Once the bottom of the barrel when it came to consumer goods, private label brands have more recently focused on developing innovative, premium products that not only rival consumer brands but sometimes surpass them. This has been particularly true in the absorbent products category where major retailers like Walmart and Target have partnered or formed exclusivity agreements with independent brands. In many cases, the diapers offered by these independent brands have been made by the same companies providing store brands for retailers.

“The new private label is mostly about the trend towards offering more private label products in the premium price tier. Historically, private labels were a way retailers would offer comparable alternatives at a lower price to whatever was the leading name brand product in the middle-tier or economy-tier,” says industry consultant Colin Hanna, of Price Hanna Consultants. “That strategy hasn’t gone away so much as it simply no longer describes the full picture of how retailers use their private label brands and products to attract customers to stores (and websites) today.”

Kroger’s private label offerings this past year provides a good illustration of what Hanna means by what’s “new” in private label: In 2021, Kroger introduced over 600 new items to its private label offerings, and 60% were in what they classify as “premium” lines.

Within absorbents, retailers have been looking at both the direct-to-consumer brands, like Honest or Dypers, to look for a model of what works. In fact, many of these brands have been credited with driving price points higher in the category, proving that customers will pay more for diapers that meet certain lifestyle needs. These independent brands have benefited from a lower barrier to entry in the disposable diaper market thanks to an explosion of e-commerce technology and global contract manufacturing. However, competition has never been greater in the category, and the cost of digital and social media advertising is much higher than it was five or 10 years ago, which has made it somewhat less easy to launch a successful new private label or direct-to-consumer brand.

However, new brands continue to emerge, many with a new ingredient story or a sustainability message. Kudos diapers, developed by a former Procter & Gamble engineer and MIT graduate, feature 100% cotton nonwovens touching the baby’s skin. This diaper brand received the Hygienix Innovation Award from INDA in 2021.

“What works is a brand that sounds new, is transparent about the ingredients, offers credibly claims to avoid harmful chemicals and minimizes impact on the environment, and otherwise convey premium or trendy aesthetics,” Hanna adds.

For Walmart and Target, the development of premium brands—White Cloud and Cloud Island, respectively—was seemingly not met with success as both brands were removed from the market after just a few years of less than stellar sales. Instead, these retailers have focused on partnership brands—Walmart with Hello Bello and Rascal & Friends and Target with Millie Moon. These brands contain the premium branding messages as well as innovative features found in the premium tier of the diaper market.

“We don’t know exactly why (White Cloud and Cloud Island) may have produced disappointing results as new private label brands,” Hanna says. “What we do know is that Target and Walmart have replaced them with one or more similar brands with exclusivity agreements.”

So, while the need to have an exclusive offering hasn’t changed, the strategy behind the creation and marketing of these brands has. While the exclusivity contracts apply to brick and mortar sales, these brands all have their own online presence and social media marketing efforts.

Rolling Out Innovation
From a manufacturers’ standpoint, absorbent products specialists serving the private label market continue to innovate. Drylock Technologies is paving the way for sustainable incontinence protection with the development of Simpli, the first plant-based incontinence underwear made in the U.S. The products are currently sold in select H.E.B. retail outlets.

Designed to provide simple, natural incontinence protection, Simpli underwear ensures only plant-based materials come in contact with user’s delicate, intimate skin. All materials are free from fragrance, lotions, parabens, natural rubber latex, toxic dyes and elemental chlorine bleaching. Now adult incontinence users can have quality protection with materials that are gentle for the skin and for the environment.

Simpli products not only feature plant-based materials but are also packaged into CO2-neutral bags making them a better alternative to traditional plastic packaging.
The product’s sustainability strategy does not stop with its ingredients. Simpli is manufactured in Drylock’s CO2-neutral certified manufacturing facility in Eau Claire, WI—the first CO2-neutral facility in the U.S. disposable hygiene industry.   

Additionally, private labeler First Quality Enterprises was one of the first companies to develop a line of three-in-one feminine pads with multi-fluid technology to provide protection, discretion and support for women experiencing bladder leaks. Incognito three-in-one pads protect against bladder leaks, menstrual leaks and daily discharge. They feature a superabsorbent core that locks in more wetness than a standard feminine hygiene pad while neutralizing odors. All Incognito products are 100% breathable, hypoallergenic and free from dyes and harsh ingredients. 

“Our goal was to combine the best core innovation to provide multi-fluid protection, while maximizing discretion through ultimate odor protection and comfort,” says Stephanie Bodle, Prevail brand manager. “Delivering all this along with 24/7 clinical support means women now have the care they need to feel confident and prepared.”

The product line is made up of five items: liners for daily wear, three ultra-thin pads for more active days, and the maternity pad, which in addition for use immediately after childbirth can also address extra-heavy overnight needs.

The Prevail brand has been providing innovative protective hygiene products for more than 30 years. Incognito combines the Prevail expertise with First Quality’s feminine hygiene technology. 

Ontex Focuses on Partner Brands
A major manufacturer of baby diapers and other disposable products, Belgium-based Ontex has increased its focus on healthcare and partner brands in Europe and North America, where the growth potential in this market is strong, under a plan called the New Ontex.

In 2020, this part of the portfolio represented €1.43 billion in revenues and an above group average adjusted EBITDA margin of 13%. Meanwhile, the business activities in the rest of the world, which are focused on Ontex’s own brands, represented €0.65 billion in 2020 in revenues with an adjusted EBITDA margin of 8%. These businesses will be managed for value while exploring future strategic alternatives.

“The New Ontex will focus on partner brands and healthcare in Europe and North America. This marks a strategy shift that will allow us to build on our inherent strengths and leverage the full potential of our know-how, scale and capabilities,” says CEO Esther Berrozpe. “Facing an unprecedented rise in raw material prices and inflation on other input costs, we have accelerated our cost reduction initiatives identifying new opportunities to streamline the group.”

The New Ontex will encompass a core portfolio of businesses where the company’s strengths lie. This includes private label and lifestyle brands, where the company has been a partner of choice for both retailers, independent brands and institutional customers, primarily in Europe and North America, for years. Ontex’s industrial footprint is well positioned to serve these regions and offers considerable opportunities for synergies and economies of scale to provide its partner clients with innovative solutions and the best quality and cost.

Ontex’s product offering will remain in three existing categories – Baby Care, Adult Care and Feminine Care – and the company will accelerate its focus on faster-growing, margin-accretive products within these categories. This includes all adult care products, baby pants and more sustainable products. The company will focus investments on maximizing synergies across its European industrial footprint and ramping up its U.S. operations, driving operational excellence to improve costs, quality and service. Ontex entered the U.S. market earlier this year through the purchase of a hygiene manufacturing site from Albaad in Rockingham County, NC.

“We see the private label diaper business is not just price-focused,” says Annick De Poorter, group R&D, quality and sustainability director. “There is a high focus on continually improving the products. To match the quality of the A-brands at a more affordable price but also to have the best quality amongst the different store brands out there. Good quality diapers drive consumer traffic to the retailer and will result in more shoppers spending their basket at the retailer. That is why retailers carefully choose via consumer panel and lab tests which diaper manufacturer to select for their store brand, not just looking at price.” 

To remain a preferred supplier, Ontex is continually improving its products focusing not just on performance but also skin care and softness, which play an important role in the purchase decision on diapers. “Over the years we have made our diapers faster at absorption, breathable and softer and softer, in some cases even surpassing the softness of national A-brand diapers,” De Poorter says.

Last month, the company introduced a new diaper core technology, which is rolling out to its partner brands.  Climaflex  ensures comfort, keeps the baby’s skin protected and ensures absorption even under the toughest conditions, with extensive baby motion. 

Diapers with the Climaflex technology have a dual-layer core in which one layer quickly attracts liquid and a second layer locks it in a very fast way and securely even in the toughest conditions, when the baby moves a lot.

“In general Ontex has seen over the last years how private label has evolved from pure price-fighting white label type of products, to really branding of retailer store brands like it was a national brand with nice packaging, advertisement claims, etc.,” De Poorter adds.

Ontex has responded to these needs with innovation like its SeconDry technology, which claims it’s up to two times drier, providing the dryness of market leaders even featuring it in side by side demonstrations as in TV advertisements in the recent past.

In recent years, Ontex has expanded its private label program to be the contract manufacturing partner of choice for many start-ups or insurgent brands, working with these partners to design and produce their diapers. “Some of those brands have grown so strongly that even the A-brands started to copy their brand proposition,” De Poorter says.

Whether developing a private label product for a lifestyle brand, Ontex’s research and development focuses on targeted development for its contract manufacturing partners, to help them develop a portfolio of product and claims to support their unique value proposition and differentiate their brands. “In some cases, we even co-develop specific solutions, with our partners, involving them from the start,” she adds.

These efforts respond to a strong consumer demand for premium products across all disposable income levels.

“Consumers know they feel better when they buy premium and are more likely to trust premium brands compared to non-premium brands,” Hanna says. “This is especially true when it comes to hygiene products for themselves or loved ones. They also want alternatives to traditional leading name-branded products – alternatives that use fewer hard to pronounce chemicals that sound potentially harmful, fewer fragrances, etc.”