Changing Diapers

JULIE GALLAGHER

At a time when the economy in shambles has been a boon for many store-brand categories, private-label diapers are sporting a serious sag.

During the four weeks ending Oct. 5, unit sales of corporate-brand disposable diapers fell 7.6% in the food channel, while dollar sales were down 7%, according to Information Resources Inc., Chicago.

Private brands are trending below overall category sales in supermarkets, where volume was down 4% and dollar sales were up 2.2% during the same period.

Tammy Marlowe, category manager for Associated Foods Stores, noticed a drop in sales of its Western Family store-brand disposable diapers, beginning six months ago.

“Sales are down, and I've been concerned about it,” she told SN.

Marlowe attributes shoppers' loyalty to national brands to the renewed focus that major manufacturers have placed on promotions.

“I've noticed some national brands being promoted in our local newspaper that I hadn't seen before,” she noted. “There are more FSIs [freestanding inserts], and shoppers are turning more to coupons.”

Shoppers also take advantage of weekly in-store promotions that focus on one of four disposable diaper brands. Associated's offering comprises best-seller Huggies; Luvs, which is its fastest-growing brand; Pampers; and its least expensive option, the Western Family brand, Marlowe said.

Although she positions her disposable diapers as “loss leaders” designed to draw families with young children, overall sales gains for the past year have been modest.

“Dollar sales are up 3%, which is very minimal,” Marlowe said. “I think that shoppers may be going more [frequently] to mass and club stores.”

Other channels are also eating into supermarkets' share of the category.

Volume sales of diapers in drug stores were up 4% during the four weeks ending Oct. 5, while dollar sales rose 6.1%, according to IRI. In food, drug and mass channels combined (excluding Wal-Mart), unit sales of diapers fell 5.4%, while dollar sales rose 3.1%.

It's hard to gauge how dramatic Wal-Mart's share of the disposable diaper market is, since it doesn't report sales to IRI. But it's not the only force that traditional grocers must contend with. Supermarkets have also grown accustomed to stiff competition from chains that count toys among their bread and butter.

“Toys ‘R’ Us has been huge in the [disposable diaper] category,” said Jim Hertel, managing director of Barrington, Ill.-based Willard Bishop.

He explained that it's among the outlets that are willing to make no money on the category if it means successfully drawing members of a market willing to spend on high-margin baby products.

In some cases, traditional supermarkets are waging a losing battle with these deep discounters.

Hertel advises category managers who have positioned diapers as loss leaders to determine whether they're drawing additional shoppers with low prices, or just losing profit unnecessarily.

“A retailer may look at diapers and say, ‘I can't win in this category, but maybe I can reduce the amount of space we're invested in and reduce the promotion activity, and just provide diapers as a convenience,’” he said.

When shelf space allows, food retailers may also effectively compete by positioning themselves as a one-stop baby shop.

Hy-Vee Baby is a growing department, especially in the chain's new stores, Hy-Vee spokeswoman Christine Friesleben told SN.

“It includes a lot more than just food and diapers, there's developmental toys, books, equipment, and natural and organic items,” she said. “Our customers appreciate the convenience of finding everything they need under one roof."

More retailers might consider these strategies, especially as diaper merchandisers fight for a piece of a shrinking pie.

Sales of disposable diapers declined nearly 11% between 2003 and 2007, according to a recent Packaged Facts report. Its author, Timothy Dowd, said the shrinking numbers may be due to declining birth rates.

In 2006, the number of U.S. births per thousand population was 14.2, 15% lower than the 1990 peak of 16.7.

Consumers may also be turning to cloth diapers.

A recent poll of cloth diaper manufacturers by the Real Diaper Industry Association showed an annual growth rate of 26% in sales of cloth diapers nationwide.

“A portion of the growth in the last 24 months is likely attributable to economic sensitivity,” said Jennifer Labit, chairman of the association. “However, the strong growth pattern we've seen in the industry actually preceded the current recession.”

Disposable diaper makers are reacting to changing market conditions in a number of ways.

Kimberly-Clark's Huggies and Pull-Ups brands began honing in on the burgeoning Hispanic market in September when the company launched its “Tren de Vida,” or Train of Life, Whistle Stop Tour.

The bilingual initiative focuses on making Hispanic moms' daily routine easier.

With the help of Mass Hispanic Marketing, the diaper maker sets up a giant inflatable train and/or changing station, depending on the venue, at Hispanic festivals, community events and in the parking lots of supermarkets that cater to a large number of Hispanic consumers.

So far, dozens of Wal-Mart stores, Kroger's Food 4 Less locations and Stater Bros. have participated.

“We're trying to show Hispanic moms that Huggies is here for them,” Odette Hasburn, vice president of client services for Mass Hispanic Marketing, told SN.

During the “Tren de Vida” events, diaper samples and other Huggies products are distributed along with diaper bags and baby blankets.

“We provide products that make their life better and help them have a fun day so they can enjoy their kids,” added Hasburn.

Each of the Whistle Stops also features a kiosk with a microphone designed to record parenting tips from Hispanic moms. The kiosks have also become a staple of in-store sampling events hosted by retailers who cater to Hispanics.

So far the kiosks have made 1,000 retailer visits, and 30,000 tips have been collected.

Huggies will compile the child-rearing advice and publish a book geared toward Hispanic moms. Titled “De Mama á Mama,” it is due out this spring.

“Members of the Hispanic community love face-to-face interaction and word of mouth” so this is perfect, said Hasburn.

Retail partners will distribute the books, positioned as a Mother's Day gift, in April. Shoppers can also request a copy online at HuggiesEnEspanol.com.

Huggies and its trading partners are wise to reach out to Hispanic shoppers.

Live U.S. births of Hispanics grew by a whopping 27% between 2000 and 2006. In 2006, Hispanic births in this country surpassed 1 million, marking a 5% increase from the previous year, and accounting for just under 25% of births from all races, according to Packaged Facts.

Ted Taft, managing director of Meridian Consulting Group, Westport, Conn., advises retailers to participate in initiatives designed to draw members of the demographic.

“Hispanics will often go to a bodega even if it means spending more, simply because they feel there are ‘more people like me’ there,” said Taft. “It's smart for traditional retailers to do these kinds of things, since they usually have trouble penetrating that audience.”

Parking lot events — especially ones that prominently feature Spanish-language signage — are a good way to draw members of the community who don't usually shop your stores, he added. Once you've won their trust, “Hispanics tend to be very brand-loyal,” Taft said.

With their disposable diaper sets, retailers are also effectively catering to ecologically conscious consumers.

Such is the case at PCC Natural Markets. The retailer merchandised gel-free Tushies, chlorine-free Tendercare and GDiapers — which consist of a washable cotton outer pant and a flushable diaper refill — before settling on its current selection of Seventh Generation's chlorine-free diapers.

“Customers didn't support those other brands,” PCC's grocery merchandiser Stephanie Steiner told SN.

Currently listed as a best seller on Amazon.com, Seventh Generation's disposable diapers are appealing to parents who are concerned about the environmental and health implications of conventional disposable diapers, said Chrystie Heimert, spokeswoman for the company.

“The process of whitening diapers produces dioxin, which is a known carcinogen, but we've removed that from the equation,” she said.

Despite a price increase months ago, and a package size reduction in March to help pay for the rising cost of petroleum, sales of the diapers at PCC remain steady. A manufacturer-imposed price increase, which will amount to about $1 per package, is planned for next month, Heimert explained.

Similar steps have been taken by major manufacturers such as Kimberly-Clark with its Huggies brand, and Associated Food Stores with its corporate brand.

“Parents tend to stock up a bit when they're on sale,” noted Steiner, who temporarily reduces diaper prices four times annually.