Costco Shifts Baby Diaper Supplier: A Major Move in the Private Label Market

The Changing Landscape of the Baby Diaper Industry

The decision to switch suppliers aligns with broader trends in the baby diaper industry, where companies are adjusting their manufacturing priorities to focus on higher-margin products and brand differentiation. The move follows an announcement by Kimberly-Clark, the former supplier of Kirkland Signature baby diapers, stating its intent to reduce its private label business.

In October 2024, Kimberly-Clark CEO Mike Hsu publicly stated that the company planned to cut its private label sales from 4% of total revenue to just 2% in 2025. This shift aligns with its strategy to invest more in proprietary diaper technologies and brand innovation rather than competing in the lower-margin private label segment.

Additionally, Kimberly-Clark CFO Nelson Urdaneta emphasized that this shift will allow the company to focus on its own brands, such as Huggies and Pull-Ups, and enhance its competitive edge by allocating resources to R&D and premium product offerings. This strategic decision signals a significant change in the private label baby diaper market, with First Quality stepping in to fill the gap left by Kimberly-Clark’s withdrawal.

First Quality: A Rising Power in the Baby Diaper Market

First Quality, a well-established private label and branded manufacturer, is no stranger to the baby diaper industry. The company owns the Cuties diaper brand and produces a wide range of hygiene products, including baby diapers, training pants, adult incontinence products, paper towels, and toilet paper.

While First Quality has not officially disclosed the details of its agreement with Costco, the company is already making major investments to expand its baby diaper manufacturing capacity.

In May 2024, First Quality announced a large-scale expansion at its Macon, Georgia plant, which will increase diaper production capacity by 50%. This expansion includes:

• A new diaper manufacturing facility

• Additional baby diaper production lines

• New training pant production lines

• A state-of-the-art automated warehouse

This $400 million investment is expected to be completed by June 2025 and will significantly strengthen First Quality’s position in the baby diaper market. With Kirkland Signature baby diapers now under its portfolio, First Quality is poised to become a key player in the private label diaper segment, directly competing with industry leaders like Kimberly-Clark and Procter & Gamble.

Why This Change Matters for Costco Customers

Costco’s decision to switch baby diaper suppliers will likely have a direct impact on consumers. The Kirkland Signature brand is widely known for offering premium quality at a lower price point, making it a popular choice for parents looking for affordable, high-quality baby diapers.

With First Quality now producing Costco’s baby diapers, some potential changes include:

1. New and Improved Features – First Quality’s expertise in absorbent technology and leak protection could result in enhanced Kirkland baby diapers with better performance.

2. Sustainability Upgrades – The company has been investing in eco-friendly manufacturing processes, which may align with Costco’s increasing focus on sustainable products.

3. Price Stability – While pricing details remain undisclosed, Costco is expected to maintain competitive pricing, ensuring customers continue to get value for their money.

However, some customers may notice differences in diaper texture, fit, or absorbency as First Quality’s design and materials may differ from Kimberly-Clark’s version. Costco will likely provide feedback channels to gauge consumer response and make further adjustments if necessary.

The Broader Impact on the Baby Diaper Industry

The private label baby diaper market has been evolving rapidly, with retailers and manufacturers adjusting their strategies to meet changing consumer demands. Some key trends shaping the industry include:

• Increased Demand for Premium Private Label Baby Diapers – Many retailers are investing in higher-quality store-brand diapers to compete with big-name brands like Pampers and Huggies.

• Greater Focus on Sustainability – Consumers are increasingly looking for eco-friendly baby diapers, prompting companies to use biodegradable materials and recyclable packaging.

• Expansion of U.S.-Based Manufacturing – As supply chain disruptions impact imported baby diaper brands, domestic production facilities are becoming a strategic advantage.

With First Quality expanding its diaper manufacturing footprint in the U.S., Costco is positioning itself at the forefront of these industry trends by ensuring a stable supply of high-quality baby diapers for its customers.

Looking Ahead: What’s Next for Costco’s Baby Diaper Business?

As Costco transitions to First Quality as its new baby diaper supplier, the retailer will likely continue to monitor customer feedback and make adjustments to its diaper design and quality. Meanwhile, First Quality’s major manufacturing expansion in Macon, Georgia, will ensure ample production capacity to meet growing demand.

With Kimberly-Clark stepping away from private label manufacturing, other retailers and brands may also look for new baby diaper suppliers, potentially giving First Quality even more market share in the private label diaper segment.

Ultimately, this change reflects a broader shift in the baby diaper industry, where manufacturers are prioritizing branded innovation, while private label specialists like First Quality take on an expanding role in supplying affordable, high-quality diapers to major retailers.

For Costco shoppers, this means continued access to premium-quality baby diapers at warehouse club prices, backed by First Quality’s expertise and growing manufacturing capabilities.