Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Diaper and Baby Products Industry
Transcript
- Lucas: So, by now the numbers are familiar. The global fertility rate has fallen from about 5 children per woman in 1960 to 2.3 today. In East Asia, it's below one-point-three. But here's what I don't think gets enough attention — what happens to the massive consumer goods industry that depends on babies? I'm talking about diapers, wipes, formula, bottles, cribs — the whole ecosystem. Luna: Right, the baby aisle at Target is basically a demographic leading indicator. When that aisle gets smaller, entire supply chains have to adjust. Lucas: Exactly. And the most direct example is the diaper market. Globally, it's worth about sixty billion dollars. But in developed economies — the US, Europe, Japan — the market is contracting by about two to three percent per year, just from fewer babies being born. That doesn't sound catastrophic, but it's a steady headwind. Luna: So how do companies like Procter & Gamble and Kimberly-Clark respond when their core customer literally becomes rarer? Lucas: One strategy: expand the product's lifespan. Kimberly-Clark, which makes Huggies, made a notable move in 2025. They launched a new line called Huggies Fit, sized for toddlers up to age four. Historically, most diapers stop at size six, around thirty-five pounds. This new line goes up to fifty-five pounds. They're essentially trying to delay the point at which a child potty trains, or accommodate delayed training. Luna: That's interesting. But isn't that working against the natural trend? Parents already want their kids out of diapers sooner, not later. Lucas: You'd think so, but the data shows the opposite. The average age of potty training in the US has actually increased from about twenty-two months in the 1960s to nearly thirty-six months today. Longer diaper usage is already happening organically. Partly because of convenience, partly because of different parenting philosophies. Kimberly-Clark is just formalizing it. Luna: So they're monetizing a behavioral trend rather than fighting demographics. That's smart. But what about when the kids are past that stage — they still lose that customer eventually. Lucas: Right, which is why the next move is into adjacent categories. The most obvious pivot is adult incontinence products. The same demographic trend — fewer babies — means more elderly people. And the adult incontinence market is growing at about six percent annually in the US, driven by aging boomers. Unicharm, the Japanese company, is a great case study here. Luna: Unicharm — they make both baby diapers and adult incontinence products, right? I think they dominate in Asia. Lucas: They do. In 2024, Unicharm reported that for the first time, revenue from their adult incontinence line surpassed their baby diaper revenue. Japan's birth rate is one-point-two — one of the lowest in the world. So Unicharm started pivoting years ago. They now market adult diapers using the same brand trust they built with Mamy Poko baby diapers. Same supply chain, same absorbent polymer technology, just a different demographic. Luna: So they're basically future-proofing by following the population pyramid upward. Baby products today, elder products tomorrow. Lucas: Exactly. And it's not just about diapers. The entire baby product ecosystem is under pressure. Think about baby monitors. That's a market that boomed with connected cameras and wearables. But if there are fewer babies, you need to sell to more per parent, or increase the price per unit. Luna: Or expand to broader home monitoring, which is what some companies like Nanit have done. Their baby monitor doubles as a home camera after the kid grows up. Lucas: Right, again extending product lifespan. Another approach is subscription models. The Honest Company — Jessica Alba's brand — pushed heavily into diaper subscriptions. They give a discount, but more importantly, they gather data on when the baby sizes change. If they can keep a customer for twenty-four months instead of eighteen, that's a significant revenue lift per child. Luna: And there's a financial incentive to start the subscription early, during pregnancy. Some companies now offer free samples at baby showers or through ob gyn offices. Lucas: Precisely. Customer acquisition cost is high because the pool is shrinking, so you want to capture the parent as early as possible. But there's a darker side to this too. When birth rates fall, the remaining babies are often born into higher-income households. In the US, birth rates have declined most steeply among lower-income women. So the babies that are born are more likely to have parents who can spend more. Luna: That creates a premiumization trend. You see more organic bamboo diapers, smart wipes warmers, high-end strollers. The market shrinks in volume but might hold value. Lucas: Exactly. P&G's Pampers line has moved upmarket with Pampers Pure, which is plant-based and chlorine-free. It costs about twenty percent more than standard Pampers. Volume is down, but margins are up. So the industry isn't dying — it's trading down in quantity and up in price. Luna: But not every brand can make that leap. Private-label diapers from store brands are growing, because some parents are price-sensitive even if the average is high. Lucas: True. That's the bifurcation. You have premium brands fighting for the high end, and store brands fighting for the value segment. The middle brands — the mass-market ones without a clear identity — get squeezed. And that's exactly what we've seen with some smaller players exiting the market. Luna: What about formula? That market is even more sensitive to demographics, but also to breastfeeding rates and regulation. Lucas: Formula is a tougher one because the growth is in developing markets, not developed ones. In the US, the formula market is roughly stable because breastfeeding rates have plateaued and more women return to work earlier. But the big battle there is regulatory — the WIC program, which is a huge customer for formula makers. There's less room for premiumization because formula is a medical necessity for many. Luna: So the diaper and baby products industry is basically a case study in demographic adaptation: extend product life, pivot to adjacent categories, capture customers early, and go premium. Is there any upside to falling birth rates for these companies? Lucas: The upside, if you can call it that, is that parents of fewer children tend to invest more per child. So the spending per baby actually goes up. A 2024 study by the USDA found that child-rearing costs have risen about three percent annually, even as family size shrinks. That extra spending flows to baby products. So a company that can capture that higher spend per child can offset volume declines. Luna: But that can't continue indefinitely. At some point, if the number of babies keeps falling, even higher spending per child won't compensate. Lucas: Right. The demographic math is unforgiving. Japan's baby product market peaked in the early 2000s and has been declining ever since, despite premiumization. That's why Unicharm's pivot to adult incontinence looks so smart in retrospect. They saw the writing on the wall fifteen years ago. Luna: Speaking of seeing the writing on the wall — if today's episode gave you a clearer picture of how demographics reshape even everyday industries, that's exactly the kind of insight we try to deliver here. The way The Demographics Podcast stays ad-free is through listener support. If you found this useful, you can buy us a coffee at buy me a coffee dot com slash fexingo. It genuinely helps keep these deep dives coming. Lucas: Thanks for saying that, Luna. And to your earlier point about the limit of premiumization — we're already seeing companies like Kimberly-Clark and P&G invest in ai driven supply chain optimization just to squeeze out cost efficiencies. Because when the volume isn't growing, you have to become more profitable per unit to maintain margins. Luna: So the future of the baby products industry is less about making more things for babies, and more about making smarter things for fewer babies. And then using that same technology for adults. Lucas: Exactly. It's a playbook we'll see repeated across many consumer goods categories as the population ages and shrinks. The companies that adapt early — like Unicharm — will survive. The ones that wait too long will find themselves with empty factories and no one to sell to. Luna: And that's the demographic dividend, in reverse. Lucas: Exactly. For The Demographics Podcast, I'm Lucas. Luna: And I'm Luna. See you next time.