Diapernextyears | Diaper | Nature

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.

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. Regarding sales forecasts«.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 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. . 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 Fluff replaced Tissue 1972 Leg Cuffs 1986 1978 ³Hourglass Shape´ Modern Diaper 2005 .

1987 Use of leg cuffs for leak prevention. 1994 . 1972 First use of Superabsorbent in diapers.Summary of events in modern diaper history          Launch of modern disposable diaper by P&G. 1987 Frontal Tape and Hook and Loop systems. 1994 Use of cloth like back sheets and breathables. 1989 Introduction of training pant diapers. 1971 Introduction of fluff instead of creped tissue. 1966 First use of tapes integrated to a diaper. 1961 Invention of Superabsorbent Polymer.

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! .Diaper wars 101:      What is happening today with the diaper industry? What is a ´purging cycleµ? A globalized price war! Who starts a new purging cycle? We may like to think purging cycles start as a result of coordinated collaboration«.

Hydrocarbon resins. . Spandex. Hot melts. Cellulose Pulp. tackifiers. etc Nonwovens. Walgreen. propylene gas« Acrylic acid. adult incontinence. BOPP. PP pellets. sanitary napkins. etc Parents buy product for their baby. etc WalWal-Mart. Carrefour. etc. Oil. Diaper Manufacturing Distribution Channels Consumer Diapers.The supply Chain Individual Elements Basic Materials Pine Trees. Finished Raw Materials SAP.

. How can you get ready for the next purging cycle? You need to be very well informed.000 USD/Ton) Purging cycles will continue every 7 to 11 years.Diaper Wars 101 (Continued)      An important disruption in the supply chain starts a new price war cycle! An extended ´fixed priceµ supply contract What past experience do we have regarding these cycles? (1994-1996 was the last one when (1994pulp peaked close to $1.

Nonwovens Markets.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. web page subscriptions. etc. Absorbents Industry or Absorbents Markets. Prediction: One magazine will evolve to Absorbents World.  . Nonwovens Industry. Industry References: Nonwovens World.

600 diapers/sec (490 billion per year). almost doubling current volume sales of 2005. only one in every 5 babies uses a disposable diaper. Today. . 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.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 15.9%  For year 2025 I expect that more than one third of the babies in the world will use a disposable diaper.

70 0 50 0 30 20 0 0 ia a I Ch i I Pa ia ki Un ta it n Babi ta t 0 t 30 (Milli ) t Br az il M xi Ph c ili in es Eg yp t Vi et na m 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 America·s (from Alaska to Argentina). There are 4 African countries in the list of the 10 largest in regards to population of babies. India has 45% more babies and 3 times more density of babies per unit area than China. with PPP below $600 they were not considered in previous table. . USA is the only country that shows significant baby growth in the next 20 years (due to immigration).

. this is a 78% increase (compare this against the 2. By the tear 2025 there will be 563 million.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).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 140 120 100 80 60 40 20 Older>70 Y2005 Older>70 Y2025 Un ite d at es Ja pa Ru n G ssi er a m an y Ita Fr ly In anc do e ne si a ra zi l Ch St in a In di a .

India and the USA will also have significant growth.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. Europe is not the ´old continentµ 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. European countries have marginal growth. .

I believe it is possible to estimate market share using only macroeconomic indicators from each country. Unemployment data and a minimal threshold PPP that triggers diaper sales.Diapers required by country (market share)     Market share data per country is not available (not free). The only information we do not have are the cultural barriers that generate market resistance«but we can have an educated guess. With a mathematical model that uses ´pre-segmentedµ ´prePurchasing Power Parity (PPP). .

5% 29.5% 22.0% 5. Congo excluded*) excluded*) Market Share 2005 India China Indonesia Pakistan United States Brazil Mexico Philippines Egypt Vietnam 2. Bangladesh.0% 4.5% 58.0% .000 Country (*Nigeria.0% 95.6% 21.5% 9.Market Share for Baby Diapers from my model: Only countries with PPP > $2.2% 9. Ethiopia and (*Nigeria.

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

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

.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 .

use microcapsules. Skin protection. microcapsules to control pH !! After saltwhen wet Grows is released .The diaper of the future:   Landfill volume reduction.

High compression packaging will continue. How much more performance in a diaper? . Much better pad integrity with new generation hot melts.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. Air laid or pulp? What about synthetics? When? Better elastic components to improve diaper fit.

examples are everywhere. Be careful when you diversify!! .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.

Conclusions .

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

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