New Ontex plan will center activities in North America, Europe

A major manufacturer of baby diapers and other disposable products, Belgium-based Ontex has increased its focus on healthcare and partner brands in Europe and North America, where the growth potential in this market is strong, under a plan called the New Ontex. Under the new plan, the company will increase its focus on its already successful relationships with partner brands in the absorbent hygiene market in North America and Europe as well as on its healthcare businesses.  

In 2020, this part of the portfolio represented €1.43 billion in revenues and an above group average adjusted EBITDA margin of 13%. Meanwhile, the business activities in the rest of the world, which are focused on Ontex’s own brands, represented €0.65 billion in 2020 in revenues with an adjusted EBITDA margin of 8%. These businesses will be managed for value while exploring future strategic alternatives. 

“The New Ontex will focus on partner brands and healthcare in Europe and North America. This marks a strategy shift that will allow us to build on our inherent strengths and leverage the full potential of our know-how, scale and capabilities,” says CEO Esther Berrozpe. “Facing an unprecedented rise in raw material prices and inflation on other input costs, we have accelerated our cost reduction initiatives identifying new opportunities to streamline the group.”

The New Ontex will encompass a core portfolio of businesses where the company’s strengths lie. This includes private label and lifestyle brands, where the company has been a partner of choice for both retailers, independent brands and institutional customers, primarily in Europe and North America, for years. Ontex’s industrial footprint is well positioned to serve these regions and offers considerable opportunities for synergies and economies of scale to provide its partner clients with innovative solutions and the best quality and cost.

Ontex’s product offering will remain in three existing categories – Baby Care, Adult Care and Feminine Care – and the company will accelerate its focus on faster-growing, margin-accretive products within these categories. This includes all adult care products, baby pants and more sustainable products. The company will focus investments on maximizing synergies across its European industrial footprint and ramping up its U.S. operations, driving operational excellence to improve costs, quality and service. Ontex entered the U.S. market earlier this year through the purchase of a hygiene manufacturing site from Albaad in Rockingham County, NC.

 “We see the private label diaper business is not just price-focused,” says Annick De Poorter, group R&D, quality and sustainability director. “There is a high focus on continually improving the products. To match the quality of the A-brands at a more affordable price but also to have the best quality amongst the different store brands out there. Good quality diapers drive consumer traffic to the retailer and will result in more shoppers spending their basket at the retailer. That is why retailers carefully choose via consumer panel and lab tests which diaper manufacturer to select for their store brand, not just looking at price.” 

To remain a preferred supplier, Ontex is continually improving its products focusing not just on performance but also skin care and softness, which play an important role in the purchase decision on diapers. “Over the years we have made our diapers faster at absorption, breathable and softer and softer, in some cases even surpassing the softness of national A-brand diapers,” De Poorter says.

Last month, the company introduced a new diaper core technology, which is rolling out to its partner brands.  Climaflex  ensures comfort, keeps the baby’s skin protected and ensures absorption even under the toughest conditions, with extensive baby motion. 

Diapers with the Climaflex technology have a dual-layer core in which one layer quickly attracts liquid and a second layer locks it in a very fast way and securely even in the toughest conditions, when the baby moves a lot.

“In general Ontex has seen over the last years how private label has evolved from pure price-fighting white label type of products, to really branding of retailer store brands like it was a national brand with nice packaging, advertisement claims, etc.,” De Poorter adds.

Ontex has responded to these needs with innovation like its SeconDry technology, which claims it’s up to two times drier, providing the dryness of market leaders even featuring it in side by side demonstrations as in TV advertisements in the recent past.

In recent years, Ontex has expanded its private label program to be the contract manufacturing partner of choice for many start-ups or insurgent brands, working with these partners to design and produce their diapers. “Some of those brands have grown so strongly that even the A-brands started to copy their brand proposition,” De Poorter says. 

Whether developing a private label product for a lifestyle brand, Ontex’s research and development focuses on targeted development for its contract manufacturing partners, to help them develop a portfolio of product and claims to support their unique value proposition and differentiate their brands. “In some cases, we even co-develop specific solutions, with our partners, involving them from the start,” she adds.

These efforts respond to a strong consumer demand for premium products across all disposable income levels. 

“Consumers know they feel better when they buy premium and are more likely to trust premium brands compared to non-premium brands,” says Colin Hanna, director of market research at Price Hanna Consultants. “This is especially true when it comes to hygiene products for themselves or loved ones. They also want alternatives to traditional leading name-branded products – alternatives that use fewer hard to pronounce chemicals that sound potentially harmful, fewer fragrances, etc

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