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

Mon Jan 26, 2015 12:22pm EST
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(This Jan. 23rd story was corrected to say analyst estimated company could have cost savings of up to $500 million, not that it could spend $500 million on product launches, advertising, in para 10)

By Devika Krishna Kumar

(Reuters) - Kimberly-Clark Corp (KMB.N: Quote) 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: Quote) 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.   Continued...

Pampers diapers, a product distributed by Procter & Gamble, is pictured on sale at a Ralphs grocery store in Pasadena, California January 21, 2014. REUTERS/Mario Anzuoni