Kimberly-Clark ends partnership with Costco for diaper production
The U.S. company shifts focus, stopping the production of Huggies diapers for the retailer's private label and prioritizing higher-margin premium products
Kimberly-Clark, the company behind Huggies diapers, has announced it will stop producing diapers for Costco, marking a shift in its business strategy. The company will abandon low-margin private label contracts in favor of focusing on higher-priced premium products under its own brand. This strategic change was disclosed during an earnings call with analysts in October, where CEO Mike Hsu detailed the company’s future direction.
According to Bloomberg, starting in January, Costco will begin selling diapers made by First Quality under its Kirkland Signature brand. Hsu explained that, in order to focus investments on capacity and technology to strengthen its brands, the company will cease production for major private label diaper contracts, such as Costco’s. This move will result in a 2% drop in Kimberly-Clark’s profits next year. The CEO also noted that the company’s private label share will decrease from 4% in 2023 to around 2% in the following year, with expectations for further declines over time.
For Costco, selling Kirkland brand items generates higher margins compared to national brands, and attracts cost-conscious consumers due to the slightly lower price.
