By Bill Peters
Procter &amp; Gamble and Kimberly-Clark are looking to attract consumers willing to pay more for essentials that work better, last longer
Pampers parent P&amp;G and Huggies seller Kimberly-Clark, who were once locked in a price war, are now pushing premium versions of their diapers.
Silk diapers? It's not unheard of, as household-basics giants like Procter &amp; Gamble and Kimberly-Clark buck the consumer trend of bargain-hunting by pushing more &#34;premium&#34; versions of some essentials in an effort to stand out on store shelves.
Those companies are looking to appeal to consumers who for years have been seeking cheaper alternatives as prices have risen, and who may be increasingly frustrated with getting what they paid for.
On recent calls with analysts, both companies have said that a focus on deluxe diapers and other upgraded basics is the right path forward, even as some on Wall Street worry about competition, demand and the companies' ability to command higher prices.
&#34;We see further opportunity to expand our categories, expand penetration and premiumize over time,&#34; Kimberly-Clark (KMB) Chief Executive Michael Hsu said during the company's earnings call on Tuesday.
&#34;I will tell you, parenthetically, I'm more excited about our next three years' innovation than what we've done in our past three,&#34; he added.
Last week, Shailesh Jejurikar, the chief executive of Procter &amp; Gamble (PG) , drew some media attention when he highlighted the company's Pampers Prestige diapers, which are made with silk materials and sold in China. During the company's earnings call, he described the diapers as a triumph of technology and design in a nation with a shakier economy and record-low birth rates last year.
&#34;They leveraged the Chinese history with silk,&#34; Jejurikar said. &#34;The shiny, soft yet strong, luxurious material has been a status symbol for more than 2,000 years.&#34;
He said that the baby-care segment in the greater China region had put up double-digit organic sales growth over the past 18 months and increased its market share. The focus on upper-end offerings drove those gains, he said.
On Tuesday, during Kimberly-Clark's fourth-quarter earnings call, executives said they had expanded their share of the North American diaper market for two straight years. Those gains followed years of efforts to play toward the higher end.
More than a decade ago, both Kimberly-Clark and P&amp;G were locked in a diaper discount war. But at a conference in September, Kimberly-Clark Chief Operating Officer Russ Torres said that over recent years, the company had &#34;premiumized&#34; its selection of diapers and facial tissues in North America. In 2019, around 50% of its products in those categories were in the premium bracket. Last year, that figure rose to 70%.
The executives made the remarks as other &#34;luxury&#34; diaper brands like Coterie and the Honest Co. - which often advertise their softness, safer ingredients and more absorbent, sometimes plant-based materials - pose greater competition for mainstays like P&amp;G's Pampers and its generally lower-priced Luvs, and Huggies, which is owned by Kimberly-Clark.
The companies' foray into basics that are a little less basic has arrived amid stiffer competition for household staples from both new market entrants with lower-priced products and cheaper private brands from larger retailers. The lower a consumer's income, the more caution they've had toward spending. Consumers have also shown signs of using the paper towels, shampoo and other essentials they do buy more sparingly to conserve supplies.
Still, Morningstar analyst Erin Lash said in an interview that even when consumers are financially squeezed, they may pay up for better basics that might have a longer-term payoff. Better laundry detergent might help clothing last a little longer. Sturdier trash bags might break less.
A similar calculation was likely being made with diapers made with more comfort and quality in mind, she said.
&#34;If a premium diaper is keeping your baby healthier, meaning no rashes, infections, if it's helping them sleep through the night, if it's preventing blowouts and them ruining clothes and outfits when you are out and about, it might be worth paying up for,&#34; she said.
Lash noted that as Kimberly-Clark tries to make diapers that are more flexible, comfortable and leak-proof, the innovation is happening on both its higher-priced and lower-priced offerings. Mid-priced diapers, as a result, have fallen slightly out of favor.
&#34;Kimberly talked about the fact that, on the good-better-best tiers, 'best' and 'good' have been doing well, and 'better' has been getting squeezed,&#34; she said.
Fourth-quarter sales for Kimberly-Clark declined from a year ago, while volumes - a measure of the number of products sold - ticked higher, a sign that prices declined.
That's a little different than P&amp;G's most recent quarter, in which volumes slipped while sales were up slightly, meaning prices increased. However, P&amp;G was more upbeat on the months ahead, as new products in the U.S. take hold.
Both companies have said they want to focus more on new products and lean harder on research and development. P&amp;G, for instance, began rolling out a stronger version of Tide detergent late last year. Over the summer, management had highlighted upgrades of a number of products, such as a stronger version of Mr. Clean cleaning sponges and new Oral-B power brushes.
Analysts at TD Cowen believe both Kimberly-Clark and P&amp;G may be underestimating the impact of deeper discounting by rivals. The question is, will consumers be willing to pay up for these new and improved household essentials?
&#34;P&amp;G's competitive advantages in market research, R&amp;D, and media certainly provide them with a head start,&#34; wrote TD Cowen analysts in a recent note to clients.
-Bill Peters
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01-28-26 1545ET

<p>Procter & Gamble and Kimberly-Clark are shifting focus from price competition to premium diaper offerings, targeting consumers willing to pay more for quality. Both companies report growth in their premium segments, with Kimberly-Clark expanding its market share in North America. P&G's Pampers Prestige, made with silk, has gained traction in China. Analysts suggest that even financially squeezed consumers may opt for higher-quality products that offer long-term benefits, despite a decline in mid-priced options. The diaper market faces competition from luxury brands and private labels, prompting innovation in both high-end and budget products.</p>

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Kimberly Clark

The diaper wars go deluxe as Pampers, Huggies chase shoppers ready to pay more for premium products