Retailers are improving the quality and promotional activity for private-label diapers as a way to absorb more margins and prevent further category sales leakage.
Wegmans Food Markets' new Baby Time diapers, for example, feature a Baby Snoopy design and a patented Flex-Fit Tab System touted as being wider and more flexible to provide "supreme" absorbency.
H.E. Butt Grocery Co. promoted its H-E-B Baby brand of diapers in a major baby contest last summer. Consumers who submitted photos of their baby were eligible to win a one-year supply of the diapers and a $1,000 savings bond.
The San Antonio-based retailer said the goal of the promotion was to introduce the retailer's full line of H-E-B Baby products - which also includes food, formula and other products - and highlight the quality guarantee that backs its products.
Such efforts come at a time when disposable diaper sales slipped nearly 6% to $942.6 million in food stores for the 52 weeks ending Feb. 19, according to Information Resources Inc.
While private-label sales are soft as well, down 6.6% to $147 million, the segment holds the No. 3 spot in terms of sales, trailing only Pampers Baby Dry and top-seller Huggies.
Store-brand diapers have come a long way over the last few years, as many now feature super-absorbent materials, Velcro fasteners and licensed character designs.
Such innovations have helped improve consumer acceptance, and in turn, drive retail-marketing programs.
Retailers hold the category in high regard because of the financial importance of diaper buyers, who produce higher basket rings.
"We understand the incremental sales value of the diaper shopper in our stores, and are always seeking different marketing strategies to keep them," said Mike Due, grocery director for Brookshire Bros., Lufkin, Texas.
Brookshire promotes both national and private-label diapers with in-store coupons, weekly ads and temporary price reductions.
"The perception of the customer is that the mass and dollar store competitors are cheaper, so we try to be as competitive as we possibly can in our efforts to change that perception," he said.
But Brookshire also gives special attention to its Cuddle Ups private-label diaper line of 13 SKUs, including convenient, jumbo and mega packs.
All are positioned as being national-brand equivalents, yet priced significantly less than the category leaders.
Cuddle Ups also are highly profitable for Brookshire. Margins are 15%-20%, compared to about 5% for national brands, Due said.
"We use Cuddle Ups to maintain gross-margin integrity within the category," Due said.
Price alone isn't the only factor in diaper purchases. Quality is an important criteria, too.
That's why Mars Super Markets in Baltimore is cautious about the idea of adding a private label, said Maryann Wagner, category buyer.
Three years ago, it dropped a lower-priced brand it had carried for eight years. It wasn't a private label, but also was not a leading brand.
"Even with the low price, it wasn't selling," Wagner said.
This was likely because of poor quality, Wagner said. While diapers are expensive, most people don't mind spending more for a better-quality product.
"Who wants to put a diaper on baby and have it leak?" Wagner said. "It's not worth it."
Today, Mars carries only Huggies and Pampers. In light of the innovations to store brands, though, Wagner said the time is right to consider adding a private label to its diaper section.
While national brands were first to use better absorbency and closure materials, private label soon followed suit, said Chuck Cerankosky, an analyst with KeyBanc Capital Markets, Cleveland.
"Private label adopted the [national-brand] innovations quickly," he said.
Take Brookshire's Cuddle Ups. Positioned as a national-brand equivalent, it boasts super-absorbent polymers, enhanced leg gathers and stronger fasteners.
Cuddle Ups perform as well as Pampers and Luvs in testing, but is priced 15% less, which helps retailers compete with mass merchants while giving them a point of differentiation, said Dave LaPlante, president and chief executive officer of Federated Group, Arlington Heights, Ill., a private-label supplier that markets Cuddle Ups.
Retailers who make the effort to build their private-label diaper program won't likely be disappointed, as quality offerings are critical in terms of preventing diaper shoppers from going elsewhere, said Frank Dell, president of Dellmart & Co., Stamford, Conn., a management consulting company.
New parents are time-starved and prefer one-stop-shopping over channel surfing, he said.
"Diaper buyers are people who don't have time to shop a big store, and would prefer going local to a store that's within a few miles of their homes," he said.
A West Coast chain uses heavy promotions, including temporary price reductions, to keep national-brand diaper prices in check - and parents with pre-potty-trained children coming to its stores.
"Since shoppers who buy diapers have larger baskets, we want to make it easier for them to buy diapers," said the chain's category manager, who requested anonymity.
Along with being competitive with national brands, the retailer is also more active in private label, recently switching suppliers and introducing a new brand to its shelves.
The chain now has a store brand that's a national-brand equivalent and is priced about 20% below the category leaders.
The goal of the change is to grow the margins of the category, which had been a zero-margin business.
The big hurdle is convincing consumers that a diaper other than a Pampers or Huggies is just as good.
Building such brand loyalty also is difficult because babies are only in diapers for a few years.
"Unless a family has another child, they leave the category, so you have to continue to build loyalty day after day," the buyer said.
Of the Top 5 disposable diaper brands, private label holds the No. 3 position in food stores
BRAND: DOLLAR SALES (IN MILLIONS); % CHANGE
1. Huggies: $198.4; 159.0%*
2. Pampers Baby Dry: $167.3; -8.0%
3. Private Label: $147.0; -6.7%
4. Pampers Cruisers: $146.1; 15.3%
5. Luvs Ultra Leakguards: $84.8; -23.8%
Source: Information Resources Inc., based on dollar sales in food stores for the 52 weeks that ended Feb. 19.
*Large growth is due to marketing initiatives, including new products or changes in pricing, promotion or distribution.