IT'S A JUGGLE OUT THERE

RUSSELL REDMAN

Changes are occurring faster on disposable diaper shelves than on the little bottoms that wear the products.

Shuffling of diaper counts, packaging and gender types, in part due to premium-brand price shifts, has rattled grocery merchandisers and consumers. According to retailers and wholesalers, frequent product alterations have made stocking, promoting and shopping the diaper aisle tricky.

However, they noted, last year's price cuts by Procter & Gamble on Pampers and Luvs and by Kimberly-Clark on Huggies have helped those brands compete with private labels and third-tier brands such as Drypers and Fittis, which had seized market share.

"For almost the last year, it's basically been just confusion in that aisle because of the constant change in size, description and product," said Charles Jones, head buyer at Scolari's Food & Drug Co., Sparks, Nev.

"They'll go from a 20-count to an 18-count to a 16-count, and they'll go from boy's and girl's to a unisex diaper and then back. Or they may have three weight sizes, condense them down to two and then back again. As a guess, they've probably changed [products] three times in the past year," he said, citing Huggies, Pampers and Luvs. "So we've cut down on the number of [stockkeeping units] and put more emphasis on those [brands] that aren't changing so rapidly."

Such flux has bred disarray in the category, several chains reported.

"You just get a section set, and it's already obsolete because they've come out with some other products," said Roger Burks, senior vice president at The Mad Butcher, Pine Bluff, Ark. "One of the biggest problems we always have with diapers is that P&G and Kimberly-Clark are constantly changing products."

At Sterk's Super Foods, Hammond, Ind., item adjustments by the premium brands have forced rotations. "They've changed things so many times that you always end up having to deal the discontinued ones to get the new ones on the shelf," said Kevin Copper, vice president of merchandising.

"It's been a bit chaotic. From a consumer viewpoint it's confusing. They get used to buying one diaper and then all of a sudden the one they're buying is not the same anymore," he explained. "Once we know they're discontinuing a particular SKU, we no longer advertise it."

Al Young, category manager at Big Y Foods, Springfield, Mass., agreed that shoppers often are perplexed. "We are finding that aisles with unisex diapers vs. boy/girl are confusing to the consumer because of the large number of SKUs," he said.

Keeping pace with the diaper aisle's metamorphosis is challenging, said Robert Nowell, grocery buyer at Community Cash Stores, Spartanburg, S.C.

"It's something you definitely have to keep up with. They change package size, the count and UPC codes. You have to make sure you have the right codes in the system. The person handling our space management program constantly has to remeasure packages to make sure the system's information is accurate," he said. "You have to make sure as best as you can that what you have on the shelf is what you're advertising."

Pay Less Supermarkets, Anderson, Ind., held off on adding a private-label diaper because of a categorywide switch to unisex. "One reason we delayed putting in Roundy's diapers was that they [initially] had six SKUs but, as everybody else was, were in the process of changing over to unisex," said Rod Boni, grocery merchandiser. The shift cut Roundy's to three SKUs, he added.

But some changes in the diaper aisle are positive, according to retailers.

"At some stores, we have actually decreased [diaper] space because of pack changes," The Mad Butcher's Burks said. "They're smaller now, and we're able to consolidate. In some stores where we didn't consolidate, we just added a shelf and picked up extra [grocery] space."

The phasing out of boy's and girl's varieties is adding flexibility to the section, Boni of Pay Less said. "I think it's going in the right direction with unisex," he explained. "It cuts down on the number of SKUs, and you can give a little more space, as far as packout, to some of the faster movers. And it's helping somewhat to eliminate out-of-stocks. Before, if you tried to carry a lot of variety, you ran the risk of out-of-stocks."

Price and item repositioning, though, hasn't seemed to lift diaper sales. Total dollar volume in diapers and training pants held steady at $3.7 billion for the 52 weeks ended Aug. 27, according to Information Resources Inc., Chicago. Unit volume data wasn't available.

"It's been relatively flat. Unit sales are up, and dollars sales are down because P&G took the position to roll back the cost and not offer the [deals]," a grocery buyer for a big Southern chain said.

P&G and Kimberly-Clark's price cuts have revived their diaper sales at the chain. "They've increased their movement," he said. "The [third-tier] and private-label segment was growing, and Huggies, Pampers and Luvs were staying flat. Luvs was losing share steadily, and P&G was the first to roll back their cost. [The price cuts] were an effort to pump a little life back into Luvs, which they succeeded in doing."

Big Y's Young, however, said sales have slowed. "The price reduction was accompanied by a decrease in count in each package. Therefore, customers must purchase more packages of diapers to equal the same amount as before. So, in actuality, it was a price increase, effectively hurting the sales of everything."

Price cuts have had the opposite effect at Lem Markets, South Boston, Va., where sales of Luvs have skyrocketed, according to Steve Reynolds, director of purchasing.

"It's shifted sales from a lot of private-label or generic-type diapers to major brands -- more or less to the Luvs. They're selling at a rate of probably 10 times as what they did last year," he said. "I would say it grew my category sales in the neighborhood of 50% to 100%." Lem's sales of third-tier diapers -- Drypers, Coochies and Bunny Hugs -- have slipped. "The movement on those is down a bit," Reynolds said.

Space changes in the category have mirrored volume, he added. "We've spread out on Luvs quite a bit because of the movement we're having. We've cut back a little on the [third-tier] brands, which are less advertised than the name-brands."

Scolari's has seen premium-brand volume inch up since prices were reduced, but third-tier brands and the chain's private label, Hy-Top, are commanding customer attention.

"Drypers, Fittis and [similar] companies have been fairly consistent in a pack and type, and their pricing has always been lower. That's why the customer is buying them," Jones said. Such consistency has led Scolari's to greater promotion of Drypers and Hy-Top, he noted. "There had been some promotion on the branded product but not a whole lot," he said. "When they start changing the pack, you can't do much promotion because you set your advertising up and two weeks later they change a pack or size and can't guarantee you what you need for an ad."

Big Y is focusing on value packs. "We are starting to promote 2X and 3X large-size diaper packages," Young said. "Consumers have to spend more for these, but so far they seem willing to do so since they do not have to purchase diapers as frequently."

Boni at Pay Less said price cuts have impacted the diaper category's price structure more than premium-brand sales.

"It's closed the price gap somewhat between the national brands and the lower-priced brands. But promotional activity on the national brands also has decreased," he said. "They're taking an EDLP approach, with less promotional support."

"It seems like [P&G and Kimberly-Clark] stopped the erosion of sales toward lower-priced brands, but any sales increase they've had was not significant," he explained.

That's also been the case at Sterk's. "Our business was more promotionally oriented and has probably slowed up a bit because [premium brands] have gone more to EDLP programs," Copper said.

Although promotions have decreased, diaper prices are more competitive overall, and shoppers aren't necessarily grabbing the lowest-priced item, retailers said.

"The [premium-brand] retails have dropped from the $10 range," the buyer from the Southern chain said. "Now we have an everyday retail of $6.77 on most of the convenient packs of Huggies and Pampers. With Drypers and Fittis, you're looking at the low $5 range, and private label falls in there, too." Scolari's Jones also noted that price differences are slimmer. "We're seeing about $1 a package [difference] between the premium brands and the Fittis and Drypers, and $1 between those and private label. Private label does well for us. All of the SKUs are in the top 15 in sales," he said. Narrowing price gaps have undercut private-label and/or third-tier diapers at some chains.

"Private-label diapers have not really had any effect on the category at all," said Burks of The Mad Butcher, which sells the Shoppers Value label. "Luvs are still our biggest seller, with Cuddles second, Fittis third and Pampers fourth. If Cuddles, Fittis and Luvs stay where they're at [in price], there's no need to carry Shoppers Value because it just doesn't warrant that kind of movement."

"Right now, with Drypers and Luvs, there is no price difference, and that's really hurt [Drypers]," Lem's Reynolds said. "Coochies we have everyday at $3.69, so there's close to $1.50 difference between those and Luvs."

The buyer for the Southern chain said his store-brand diapers are positioned as the main option to national brands and, therefore, are getting more space and promotion. "We did a category review several months ago, and since then we've done away with Drypers altogether. We still have Fittis, but not many," he explained.

Despite a blurring of diaper price tiers, multiple price levels remain a key to the category, retailers said.

"There is still a need for third-tier diapers like Drypers and Fittis, even with alleged lower national-brand retails," Big Y's Young said. "The consumer is looking for a bargain, and Cuddles, Cozies, etc., are filling that void. If not for these alternative brands, Pampers and Huggies would still be selling at $10.99."

Yet some diaper aisle contenders could get knocked out, Pay Less' Boni noted. "We are watching sales. I think eventually you're going to see a brand or two drop out. We're just watching to see who the players really are and what kind of support they'll have for their products."