the diaper industry in the next 25 years

The Diaper Industry in The Diaper Industry in the Next 25 yearsthe Next 25 years

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Index of TopicsIndex of Topics

How can you anticipate the future?How can you anticipate the future? A quick review of the past and the history of the diaperA quick review of the past and the history of the diaper Why so many companies are loosing money with diapers today?Why so many companies are loosing money with diapers today? What is the size of the diaper market today? How is it divided?What is the size of the diaper market today? How is it divided? Where is the future growth for baby and adult diapers?Where is the future growth for baby and adult diapers? What will be the new features of the future diaper?What will be the new features of the future diaper? What to expect in the next 20 years, who will survive?What to expect in the next 20 years, who will survive? Conclusions and time for questions.Conclusions and time for questions.


Risks predicting the futureRisks predicting the future No one knows the future… but we can have an educated No one knows the future… but we can have an educated

guess.guess. Sales people need to anticipate the future. (Due to ever Sales people need to anticipate the future. (Due to ever

increasing SKU’s it is starting to be impossible to operate increasing SKU’s it is starting to be impossible to operate without a good sales forecast)without a good sales forecast)

Industry leaders need a future vision to steer the company Industry leaders need a future vision to steer the company in the right direction. in the right direction.

Regarding sales forecasts…. The use of electronic data Regarding sales forecasts…. The use of electronic data transfers with clients and suppliers will be mandatory in transfers with clients and suppliers will be mandatory in order to reduce manufacturing and working capital costs.order to reduce manufacturing and working capital costs.

Predicting the short term is not hard, predicting the long Predicting the short term is not hard, predicting the long term future requires similar tools and maybe a bit more of term future requires similar tools and maybe a bit more of intuition.intuition.


A quick review to diaper History before 1960A quick review to diaper History before 1960

Maria Allen

Marion Donovan 1946

1870 FirstMass ProductionOf cloth diapers

George Shroder 1949

1949 First pin free diaper

A quick review at modern diaper historyA quick review at modern diaper history

Billy Gene HarperCarlyle Harmon 1966

Vic Mills 1961

Fluff replaced Tissue 1972

Leg Cuffs 1986

Modern Diaper 20051978 “Hourglass Shape”

Inventors of SAP

Summary of events in modern Summary of events in modern diaper historydiaper history

Launch of modern disposable diaper by P&G, 1961Launch of modern disposable diaper by P&G, 1961 Invention of Superabsorbent Polymer, 1966Invention of Superabsorbent Polymer, 1966 First use of tapes integrated to a diaper, 1971First use of tapes integrated to a diaper, 1971 Introduction of fluff instead of creped tissue, 1972Introduction of fluff instead of creped tissue, 1972 First use of Superabsorbent in diapers, 1987First use of Superabsorbent in diapers, 1987 Frontal Tape and Hook and Loop systems, 1987Frontal Tape and Hook and Loop systems, 1987 Use of leg cuffs for leak prevention, 1989Use of leg cuffs for leak prevention, 1989 Introduction of training pant diapers, 1994Introduction of training pant diapers, 1994 Use of cloth like back sheets and breathables, 1994Use of cloth like back sheets and breathables, 1994


Diaper wars 101:Diaper wars 101: What is happening today with the diaper industry?What is happening today with the diaper industry? What is a “purging cycle”? A globalized price war!What is a “purging cycle”? A globalized price war! Who starts a new purging cycle?Who starts a new purging cycle? We may like to think purging cycles start as a result We may like to think purging cycles start as a result

of coordinated collaboration…. No! I believe they of coordinated collaboration…. No! I believe they are truly random events.are truly random events.

How do they get started? …. They start when there How do they get started? …. They start when there is a weak link in the supply chain!is a weak link in the supply chain!


Individual ElementsIndividual Elements Pine Trees, Oil, propylene gas…Pine Trees, Oil, propylene gas…

Basic MaterialsBasic Materials Acrylic acid, Hydrocarbon resins, Acrylic acid, Hydrocarbon resins, PP pellets, tackifiers, etcPP pellets, tackifiers, etc

Finished Raw MaterialsFinished Raw Materials SAP, Hot melts, Cellulose Pulp, SAP, Hot melts, Cellulose Pulp, Nonwovens, Spandex, BOPP, etc.Nonwovens, Spandex, BOPP, etc.

Diaper ManufacturingDiaper Manufacturing Diapers, sanitary napkins, adult Diapers, sanitary napkins, adult incontinence, etcincontinence, etc

Distribution ChannelsDistribution Channels Wal-Mart, Carrefour, Walgreen, etcWal-Mart, Carrefour, Walgreen, etc

ConsumerConsumer Parents buy product for their baby.Parents buy product for their baby.

The supply Chain


Diaper Wars 101 (Continued)Diaper Wars 101 (Continued)

An important disruption in the supply chain An important disruption in the supply chain starts a new price war cycle!starts a new price war cycle!

An extended “fixed price” supply contract An extended “fixed price” supply contract What past experience do we have regarding What past experience do we have regarding

these cycles? (1994-1996 was the last one when these cycles? (1994-1996 was the last one when pulp peaked close to $1,000 USD/Ton)pulp peaked close to $1,000 USD/Ton)

Purging cycles will continue every 7 to 11 years.Purging cycles will continue every 7 to 11 years. How can you get ready for the next purging How can you get ready for the next purging

cycle? You need to be very well informed.cycle? You need to be very well informed.


The name of the game is InformationThe name of the game is Information Who can provide us with the right information?Who can provide us with the right information? The enemy of my enemy is my friendThe enemy of my enemy is my friend … …information can be information can be

free! Look for partners! Unfortunately this seldom happens. free! Look for partners! Unfortunately this seldom happens. Industry References: Nonwovens World, Nonwovens Industry, Industry References: Nonwovens World, Nonwovens Industry,

Nonwovens Markets, web page subscriptions, etc.Nonwovens Markets, web page subscriptions, etc. Prediction: One magazine will evolve to Prediction: One magazine will evolve to AbsorbentsAbsorbents World, World,

AbsorbentsAbsorbents Industry or Industry or AbsorbentsAbsorbents Markets. Markets.

Size of the baby diaper market Size of the baby diaper market today and year 2025today and year 2025

If you count all of the babies of the world from the age of If you count all of the babies of the world from the age of newborn to 30 months old, there are newborn to 30 months old, there are 321321 million babies. million babies.

If every baby in the world used a disposable diaper we would If every baby in the world used a disposable diaper we would need 15,600 diapers/sec (490 billion per year).need 15,600 diapers/sec (490 billion per year).

Today, only one in every 5 babies uses a disposable diaper.Today, only one in every 5 babies uses a disposable diaper. In year 2025 the world will have In year 2025 the world will have 328328 million babies million babies If diapers changes are reduced 5% due to better design…If diapers changes are reduced 5% due to better design… Total diaper requirement in 2025 will be reducedTotal diaper requirement in 2025 will be reduced 2.9%2.9% For year 2025 I expect that more than one third of the For year 2025 I expect that more than one third of the

babies in the world will use a disposable diaper, almost babies in the world will use a disposable diaper, almost doubling current volume sales of 2005.doubling current volume sales of 2005.


Babies 0 to 30 months(Millions)

0

1020

3040

5060

70

India

China

Indonesia

Pakist

an

United

Stat

es Brazil

Mexico

Philip

pines Egy

pt

Vietnam

2005

2025

What can we learn from What can we learn from the Table:the Table:

There are twice as many babies in India today as all of There are twice as many babies in India today as all of the babies in the America’s (from Alaska to Argentina).the babies in the America’s (from Alaska to Argentina).

India has 45% more babies and 3 times more density of India has 45% more babies and 3 times more density of babies per unit area than China.babies per unit area than China.

USA is the only country that shows significant baby USA is the only country that shows significant baby growth in the next 20 years (due to immigration).growth in the next 20 years (due to immigration).

There are 4 African countries in the list of the 10 largest There are 4 African countries in the list of the 10 largest in regards to population of babies; with PPP below in regards to population of babies; with PPP below $600 they were not considered in previous table.$600 they were not considered in previous table.


Size of the adult diaper today Size of the adult diaper today and year 2025and year 2025

There are 316 million adults over 70 years old in There are 316 million adults over 70 years old in the world today (1 in every 3 requires protection).the world today (1 in every 3 requires protection).

By the tear 2025 there will be 563 million, this is a By the tear 2025 there will be 563 million, this is a 78% increase78% increase (compare this against the 2.1% (compare this against the 2.1% increase for babies)increase for babies)

For year 2025 I expect adult incontinence For year 2025 I expect adult incontinence sales will grow at least 3 times the current sales will grow at least 3 times the current volume sales of today.volume sales of today.


Grow of people >70 between 2005 and 2025

-

20

40

60

80

100

120

140

China

India

United S

tate

s Japan

Russia

Germ

any Ita

ly

France

Indones

iaBra

zil

Older>70 Y2005

Older>70 Y2025

What can we learn from the table:What can we learn from the table:

China has the largest population of senior citizens and China has the largest population of senior citizens and also the biggest growth in the next 20 years.also the biggest growth in the next 20 years.

India and the USA will also have significant growth.India and the USA will also have significant growth. European countries have marginal growth, Europe is European countries have marginal growth, Europe is

not the “old continent” only because of its buildings…not the “old continent” only because of its buildings…today it is also old because of its people.today it is also old because of its people.

Indonesia and Brazil will move from positions 9 and Indonesia and Brazil will move from positions 9 and 1010thth to position 5 to position 5thth and 6 and 6thth in year 2025. in year 2025.


Diapers required by country Diapers required by country (market share)(market share)

Market share data per country is not available (not free).Market share data per country is not available (not free). I believe it is possible to estimate market share using I believe it is possible to estimate market share using

only macroeconomic indicators from each country.only macroeconomic indicators from each country. With a mathematical model that uses “pre-segmented” With a mathematical model that uses “pre-segmented”

Purchasing Power Parity (PPP), Unemployment data Purchasing Power Parity (PPP), Unemployment data and a minimal threshold PPP that triggers diaper sales.and a minimal threshold PPP that triggers diaper sales.

The only information we do not have are the cultural The only information we do not have are the cultural barriers that generate market resistance…but we can barriers that generate market resistance…but we can have an educated guess.have an educated guess.


Market Share for Baby Diapers from my model:Market Share for Baby Diapers from my model:Only countries with PPP > $2,000 Only countries with PPP > $2,000

(*(*Nigeria, Bangladesh, Ethiopia Nigeria, Bangladesh, Ethiopia and Congo excluded*and Congo excluded*))

Country Country Market Share 2005Market Share 2005

IndiaIndia 2.0%2.0%ChinaChina 5.5%5.5%IndonesiaIndonesia 9.0%9.0%PakistanPakistan 4.0%4.0%United StatesUnited States 95.5%95.5%BrazilBrazil 29.5%29.5%MexicoMexico 58.6%58.6%PhilippinesPhilippines 21.5%21.5%EgyptEgypt 22.2%22.2%VietnamVietnam 9.0%9.0%

What kind of cultural and social barriers?What kind of cultural and social barriers?

Social and economic Barriers:Social and economic Barriers:

In many countries the cost of diapers are very In many countries the cost of diapers are very high in relation to the cost of labor. In India, it high in relation to the cost of labor. In India, it is still possible to hire a maid with $100 dollars is still possible to hire a maid with $100 dollars per month (but not for long).per month (but not for long).

It takes a lot of money to reeducate people It takes a lot of money to reeducate people regarding what are acceptable social practices regarding what are acceptable social practices (such as babies “peeing” on the street). (such as babies “peeing” on the street).

Note: The playboy maid photo was to make sure you were not sleepy Note: The playboy maid photo was to make sure you were not sleepy


Baby diaper market predictionsBaby diaper market predictions

China will have the largest baby market grow in the next 5 China will have the largest baby market grow in the next 5 years or so. Explain… Compare with Japan…years or so. Explain… Compare with Japan…

India will be the largest consumer of diapers within the next India will be the largest consumer of diapers within the next 15 years, explodes in about 3 to 5 more years when PPP 15 years, explodes in about 3 to 5 more years when PPP reaches required Threshold (get ready!)reaches required Threshold (get ready!)

Brazil (waiting for higher PPP), 10% of the people in Brazil Brazil (waiting for higher PPP), 10% of the people in Brazil have 50% of the wealth. Indonesia…have 50% of the wealth. Indonesia…

North African Countries (exceptional growth!)North African Countries (exceptional growth!) Latin America (Colombia, Argentina, Chile) OK. Mexico and Latin America (Colombia, Argentina, Chile) OK. Mexico and

Caribbean countries limited because of current poverty levels Caribbean countries limited because of current poverty levels (Mexico’s poverty is 40% and market share is close to 60%, (Mexico’s poverty is 40% and market share is close to 60%, only growth in this region are exports)only growth in this region are exports)


Let us talk about the Let us talk about the new diaper features.new diaper features.


How do you imagine the diaper of the future?How do you imagine the diaper of the future?

People like to fantasize about the use of electronic gadgets.People like to fantasize about the use of electronic gadgets.

The need moves the market and not only the technologyThe need moves the market and not only the technology

I do not believe these gadgets will be mass produced

The diaper of the future:The diaper of the future:

Landfill volume reduction, use microcapsules.Landfill volume reduction, use microcapsules. Skin protection, microcapsules to control pH !!Skin protection, microcapsules to control pH !!

Grows when wetAfter salt is released


Diaper of the future:Diaper of the future:

Special nonwoven fabrics (breathable when dry)Special nonwoven fabrics (breathable when dry) New nonwovens (breathable only when its hot)New nonwovens (breathable only when its hot) Backsheet without the need of laminated film will bring a Backsheet without the need of laminated film will bring a

new generation of extra soft diapers.new generation of extra soft diapers. High compression packaging will continue.High compression packaging will continue. Air laid or pulp? What about synthetics? When?Air laid or pulp? What about synthetics? When? Better elastic components to improve diaper fit.Better elastic components to improve diaper fit. Much better pad integrity with new generation hot melts.Much better pad integrity with new generation hot melts. How much more performance in a diaper?How much more performance in a diaper?


Predictions regarding industry diversificationPredictions regarding industry diversification

Successful paper companies have a good chance of Successful paper companies have a good chance of becoming successful diaper producers.becoming successful diaper producers.

Successful diaper producers have a slim chance of Successful diaper producers have a slim chance of also becoming successful tissue producers, also becoming successful tissue producers, examples are everywhere.examples are everywhere.

Be careful when you diversify!!Be careful when you diversify!!


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the diaper industry in the next 25 years

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