Kudos Sustainable Diapers Are Ready to Hit Target Stores

Throughout modern history, parents have only had one real choice when it comes to disposable diapers: plastic.

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

Additionally, they are not as breathable as other materials, which can make incidents like diaper rash more common.

However, plastic diapers from major brands like Procter & Gamble– Pampers owned Kimberly ClarkKudos-owned Huggies continues to dominate the market. And Amrita Sehgal, Kudos founder and CEO, is looking to change that.

The MIT graduate, mechanical engineer and “Shark Tank” alumna told CNBC she developed a sustainable diaper that uses some plastic but is lined with 100 percent cotton and includes other biodegradable materials like sugarcane and trees.

Later this month, the diaper will be the first of its kind to hit retail stores when it launches in approximately 375 countries. Goal Locations across the country.

“I’m so excited to partner with Target to make history as the first 100% cotton-lined disposable diaper to hit retail shelves,” Segal told CNBC. “It’s a really big deal for us, especially since Target doesn’t carry many brands.”

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

Over the past 12 months, the company has sold more than 20 million diapers and sales have grown by more than 100%.

Segal says she has long been interested in consumer packaged goods, and has spent her career figuring out ways to redesign everyday products, like sanitary pads and diapers, in an attempt to disrupt an industry long dominated by corporate superpowers.

Its goal is to reduce the world's dependence on fossil fuels by building new supply chains and developing sustainable products that are as effective as, if not better than, the competition.

“I'm not going to launch a product that's not equal to or superior to Pampers,” Segal said.

“Are there eco-friendly alternatives? Yes, but they don’t perform as well, and when it comes to diapers, we can’t have something that doesn’t perform as well. When you blow out once, or leak again, your parents are really sleep deprived. They need things that work. And they’re not willing to compromise performance for the sake of the environment.”

After three years of research and development, Seagal has developed a diaper that can absorb significantly more fluid than competitors such as Pampers Pure Protection, Huggies Special Delivery, and Amen Diapers, according to independent testing by Diaper Testing International.

Pampers did not respond to a request for comment, and The Honest Company declined to comment.

A spokesperson for Kimberly-Clark, which owns Huggies, told CNBC he couldn't comment because he hadn't seen the study by Diaper Testing International.

Segal has also developed its own DoubleDry technology, which adds two layers to the diaper instead of one, allowing it to absorb moisture.

“If you take the plastic out and replace it with cotton, your diaper is going to fail miserably, because what happens is your baby is going to pee and all the urine is going to collect, and then your baby’s bottom is going to be wet,” Segal said. “How do you quickly absorb that urine and stool and then get it through the layers of the diaper and then distribute it evenly so that your baby’s bottom feels dry? So that’s really our innovation.”

Kudos is much smaller than its larger competitors, but Segal said its size puts the company in a unique position to build new cotton supply chains and help suppliers grow alongside the company.

“For a company like Procter & Gamble to do this, you’re talking about… hundreds of millions of dollars to reconfigure their equipment to be able to do this… It’s really hard with their current supply chains to be able to actually allow natural materials to work in their current operations,” said Segal, who worked at Procter & Gamble as a design and manufacturing engineer after graduating from MIT.

Sourcing natural materials to replace plastic can be a challenge for larger companies because of their size, Segal said. Suppliers like cotton farmers tend to identify buyers and partners before they grow the material they need, she said, and because demand for cotton from diaper manufacturers is still lacking, those supply chains are still not widely available.

As more and more smaller brands work with natural suppliers to develop new supply chains, Segal hopes that larger brands will embrace natural materials instead of plastic on a larger scale, which could reduce the price of these materials and thus make plastic more expensive.

“When will we really get mass adoption of natural materials? The reality is when natural materials become cheaper than plastic,” she said.

Kudos faces a scene of immense size.

Established brands that start out selling directly to consumers and then make their way into retail can struggle with the high cost of inventory and the expensive payment terms that come with it.

Hello Bello, a sustainable, hypoallergenic diaper brand founded by celebrity couple Kristen Bell and Dax Shepard, filed for bankruptcy in October after struggling to develop its supply chain after it began selling in retailers like Walmart.

Over the past few years, a number of other consumer products companies and direct-to-consumer brands have faced similar fates after emerging into a financing environment that prioritized growth over profitability.

“At the height of the DTC boom, it was like, ‘Don’t worry about unit economics now, right?’ Like revenue growth, revenue growth, revenue growth, and then once you get to $100 million, $200 million in revenue, let’s figure out how to make this profitable,” said Segal, who founded her company in 2021 and received funding from “Shark Tank” host Mark Cuban and Shark show guest Gwyneth Paltrow in 2023.

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

Next year, Saigal’s top priority is to achieve profitability, and to get there, she’s keeping her staff lean and being strategic with the capital she uses to pay for inventory before launching at Target. She’s also had to tread carefully when it comes to pricing. Her products are more expensive than those of her competitors, but if the price is too high, she risks alienating potential buyers.

Right now, parents can buy Kudos diapers for between 41 and 70 cents per diaper, depending on size. That compares to a box of Pampers Pure Protection diapers, which range from 34 to 75 cents per diaper, according to a listing on Target.com.

“We’re a little bit more expensive because the raw materials we use are more expensive, but I tried to keep it to a minimum,” Segal said. “I care a lot about being top-notch, but affordable. And that’s exactly what I want to do, so we can reach as many people as possible, and clean materials aren’t out of reach.”

Disclosure: CNBC has exclusive off-network rights to “Shark Tank,” which features Mark Cuban as a panelist.