NO. 3 DIAPER MAKER TO MERGE LABELS

JAMES TENSER

HOUSTON -- Drypers Corp. here, the No. 3 branded disposable diaper maker, is combating business complexity by consolidating its four regional brands under its corporate brand name.

While the company's diapers are sold in about 68% of the nation's supermarkets, the company expects the consolidation to open doors at the largest supermarket chains and in other retail channels, which account for roughly 40% of disposable diaper sales nationally.

"This gives us a chance at the national drug chains and the mass merchants. We did not have access to them before," said Terry Tognietti, co-chief executive officer and president.

Already, the changes have helped Drypers secure a program in the 70 Super Kmart Centers nationwide, a first for the manufacturer, he said. The diapers are being introduced at the chain this month.

In an interview, Tognietti outlined a series of initiatives the company is taking during the first quarter of this year:

The company has consolidated its four regional brands -- Cozies, WeeFits, Baby's Choice, and Drypers -- under the Drypers logo. Beginning Feb. 27, all shipments from the company's four manufacturing facilities will share a common, upgraded package design and UPC codes.

In addition, Drypers aims to boost market share with a price cut and promotions:

· The company is taking a competitive price cut of $1.00 for the launch of the consolidated brand, rolling back Drypers' everyday retail price from about $5.99 to $4.99 per package. This counters a recent Procter & Gamble price cut on its Luvs brand. Tognietti said Drypers is determined to maintain its value-price niche below the two major branded manufacturers and above store brands.

· On March 26, Drypers, Gerber Products Co. and Scott Paper will drop a two-page freestanding insert for a National Baby Week promotion featuring diapers, baby food, accessories and baby wipes. The promotion will be backed by related store promotions and multi-brand displays. "You really can't do tie-ins like this unless you are national," Tognietti said.

· Drypers will kick off its first-ever national print advertising campaign in April, with full page ads in targeted magazines, including Parents, American Baby and several others.

Drypers has always done "cooperative-type merchandising," said Tognietti. "Our ......niche is to bring profits to the category. But our four regional brands couldn't put together a unified ad campaign for brand support."

Along with the sales volume boost provided by the newly won Super Kmart Centers account, this will provide manufacturing economies that can help Drypers maintain its low price positioning vs. the much larger P&G and Kimberly-Clark, he said.

"One national brand brings better use of our manufacturing capability; line changeovers and packaging changeovers are minimized," he said.

Another opportunity to attack complexity exists in the Western and Southern regions of the country, where Drypers' brands have had separate designs and packaging for boys and girls. As part of the brand consolidation, the company is now making a transition in those markets to unisex designs. "This reduces [stockkeeping units], and increases movement per SKU. It increases profit per SKU and per linear foot," said Tognietti.

Having a smaller number of items in the line also reduces the risk of disappointing shoppers.

"A big concern is the potential for out-of-stocks. Diapers are bulky items and some shoppers stock up on deals. So we need displays for promotions. Our field people -- our brokered sales force -- will work with accounts individually. A number of our brokers represent Gerber as well, and they can work toward in-store displays for the Baby Week promotion."

He added that the Drypers and Gerber are working cooperatively with retailers to try to back the FSI with in-store displays. Houston-based Drypers was founded in 1987 as Varagon Corp., which marketed the Drypers brand in the Southwest. In 1992, it acquired two regional diaper manufacturers, VMG, Seattle and Ultra Care, Marion, Ohio, and the company was renamed Drypers Corp.