The Diaper

Industry in the
Next 25 years
By Carlos Richer
Richer Investment SA
de CV
Diaper Consulting
Services

Insight 2005
Minneapolis

Index of Topics

How can you anticipate the future?

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

Risks predicting the future

No one knows the future but we can have an educated

guess.
Sales people need to anticipate the future. (Due to ever
increasing SKUs it is starting to be impossible to operate
without a good sales forecast)
Industry leaders need a future vision to steer the company in
the right direction.
Regarding sales forecasts. The use of electronic data
transfers with clients and suppliers will be mandatory in
order to reduce manufacturing and working capital costs.
Predicting the short term is not hard, predicting the long
term future requires similar tools and maybe a bit more of
intuition.

A quick review to diaper History

before 1960
Maria Allen
1870 First
Mass Production
Of cloth diapers

1949 First pin free diaper

Marion Donovan 1946

George Shroder 1949

A quick review at modern diaper

history
Inventors of SAP
Billy Gene Harper
Carlyle Harmon
1966
Vic Mills 1961

Leg Cuffs 1986

Fluff replaced Tissue

1972

1978 Hourglass Shape

Modern Diaper 2005

Summary of events in modern

diaper history

Launch of modern disposable diaper by P&G, 1961

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

Diaper wars 101:

What is happening today with the diaper

industry?
What is a purging cycle? A globalized
price war!
Who starts a new purging cycle?
We may like to think purging cycles start as
a result of coordinated collaboration. No!
I believe they are truly random events.
How do they get started? . They start
when there is a weak link in the supply
chain!

The supply Chain

Individual
Elements
Basic Materials

Pine Trees, Oil, propylene

gas

Finished Raw
Materials

SAP, Hot melts, Cellulose

Pulp, Nonwovens, Spandex,
BOPP, etc.

Diaper
Manufacturing
Distribution
Channels
Consumer

Diapers, sanitary napkins,

adult incontinence, etc

Acrylic acid, Hydrocarbon

resins, PP pellets,
tackifiers, etc

Wal-Mart, Carrefour,
Walgreen, etc
Parents buy product for

Diaper Wars 101

(Continued)

An important disruption in the supply

chain starts a new price war cycle!
An extended fixed price supply contract
What past experience do we have regarding
these cycles? (1994-1996 was the last one
when pulp peaked close to $1,000
USD/Ton)
Purging cycles will continue every 7 to 11
years.
How can you get ready for the next purging
cycle? You need to be very well informed.

The name of the game is

Information

Who can provide us with the right information?

The enemy of my enemy is my friend information can
be free! Look for partners! Unfortunately this seldom
happens.
Industry References: Nonwovens World, Nonwovens
Industry, Nonwovens Markets, web page subscriptions, etc.
Prediction: One magazine will evolve to Absorbents World,
Absorbents Industry or Absorbents Markets.

Size of the baby diaper

market today and year 2025

If you count all of the babies of the world from the age of
newborn to 30 months old, there are 321 million babies.
If every baby in the world used a disposable diaper we
would need 15,600 diapers/sec (490 billion per year).
Today, only one in every 5 babies uses a disposable diaper.
In year 2025 the world will have 328 million babies
If diapers changes are reduced 5% due to better design
Total diaper requirement in 2025 will be reduced 2.9%

For year 2025 I expect that more than one third

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

70
60
50
40
30
20
10
0

Babies 0 to 30 months
(Millions)

2005
2025

What can we learn from the

Table:

There are twice as many babies in India today as

all of the babies in the Americas (from Alaska to
Argentina).
India has 45% more babies and 3 times more
density of babies per unit area than China.
USA is the only country that shows significant baby
growth in the next 20 years (due to immigration).
There are 4 African countries in the list of the 10
largest in regards to population of babies; with
PPP below $600 they were not considered in
previous table.

Size of the adult diaper today and

year 2025

There are 316 million adults over 70 years

old in the world today (1 in every 3 requires
protection).
By the tear 2025 there will be 563 million,
this is a 78% increase (compare this
against the 2.1% increase for babies)
For year 2025 I expect adult
incontinence sales will grow at least 3
times the current volume sales of today.

What can we learn from the

table:

China has the largest population of senior

citizens and also the biggest growth in the next
20 years.
India and the USA will also have significant
growth.
European countries have marginal growth,
Europe is not the old continent only because
of its buildingstoday it is also old because of
its people.
Indonesia and Brazil will move from positions 9
and 10th to position 5th and 6th in year 2025.

Diapers required by country

(market share)

Market share data per country is not available

(not free).
I believe it is possible to estimate market share
using only macroeconomic indicators from each
country.
With a mathematical model that uses presegmented Purchasing Power Parity (PPP),
Unemployment data and a minimal threshold
PPP that triggers diaper sales.
The only information we do not have are the
cultural barriers that generate market
resistancebut we can have an educated guess.

Market Share for Baby Diapers

(*Nigeria, Bangladesh,
from
Only countries
withmy
PPPmodel:
Ethiopia and Congo
> $2,000
Country

India
China
Indonesia
Pakistan
United States
Brazil
Mexico
Philippines
Egypt

excluded*)

Market Share 2005

2.0%
5.5%
9.0%
4.0%
95.5%
29.5%
58.6%
21.5%
22.2%

What kind of cultural and social

barriers?

Social and economic

Barriers:

In many countries the cost of diapers are

very high in relation to the cost of labor. In
India, it is still possible to hire a maid with
$100 dollars per month (but not for long).
It takes a lot of money to reeducate people
regarding what are acceptable social
practices (such as babies peeing on the
street).
Note: The playboy maid photo was to make sure you were not sleepy

Baby diaper market

predictions

China will have the largest baby market grow

in the next 5 years or so. Explain Compare
with Japan
India will be the largest consumer of diapers
within the next 15 years, explodes in about 3
to 5 more years when PPP reaches required
Threshold (get ready!)
Brazil (waiting for higher PPP), 10% of the
people in Brazil have 50% of the wealth.
Indonesia
North African Countries (exceptional growth!)
Latin America (Colombia, Argentina, Chile)
OK. Mexico and Caribbean countries limited
because of current poverty levels (Mexicos
poverty is 40% and market share is close to
60%, only growth in this region are exports)

Let us talk about

the new diaper
features.

How do you imagine the diaper of

the future?

People like to fantasize about the use of electronic gadgets.

I do not believe these gadgets will be

mass
produced
The need moves the market and not only the technology

The diaper of the future:

Landfill volume reduction, use microcapsules.

Skin protection, microcapsules to control pH !!

After
Grows
saltwhen
is released
wet

Diaper of the future:

Special nonwoven fabrics (breathable when dry)

New nonwovens (breathable only when its hot)
Backsheet without the need of laminated film will
bring a new generation of extra soft diapers.
High compression packaging will continue.
Air laid or pulp? What about synthetics? When?
Better elastic components to improve diaper fit.
Much better pad integrity with new generation
hot melts.
How much more performance in a diaper?

Predictions regarding industry

diversification

Successful paper companies have

a good chance of becoming
successful diaper producers.
Successful diaper producers have
a slim chance of also becoming
successful tissue producers,
examples are everywhere.
Be careful when you diversify!!

Conclusio
ns

Thank you!
Questions?
By Carlos Richer
Richer Investment SA
de CV
Diaper Consulting
Services
www.richernet.com