Transcript The Diaper Industry in the Next 25 years

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
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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
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No one knows the future… but we can have an educated
guess.
Sales people need to anticipate the future. (Due to ever
increasing SKU’s 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
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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:
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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
Pine Trees, Oil, propylene gas…
Basic Materials
Acrylic acid, Hydrocarbon resins,
PP pellets, tackifiers, etc
Finished Raw Materials SAP, Hot melts, Cellulose Pulp,
Nonwovens, Spandex, BOPP, etc.
Diaper Manufacturing
Diapers, sanitary napkins, adult
incontinence, etc
Distribution Channels
Wal-Mart, Carrefour, Walgreen, etc
Consumer
Parents buy product for their baby.
Diaper Wars 101 (Continued)
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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
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Who can provide us with the right information?
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The enemy of my enemy is my friend …information can be
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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
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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.
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What can we learn from the Table:
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There are twice as many babies in India today as all of
the babies in the America’s (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
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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.
Grow of people >70 between 2005 and 2025
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What can we learn from the table:
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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
buildings…today 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)
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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 “pre-segmented”
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 resistance…but we can
have an educated guess.
Market Share for Baby Diapers from my model:
Only countries with PPP > $2,000
Country
India
China
Indonesia
Pakistan
United States
Brazil
Mexico
Philippines
Egypt
Vietnam
(*Nigeria, Bangladesh, Ethiopia
and Congo excluded*)
Market Share 2005
2.0%
5.5%
9.0%
4.0%
95.5%
29.5%
58.6%
21.5%
22.2%
9.0%
What kind of cultural and social barriers?
Social and economic Barriers:
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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
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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 (Mexico’s 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?
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People like to fantasize about the use of electronic gadgets.
I do not believe these gadgets will be mass produced
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The need moves the market and not only the technology
The diaper of the future:
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Landfill volume reduction, use microcapsules.
Skin protection, microcapsules to control pH !!
After
Grows
saltwhen
is released
wet
Diaper of the future:
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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
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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!!
Conclusions
Thank you!
Questions?
By Carlos Richer
Richer Investment SA de CV
Diaper Consulting Services
www.richernet.com