where the population of babies is growing only about 1% annually and price increases are hard to come by, he said.

P&G Treasurer John Goodwin noted in a conference call for investors earlier this month that Pampers' superpremium Baby Stages of Development line now represents more than half the brand's U.S. sales.

'Unique insights'
Craig Wanous, Huggies brand manager, said K-C's changes were based on "unique insights" from online research with moms, who generally believe diapers aren't very comfortable for their kids.

That's despite lots of ads to the contrary, particularly from Publicis Groupe's Saatchi & Saatchi, New York, on behalf of P&G's Pampers, which is preparing a product-improvement barrage of its own.

P&G is rolling out a more flexible "Caterpillar Flex" diaper for its base Pampers Baby Dry line. It also has improved absorbency for its superpremium Baby Stages of Development line, aimed at specific challenges posed by newborns and older babies. And it has improved leakage protection for value-priced Luvs, billed as more leak-proof than higher-priced Huggies products. P&G ads from Saatchi break next month.

Marketing support for K-C's new Huggies Supreme lineup will be a swan song for WPP Group's Ogilvy & Mather Worldwide, New York, which is handling the effort as the account shifts to a new team at sibling JWT, Mr. Thibault said.

Exclusive deal
In addition to the usual TV, print, online and direct-mail support, the new Supreme line will be the first to benefit from an exclusive deal Huggies has reached with NBC Universal, iVillage and GE Healthcare for advertising on their in-hospital TV network -- which reaches 82% of moms of newborns each year, Mr. Thibault said.

The deal gives Kimberly-Clark a new weapon in reaching moms early in their diaper decision making. P&G long has dominated hospital sampling and sponsorship of Lamaze childbirth programs.
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