The Diaper Foundry Is Surging, Why Is The Brand Transformation And Imminent?

Foundry (OEM) or OEM is not a new thing in the diaper industry. Each brand has more or less its own partner foundry or factory. From domestic local brands, to the “Chinese brand”, to some foreign brands, many of them have passed the hands of Chinese diaper OEMs. On the Internet, the diaper foundry is everywhere.

Why is diaper OEM so common? The reason is simple, convenient and save money. In addition to the relatively low cost of the foundry company itself, it is possible to have a relatively simple upstream manufacturing resource with relatively mature raw materials and production equipment. As everyone knows, the manufacturing process of diapers is a highly mechanized assembly line that assembles various diaper parts such as wood pulp, SAP, non-woven fabrics, rubber bands, and the like. Therefore, for OEMs, as far as the model is concerned, as long as there is profit in the order, it is relatively simple.

Then, since the diaper OEM is so good, why do many companies that have done many years of work, but in the end, they want to embark on a brand that is not good to go?

In this regard, Bo Wei Xiaobian consulted Mr. Y, who has relevant experience in the industry, he said:


01

OEM does not have an independent brand?

"First, the trademark is the customer, you produce more, the consumer does not know that you are producing, and will always be pinned by the OEM customer."

In the foundry mode, the most important thing for many factories is to accept the instructions of OEM customers to produce OEM products. Because there is no trademark ownership, it is relatively "unknown" and is in a relatively passive state during the cooperation process. Under such circumstances, OEMs may want to "reinvent themselves."


02

Industry low profit, high competition?

“Secondly, OEM customers will also put forward a lot of additional requirements as orders increase. For example, warehousing and stocking are all manufacturers need to increase costs and cannot increase prices for customers. The bigger the price, the lower the profit.”

In fact, because most of the foundry companies, especially OEMs, have limited profit margins, their gross profit margins are often much lower than those of diaper brands. In most cases, the price of the diaper terminal will not increase significantly. Once the price of raw materials for diapers rises, the pressure on the price increases is the downstream processing enterprises. In particular, many small and medium-sized foundry companies that are sandwiched between diaper raw materials suppliers and brand owners are in a state of survival, and survive in meager profits.


03

OEMs may face financial strain risks?

“Thirdly, OEM customers will have strict requirements on payment after a long time of cooperation. As a result, manufacturers have been passive in terms of funds. If customers refuse to pay or deliberately default, the company will be double-punched, suppliers and employees. Taxes, utilities, etc. are not owed."

In fact, because most of the foundry companies, especially OEMs, have limited profit margins, their gross profit margins are often much lower than those of diaper brands. In most cases, the price of the diaper terminal will not increase significantly. Once the price of raw materials for diapers rises, the pressure on the price increases is the downstream processing enterprises. In particular, many small and medium-sized foundry companies that are sandwiched between diaper raw materials suppliers and brand owners are in a state of survival, and survive in meager profits.


04

Low-cost competition in the foundry market?

"Fourth, there are a lot of manufacturers now, there are some behaviors of low-cost customers. The loyalty of OEM customers is generally not high, and the price is low."

Affected by the fierce competition in the Red Sea market, some SMEs lacking core competitiveness can only continue to reduce their profit margins, and even adopt low-cost strategies to obtain OEM orders. In the market competition of “low price”, customer loyalty is generally not high.


In addition, it is understood that some problems in the foundry industry are also pushing some OEMs to the brand.

Jagged quality problems?

For the foundry, the most important thing is to accept the customer's instructions and produce the best quality products at the lowest cost according to the requirements of the other party. However, the quality problems of diapers often come up to the quality and extent of "requirements".


In the many production links of diapers, due to the influence of the quality control specifications of the foundry, there are some hidden dangers. For example, although the performance of the composite core of the diaper is monitored according to international requirements, data such as the amount of rewet, the length of the urine diffusion, and the slippage are not fully reflected during the user's use, so some Benchmark requirements related to quality aspects may be overlooked and have an impact on the quality of the product.


Of course, it is not that the branded diapers do not mean that the quality is not guaranteed, but under the low-price competition, some foundry companies tend to overlook the “quality”. Faced with the current market situation, in order to reduce costs, some small and medium-sized foundry companies can only cut costs in research and management. Especially in terms of management costs, some foundry companies are not standardized because of the low production conditions. Even some small foundries will “adjust” the materials used. Therefore, under the influence of low-price competition in the market, nature has created a quality product that is uneven.

Is the diaper homogenized?

In fact, compared with some well-known foreign OEMs, some domestic OEMs still need to work harder on product research and development. The development of some enterprises has even started from imitation, and it is in a relatively blank stage in the core production process. Therefore, these foundry companies can only use familiar equipment and processes to produce familiar styles, which ultimately leads to the increasingly prominent homogenization phenomenon.


In fact, as a highly customized product, diapers have achieved the characteristics of different brands because of the core and differentiation of the production process. This is also why some foreign famous brand diapers are only affected by the pressure of gross profit, and they only choose to build factories in China instead of choosing the important reasons for the foundry production. For example, Pampers, which has factories in Guangzhou and Tianjin, Kao, which has factories in Shanghai and Hefei, and You Nijia, which has five factories in Shanghai, Tianjin, and Yangzhou.


The diaper foundry company will be at the bottom of the industrial chain because it has no core production process and no independent intellectual property rights. The end result is that in the entire market, the phenomenon of getting together is obvious. Although some diaper foundries cover a wide range of categories, the production content is highly similar.


In the era of shuffling, the rise of the brand road?


In summary, based on these reasons, the living space of some small and medium-sized OEMs in the diaper OEM market is constantly being compressed, prompting the arrival of the industry reshuffle, and forcing companies to seek breakthroughs. At the same time, with the upgrade of the diaper consumer market, the low-price strategy seems to be not easy to “touch” many brands, and now they are more focused on quality and innovation. Therefore, some companies choose to transform into technology-based enterprises and raise the threshold for competition. And more companies have chosen to embark on the brand road.


In this regard, Mr. Y shared his insights with us based on the relevant experience of the company:


"We have been OEM for more than ten years. It takes a lot of determination to get out of ODM. At the same time, there is still one biggest drawback. If a manufacturing company has a free brand, many OEM customers will avoid this and prevent it. Market conflicts, so many manufacturing companies dare not take the initiative to transform, which will lead to the loss of many OEM orders, resulting in overcapacity."


As the so-called challenges and opportunities coexist, this shuffle also gives foundry companies a new opportunity.


Mr. Y believes: “Now is the stage of shuffling. The increase in raw and auxiliary materials will increase the cost of OEM customers, and the production cost of equipment will decrease. But it is not as passive as its own brand. OEM customers have sales channels but the problem is also Obviously, the cost is too high, so manufacturers will increase profits. Therefore, the late market is completely free brand competition OEM customers, this price increase is equal to giving the manufacturing industry a good opportunity to create its own brand, the market The more chaotic it is, the better it will be."


Of course, developing a brand is not a day's work. In addition to investing a lot of manpower, material resources and financial resources, having unique production process technology standards and values is the most suitable ability of own brands. Obviously, the road to the rise of many foundry companies is still on the road.


"Free brands are difficult to do, but as long as they slowly settle down and serve every consumer, they will gradually grow stronger and bigger, and free brands can be manipulated by enterprises themselves, so that subsequent problems and risky enterprises are controllable. Mr. Y said this.