In December, global diaper manufacturer Ontex shocked investors with an announcement it was revising its full year expectations for revenue growth. Weaker-than-expected demand and competition from multinational brands led the retail brand specialist to estimate its revenues would decrease in the high single digits, a stark contrast to the stable sales it had previously predicted.

According to executives, while it had secured new contracts in Europe and North America, this new business was not as strong as predicted and not impactful enough to offset overall decline in consumer demand.

“Consumer demand has softened throughout the year, in particular for baby diapers in our key markets, which has led us to revise our full-year outlook,” says Gustavo Calvo Paz, Ontex’s CEO. “This is disappointing, especially as we have made strong progress on our strategic portfolio and operational transformation, and have been gaining contracts over the period.”

However, the company expects to maintain double-digit margins for 2025, despite strong market headwinds, demonstrating that Ontex has strengthened its foundations in the last few years. In response to weakened conditions, Ontex plans to ramp up efficiency improvements and expects to achieve an SG&A of €200 million over the next three years. The required one-off implementation costs are expected to remain below €40 million. More details of these efforts will be shared in February.

According to data furnished by Euromonitor, softness in the disposable baby diaper market is not just impacting Ontex’s performance. As birth rates have stagnated in developing markets like the U.S., China and Japan, so have diaper sales, which registered just 0.04% volume growth in 2024. This phenomenon, known as the “baby bust,” is shrinking the user base and makes growth challenging. Economic pressures, such as rising costs of living, have increased price sensitivity, pushing consumers to seek value without sacrificing quality. 

“In response, manufacturers are diversifying portfolios to offset slowing diaper demand, expanding into adjacent categories like baby wipes, skin care, maternity care and adult incontinence,” says Liying Qian, global insight manager for tissue and hygiene at Euromonitor International. “They’re developing specialized products for neglected user groups (e.g., preemies, older children, specific health needs) and tailoring segmentation to local needs.”

Innovating Upward

According to industry consultant Pricie Hanna, eroding market conditions have created an especially competitive market impacting not just international brands but also the specialty diaper manufacturers who are creating new choices for parents—often based on lifestyle factors or alternative raw material stories—within the baby care category. With brands like Kudos, offering a cotton-based diaper, or Hello Bello, a maker of value-priced premium diapers, taking up more shelf space in places like Target and Walmart, brand owners are doubling down on innovation to hold onto marketshare and gain customers.

“The real competition is the major brand owners going up against the specialty diaper manufacturers,” Hanna says. “Companies like Procter & Gamble and Kimberly-Clark aren’t worrying about private label (diapers) but they are worried about some of these premium brands and catching up with their innovations in diapers.”

While the slowdown in birth has created problems for diaper manufacturers, it has also created opportunities for more premium products as parents of fewer children are prone to spending more per child. “People always put their babies first,” says Hanna. “The good news is they want a product that can work and offer a premium experience.”

This has allowed diaper makers, small and large, to focus on innovation, not price, to woo customers, which has led to some interesting developments across the value chain.

“Everyone is really focusing on innovation thanks to the growing influence of successful, premium specialty diapers made by small brands,” Hanna says. “Not all of these have made a significant impact on sales but their influence has been enough to motivate the two big producers in North America.”

Euromonitor’s Qian agrees that smaller brands’ focus on wellness, clean ingredients and digital engagement has pushed established players like P&G and K-C to innovate. “Recent moves include new sizes, advanced skin care features and tech integration (e.g., diapers for newborns, temperature-regulating topsheets, blowout blockers),” she says. “Over the years, both companies continue to grow other hygiene sectors like adult incontinence and menstrual care and have explored adjacent categories to diversify revenue and respond to demographic shifts.”

K-C’s current strategy involves focusing not only on premiumization but delivering product performance and comfort across the price/value tiers with its Huggies diaper brands. Earlier this year, the company introduced Huggies with Snug & Dry Softness in the value tier of the U.S. baby diaper market. Combining ultra-soft materials with leak-free protection, the diapers align with the company’s commitment to making desirable product benefits such as garment-like comfort and skin health available beyond the top-tier of its offerings.

“Parents told us they want value-tier diapers that feel gentle on a baby’s skin without sacrificing performance,” says Josie Adams, vice president, research and development, North America personal care at K-C. “We responded with advanced absorbent core technology and garment-like softness. This product delivers comfort and protection in one solution and exemplifies our commitment to delivering quality solutions across the value spectrum.”

The launch is also an example of how  K-C’s  global scale enables it to bring innovations that are winning in one market, to other markets in a customized manner, to meet consumers’ unmet needs. In developing Huggies Snug & Dry, the North American team partnered closely with R&D and supply chain experts in China and other regions to adapt absorbent core technology for the U.S. consumer.

 “By improving collaboration, the teams achieved the shortest time to launch a new product in our U.S. business,” Adams explains. “As our CEO shared earlier this year, this approach is the roadmap for our future diaper innovation as we roll out even more proprietary technology around the world in the coming years.”

Beyond North America, K-C is innovating to strengthen its value propositions and drive local category participation allowing growth and innovation to be powered by the company’s global scale and increased agility. Within baby care, the pipeline is  designed to address consumer needs in performance areas like leak protection, skin health, comfort and fit, the key factors parents and caregivers prioritize when purchasing diapers.

“By combining science, consumer insight and uncompromising safety standards, K-C deliver solutions that work to make life better for families everywhere,” Adams adds.

As K-C focuses on a multi-tier strategy to win consumers, competitor P&G has focused on premium tier innovation. Earlier this year, Pampers Cruisers, its premium brand, was upgraded with Extra Absorb Channels that help babies stay drier and do not sag compared to ordinary diapers. The upgraded diapers have three absorbent channels in the core of the diaper that distribute wetness evenly and help prevent diaper sag. Pampers Swaddlers diapers were also updated with Extra Absorb Channels and now feature a new outer cover that is softer than current Pampers Swaddlers. 

“Pampers understands that as babies grow, develop and explore their worlds, they need a diaper that allows them to move freely by providing a great fit while staying dry,” says E. Yuri Hermida, vice president of North American Baby & Feminine Care, P&G. “That’s why we are delighted to bring babies and parents our new Pampers Cruisers diapers, which set babies free from diaper sag so they can move, dance and play without restriction.”

P&G has also responded to increased competition within the North American diaper market by looking to China. However, instead of exporting existing diaper brands from its Chinese operations, the company has created a new brand, called bumbum, which is being sold in the U.S. in Target stores. 

According to multiple reports, P&G has indicated that it launched a Chinese-made diaper brand in the U.S., which complements its existing North American brands, as part of a broader strategy to offer superior products in baby care. The diapers are soft, hypoallergenic and infused with aloe, aiming to provide 12-hour protection without fragrances or parabens, and they are often compared to other successful smaller brands like Millie Moon, which is also made in China, and Honest.

P&G’s decision to make a diaper in China for the U.S. market proves how attractive Chinese-made diapers have become to the North American consumer. Not only are these diapers less expensive, they often outperform in terms of softness and absorbency. According to Euromonitor, four of the world’s top 10 fastest growing diaper manufacturers are Chinese. These producers are successful because of their ability to offer premium products at a value price point, something P&G is replicating with bumbum, which is priced 10 cents per diaper lower than its top-of-the line Pampers Pure diaper in Target stores and about one cent below Chinese-made Millie Moon.

Within China, however, P&G is reporting success within its Pampers brand. In a recent earnings call, executives told analysts that Pampers is driving growth in the premium and super-premium segments of the market by consistently upgrading and clearly communicating its superior offerings to deliver ultimate comfort, protection and luxury softness on skin. In fiscal 2025, the diaper brand grew organic sales nearly 20% in China and increased value share by more than two points.

Baby Pants Gain Traction

As Ontex faces recent struggles in its broader baby care business, one bright spot continues to be the U.S. baby pants market. The company reports it has tripled its production capacity for baby pants in North America and further improved its operational efficiencies to strengthen its North American bi-coastal manufacturing model, which includes a plant in Tijuana, Mexico acquired in 2015, and a plant in Stokesdale, NC established in 2022. 

The company recently celebrated its success in North Carolina with state and community leaders. Since opening its doors in 2022, the Stokesdale facility has tripled production capacity and is now producing thousands of diapers per minute.

 “We want to be the number one trusted retail partner for baby care products,” says Hillary McElroy, director baby care at Ontex. “Ontex serves a wide range of needs from the value conscious shopper to the most premium tier. This is for everyone. There is a place for different tiers of pants.”

Calling North America an engine for growth for the company, McElroy says the expansion in the North American baby pants business, which lags European adoption rates, has been gradual. 

“We have tripled our capacity since introducing pants in North America as the market has become more accepting of these products,” she says. “Our bicoastal manufacturing is a competitive advantage for our retailers.”

Growth in baby pants, which are different from training pants in both the way they are engineered and used, reflects a broader shift in consumer behavior, which started in Asia, spread to Europe and is now taking hold in North America. More active toddlers and more active lifestyles have led to need for different use formats in baby care applications. 

“Pants have become an important part of the ‘mom arsenal’ allowing them to change diapers on the go,” McElroy adds. “These products have come to be seen as a premium feature, starting with babies younger than one year old.”

Within its baby pants lineup, Ontex has incorporated unique features including its Dreamshield 360º stretch innovation, which is designed with a unique pee and poo back barrier and a 360-degree fit for all-around protection and comfort, as well as triple leakage barriers and SeconDRY technology, ensuring all-around anti-leak fit and ultimate dryness. “Consumers no longer see baby pants as a training tool but a quality product that makes their everyday lives easier, day and night,” says Laurent Nielly, Ontex’s incoming CEO. “The Dreamshield 360° innovation puts our retail partners in a position to supply the next generation baby pants consumers want: baby pants that offer superior protection and comfort including at night and are a great option for active babies.”

Ontex has also  incorporated an all-around leak protection system in its smallest baby diapers, offering comprehensive front, back and side-to-side coverage designed to deliver all-around coverage that helps keep babies comfortable, dry and secure.  “As both a mom and a product developer, I understand how important it is for parents to feel confident in the products they choose for their babies,” says McElroy. “Our new 360° anti-leak technology offers parents peace of mind, knowing their babies are well-protected no matter what the day brings. ”

Another producer largely serving the store brands category, Drylock Technologies is also noticing a rapid move from taped diapers to pants and has been at the forefront of this transition, developing pants that combine easy pull-on convenience, secure fit and high absorption performance. “Our solutions are engineered to move naturally with the baby, supporting freedom of movement without sacrificing protection,” according to executives.

To better serve its customers, Drylock combines consumer insights, category expertise and flexible innovation platforms to help retail partners translate consumer needs into clear propositions, relevant ranges and compelling on-pack and in-store stories. “Whether it is optimizing price performance architecture, accelerating the shift to pants, or integrating sustainability into brand positioning, Drylock works side by side with customers to strengthen brand equity and drive long term category growth,” the company says.

Drylock’s patented channel technology has been designed from the outset with anatomical differences between boys and girls in mind. Tube placement and liquid distribution zones are optimized based on where absorption is needed most for boys and for girls. Drylock continuously improves this technology to enhance absorption speed, liquid control and dryness.

Beyond absorption alone, Drylock takes a holistic approach to managing both pee and poo, combined with reinforced protection at the cuffs. Advanced topsheet and acquisition layer designs help create a controlled, solid protecting film that supports fast liquid intake while forming a defined area of extra protection. At the same time, optimized leg cuffs and barriers provide overall extra protection, helping contain messes, reduce leaks and keep moisture away from the skin, even during movement and longer wear times.

In other development efforts, Drylock has integrated bamboo based fluff into selected diaper designs reducing its reliance on traditional wood based materials without compromising absorbency, softness or skin comfort. 

Combating Challenges

As manufacturers and marketers of baby diapers navigate the challenges of the global market, growth opportunities will remain the strongest in developing markets—Asia, Africa and Latin America—where higher birth rates and rising incomes drive demand, though income inequality remains a challenge, according to Qian. “Even in mature markets, premium segments and adjacent categories (maternity, senior care) are expanding. Digital engagement and omnichannel strategies, including e-commerce, influencer marketing and subscriptions, are driving growth and brand loyalty, especially among younger parents who value convenience and authenticity,” she says.

Meanwhile, the continued introduction and success of independent brands will intensify competitive pressure and force established players to adapt. For example, in the U.S., brands like Coterie have introduced innovative, eco-friendly and comfort-focused products, while Chinese-made Rascal & Friends and Millie Moon leverage access to softer nonwovens, offering superior comfort, which is highly valued by parents, especially for newborns and preemies.

“Competition in any environment drives learning and progress, and the baby care category is no exception,” says K-C’s Adams. “The growth of smaller brands pushes all players to innovate and differentiate. This dynamic reinforces our commitment to continuous improvement and consumer-centric, purpose-led innovation.”