Why sales of private-label diapers are on the rise

But this year, Ontex is seeing a bump in retailers investing more into building up their own private-label brands. As a co-manufacturer, Ontex does not share who it is working with, but Wood told Modern Retail that more companies are looking to diversify their private-label diaper offerings.

“We’ve seen more retailers put resources and build teams around it and focus more on that brand, both what’s in the box and how the box is marketed,” Wood said. “You can feel the wave, and different retailers are further along that journey. But there’s certainly a concentrated effort from everybody to get more engaged in their own private-label brand business.”

While the data is mixed on just how much market share private-label diapers are gaining compared to national brands, the attention is a novel shift in a category that’s been long dominated by P&G’s Pampers and Kimberly-Clark’s Huggies, but has been seeing a rise in online and offline competitors. Luxury DTC options like Coterie are capturing the higher end of the market, while eco-friendly startups like Kudos, Ecopeaco and Dyper are showing up on more big-box shelves. Then there are more budget-friendly alternatives like Rascals + Friends that popped up at Walmart in 2023. The Honest Company, for its part, re-launched its diapers this summer and advertised them as having better leak protection.

This increased competition is forcing legacy players to compete. P&G rolled out the luxury Bumbum brand this year, while Huggies debuted its clean-leaning Skin Essentials line last year. And it also means there is more room for retailers to get into the fray as private labels become more attractive for value-driven shoppers.

The diaper category has long been dominated by conglomerates, like Pampers and Huggies, thanks in part to people being introduced to those brands when having a baby at the hospital, and through national advertising campaigns. But that brand affinity has changed slightly as consumer preferences shift. Some parents are looking for products that don’t use plastic or certain ingredients. And there has also been demand for a lower-priced product.

Critically, there are also more domestic resources for retailers to tap. Ontex, for its part, has invested nearly $100 million into a three-year-old manufacturing facility in Stokesdale, North Carolina that can produce thousands of diapers a minute. Meanwhile, a European company called Drylock Technologies, which specializes in adult products, opened a new facility in North Carolina last summer explicitly to focus on baby products. In Georgia, a manufacturer called First Quality, which has made Prevail incontinence products, is undertaking a $418 million expansion of its plant to boost diaper production.

Private-label opportunity

To be sure, some powerful private-label brands have managed to figure out how to command an audience. Costco, for its part, has long sold one of the most popular private-label diapers out there. A 2023 survey from Everyday Health Group of 2,000 parents found that about one in six used Kirkland brand diapers. Up until the end of last year, the brand was manufactured by Kimberly-Clark, which also makes Huggies. But this year, Costco switched to having its diapers made by First Quality as Kimberly-Clark began to move away from its private-label contracts. 

Circana’s Sally Lyons Wyatt said diaper spending is relatively flat, and national brands have continued to gain more share compared to private label over the last 52 weeks. She said this points to national brands doing a better job communicating their value and their story, which allows shoppers to justify paying a higher price.

“All of the different things that you look for in a diaper are really articulated well with national brands,” she said. “There’s probably a bit of loyalty to some of the brands that have really done a nice job at social and digital media by reaching out to new parents and showcasing the benefits of their diaper, specifically.”

But John Clear, a partner at consulting firm Alix Partners, said there’s been “massive” growth in private label in recent years. Before the Covid-19 pandemic, around 19- 20% of all U.S. grocery sales were private brands. Now, that’s closer to 24-25% and projected to hit 30% by 2030.

“The combination of inflation, wage pressure and economic pressure has meant that there’s been a lot of trade-down activity,” Clear said. “Within traditional grocery, people are moving from national brands to private brands, and then there’s cross-channel, with people moving from traditional grocery settings like Kroger or Albertsons into club discounts (like Costco).” 

Premiumization of the private-label product

The biggest draw of private-label diapers comes down to price as people begin to think more about cutting costs. A 200-pack of size 4 diapers from Target’s Up and Up brand, for instance, costs $36.99, or 18 cents a unit. But Pampers Swaddlers in a size 4 are priced at $53.99 for a 148 count, or 36 cents a unit.

But when it comes to diapers, parents are likely to switch if the performance isn’t right. There’s a big expectation for the product to look and feel as good as the national brands.

At Ontex, head of baby care, Hillary McElroy, said the biggest trend McElroy sees is the “premiumization” of the category.

“They really want value out of a product, but value doesn’t necessarily mean lower performance,” she said. “They’re expecting the same or better quality at that affordable price.”

In response, McElroy and her team got through a process of “co-development” with retailers. That includes sharing what they’re seeing in the category and what kind of product may be a fit for the retailer’s target customer or region. Softness and thick diapers are particularly in demand — “parents want to feel that comfort,” McElroy said. Other companies may lean into seasonal prints to add some fun to the category.

Next year, the company will began offering training pants in bigger sizes, like 5T/6T, plus pull-on diaper pants in sizes 3 through 7. Pack size is an important consideration, too, and Ontex has seen a shift in popularity to larger, value-sized options this year, Wood said.

But the conversation starts with the brand and what their customer may be looking for, Wood said.

“You start with what’s best for your consumer — the one that’s shopping with your brand, coming in and looking for your brand name,” he said. “We’re not bringing one national brand in and force-fitting it. We’re actually starting the opposite way based on their consumer and their brand, and then building it up.”