Kudos sustainable diapers come to Target stores

Throughout modern history, parents have had just one real alternative to disposable diapers: plastic.

These single-use products are typically produced from fossil fuels like petroleum and take a whole bunch of years to decompose, making them the third-largest consumer item in U.S. landfills, in line with the U.S. Environmental Protection Agency.

Additionally, they will not be as breathable as other materials, which may result in more frequent incidents similar to diaper rash.

Nevertheless, plastic diapers from mega brands like Procter & GamblePampers and Kimberly Clarksubsidiary Huggies continues to dominate the market. Amrita Saigal, founder and CEO of Kudos, wants to vary that.

The Massachusetts Institute of Technology graduate, mechanical engineer and former “Shark Tank” contestant has developed a sustainable diaper that uses some plastic but is lined with 100% cotton and accommodates other biodegradable materials similar to sugar cane and trees, she tells CNBC.

Later this month, it can be the primary diaper of its kind to hit retail stores when it’s sold in roughly 375 Goal Locations nationwide.

““I'm so excited to partner with Target and make history by bringing the primary disposable diaper with 100% cotton lining to retailer shelves,” Saigal said in an interview with CNBC. “It's just a extremely big deal for us, especially because Target doesn't carry loads of brands.”

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

In the last 12 months, over 20 million diapers have been sold and sales have increased by over 100%.

Saigal says she has long been fascinated by consumer packaged goods and has spent her career finding ways to redesign everyday products like sanitary napkins and diapers to disrupt an industry long dominated by large corporations.

Their goal? To reduce the world's dependence on fossil fuels by building new supply chains and developing sustainable products that are as effective – if not more effective – than those of the competition.

“I will not bring a product to market that is not equal or better than Pampers,” Saigal said.

“Are there environmentally friendly alternatives? Yes, but they don't work, and in relation to a diaper, we are able to't have anything that doesn't work. Once the diaper bursts or leaks, parents are already sleep deprived. They need things that work. They're not willing to compromise performance for the sake of being environmentally friendly.”

After three years of research and development, Saigal has developed a diaper that can absorb far more liquid than competing products such as Pampers Pure Protection, Huggies Special Delivery and Honestly Diapers, according to independent testing by Diaper Testing International.

Pampers did not respond to a request for comment. In a statement, a spokesperson for Honest said: “We conduct quite a lot of tests to make sure our products meet our rigorous safety and performance standards. Our philosophy on diaper performance is that in-use testing, which also evaluates comfort, fit and leakage protection, is essentially the most reliable indicator of how effective a diaper is at keeping baby comfortable and dry.”

A spokesperson for Kimberly-Clark, the Huggies group, told CNBC that they could not comment because they had not seen the study conducted by Diaper Testing International.

Saigal has also developed its own “DoubleDry” technology, in which the diaper consists of two layers instead of one, allowing moisture to be wicked away to the outside.

“If you only removed the plastic and replaced it with cotton, your diaper can be a catastrophic failure because your baby would pee and all of the urine would pool up after which your baby's bottom can be wet,” Saigal said. “How are you able to drain urine and poop quickly after which pull it through the layers of the diaper and distribute it evenly in order that your baby's bottom feels dry? That's exactly what our innovation is.”

While Kudos is much smaller than its mighty competitors, Saigal says its size gives it a unique position to build new cotton supply chains and help suppliers grow alongside the company.

“An organization like P&G would need to spend a whole bunch of hundreds of thousands of dollars to retool its facilities to make this possible. With the prevailing supply chains, it's really difficult to make use of natural materials in the present processes,” says Saigal, who worked as a design and manufacturing engineer for P&G after graduating from MIT.

Even sourcing natural materials instead of synthetics would be challenging for larger companies because of their size, Saigal said. Suppliers like cotton farmers typically have buyers and partners locked in before they grow the materials they want, and because there isn't mass demand for cotton from diaper manufacturers yet, those supply chains don't really exist at scale yet, she said.

As more smaller brands partner with natural material suppliers to build new supply chains, Saigal hopes that major brands will increasingly turn to natural materials instead of plastic in the future, which could lower the price of these materials and, in turn, make plastic more expensive.

“When will we actually see widespread use of natural materials? The reality is when natural materials grow to be cheaper than plastic,” she said.

Kudos faces a huge challenge.

Hot brands that first sell directly to consumers and then move into retail can run into trouble due to high inventory costs and the associated onerous payment terms.

Hello Bello, a hypoallergenic, sustainable diaper brand founded by celebrity couple Kristen Bell and Dax Shepard, filed for bankruptcy in October amid difficulties growing its supply chain after it began selling its products in retailers such as Walmart.

In recent years, numerous other consumer goods manufacturers and direct-to-consumer brands have suffered a similar fate after growing up in a financing environment that prioritized growth over profitability.

“In the heyday of DTC, it was, 'Don't worry about unit costs now, right?' So, just revenue growth, revenue growth, revenue growth, after which if you get to $100 million or $200 million in revenue, then we'll determine the way to make that profitable,” said Saigal, who founded her company in 2021 and secured funding from “Shark Tank” host Mark Cuban and guest shark Gwyneth Paltrow in 2023.

“I don't think that model works anymore,” she continued. “It's like growing slower, but making unit costs work from day one. I believe the brands that want to achieve success today need to have a really, very tight grip on their numbers and unit costs from the start.”

In the coming year, Saigal's top priority is to make her company profitable. To achieve that goal, she's keeping her team lean and being strategic with the capital she's using to pay for inventory before her launch at Target. She also has to walk a tightrope when it comes to pricing. Her products are more expensive to produce than her competitors', but if the price is too high, she risks alienating potential buyers.

Currently, parents can purchase Kudos for between 41 and 70 cents per diaper, depending on the size. For comparison, a pack of Pampers Pure Protection costs between 34 and 75 cents per diaper, according to a listing on Target.com.

“We're a little bit bit dearer because our raw materials are dearer, but I've tried to maintain that as little as possible,” Saigal said. “It's very vital to me to be premium but still inexpensive. That's exactly what I would like to do, in order that we're accessible to as many individuals as possible and cleaner materials aren't out of reach.”