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 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.
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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)
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