Has Procter & Gamble Created the Perfect Diaper?
NEW YORK ( TheStreet) -- Procter & Gamble
Procter & Gamble's latest focus uses testing and patents to design a "leak-proof" diaper that could keep competition well behind.
With its Pampers and Luvs brands, Procter & Gamble is the world market leader in diaper sales. Last year, the company had around a 35% market share. The company competes against Kimberly-Clark
A new report from Bloomberg shows that Procter & Gamble is working on a diaper with "zero-leakage." The diaper would also give babies or toddlers an "underwear-like fit," providing dryness and comfort. Procter & Gamble spends millions of dollars each year testing new diapers to maintain its market share lead.
The question always remains whether consumers will spend the extra money versus generics.
As a father of a 19-month-old, I can say that the Pampers brand will be worth it if this super diaper hits the market. Generic diapers are nice, but the goal of keeping everything contained is worth any price.
Procter & Gamble is also benefiting from a growing diaper market. With an increase in world population and new areas of the world getting access to diapers, it is one of many companies that benefit from the growth. Asia and Latin America are the two biggest growth areas, and Procter & Gamble continues to bring some of its strong billion dollar brands and smaller localized brands to the regions.
The diaper battle could further befoul the already intense rivalry between Target and Procter & Gamble. Recently, Target began taking away prominent end-cap and shelf space from Procter & Gamble products. The move was seen as retaliation for Procter & Gamble's providing Target competitor Amazon
Last year, Pampers had $10 billion in sales for the second straight year. In 2012, Pampers became the first Procter & Gamble brand to cross the $10 billion sales mark. The business category of baby care/feminine care/family is the second highest revenue driver for the company and also contributes a significant amount to net income, and sees strong operating margins of around 21%.
Shares of Procter & Gamble were up 17% in 2013. So far in 2014, shares trade down around 3% but still offer an attractive dividend yield and growth through strong brands and product innovation. While Procter & Gamble will continue to see generic competition, don't forget about the strength of its brands and its opportunities in emerging markets.