Guaranteed TreeFree Diaper™: Start-Up ‘Soft N Dry Diapers Corp’ is aiming to go public with better baby diapers

Diapers are a highly competitive, global, still growing 85-billion-dollar business. This has been known at least since the meteoric rise (and fall) of what was probably the most famous diaper start-up of the past decades: www.diapers.com. In the early days of e-commerce, the company relied on direct sales, bypassing the middleman. We know how the story ended. Amazon undercut the company for so long that the owner of diapers.com finally had to give in and agree to a sale. In the end, Amazon shut down the company altogether due to “lack of profitability”. Ninety-seven percent of diapers are still sold in stores, with only three percent sold online.

Nevertheless, Canadian start-up Soft N Dry Diapers Corp. (“SDC”) is now venturing into the diaper market as a new player, but is deliberately taking a completely different approach. The company wants to revolutionize the diaper from the inside out, with a new cellulose-free diaper core, based loosely on the “Intel inside” principle. The absorbent core of the diaper with the patented ecoLiite Core™ technology is approximately 25% cheaper to manufacture than the current cellulose cores that dominate 99% of the global market. Soft N Dry also promises 50% better performance, resulting in savings for manufacturers and consumers. Matthew Keddy, CEO, calls the innovation in the diaper market simply “the hottest topic in the diaper industry since the invention of the elastic waistband in the 1970s.” In fact, little to no innovation has been needed in the past 50 years. Since the introduction of the elastic diaper waistband in the 1980s, there have been no products or solutions that have fundamentally changed the industry like the patented ecoLiite Core™ technology.

Figure 1: Finally, something new after 50 years. Soft N Dry scores with more sustainability, lower costs and more performance.

Having learned the lesson of diapers.com, Soft N Dry intends to focus exclusively on B2B. The new cores are sold directly to the manufacturers of the world’s biggest brands, which already hold 99% of the market share. Another target is large national retail chains that sell their own diapers under private labels, such as Aldi or Lidl. Soft N Dry therefore does not compete with Pampers or Huggies for market share or shelf space. Ultimately, Soft N Dry wants to have two sources of revenue: firstly, the absorbent lining of the diaper and, secondly, a finished diaper with a cover and lining, mainly for customers with their own brands who do not have their own manufacturing department and rely on third-party suppliers.

EU supply chain law could massively accelerate the introduction of the Soft N’Dry diaper core

More than 10 million trees are felled each year to supply the diaper market alone, with about 18 billion diapers ending up in landfills each year in the United States alone. The European Union is therefore planning new restrictions (EUDR) for Europe regarding the use of trees for paper products from January 1, 2025. Although it is still unclear whether the regulation will come into force as expected, the pressure on manufacturers is palpable. In the future, only products that are both “deforestation-free and legal” will be allowed on or exported from the EU market. Manufacturers will be responsible for the due diligence declaration for the supply chains. This would effectively ban wood-based pulp in diapers. As a result, the looming European ban has recently significantly accelerated Soft N Dry’s timelines.

Since the announcement of the forthcoming EU regulation, a number of global manufacturers have expressed a strong interest in Soft N Dry’s solution. Interested parties include a Fortune 250 company outside Europe and one of the top three diaper manufacturers in the world outside North America.

A simple calculation gives an indication of the magnitude involved. According to Soft N Dry, a typical order for 100 million units (a starter order) corresponds to gross sales of 6 million USD and a gross profit of 3 million USD. It is important to realize that 400 million diapers, i.e. an initial order and three follow-up orders of the same size, can easily be handled in a single production facility. The estimated production time is only 28 days. A single factory produces billions of diapers per year.

The Soft N’ Dry team includes top people from the industry

Soft N Dry CEO Matthew Keddy, himself a serial entrepreneur in a wide range of industries, has been working on the diaper idea for four years. He was tempted to start something disruptive in the stagnant diaper market while the whole world is busy with topics like AI. Especially in the past six months, Keddy has once again strengthened his team enormously. Alexander Valle Burkert, Chief Technology Officer (CTO) of Soft N Dry, has three decades of experience in the development of baby diaper products and the supply of global customers. At PT Softex Indonesia, he launched over 20 new baby diaper products, reducing time to market from nine to three months and increasing sales to $480 million per year. In the end, PT Softex was sold to Kimberly Clark for $1.2 billion. Although Alex has only been on the team since this summer, he has already further improved the company’s proprietary diaper core, which is now commercially saleable.

The second name that makes you sit up and take notice is Robert Sjöström, who recently joined Soft N Dry as a strategic advisor. Sjöström has more than two decades of leadership experience. He has most recently held several key roles, including President and CIO at Essity AB, where he was head of all hygiene categories (including baby) and responsible for the group’s M&A business. Sjöström managed a €7 billion budget and was responsible for global procurement, supply chain and digital transformation at Essity, among other things. Robert is Chairman of the Board of Midsummer and a member of the Board of Greenly.

Soft N Dry plans to go public on the Canadian CSE and dual-list in Frankfurt before the end of this year. Cash flow from the licensing business is expected to begin as early as the first quarter of 2025. CEO Matthew Keddy is toying with the idea of paying an early dividend in view of the strong free cash flow model – ideally in the first year on the stock exchange.

Summary: Approximately 6,600 diapers are used per child (2,200 per year for about 3 years), at a price of approximately 0.25 to 0.55 US dollars per diaper. According to estimates, the global diaper market is currently worth 85 billion US dollars worldwide, with a projected growth rate of 6.38% per year. The industry is dominated by the largest players, who primarily focus on marketing to differentiate themselves from the competition and gain market share. Major innovations have been virtually non-existent since the introduction of the disposable diaper 50 years ago. The pitch of Soft N Dry is therefore quite simple: fewer diapers per day means lower costs for families. Fewer diapers also means fewer diapers in the landfill. And last but not least, longer daytime and nighttime comfort means better sleep for babies and parents. Soft N’ Dry is unlikely to appear on store shelves under its own name, but it will provide the inner values of a new generation of diapers in the future. With the world’s first disposable baby diaper lining without trees, Soft N Dry aims to score points with higher sustainability, lower costs and better performance. The need to save, especially for families with many children, could become the main driver for business. After all, 33% of families have to save on the basic necessities of life in order to be able to afford diapers for their children. We will be following the progress of Soft N Dry closely from now on.