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Diaper War

Delhi School of Management


Delhi Technological University

Ankit Malik – 11/MBA


Prashant Agarwal –
31/MBA
Rohit Pandey – 41/MBA
Varun Gupta – 54/MBA
Vishal Joon – 57/MBA
Index
• Profiles of the corporate giants
P&G and K-C
• Product Profile Diapers
• Introduction to case
• Challenges faced
• Solutions
• References.
Vision
Be, and be recognized
as, the best consumer
products and services
company in the world.
Mission
We will provide branded products and
services of superior quality and value
that improve the lives of the world’s
consumers.
As a result, consumers will reward us
with leadership sales, profit and value
creation, allowing our people, our
shareholders, and the communities in
which we live and work to prosper.
Company Background
• Started in 1837 by William Procter and
James Gamble
• First products were soaps and candles
• Procter and Gamble has nearly 300 brands
in more then 160 countries
• Main Headquarter in Cincinnati, Ohio
• Employ 140,000 people
• Current revenue $79.3 billion
•Gross Margin 15 Times the
Industry Average •Top Brands Losing Market Share
•One of the best marketers in the •Health and Beauty Women Only
world •Lagging behind in online media
•Tightly integrated with the presence & leadership
largest retailers in the US and •Slow Process Heavy Culture
around the world •Views Product Performance only
•Product innovation •Expansion for brands is limited
•Distribution channels all over the
world
• Increase of regulations
•Doubling Environmental Goals for
•Substitute brands that have a
2012
•Utilizing online social networks cheaper price
•Private label growth
•Going Green/Eco Friendly
•Slowdown in consumer spending in
•Capitalizing on online media
•Emerging markets the US & globally
•Key competitors expanding their
•New acquisition opportunities
•Selling directly to consumers product portfolios through
•Design for better product experience acquisitions
•Increase in raw material price
Vision
"To enhance the Health,
Hygiene and Well Being
of People Everywhere,
Every day."
Consumer Brands
Company Overview
• Global health and hygiene company
– Personal Products industry
– Products made from natural or synthetic fibers
– Advanced technologies in fibers, non wovens, and absorbency.

• Founded in 1872 & headquartered in Dallas, TX


• Consumers in more than 150 countries worldwide
• Manufacturing facilities in 40 countries
• More than 56,000 employees
• FY2009 Total Revenues of $19.15B

• More than 1.9 billion people (1/4 of the world’s population)


trust K-C brands EVERYDAY.
Business Segments: Brands
Personal Care
Huggies, Pull-Ups, Little Swimmers, GoodNites, Kotex, Lightdays,
Depend, Poise
Consumer Tissue
Kleenex, Scott, Cottonelle, Viva, Andrex, Scottex, Hakle, Page
K-C Professional & Other
Kimberly-Clark, Kleenex, Scott, WypAll, Kimtech, Kleenguard,
Kimcare
Health Care
Kimberly-Clark, Ballard
•Cost advantage •Not innovative
•Effective communication •Not diversified
•Innovation •Weak management team
•Online growth •Weak, damaged brand
•Loyal customers
•Strong brand equity
•Strong financial position
•Supply chain
•Pricing
•Reputation management

•Competition
•Acquisitions
•Cheaper technology
•Emerging markets and expansion
•Economic slowdown
abroad •Exchange rate fluctuations
•Innovation
•Lower cost competitors or imports
•Online Business and media
•Maturing categories, products, or
•Product and services expansion
services
•Takeovers
•Price wars
•Product substitution
Time Line Kimberly-Clark Proctor And Gamble

1960 In 1961 P&G enter this segment with


the brand called Pampers ,but the
prices remain high of $ .10/diaper
which shows that it was purchasing
partially completed components

1964 Slashed the Prices to $ .055/diaper

1968-1969 K&C entered the Market It’s spread it’s wings in whole North
with a product Kimbies America in 1969
1970 Share Market was just 8% While it was dominating the Market
with 92% share
1974 Share Market Grew due to While the share of P&G was decreasing
product superiority to 20% but it realized the importance of R&D
Interest Started to decline It innovated it’s product in form of
and Market share felt Tissue to pulp fluff, and moving on to
adhesive tab in the next year

Contd…..
Time Line Kimberly-Clark Proctor And Gamble

1976 Market Share kept low Introduced a new product in the form
of Luvs with new features and it was
priced 25-30% above pampers
1978 Realized their Mistake and Due to introduction of Huggies, P&G
introduced Huggies to replace reacted by rolling the Luvs nationally
Kimbies backed by a great despite poor test results and suffered
marketing team & a setback.
introduction with large
Promotional & advertising

1980 K&C huggies had just 7.1 % P& G overall Market Share was 65.5
Market Share % share
1984 Huggies Market grew to 24% In P&G camp the share of Pampers
was continuously falling but the
share of Luvs was continuously
increasing
1986 K&C stopped the Production Market share was lost as it was not
of kimbies –their flagship changing itself to the times and the
product to make space for innovation being Made in the Diapers
Huggies Industry.

Contd…
Time Line Kimberly-Clark Proctor And Gamble
Changed it’s strategies:-
• Repositioned the Pamper as a
Premium Product through
improvement In pampers.
• Invested $500 million in production
system
•$225 in additional advertising
1986 K&C introduced it nine P&G introduced the Super Thin
months later Diapers

1989 K&C with a 32% share P&G with a 48% share.

P&G appoints a new CEO Edwin Artzt


which have a considerable
experience in international
disposable diapers
Other Developments in the Diaper market
Time Line Developments
1970’s Many companies started absconding the Diaper Mkt primarily due to
two reasons:-
• Due to Poor Marketing Communication of Product Benefits
• Inability of some firms to reduce Manufacturing Costs to P&G level

1976 Diaper Market was just 35% of U.S. Babies due to Un-communicated
Benefits.
1983 Aspirations of consumers Changed as they started wanting best
products despite high prices or they wanted low prices.
1984 Market Share Captured by K&C was mainly from Pampers Share and the
Other Share’s and the Luvs share kept on increasing.
1988 P& G was mainly depended on Japan for it’s raw materials.
In 1988, Cellanese started Operations in U.S.

1989 Cost of Diapers Started decreasing due to investment in Machinery and


both P&G and K&C was able to achieve 33% decrease in transportation
Costs.
Pt’s of Importance
First Mover Johnson & Johnson was the one to introduce North America to
Advantage diapers in 1940 but it was not able to completely Utilize it and
Ultimately fled this segment in 1970’s .It was P&G which tapped
the potential due to continuous R&D and improvement in
Manufacturing Process.
Role of Diapers Both the P&G and the K&C were experiencing a Margin of 15 % in
diapers in Comparison to the other Products in their basket.
Advantage with K&C Vertical Control provided the advantage of flexibility and Scalability
under rapidly changing Competitive advantage.
Advantage with P&G It was able to harness the technological progress of Japan, due to
which most of the time enjoyed the first Mover advantage.
Always maintained a greater focus on the innovation part.
It was present in Japan and Europe whereby the share was growing
by 15% and 40 % respectively.
Acting Against Both P&G and K-C tried to avoid the complaints rather than
Environmental Issues addressing them, Secondly they tried to find the solution by
deviating from the present Market to Incontinence Products for the
Old.
The Case
The Diaper War: Kimberly-Clark vs Proctor
& Gamble
This case highlights Kimberly-Clark's
perspective on the fierce competitive battle with
Procter & Gamble (P&G) in the diaper industry.
The competitive struggle involves a broad range
of issues including: rapid product development,
international threats and opportunities,
diversification options and public pressure over
environmental concerns. In particular, Kimberly-
Clark must decide on a response to P&G's most
recent product introduction.
Pampered Kimbies
• Pampers launched in 1961
• Priced at $ .10
• Reintroduced in 1969 at a lower price of
$ .055
• Kimbies was counterattack by KC
• Launched in 1968
• In 1970s pampers continued to surge its
market share upto 92%.
P & G’s Luv to Huggies
• Test marketed from 1976
to 1978.
• Huggies was the answer
from KC.
• Better than Pampers & Luv
• Huggies replaced Kimbies
completely by 1986.
Super Thin Diapers
• P & G got the first mover advantage in
this segment.
Challenges before
the “North-American Disposable Diaper Industry”

•Environmental Issue:

In 1989, almost 19 billion disposable diapers


were sold in North America. It produced an
estimated 4 – 5.5 billion pounds of discarded
diapers.

This constituted about 20 %( by volume ) of


the residential landfills.

The “non-biodegradable” nature of the plastics used in the product


attracted criticism.

Environmental groups had highlighted concerns about “potential


health risks for sanitation workers” and “the threat to ground water”.
•Legal developments:

By 1989 , legislation taxing ,regulating, or banning the sale of


disposable diapers had been introduced in 11 US states.

Most punitive measures were scheduled to come into effect in 1992-


1994.
•Financial :

Transportation costs were estimated to compose at least 7


percent of the retail value.

The production of disposable diapers was capital intensive,


involving a continuous flow of assembly
utilizing large,complex,high-speed machines.
•Unpredictable market conditions:

Uncertain market share forecasts and fluctuations led ,at


different times ,to “ product shortages” and “capacity
surpluses”.
•Changing trends in international markets:

Japan:

Following World War II, national standards


were introduced for cloth diapers as a means
of improving overall hygiene. Also, the use of
cloth diapers was encouraged by a Japanese tradition.

In 1970s, P&G had over 90% of the Japanese disposable market.


By 1985, its share fell to about 7% !!!

KAO Corporation ,a Japanese soapmaker launched a brand of


super –thin diapers ,
named “Merries”.
Europe:

Europe composed of protected national markets, thus limiting


the production, marketing and distribution economies.

European industry leaders emerged, leading to emergence of


several strong country-specific firms .
Market Opportunities

• Incontinence Products

• Estimated sales in US market by 1990 -


$1 Billion

• Difference in strengths of both the


firms
Recent Events at P&G
• November 1, 1989, Mr. Edward Artzt was appointed as P&G’s
new CEO
Signs of Change

• Change in style for the first time

• P&G’s huge advertising and promotional


campaigns

• Kimberley Clark developed a similar


product

• Importance of balance between short term


& long term perspectives
Conclusion
They should work in harmony to prevent
external players entering into diaper
market. Since first-mover advantage goes
to any one of them, they can act as a cartel
and play safe in the market without
loosing much of their profits. After all it
looked to be a win-win situation for both
the players. But at last, both companies
opted for different market attack.
References

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