Drpers Corporation Analysis

OVERVIEW OF THE CASE

Drpers Corporation is a producer and marketer of premium quality, valued-price disposable baby diapers and training pants sold under Drypers brand nama in the United States (U.S) and under other brand names internationally. The company also manufactures and sells lower=priced disposable diapers under other brand name such as Comfees in the U.S and internationally, as well. In addition to private-label diapers, training pants and premoistened baby wipes.

In 1997, branded products represent 88.9% of company net sales in the U.S, sales of private label and other products account for remaining sales. The company's Drypers premium-brand diapers and training pants account for 52.3% of total company and domestic net sales for the same year, which was decreased, from 62.3% in 1996 and 61.3% in 1995. The company leases manufacturing, distribution and administrative space in nine locations in the U.S, Brazil, Puerto Rico, Argentina and Mexico. Corporate headquarters are located in Houston, Texas.

The company is the world's sixth largest producer of disposable baby diapers and the

third largest marketer of brand name disposable diapers in US. In 1997, the company's Drypers brand achieved the fourth largest selling diaper brand in US, and the second largest selling training pants in grocery stores.

Late of 1997, the senior executives discussed to spend more than $10 million dollars on national television advertising in 1998. However, the discussion needs to analyze the impacts on Drypers Corporation including the short and long term affect to ensure the effectiveness of the spending. The market for disposable diapers and training pants is for infants who are in age of birth until 30 months and children who are range of age 8 and use the diapers as well as training pants. The mothers can be as the target market for diapers manufacturer because they will make a decision on the brand of diapers and training pants which they would like to buy for their children and usually make the purchase.

Table 1: Trends in U.S Disposable Diaper and Training Pants Market.

1994 1995 1996 1997

Infants (million): Birth to 30 months 10 9.8 9.7 9.7

Diapers sold (billions of units) 17.2 17.2 17.3 17.5

Diaper retail dollar sales (millions) $3,880 $3,825 $3,855 $3,930

Children (millions): 18 months to 8 years 26.1 26.3 26.3 26.2

Training and youth pants sold (million of units) 970 1070 1250 1410

Training and youth pants retail dollar sales (millions) $485 $510 $540 $595

Table 1 shows the trends in U.S disposable diaper and training pants market between infants and children. According to the Table 1, the retail dollar value of unit volume for the market, has recorded modest growth in recent years due to trend in fewer infants below 30 months of age and diaper improvements in absorbency and leakage control. This is because in 1994 the sales for disposable diapers is estimated as $3.88 billion, then decreased to $3.825 billion before it increased again in 1996 and 1997 but in a little amount of increased. In 1996 the sales is $3.855 before it increase as much as $0.075 billion in 1997 and estimated to be $3.93 billion for that year. While, the trends for training and youth pants also showing the increases in their retail sales from $485 million in year of 1994 until it is estimated to be $595 in 1997.

COMPANY HISTORY AND BACKGROUND

Drypers Corporation is the third-largest manufacturer of disposable diapers and related products in the United States. The company's product line includes disposable diapers, disposable training pants, and pre-moistened wipes, most of which are marketed under the Drypers name. In the diaper market, industry giants Procter & Gamble and Kimberly-Clark lead Drypers, to which it is a distant third place finisher holding less than a 10 percent share of the domestic market. Nevertheless, the company has successfully created a niche for itself by creating quality products that sell at significantly lower prices than those of its competition.

Drypers Corporation was formed in 1987 under the name Veragon Corporation, although the company's roots can actually be traced back three years earlier to when the company's founders launched another diaper business in Vancouver, Washington, called VMG Products. VMG was the brainchild of three college friends, David Pitassi, Walter Klemp, and Tim Wagner, all of whom shared an