DIAPER WARS: COMPETITIVE INDUSTRY WOOS PARENTS WITH NEW PRICES, NEW PRODUCTS

First there was fire, then, the wheel, and, finally, Pampers, said one mother of two, in discussing the great inventions of all times. But her thinking has been shared by millions of moms and dads since the invention of the disposable diaper more than 30 years ago.

Pampers, which was first introduced by Procter & Gamble Co. in a 1961 test market in Peoria, Ill., became a household name in Cape Girardeau some six years later when a paper-products facility was constructed 15 miles north of the city for the manufacture of the new, absorbent, paper diaper that was taking the nation by storm.

Today, the Cape Girardeau factory, which now has more than 1.3 million square feet (30 acres) under roof, is still a primary manufacturer of disposables, including both Pampers and Luvs. It provides employment for more than 1,300 people with a local payroll that exceeds $50 million a year.

Pampers and Luvs are big sellers in Cape Girardeau.

"This is a P&G town," said Dennis Marchi, manager at Schnucks grocery. "That could be due to a couple of factors because the disposable diapers are made here and the fact that P&G does an excellent job of marketing their products."

"P&G's Pampers and Luvs and Kimberly Clark's Huggies are all good movers here," said Mark Hoffman, assistant manager at Wal-Mart.

"Quality and performance are only part of consumers' value equation," said Edward L. Artzt, chairman and chief executive of P&G, headquartered in Cincinnati. "Price is also important; when people look at disposable diapers they look at prices."

Artzt announced that effective today P&G has reduced the price of Pampers and Luvs. "Consumers will notice a 5 percent drop in Pamper prices and a 16 percent decrease in Luvs prices," he said.

P&G announced initiatives on its diaper business concerning the price decreases and market testing of a new 50-percent-thinner diaper.

"Importantly, these actions are being offset by savings in corporate manufacturing costs and other system efficiencies, and will not affect this year's corporate earnings," said Artzt. "In fact, we believe it will help set the stage for stronger results next year in the diaper industry."

Artzt said, "P&G will continue to do whatever it takes to ensure that our brands represent outstanding value by eliminating costs that don't contribute to that goal and maintaining competitive pricing."

The disposable diaper market is a competitive one. Companies like P&G and Kimberly Clark, which have about 30 percent of the U.S. market, are continually striving for secrecy and improvements.

he new Pampers Ultra Dry Thin product will enter the Omaha, Neb., test market this month after experiencing good results from the Pacific Northwest test market.

"The new product is about 50 percent thinner than current Pampers Phases," said Artzt. "Consumers have rated the new, thin product as a superior product which provides outstanding dryness in an even thinner diaper.

The Pampers lineup includes newborn; infant 1 and 2; crawler; and walker 1, 2 and 3. The new Pampers Ultra Dry Thin also will include crawler-walker 1 and walker 2 in the Omaha tests.

Luvs, billed by the company as a "basic premium" product, is designed to meet the performance needs of a large segment of consumers who want a lower-price diaper.

"Our research tells us there is a large segment of consumers who would prefer a quality, medium-priced diaper," said Artzt. "The Luvs meets this need, which is currently not being met by either end of the diaper market."

The company reportedly will phase out seven of the 17 versions of Luvs packages. Pampers will still be available in 21 packaging versions.

Both P&G and Kimberly Clark have been losing market share to private-label diapermakers, according to an article in the April 1993, issue of "Pulp & Paper Week," a paper industry publication.

A Morgan Stanley & Co. Inc. analyst said late last year that "after remaining at about 18 to 20 percent of the baby-diaper market throughout the 1980s, private-label companies now hold 25 to 26 percent of the market."

Private labels gained as consumers turned increasingly to these cheaper products in the recession, particularly as the quality differential versus brand products narrowed, according to Sherman Chao, analyst with Merrill Lynch & Co.

roducers are churning out new varieties of disposable diapers in their never-ending effort to hold on to, if not expand, their market share in the slow-to-no-growth U.S. diaper arena.

Meanwhile, P&G's Pampers and Luvs continue to command almost 50 percent of the $4 billion U.S. disposable-diaper market and nearly 50 percent of the $4 billion European market.

Kimberly Clark now has its new Huggies UltraTrim diapers in national distribution in the U.S. The UltraTrim is half as thick as conventional diapers. The company also plans to put diapers as well as its Huggies Pull-Ups disposable training pants for toddlers on the market in Europe within the coming year. Analysts expect this move will put Kimberly Clark into competition with P&G.

Disposable training pants currently are not available in Europe. In the U.S. the training pants market is valued at about $500 million to $800 million. P&G also will debut its own disposable training pants product, Pamper Trainings, in Europe this summer.

P&G also is working on a new, thinner diaper utilizing a curly fiber absorbent technology. The product is being tested under the name Pampers Baby Dry in Aberdeen, Scotland. Diapers based on the same technology, and called Ultra Dry Pampers Phases, are being put to the test in Eugene, Ore.

P&G was founded more than 150 years ago when candlemaker William Procter and soapmaker James Gamble signed a partnership agreement to form Procter & Gamble Co. in Cincinnati.

Today, P&G makes and markets more than 200 products for consumer and institutional use. P&G does business in more than 140 countries. Among them are foods and beverages, laundry and cleaning products, personal-care products, pharmaceutical products, and industrial and institutional products.

Pampers was not the first disposable diaper on the market, but it was the first to remain on the market. A product by the name of Chux made an appearance in the late 1950s. A few other now-defunct brands of primitive paper-diaper liners surfaced briefly, but it wasn't until Pampers was introduced by P&G that the disposable diaper came into its own.