Low-cost baby care products from Amazon.com could be a threat to the makers of both Huggies and Pampers. Image: Amazon Elements.

Amazon.com (NASDAQ:AMZN) thinks America is ready for transparent diapers.

Well, not actually the see-through kind, but rather ethically sourced and with full transparency about where the materials that make up the diaper come from. Priced at a significant discount to either Huggies or Pampers, they're a direct shot at consumer goods giants Kimberly-Clark (NYSE:KMB) and Procter & Gamble (NYSE:PG).

Although Kimberly-Clark shareholders in particular ought to take notice because the diaper maker is already losing market share, investors needn't worry about its future or its dividend.

Your slip is showing
Kimberly-Clark's Huggies are slipping. For the first time in 20 years P&G says it has more market share in diapers than its rival. Huggies volumes fell by low double-digit rates in the third quarter compared to mid single-digit growth in 2013, which more than offset the double-digit gains it made in the super-premium category.

Moms are either going upscale with their diapers or down market, leaving Kimberly-Clark's mid-tier Snug & Dry line -- which accounts for two-thirds of the $2 billion in revenues the diaper maker generates annually from Huggies -- high and dry. Kimberly-Clark says the brand lost large swaths of share to P&G's discount Luvs in the third quarter.

It's off to the races, but Huggies diapers are still at the gate as cheaper options from rival P&G steal market share. Photo: Quinn Dombrowski via Flickr.

The diaper duopoly

P&G and Kimberly-Clark own nearly 80% of the market. Between Pampers and Luvs, P&G owns a 40% share, and believes it earns earn about half of the category's profits. Kimberlerly-Clark's Huggies hold a 39% share, and private-label brands make up another 19%.

Amazon Elements, the new line of basic baby care products from the e-commerce retailer, could make an even bigger dent in Huggies sales, but fortunately for Kimberly-Clark, Amazon is focusing on the wrong benefits.

Instead of positioning it as a low-cost alternative, Amazon is branding it as an ethically manufactured option. That will find traction with some consumers, but hyperfocusing on ingredient- and material-sourcing will also lead to information overload.

Will consumers really care Amazon sourced the water used in its baby wipes from the White Lick Creek Aquifer in Mooresville, Ind.? Do they even know what an aquifer is or if using water from one is better than another from another source?

Price is likely to be a far more compelling way to position its diapers, and Amazon Elements diapers can be bought at a steep discount to what moms pay for Huggies on the site.

A history of consistency
Still, Kimberly-Clark investors shouldn't be concerned. Huggies make up just 13% of Kimberly-Clark's personal care segment sales and 6% of total revenues. Giving up share to Amazon while also losing to P&G will pinch it some, but won't be fatal. Kimberly-Clark's other product lines enjoyed a strong third quarter regardless.

Total net sales rose 3.4% to $5.4 billion, organic sales were up 4%, and third-quarter operating profit increased 13% to $483 million.

KMB Dividends Paid (TTM) Chart

KMB Dividends Paid (TTM) data by YCharts

Its dividend is safe too. Currently yielding 3%, Kimberly-Clark has increased the payout annually for 42 consecutive years. The diaper maker also recently announced a new $5 billion stock repurchase program for up to 40 million shares. With such a consistent record of returning value to shareholders, its stock is at a 52-week high and is up 20% over the past year.

The global scene is nothing to sneeze at
Certainly the U.S. diaper market is in a state of flux for Kimberly-Clark, but the international diaper market remains strong.

Even with headwinds from currency exchange rates, third quarter sales for KC International rose 9% with volumes up 6% as organic sales jumped 25% in China, Russia, and Eastern Europe, along with solid gains in Brazil, South Africa, South Korea, and Vietnam.

Kimberly-Clark's Kleenex tissue brand also continues to gain market share in North America and consumer tissue operating margins jumped 250 basis points year over year. New product introductions also have been well received.

Still a good fit
Amazon's entrance into the baby care market with low-cost, ethically sourced diapers and baby wipes is certainly something Kimberly-Clark shareholders should watch, but because Huggies represents a relatively small component of the overall business and the rest of its operations are strong, means it's nothing income investors need to wet their pants over. 

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Kimberly-Clark, and Procter & Gamble. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.