Lawsuits Fly in the Battle to Cover the Most Baby Bottoms, a Fracas Insiders Call . . . : The Diaper Wars

At an obscure textile conference in South Carolina not long ago, a patent attorney from rural Wisconsin stole the show.

Everybody wanted to watch his videos.

Most people would have found these tapes as captivating as a ticking clock. The industrial videos captured scenes from the inner sanctums of the nation’s two biggest diaper makers--the Procter & Gamble Co. and Kimberly-Clark Corp.

But as attorney Francis J. Bouda recalls: “There was standing-room only, wall-to-wall bodies. They thought it was great.”

And after word of the peep show spread, dozens of diaper manufacturers from Hong Kong to Germany to Australia bombarded the Cleveland, Wis., attorney with requests for the videos, which had become public record during a court trial.

Why the fascination with diapers?

It’s all part of what industry insiders call the “Diaper Wars.” In courtrooms, along grocery-store aisles, and in research labs guarded as closely as bank vaults, the nation’s disposable diaper makers fight fiercely to cover billions of baby bottoms.

Any morsel of information about the competition is gobbled up in this secretive, arcane industry. In diaper trade journals, insiders can follow the progress of Venezuela’s diaper production, learn who’s bought Zuiko diaper machines in Saudi Arabia or how the European Common Market decided whether a joint diaper venture violated something called the Treaty of Rome.

Today, Americans spend $4 billion a year on throwaway diapers. Parents may postpone purchasing a bigger house, a new car or a trip to Disneyland, but until youngsters clear the potty-training hurdle, parents have got to keep buying diapers. Last year, parents changed their babies’ disposables 16.8 billion times. (Only 15% of parents remain loyal to cloth diapers.)

But while the disposables’ audience may be captive, it’s fickle. Over the years, many corporate titans as well as mom-and-pop entrepreneurs have tried to cash in on the disposables’ popularity, only to discover that getting into the diaper business can make as much sense as standing in front of a speeding train.

Just two companies have been incredibly successful--Procter & Gamble, the maker of Pampers and Luvs, and Kimberly-Clark, which sells Huggies. And the firms jealously guard their advantages in an industry that had barely existed 30 years ago.

“Trying to visit one of these diaper plants is like trying to get into prison,” says D. K. Smith, a diaper consultant from Mesa, Ariz. “It’s very tight security.”

Kimberly-Clark’s Huggies diaper line is so popular that it bumped Kleenex as the company’s best-selling product. Thirty percent of diaper shoppers buy Huggies. P&G;, credited with inventing the modern disposable, has carved out 50% of the market with its Luvs and Pampers. P&G;’s diaper line also muscled aside such old consumer favorites as Tide detergent and Ivory soap to become the company’s biggest cash cow.

The remaining market is divided among lesser-known companies that provide house-brand diapers for grocery stores and chains such as Toys R Us, Wal-Mart and Target. Those products usually sell for about 15% to 20% less than the leading name brands.

With so much at stake, Wall Street analysts observe that the rivalry between the two diaper kings is as intense as Coke and Pepsi’s dogfight to be America’s No. 1 thirst quencher.

Publicly, the two firms’ executives politely decline to say much about the other. During an interview, in fact, a P&G; spokesman in Cincinnati refers to his company’s archrival as “our friends in Dallas.”

Behind the scenes, however, the two companies have been ruthless.

They snarl at each other through subpoenas. Since 1985, they have filed a blizzard of lawsuits and countersuits in courthouses from Seattle to Charleston, S.C. They’ve portrayed each other as industrial thieves stealing innovative ideas or as antitrust gluttons who want to hog the market.

“They are intent on killing each other. Lord knows what the next (suit) will be,” observes Bouda, who counsels other diaper manufacturers here and overseas on how to avoid getting sucked into the litigation swamp.

“All my clients come to me and say, ‘How do you keep out of trouble with those two?’ ”

The litigation is expensive and technical.

One hard-fought lawsuit, for instance, was triggered bS. Patent No. 4,610,678, which protected a technological advance made by Procter & Gamble in diaper absorbency. (For the diaper industry, the constant quest for a more absorbent diaper ranks right up there with the search for the Holy Grail.) Kimberly-Clark bitterly complained that P&G; had really fooled a patent examiner into making the award.

In another suit, P&G; argued that Kimberly-Clark had illegally copied a process that heat-shrinks material in hospital gowns to develop elastic waistbands on diapers.

With so much at stake during these trials, Kimberly-Clark’s chief executive officer flew to Seattle not long ago to defend his product’s “leakage control shield.”

Wayne R. Sanders walked into a courtroom where diapers by the dozens decorated desks and tables, and expert witnesses postulated about such things as diarrhea. Sander’s mission: to diaper a baby doll on the witness stand.

Sanders’ rise to CEO illustrates just how crucial diapers are to this consumer-products company. His promotion came not long after overseeing a true coup: the creation of a disposable training pant.

Cloaked in as much secrecy as the Manhattan Project, Kimberly-Clark scientists had tried for years to make a kid-friendly training pant. (At one point, the project, code named Omega, was headquartered in a former Ford dealer’s garage in Neenah, Wis.)

The major hang-up was the stretchy side panels needed to allow a child to pull up the pants. With Sanders prodding researchers, they finally hit upon using an elastic, non-woven fabric invented in-house years earlier.

Introduced in 1989, Huggies Pull-Ups generates $300 million annually and prolongs reliance on disposables. The Japanese make the only similar product--Trapanman, which means training pant man.

“It was considered a great accomplishment,” brags Jean Allen, a Kimberly-Clark spokeswoman, of Sanders’ role in finding the missing link. “It’s a big deal.”

Industry insiders say P&G; executives must be gnashing their teeth over Huggies Pull-Ups. And, of course, scrambling to come up with their own.

For the record, Scott Stewart, a P&G; spokesman, merely says the disposable training pant clearly “merits consideration.”

“Beyond that, we can’t talk about our future plans,” he adds.

Both companies, however, were crowing a lot this spring about innovations. Later this year, Kimberly-Clark will release a diaper that’s half as thick. And Procter & Gamble will begin selling a super-dry diaper that is far more absorbent, thanks to a curly cellulose fiber.

The latest improvements are a headache for private-label diaper companies that must chase the two leaders. Without a huge stable of scientists and engineers, it can take the smaller diaper companies a year to duplicate such advances.

At Pope & Talbot Inc., a Portland, Ore., diaper maker, employees have already torn the new Huggies diaper apart in hopes of discovering how it’s been made thinner.

“When you have a war between the two big guys, the little guys have to move fairly nimbly to not be stepped on,” says Robert Wulf, who handles investor relations at Pope & Talbot. “There is no question new product development is good for the industry . . . but it makes our lives more difficult.”

No one could have envisioned just how high-tech diapers would become when a P&G; chemical engineer, weary of changing his grandchildren’s cloth diapers, spurred invention of the modern disposable more than 30 years ago.

At the time, the few primitive disposables available were sold almost exclusively in department and drug stores for vacationing families.

Procter & Gamble bombed on its first try. The disposable was tested first on babies in Dallas and, with the temperature averaging 93 degrees during the experiment, mothers complained that the plastic diapers made their babies miserable. After adjustments, P&G; employees assembled 37,000 diapers by hand and tried them out in a colder climate--Rochester, N.Y.

P&G;’s diapers were officially unveiled in Peoria, Ill., in 1961. They were christened Pampers, after executives discarded such names as Zephyrs, Solos and Winks. In the early years when the supply was limited, customers sometimes bought Pampers right from the trucks as they were unloaded in front of grocery stores.

Pampers’ success was irresistible. More than 700 diaper makers are now selling their wares across the globe, says diaper consultant John Starr. Yet, he adds, most of the world’s babies and toddlers have never seen a cloth or disposable diaper. In China, for instance, baby clothes are designed with openings in the bottom to allow for accidents. Parents in impoverished countries make do with peat moss, rags, twigs and leaves.

Today, the first disposables look like Stone-Age relics, but so do the diapers of just a few years ago.

With several hundred diaper patents on file in Washington, the advances are coming rapidly, says Ed Vaughn, a textile professor at Clemson University. He says today’s disposables are very sophisticated.

That has a lot to do with the sort of people who devote their professional careers to improving them.

Among those on diaper company payrolls are medical microbiologists, immunologists, toxicologists, physicists, biochemists, mechanical engineers and physicians with impressive diaper-rash credentials. Also called in to consult are folks such as Starr and Vaughn, experts on non-woven textiles. The guts of disposable diapers--as well as tea-bag covers, sanitary napkins and surgical masks--are all non-wovens, made without weaving threads.

All concerned agree that babies have benefited from the disposable diaper competition. But is a baby really more comfortable in one brand over another?

“The products by now are very similar,” says George Adler, a Wall Street analyst with Smith & Barney.

“There is really very little product difference between Huggies, Pampers and Luvs.”