NEW YORK: The diaper business is worth around $12.6 billion. However, diapers are difficult to sell to people who don’t need them. As the birth rate in the United States falls, CPG brands are struggling to respond to the demographic shift.
Last summer, the already declining birth rate in the world’s largest economy hit a historic low. In 2016, the number of births in the US fell 1% year on year, drawing the general fertility rate to 62 births per 1,000 women ages 15 to 44.
The trend, according to the Washington Post, was driven by declines in births among young women in their teens or 20s. Births among 30s and 40s increased, however, but not enough to keep the overall rate stable.
"This could be parents delaying or that drop could be here to stay," Jason Dorsey, president of the Center for Generational Kinetics, told CNBC. "We won't know for another five years, but companies can't wait that long to find out."
Babies need diapers, but if there aren’t babies it becomes difficult to shift them. According to a story on CNBC, the delay in parenthood has caused a drop of 0.3% from 2012 to 2017 in the value of the diaper market.
"Big brands right now need to adapt, because a delay in having children or a decline poses a significant material threat to their core business," Dorsey added.
Last week, two FMCG giants with particular interests in the diaper market noted the effect of this shift on their businesses. Procter & Gamble – which makes Pampers – on Tuesday reported a 1% decline in its baby, feminine, and family care segment, one which has remained flat or declined regularly since 2014.
Meanwhile, Kimberly-Clark, maker of Huggies, noted a lower U.S. birth rate as one of its key challenges.
But decline cannot be explained by demographic shifts alone. Startups offering organic diapers, or a subscription delivery format have driven innovation and threaten parts of the FMCG giants’ business.
Sourced from Washington Post, CNBC; additional content by WARC staff