The balance of power is shifting on the European private label diaper market. The market leader Ontex recently lost several customers to its competitor Drylock. As a consequence, Ontex can no longer utilize in full its own capacities: according to employee representatives, the company with headquarters in Belgium is examining the future of its plant in the Rhineland-Palatinate city of Mayen. Ontex has discontinued tampon production at the site, which only started a year ago. The employees in Mayen are on short-time working and the manufacturer has also announced that it will be parting with employees.
A curious background story to the duel between Ontex and Drylock is that Drylock CEO Bart van Malderen led the competitor until 2007. Van Malderen’s father Paul Van Malderen once founded Ontex. Bart himself joined Ontex in 1987, was the owner until 2003 and, after selling the shares, remained CEO of the manufacturer for four more years. Private label customers benefit from the dispute, as they can play the manufacturers off against each other. They hardly have to fear price increases despite rising raw material costs.
The LZ has learned from informed sources that Ontex recently lost a major Lidl-contract. Insiders report that also at dm contracts have been discontinued. In other European countries – especially on the for Ontex important French market – the losses are even greater. Upon request, the manufacturer did not comment on individual contracts. However, they confirm in general the decline in contracts.
According to reports, a large part of the contracts went to Drylock. The manufacturer announced in the LZ in February (lz 07-21) that it would increase its turnover over the next five years from around EUR 600 million to EUR 1 billion. Van Malderen founded Drylock in 2012. At the time, the manager explained his return to the business by stating that the market had hardly evolved and that the sector still gripped him. Since its foundation, Drylock has been gradually closing the distance to the European market leaders Ontex and Essity. Like Ontex, the company has its headquarters in Belgium, but produces for the German market in the Czech Republic.
In Germany, Drylock is believed to be close to the EUR 100 million turnover mark, according to an estimate by LZ. Drylock states that it is now the main supplier for Lidl. According to Euromonitor, diaper sales in Germany in 2020 totalled around EUR 690 million. World market leader Pampers by Procter & Gamble holds a 48 percent share of this total, whilst private label brands combined hold a share of around 33 percent.
Ontex’s group turnover fell by 8.5 percent to almost EUR 2 billion last year. The diaper business itself decreased by 13.6 percent compared to the previous year. Esther Berrozpe, who has been managing Ontex since January, also mentioned “double-digit sales declines in the first quarter” of this year. The reason: the European sales, which account for around 40 percent of the group sales, have hit “their lowest point”. The new CEO does not expect an increase in sales until the second quarter.
In Mayen, the company is now negotiating with employee representatives about the future. None of the parties involved commented on the extent of the targeted downsizing, but rumour has it that several hundreds of people could be affected. For the time being the talks are constructive, representatives of both sides confirm. Demands are however “far apart”, says an employee representative. Therefore, the IG BCE demands site security for the next five years – which Ontex does not want to grant. CEO Berrozpe had announced that Ontex would simplify the business and product portfolio and “promote performance with a lean organization”.