Nappies war intensifies in Europe, but Asia is the bigger prize

Kimberly-Clark’s EUR1.7 million re-launch of Huggies Pull-Ups is a smart strategic move as the brand seeks to win ground from Pampers in Western Europe. But, the company needs to keep an eye on the bigger global picture, which means raising its game in Asia-Pacific. Euromonitor International explains.

Nappies war heats up in Western Europe

In 2009, Pampers generated retail volume growth of 3.5% compared to 0.3% for Huggies, according to new data from Euromonitor International. It was the eighth straight year in which Huggies failed to make any gain on its archrival.

Western Europe proved a tough operating environment for both brands, with regional growth for nappies languishing below 2%. Undeterred, the market’s two biggest players are ramping up European investment this summer, Huggies with its re-launch of potty-training pants, and Pampers with its super absorbing Dry Max technology.

The re-launch of Huggies Pull-Ups comes hot on the heels of a packaging makeover right across the brand and is indicative of Kimberly-Clark’s commitment to Western Europe. So far so good, but the company needs to be careful about its strategic global priorities.

The first point to consider is that Huggies sold around three and a half times fewer nappies/diapers/pants than Pampers in Western Europe last year, so the brand faces a mountain to climb if it is to claw back any significant market share. Secondly, the Western European market is mature, which leaves limited margin for strategic error. With that in mind, does the Huggies Pull-Ups re-launch hit the mark?

Brand loyalty for nappies tends to be high in Western Europe, even when times are tough. It is a trend that has played into the hands of Pampers, the dominant player, because families will typically choose the same brand for any subsequent children.

New investment behind Pull-Ups is a clever strategic move because it has potential to work as a sort of stealth tactic. Specifically, if Huggies can win approval from parents in the toddlers market, there will be a medium-term upside as those same parents have more children.

In short, families will be more willing to switch brands when it comes to their new-borns if the experience has been positive for their toddlers. The intelligent backdrop to the marketing re-launch is a focus on educating parents about how best to guide children through the difficult cycle of potty-training.

Pampers, of course, is rarely outmanoeuvred in the nappies market and has brought on stream Dry Max as part of its New Baby and Active Fit line in the UK. Due to its new super absorbing technology, this nappy is lighter than anything that has come before.

The added value is that Dry Max will colonise more space on retail shelves and could prove a hit in terms of household nappy storage. However, Pampers will need to watch closely how Huggies Pull-Ups perform in the toddler category because growth in Western Europe will increasingly be driven by market share, not volume expansion.

Asia-Pacific leapfrogs Western Europe

In terms of the wider global picture, it is noteworthy that the value of Western Europe’s nappies/diapers/pants market summed EUR4.7 billion in 2009, which was higher than North America (EUR4.3 billion), but, for the first time ever, lower than Asia-Pacific (EUR4.8 billion). Demographics explain part of the swing. Specifically, the number of babies and toddlers (aged 0 to 4) grew by less than half a million in Western Europe between 2004 and 2009, which was three times lower than absolute growth in Asia-Pacific.

Asia-Pacific is also getting much richer, which in the space of five years has fuelled EUR1.8 billion of new nappies/diapers/pants business, compared with a sluggish EUR294 million in Western Europe. And this goes to the nub of why strategic global prioritising is so important. Indeed, while the two leading players need to keep innovating in Western Europe (as the market matures, innovation is route one to growth), that should not come at the expense of emerging market investment.

Investment priority is especially key to the global perspective of Huggies. Consider, for example, that between 2004 and 2009, Pampers gained around four million units of new business in Asia-Pacific compared with one million units in Western Europe. By contrast, Huggies generated absolute growth of 360,000 units in Asia-Pacific compared with 305,000 in Western Europe. And it is China that has paradoxically proved a land of missed opportunity for Huggies. For example, Pampers gained some 845,000 units of new business in China last year, some four times more than Huggies.

Huggies missed the boat in China and, as a result, faces an uphill struggle to catch up with Pampers. Going forward, Kimberly-Clark should not let the same thing happen in India, which has potential to be the next big Asian growth story for nappies/diapers/pants. Here, Huggies has the advantage of heading the market ranking, albeit in the context of a low real base. The brand needs to use this position as a platform to achieving much wider penetration over the coming years. And the same strategic logic can be applied to a cluster of second-tier regional markets, such as the Philippines, Thailand, Indonesia and Vietnam.

Savvy investment in Western Europe is all well and good, and the re-launch of Huggies Pulls-Ups deserves kudos. But, Asia-Pacific is a much bigger growth story in the waiting. And for Huggies, there has never been a more important time to ramp up the regional war chest.