Congrats: Sustainable diaper brand takes on industry giants with Target launch

KEY WEST, FLORIDA — Throughout modern history, parents have only had one choice when it comes to disposable diapers: plastic.

Single-use products, typically made from fossil fuels like petroleum, can take hundreds of years to decompose, making them the third largest consumer item in U.S. landfills, according to the Environmental Protection Agency.

Additionally, they are not as breathable as other materials, potentially making accidents like diaper rash more common.

However, plastic diapers from big brands like Pampers, owned by Procter & Gamble, and Huggies, owned by Kimberly-Clark, continue to dominate the market. Amrita Saigal, founder and CEO of Kudos, is trying to change that.

The Massachusetts Institute of Technology graduate, mechanical engineer, and “Shark Tank” alum has developed a sustainable diaper that uses little plastic, is lined with 100 percent cotton, and utilizes other degradable materials like sugar cane and trees, she told CNBC.

It will be the first diaper of its kind to hit retail stores later this month, when it launches in approximately 375 Target stores nationwide.

“I’m really excited to partner with Target to make history as the first 100% cotton-lined disposable diaper to hit retail shelves,” Saigal said in an interview with CNBC. “That’s a really big deal for us, especially because Target doesn’t have a lot of brands.”

Innovation and Disruption

In the three years since its launch, Kudos has raised more than $6 million in funding. It closed a $3 million round last month, with investments from Precursor Ventures, Xfund, and Oversubscribed Ventures.

In the last 12 months it has sold over 20 million diapers and sales have more than doubled.

Saigal says she has always been fascinated by consumer packaged goods and has spent her career devising ways to redesign everyday products, like pads and diapers, in an effort to disrupt an industry dominated by large companies.

Its goal? To reduce the world’s dependence on fossil fuels by creating new supply chains and developing sustainable products that are as effective as, or better than, their competitors.

“I will not launch a product that is not on par with or better than Pampers,” Saigal said.

“Are there green alternatives? Yes, but they don’t work, and when it comes to diapers, we can’t have something that doesn’t work. If you have a leak, you have a leak, your parents are already sleep deprived. They need things that work. They’re not willing to sacrifice performance for eco-friendliness.”

After three years of research and development, Saigal has created a diaper that can absorb significantly more liquid than competing products, such as Pampers Pure Protection, Huggies Special Delivery and Honest, according to independent tests conducted by Diaper Testing International.

The “DoubleDry” technology

Saigal has also developed the patented “DoubleDry” technology, which involves inserting two layers into the diaper instead of one, allowing it to absorb moisture.

“If you just took the plastic out and replaced it with cotton, your diaper would fail miserably, because what would happen is your baby would pee and all the urine would accumulate, and then your baby’s bottom would be wet,” Saigal said. “How do you get that urine and poop out quickly, and then get it through the layers of the diaper and distribute it evenly so that your baby’s bottom feels dry? That’s the whole point of our innovation.”

Kudos is much smaller than its more powerful competitors, but Saigal said the company’s size puts it in a unique position to develop new cotton supply chains and help suppliers grow with the company.

“For a company like P&G to do this, they would have to spend hundreds of millions of dollars to reconfigure their equipment to be able to do this… it’s really difficult, with their current supply chains, to allow natural materials to work in their current process,” said Saigal, who worked for P&G as a design and manufacturing engineer after graduating from MIT.

The Diaper Economy

Kudos is faced with a daunting landscape.

Successful brands that start out selling directly to consumers and then move into retail can struggle with the high inventory costs and burdensome payment terms that come with them.

Hello Bello, a sustainable, hypoallergenic diaper brand founded by celebrity couple Kristen Bell and Dax Shepard, filed for bankruptcy in October as it struggled to build out its supply chain after starting to sell at retailers like Clothing Store.

In recent years, other consumer goods companies and direct-to-consumer brands have faced similar fates after entering a financing environment that prioritized growth over profitability.

“In the golden age of DTC, it was like, ‘Don’t worry about unit economics now, right?’ Like, just revenue growth, revenue growth, revenue growth, and then once we get to $100 million, $200 million in revenue, then we figure out how to make it profitable,” said Saigal, who founded his company in 2021 and secured funding from “Shark Tank” host Mark Cuban and Shark host Gwyneth Paltrow in 2023.

“I don’t think that model works anymore,” he continued. “It’s like growing slower but making unit economics work from day one. I think the brands that are going to be successful now have to have a very, very tight grip on their numbers and their unit economics from the beginning.”

In the coming year, Saigal’s number one priority for his business is to reach profitability, and to get there, he’s keeping his team lean and strategic with capital he’s using to pay for inventory ahead of his Target launch. He’s also had to walk a fine line when it comes to pricing. His products are more expensive to make than his competitors, but if he prices them too high, he risks alienating potential buyers.

Currently, parents can purchase Kudos for between 41 cents and 70 cents per diaper, depending on the size. That’s comparable to a box of Pampers Pure Protection, which costs between 34 cents and 75 cents per diaper, according to an ad on Target.com.

“We’re a little more expensive just because our raw materials are more expensive, but I’ve tried to keep it as low as possible,” Saigal said. “I’m really interested in being premium but affordable. That’s exactly what I want to do so that we’re accessible to as many people as possible and that cleaner materials aren’t out of reach.”