Sponsored by: Investment Center

Something new in your business?  Click here to submit your business press release

Chamber Corner | Main Street News | Job Hunt | Classifieds | Calendar | Illinois Lottery 

Diaper wars: Kimberly to take on P&G through innovation, higher ad spend

Send a link to a friend  Share

[January 24, 2015]  By Devika Krishna Kumar
 
 (Reuters) - Kimberly-Clark Corp <KMB.N> is set to increase advertising and promotional spending for its diapers and launch new products in an escalating war with bigger rival Procter and Gamble Co <PG.N> in North America.

Industry analysts say moms are either going upscale and choosing Pampers or going down-market with Luvs, both P&G brands, leaving Kimberly-Clark's mid-tier Huggies Snug & Dry line without a real identity.

To compete better, Kimberly-Clark said on Friday it would cut prices and "improve" its Snug & Dry line starting this quarter, without giving details.

Huggies is the core of Kimberly-Clark's baby care products business, which generates about $7 billion in annual sales. Pampers, P&G's largest brand, alone has sales of over $10 billion.

"The consumer is shifting downward in price and they (Kimberly-Clark) don't have a lower-priced product," Sanford Bernstein analyst Ali Dibadj told Reuters.

Dibadj said the company could play either end of the price spectrum: introduce a lower-priced brand or "a product that is of such high quality that people are willing to pay more for it."

P&G and Kimberly-Clark control about 80 percent of the U.S diaper market, but the Kleenex maker is losing share, according to Euromonitor International data. Huggies' U.S. market share dropped to 8.50 percent in 2013 from 10.2 percent in 2008.

Indeed, weakening sales of Huggies and other core products in North America is expected to lead to fall in sales in 2015, Kimberly-Clark said on Friday. Its shares fell 6 percent.

To claw back market shares, Kimberly-Clark plans to launch new products this year and spend more on advertising them.

Barclays analyst Lauren Lieberman estimates the company could cough up about $500 million for these initiatives.

[to top of second column]

Kimberly-Clark spent about $3.71 billion on marketing and research in fiscal 2014. P&G spent nearly triple, $9.73 billion, just on advertising in 2013.

Lieberman said Luvs sells at a roughly 20 percent discount to Huggies Snug & Dry, with the magnitude of the discount varying with promotional activity.

For example, the lowest-priced Huggies Snug & Dry 44-pack for a size 1 newborn baby costs $8.97, while P&G's 48-pack Luvs for the same size sells for $6.99, according to Wal-Mart Stores Inc's <WMT.N> website.

Luvs has been promoted for almost every week this year at one of P&G's main retail customers, Kimberly-Clark Chief Executive Thomas Falk said.

"I think Luvs has picked up 2 share points so far this year."

(Writing by Siddharth Cavale; Editing by Savio D'Souza)

[© 2014 Thomson Reuters. All rights reserved.]

Copyright 2014 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Back to top