The decline in the birth rate in the United States worries diaper manufacturers

In recent years, the birth rate in the United States has remained stagnant, which may affect the diaper industry, which for a long time was considered a “guaranteed” source of income, being responsible for generating $5.9 billion per year.

In this context, for diaper manufacturers Procter & Gamble (P&G) and Kimberly-Clark, owners of the Pampers and Huggies brands, respectively, the country’s falling birth rate is perceived as a challenge never faced before. In addition, unusual inflation for baby care products since the pandemic has forced some families to cut back on diaper purchases.

Changes in consumer behavior, such as opting for reusable diapers, starting children’s potty training earlier or even changing diapers less frequently, are leading companies to adopt new strategies to drive sales, including the development of diapers for older children.

“We’ve never seen a situation where birth rates are declining at the same time we have this same level of inflation,” said Nik Modi, an analyst at RBC Capital Markets.

The fertility rate, which is the number of births in a year per 1,000 women aged 15 to 44, last peaked in the 1950s, during the baby boom, at around 120. By 2020, this number had already fallen to below 60, which is of increasing concern to companies involved in the production of child care items.

The fertility rate for teens ages 15 to 19 has declined 73% from 1990 to 2019, while the fertility rate for U.S. women ages 20 to 24 has fallen 43% over the same period, and those ages 40 to 44 have seen their rate increase by 132%.

“I wouldn’t trust birth rates to suddenly change direction,” said Pricie Hanna, managing partner of Price Hanna Consultants, which advises companies on hygiene products. “It really is a cultural fact,” she added.

According to Gary Stibel, CEO of New England Consulting Group, the cultural shift has implications that go far beyond diapers. Recent years of declining fertility in the U.S. portend increased competition for manufacturers of all kinds of child-focused goods, he said.

 

DROP IN DIAPER SALES

Against this backdrop, retail unit sales of diapers fell 1% last year, marking the fourth consecutive year of decline amid higher prices, according to Circana.

“The industry clearly faces a situation with the declining birth rate that has caught everyone’s attention,” said Jim Robinson, a partner at Absorbent Hygiene Insights and a consultant to the diaper industry. “This will affect future growth,” he noted.

Together, P&G and Kimberly-Clark own more than half of the U.S. diaper market, so the data is considered relevant to both companies.

P&G’s annual sales for the Pampers brand alone exceed $7 billion globally, nearly 9% of the company’s sales, but the volume of baby care products sold declined in the fourth quarter of 2023 amid higher prices.

The category is also important to Kimberly-Clark, which derives more than a third of its revenue, about $7 billion, from baby and child care products.

AVOIDING A PROBLEM

To get around this crisis, P&G has sought to add new features to diapers that may even be valued by thrifty parents. According to the company, it managed to expand its North American sales of its ultra-soft Pampers Swaddlers line from $700 million five years ago to more than $1 billion now.

The leading consumer goods company has also been producing diapers for older children. Last year, through the Pampers brand, the company introduced a size 8, designed for children 20 kilograms or more.

“Diaper manufacturers have been finding ways to extend the shelf life of their customers, with nighttime diapers for both toddlers and older children,” Hanna said. “So that has helped a little bit,” he noted.

Adult diaper consumption has also been a bright spot for the personal care industry as the baby boomer generation ages. Adult incontinence products are expected to remain among the fastest-growing personal hygiene categories in the coming years, according to Diana Gomes, an analyst at Bloomberg Intelligence.

However, despite growth in retail sales of adult urinary incontinence diapers over the past three years, they still account for less than half the size of the baby diaper market, according to Circana data. For this reason, manufacturers are increasingly focused on creating new products for children.

P&G

According to Andre Schulten, P&G’s chief financial officer, the company is trying to sell more training briefs for kids who still wet the bed up to age 12. “When you think about kids who wet the bed, these are young children who have difficulty staying dry at night, we are meeting a consumer need that has not yet been addressed,” he said.

Another strategy adopted by P&G, according to Schulten, is to encourage caregivers to use more wet wipes, which helps boost the company’s baby products business.

P&G sells multipurpose wipes not only for babies’ private parts, but also for wiping dirty faces and kitchen countertops, to establish a “routine” with parents, the executive said. “With every diaper change, it’s not just about the diaper, it’s also about the wipes,” he commented.

KIMBERLY-CLARK

Separately, Kimberly-Clark has bet on its new moisturizing wipes and its various lines of fragrance-free diapers to win over parents concerned about protecting their children’s sensitive skin.

“The diaper of the future is firmly focused on better meeting consumer needs,” says Matt Barresi, general manager of Kimberly-Clark’s diaper business. According to the executive, shoppers are increasingly demanding fragrance-free products. “We’re really seeing consumers identifying with this.”

According to the company, its new soothing and nourishing wipes, which promise to cleanse, moisturize and soothe baby’s delicate skin, are meeting internal expectations, thanks to repeat purchases by parents, despite the higher cost.