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Even during a recession, spending on babies generally holds up as parents prioritise the needs of their children over their own needs. While sales of other tissue and hygiene products may stutter during economic downturns, nappies/diapers/pants is a category that usually remains resilient regardless of the economic climate. However, it would seem that even a category as convenient and as much of a necessity as nappies/diapers/pants can only hold off the effects of the ongoing economic crisis for so long.
According to a recent report in the Wall Street Journal, the volume of diapers sold in the US fell by 1% in the four weeks ending 4 September 2011 from a year earlier, extending a series of similar or steeper declines stretching back to August 2010. According to the most recent Euromonitor International statistics, nappies/diapers/pants fell by 1% in value in 2010 to reach US$5.4 billion, continuing the downward trend in the category that began the year before. Volume sales, meanwhile, largely remained flat.
While the article in the Wall Street Journal flagged up the falling diaper sales, it went on to say that this is paralleled by strengthening sales of nappy rash creams, drawing the conclusion that parents are changing their babies’ diapers less frequently in a bid to save money. According to Euromonitor International statistics, nappy rash creams have indeed enjoyed strong growth of late. In 2010, nappy rash treatments was the best performer in medicated skin care, posting current value growth of 5% compared with overall category growth of 1%.
While the respective fortunes of diapers and nappy rash creams could well reflect the fact that parents are changing their babies’ nappies less frequently in a bid to economise, this is by no means the only possibility. The rise in nappy rash cream sales can also be linked to the health scare surrounding Procter & Gamble’s Pampers Dry Max diapers, which began in May 2010 and saw the US Consumer Product Safety Commission receive more than 4,700 reports of rashes from parents who had used the diapers on their children, leading to the eventual withdrawal of the product. The scare generated long-term media coverage and the outbreak of rashes and news of potential outbreaks served to drive sales of nappy rash treatments significantly. Given that the scare is still fresh in many parents’ minds, this could account at least in part for the category’s more recent gains.
There is no doubt that the global economic downturn and its continued effects are taking their toll on value sales of nappies/diapers/pants in the US and that some consumers will be changing their children’s diapers less frequently in a bid to economise, while others have traded down in their purchasing habits – private label nappies/diapers/pants saw the strongest growth in share in 2010 of one percentage point, now accounting for 16% of the US market. In the same period, both Huggies and Pampers lost share. However, to draw the conclusion that the category is suffering primarily because consumers are trading down and/or leaving their children in the same nappy for longer is to run the risk of not seeing the wider picture and the true extent of the difficulties the category is facing in the US.
Underpinning the category’s difficulties is the country’s falling birth rate, which declined from 14.3 births per 1,000 inhabitants in 2006 to 13.5 in 2010. In 2010, the birth rate fell by 3% on the previous year, the largest drop seen in 20 years. It stands to reason that the fewer babies there are, then fewer diapers will be sold. As the birth rate has now been falling since the start of the global economic crisis in 2007, the problem now affects all categories within nappies/diapers/pants.
Given the fall in birth rate, it becomes difficult to state categorically whether the reported slowdown in diaper sales is actually due to parents using fewer diapers or whether there are simply fewer babies around to need diapers. While the category’s current lacklustre sales are most likely a combination of the two, the declining US birth rate remains the biggest long-term potential impediment to future growth in nappies/diapers/pants as Americans are waiting longer to start families, not just as a result of current difficult economic circumstances, but also because of long-term cultural trends.
While the economy and suppressed birth rate combined are the most pressing immediate concerns for diaper manufacturers, looking further ahead, the small but burgeoning trend of reusable cotton diapers may well exert further pressure on the category, and it is vital that manufacturers begin planning now as to how to react to this rival product.
As sustainability remains high on the political agenda despite the financial crisis – and will do so for the foreseeable future well beyond when the crisis finally subsides – more Americans are being convinced to make efforts in their personal lives to reduce their impact on the environment – a trend that is only likely to gather pace once the economy returns to full strength. In the US, cloth nappies remain a little used alternative to disposable diaper products – the nappy penetration rate in the US remains extremely high, with 94% of 0-2-year-olds using disposable nappies and 44% of 2-4-year-olds utilising disposable training pants – but a small group of consumers are making a big noise about the relative benefits of reusable diapers. Although consumers who prefer cloth diapers are still very much in the minority, this burgeoning trend is one disposable diaper manufacturers may well need to further contend with once the more immediate financial threats subside.
A combination of tough economic conditions, a falling birth rate and strengthening awareness of environmental concerns is creating a difficult climate unlike anything the nappies/diapers/pants category has faced before. How major manufacturers deal with this three-pronged attack will be crucial in determining their long-term success.
Given that diaper manufacturers can do little to influence the birth rate, they must currently concentrate on retaining customers through the financial storm –coupons and multi-pack deals would not go amiss – but also focus on their strategy for riding out the crisis and achieving growth once the economy starts to recover. It is telling that the only branded nappy maker to increase its market share in the US during 2010, albeit marginally, was environmentally-friendly manufacturer Seventh Generation. Given this, and the potential longer-term threat of cotton diapers to the interests of major players beyond the current financial crisis, focusing on environmentally-friendly and sustainable diaper innovation is imperative for the long-term success of manufacturers.